Thunder Basin Coal Co. v. Wyoming State Bd. of Equalization
| Decision Date | 08 June 1995 |
| Docket Number | No. 94-125,94-125 |
| Citation | 896 P.2d 1336 |
| Parties | THUNDER BASIN COAL COMPANY, Appellant (Petitioner), v. WYOMING STATE BOARD OF EQUALIZATION, Appellee (Respondent). |
| Court | Wyoming Supreme Court |
Alan B. Minier of Rothgerber, Appel, Powers & Johnson, Cheyenne, for appellant.
Joseph B. Meyer, Atty. Gen., and Vicci M. Colgan, Sr. Asst. Atty. Gen., for appellee.
Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.
Appellant Thunder Basin Coal Company filed a petition in the district court for a review of the findings of fact, conclusions of law, and order which had been issued by Appellee Wyoming State Board of Equalization. The district court certified the case to this Court pursuant to W.R.A.P. 12.09(b).
We affirm the State Board of Equalization's decision.
Thunder Basin presents the following issues for our review:
Must the final agency action of the Wyoming State Board of Equalization be set aside as contrary to law and otherwise not in accordance with the standards of W.S. § 16-3-114(c), because the Board:
1. Refused to set aside in its entirety a reassessment arising out of an audit that (a) was not intended to ascertain the fair cash market value of [Thunder Basin's] product; (b) disregarded the appraisal judgment exercised by State employees who did the original valuations; (c) was conducted without guidelines and without reference to any recognized audit standards; and (d) was beyond the scope of audits permitted under Wyoming law;
2. Made findings of fact that are unsupported by substantial evidence because they are (1) based on matters outside the record in this case (including matters apparently officially noticed) whose source, if any, the Board refused to disclose; and (2) based on testimony that was not competent[;]
3. Upheld the State's disallowance of certain components of the initial valuations of [Thunder Basin's] coal production, including (a) the disallowance of "calculated profit" for 1987 and (b) the disallowance of haulage costs for 1986;
4. Refused to hear [Thunder Basin's] claims for offset or refund; and
5. Made procedural and evidentiary rulings that deprived [Thunder Basin] of its due process right to adequately prepare and present its case.
Thunder Basin operated the Black Thunder and Coal Creek coal mines located in Campbell County. The Department of Audit began an audit in 1989 of Thunder Basin's coal production for the years 1984 through 1988. The 1986 and 1987 production years are the only years at issue in this appeal. For those years, the Department of Revenue employed a net-back valuation formula to value the coal which had been sold at points other than at the mouths of the mines. The net-back valuation formula is described in Amax Coal Company v. Wyoming State Board of Equalization, 819 P.2d 825, 827 n. 4 (Wyo.1991).
The Department of Audit identified a number of errors which had been made in the original valuations of Thunder Basin's coal production. As a result of the audit, the Department of Revenue issued additional severance tax assessments to Thunder Basin and certified increases in the taxable value of Thunder Basin's coal production to Campbell County for ad valorem tax purposes.
Thunder Basin did not agree with the Department of Revenue's determinations and appealed to the State Board of Equalization. The State Board of Equalization held a contested case hearing on Thunder Basin's appeal. During the hearing, the State Board of Equalization refused to admit evidence offered by Thunder Basin with regard to the standard industry rate of return on and of its investment which was used in the net-back valuation formula in 1986 and 1987 or to its actual rate of return on and of its investment. Thunder Basin was allowed to submit a written offer of proof of its evidence on these issues. The State Board of Equalization upheld some of the Department of Revenue's additional assessments. Specifically, the State Board of Equalization affirmed the Department of Revenue's assessments which resulted from a disallowance of a double deduction for Thunder Basin's coal haulage costs for 1986 and a disallowance of a deduction for its "calculated profit" for 1987. Thunder Basin appealed to the district court from the State Board of Equalization's decision, and the district court certified the case to the Wyoming Supreme Court pursuant to W.R.A.P. 12.09(b).
When we are reviewing cases which have been certified to us pursuant to W.R.A.P. 12.09(b), we apply the appellate standards which are applicable to the reviewing court of the first instance. Hepp v. State ex rel. Wyoming Workers' Compensation Division, 881 P.2d 1076, 1077 (Wyo.1994).
We review an administrative agency's findings of fact under the substantial evidence standard:
Romero v. Davy McKee Corporation, 854 P.2d 59, 61 (Wyo.1993) (citing Farman v. State ex rel. Wyoming Workers' Compensation Division, 841 P.2d 99, 102 (Wyo.1992)).
Bearden v. State ex rel. Wyoming Workers' Compensation Division, 868 P.2d 268, 269 (Wyo.1994). We do not, however, defer to an agency's conclusions of law. "Instead, if the 'correct rule of law has not been invoked and correctly applied, ... the agency's errors are to be corrected.' " Thunder Basin Coal Company v. Study, 866 P.2d 1288, 1291 (Wyo.1994) (quoting Devous v. Wyoming State Board of Medical Examiners, 845 P.2d 408, 414 (Wyo.1993)).
Many of the factual and legal issues which have been presented in this case are very similar to those which were presented in Amax Coal West, Inc. v. Wyoming State Board of Equalization, 896 P.2d 1329 (Wyo.1995). We will, therefore, rely extensively upon our rulings in Amax Coal West, Inc. in deciding this case.
Thunder Basin contends that the State Board of Equalization erred by "refusing to set aside the [Department of Revenue's] reassessment in its entirety as contrary to law" because it did not reflect the fair cash market value of its mine product. As we explained in detail in Amax Coal West, Inc., Wyoming's constitution and statutes require that coal production must be valued for taxation purposes at its fair cash market value at the mouth of the mine. 896 P.2d at 1332. Recognized appraisal techniques must be used to determine the fair cash market value of the coal which is sold away from the mouth of the mine. All factors which relate to the value of the product must be addressed in the valuation method. The net-back valuation formula is one such appraisal technique. 896 P.2d at 1332-33.
Thunder Basin seeks to challenge components of the net-back valuation formula, including the Department of Revenue's use of a standard rate of return instead of Thunder Basin's actual rate of return. The record reveals that Thunder Basin was aware of the Department of Revenue's use of a standard rate of return at the time that the department made its original assessment. Thunder Basin waived its right to challenge the components of the formula when it voluntarily elected not to appeal from the original assessment which was derived from the use of the formula. It, therefore, conceded that the net-back valuation formula was an appropriate appraisal method to be used in determining the fair cash market value of its coal production. Thunder Basin cannot, at this late date, challenge the basic components of the formula when the components were not changed in the audit or revaluation. 896 P.2d at 1332.
Since Thunder Basin waived its right to contest the net-back valuation formula, evidence on the origins of the standard rate of return and evidence with regard to Thunder Basin's actual rate of return were irrelevant to the issues properly before the State Board of Equalization at the contested case hearing. The Board correctly refused to hear that evidence and did not err by requiring Thunder Basin to present its offer of proof in written form. 896 P.2d at 1335. Similarly, the State Board of Equalization's findings on the origins of the standard rate of return were not essential to its decision, and we do not need to determine whether or not those findings were supported by substantial evidence. Id.
The audit revealed errors in the valuation of Thunder Basin's coal production: (1) Thunder Basin was allowed to deduct its haulage cost twice in 1986--once as a transportation cost and again as a processing cost--and (2) Thunder Basin was allowed to take a deduction for its "calculated profit" as a processing cost in addition to receiving a deduction of the standard rate of return on and of its investment which was given to all coal producers in 1987. After the audit, the Department of Revenue disallowed the deduction for Thunder Basin's haulage as a processing cost and refused to give Thunder Basin a deduction for its calculated profit. The Department of Revenue issued additional assessments to reflect those determinations. The State Board of Equalization upheld the additional assessments.
Thunder Basin offers an offset theory, which is similar to the argument presented by Amax, to account for the erroneous deductions. 896 P.2d at 1333. Thunder Basin contends that the Department of Revenue, in a valid exercise of its appraisal judgment, allowed Thunder Basin to take the double deduction for its haulage costs as a substitute for giving it credit for its actual profit in the original 1986 assessment. Thunder Basin's theory is untenable.
Thunder Basin does not direct us to any statutory or regulatory authority which supports the conclusion that it is entitled to have a double deduction for a single cost....
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