2011 Wyoming Statutes
TITLE 39 - TAXATION AND REVENUE
CHAPTER 14 - MINE PRODUCT TAXES ARTICLE 1 COAL
39-14-201. Definitions.

(a) As used in this article:

(i) "Arm's-length market or sales price" means the transaction price determined in connection with a bona fide arm's length sale;

(ii) "Bona fide arm's-length sale" means a transaction in cash or terms equivalent to cash for specified property rights after reasonable exposure in a competitive market between a willing, well informed and prudent buyer and seller with adverse economic interests and assuming neither party is acting under undue compulsion or duress;

(iii) "Average daily production" means the qualified maximum total production of domestic crude oil produced from wells reported as oil wells to the Wyoming oil and gas commission during the preceding calendar year divided by the number of calendar days in that year times the number of wells which produced and wells which injected substances for the recovery of crude petroleum from that property or lease in that year. To qualify as maximum total production each well must have been maintained at the maximum feasible rate of production in accordance with recognized conservation practices and not significantly curtailed by reason of mechanical failure or other disruption in production;

(iv) "Collection wells" means reservoir access holes drilled from underground shafts or tunnels from which crude oil or natural gas is produced;

(v) "Compressor" means a device associated with processing or transporting natural gas which mechanically increases the pressure of natural gas;

(vi) "Crude oil" means the crude petroleum oil and any other hydrocarbons, regardless of gravity, produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas before or after it leaves the reservoir;

(vii) "Dehydrator" means a device which removes water vapor that is commonly associated with raw natural gas;

(viii) "Department review" means, but is not limited to, corrections of clerical errors or reconciliations of tax reports with reports required by other state or federal agencies;

(ix) "Gathering" means the transportation of crude oil, lease condensate or natural gas from multiple wells by separate and individual pipelines to a central point of accumulation, dehydration, compression, separation, heating and treating or storage;

(x) "Heating and treating" means the removal of solid, liquid and gaseous components from the well stream by chemical, mechanical and thermal processes;

(xi) "Lease" means the area encompassed in the leasehold granting the right to explore for or produce crude oil or natural gas, which may include a single tract or multiple tracts of land described in the instrument granting the leasehold;

(xii) "Lease automatic custody transfer unit (LACT)" means a device which automatically and mechanically measures and at which point custody of crude oil transfers from the producer to the purchaser;

(xiii) "Lease condensate" means liquid hydrocarbons which are separated from other components of the natural gas production stream on the lease or before the inlet to a natural gas processing facility;

(xiv) "Mine product valuation amendment" means a valuation adjustment determination made by the department including special directives;

(xv) "Natural gas" means all gases, both hydrocarbon and nonhydrocarbon, that occur naturally beneath the earth's crust and are produced from an oil or gas well. For the purposes of taxation, the term natural gas includes products separated for sale or distribution during processing of the natural gas stream including, but not limited to plant condensate, natural gas liquids and sulfur;

(xvi) "Purchaser" means the first purchaser who acquires the produced crude oil, lease condensate or natural gas from the taxpayer for value;

(xvii) "Previously shut-in well" means a well from which crude oil previously has been produced and from which no production has occurred for at least the two (2) consecutive years prior to January 1, 1995;

(xviii) "Processing" means any activity occurring beyond the inlet to a natural gas processing facility that changes the well stream's physical or chemical characteristics, enhances the marketability of the stream, or enhances the value of the separate components of the stream. Processing includes, but is not limited to fractionation, absorption, adsorption, flashing, refrigeration, cryogenics, sweetening, dehydration within a processing facility, beneficiation, stabilizing, compression (other than production compression such as reinjection, wellhead pressure regulation or the changing of pressures and temperatures in a reservoir) and separation which occurs within a processing facility;

(xix) "Property" means lease or unit. The term "property" is synonymous with the term "mining claim";

(xx) "Recompletion" means any downhole operation that is conducted to establish production of an oil or gas well in any geological interval not currently completed or producing which has been approved as a recompletion by the Wyoming oil and gas conservation commission;

(xxi) "Reservoir" means an underground accumulation of oil or gas or both characterized by a single pressure system which is segregated from other such accumulations;

(xxii) "Separating" means the isolation of the well stream into discrete gas, liquid hydrocarbons, liquid water and solid components;

(xxiii) "Severance tax" means an excise tax imposed on the present and continuing privilege of removing, extracting, severing or producing any mineral in this state;

(xxiv) "Stripper production" means the production from a property or lease whose average daily production of crude petroleum from wells reported as oil wells to the Wyoming oil and gas commission did not exceed:

(A) Ten (10) barrels per day per well during the preceding calendar year if the average price received by the producer for production from the property was twenty dollars ($20.00) or more per barrel; or

(B) Fifteen (15) barrels per day per well during the preceding calendar year if the average price received by the producer for production from the property was less than twenty dollars ($20.00) per barrel.

(xxv) "Sweetening" means any activity that removes acid gases, such as hydrogen sulfide and carbon dioxide, from the well stream. Sweetening includes, but is not limited to absorption, stabilization, thermal and catalytic conversions, chemical reaction and regeneration;

(xxvi) "Tertiary production" means the crude oil recovered from a petroleum reservoir by means of a tertiary enhanced recovery project to which one (1) or more tertiary enhanced recovery techniques meeting the certification requirements of the Wyoming oil and gas conservation commission or the United States government are being applied;

(xxvii) "Unit" means the total area incorporated in a unitization agreement providing for a consolidated development and operational plan to recover oil or gas from the lease areas incorporated in the unit. Participating areas of units as designated by the Wyoming oil and gas conservation commission may be designated as separate units for production tax purposes;

(xxviii) "Unreported production" means production volume for which no tax report was filed for the reporting period by the taxpayer or his agent;

(xxix) "Value of the gross product" means fair market value as prescribed by W.S. 39-14-203(b), less any deductions and exemption allowed by Wyoming law or rules;

(xxx) "Well" means a hole drilled in the earth for the purpose of finding or producing crude oil or natural gas;

(xxxi) "Wildcat well" means any crude oil or natural gas well designated as a wildcat well by the Wyoming oil and gas conservation commission. The Wyoming oil and gas conservation commission shall adopt rules and criteria to implement this designation process. The rules and criteria shall provide that wildcat wells are wells outside known fields or new wells which are determined by the commission to have discovered crude oil or natural gas in a pool not previously proven productive;

(xxxii) "Workover" means any downhole operation that is designed to sustain, restore or increase the production rate or the ultimate recovery in the geologic interval in which an oil or gas well or group of wells is currently completed and producing and approved as a workover by the Wyoming oil and gas conservation commission;

(xxxiii) For the purposes of W.S. 39-14-203(b)(vi)(E), "rate of return" means the weighted average cost of capital (hereafter referred to as the "capitalization rate") as calculated under this paragraph for the ten (10) largest natural gas producers in this state on a production volume basis during the preceding production year for which the appropriate data is publicly available (hereafter referred to as the "representative companies"). The following shall apply:

(A) The capitalization rate is any rate used to convert an income stream into a present worth of future benefits. The rate reflects the relationship between one (1) year's income or an annual average of several years' income and the corresponding value. The department shall annually calculate the capitalization rate based upon the band of investment method as defined by this paragraph. The primary components of the capitalization rate shall include capital structure and cost of capital (debt, preferred and equity capital) as developed in appropriate money markets for the representative companies;

(B) "Band of investment method" means that the capitalization rate is equal to the weighted average cost of the debt and equity portions of the capital investment. The following shall apply:

(I) Proper development and application of the band of investment shall require obtaining and analyzing data for the percent of debt and equity which makes up the capital structure as determined from published financial sources such as Moody's bond record, Moody's bond survey, Value Line, Moody's public utility or transportation manuals, regulatory reports or other recognized financial materials. The determination shall be done by the corporate bonds' rating of the representative companies or other means if bond ratings are not available;

(II) Debt rate estimates used in the band of investment method shall reflect the average current cost of yield to maturity of outstanding issues of debt financing for the year ending closest to the date of the calculation of the capitalization rate required by this paragraph. The rates shall be taken from published financial sources such as Moody's public utility news reports or other recognized financial materials. The determination shall be done by corporate bond rating of the representative companies;

(III) Preferred rate estimates used in the band of investment method shall reflect the average current cost of market yield of outstanding issues of preferred stock financing for the year ending closest to the date of the calculation of the capitalization rate required by this paragraph. The rates shall be taken from published financial sources such as Moody's public utility news reports or other recognized financial materials. The determination shall be done by corporate bond rating of the representative companies;

(IV) The current cost of equity shall be based on data from the capital markets of the representative companies. Equity rates shall reflect the representative cost of equity financing for the representative companies by corporate bond rating as of the date of the calculation of the capitalization rate under this paragraph. The current cost of equity shall be developed by accepted models in the appraisal and financial communities. These models shall include, but are not limited to, equity risk premium, capital asset pricing model and the discounted cash flow model. The sources of required data shall be taken from published financial sources such as Value Line, Ibbotson Associates, Wall Street Journal, regulatory filings and other recognized financial materials. Not later than March 15 of each year, the department shall conduct a public meeting for presentation of the capitalization rate to be used to value production in the same calendar year in which the rate is determined. Notice of the date and time of the meeting shall be provided to all interested parties at least thirty (30) days prior to the meeting. Interested parties may present written or oral comments on the proposed capitalization rate or within five (5) business days thereafter. A final determination of the capitalization rate shall be made available on or before March 31 or as soon thereafter as possible;

(V) Within thirty (30) days of the final capitalization rate determination under this paragraph, the taxpayer shall file amended returns and remit any severance tax due for that portion of the year for which the capitalization rate had yet to be determined and no interest or penalty shall be due as a result of the application of the new capitalization rate.

(xxxiv) For the purposes of W.S. 39-14-203(b)(vi)(E), "return on investment" means the product of the rate of return multiplied by the gross capital investment in all processing and transportation facilities used by the taxpayer to process or transport natural gas from the point of valuation to the point of arms-length sale as maintained on the taxpayer's books and records under generally accepted accounting principles;

(xxxv) For the purposes of W.S. 39-14-203(b)(vi)(E), "total direct processing and transportation costs" means all costs incurred by the taxpayer to operate all processing or transportation facilities from the point of valuation to the point of arms-length sale as maintained on the taxpayer's books and records. The costs shall include salaries and benefits; contract labor; repairs and maintenance including processing facility turnarounds; fuel, power and utilities; chemicals; processing facility premise lease costs to nonaffiliated parties; waste water treatment; disposal of byproduct and waste products; safety; costs of environmental permitting and monitoring, federal and state environmental compliance fees and costs, excluding compensatory and punitive damages and governmental penalties; laboratory; distributive control system; and ad valorem taxes on real and tangible personal property excluding the gross products tax. The taxpayer shall be entitled to its proportionate share of the total direct processing and transportation costs as measured by its percentage of inlet volumes;

(xxxvi) For the purposes of paragraph (xxxiv) of this subsection, "gross capital investment" means the total gross capitalized investment in the processing and transportation facilities from the point of valuation to the point of arms-length sale as maintained on the taxpayer's books and records under generally accepted accounting principles. The gross capital investment shall be calculated based on the company's books and records as of January 1 plus December 31 of the production year, divided by two (2). For purposes of this paragraph, gross capital investment shall not include any investment in equipment that is considered permanently abandoned under generally accepted accounting principles. Gross capital investment shall include items which are not in continuous operation if they remain on the company's books and records under generally accepted accounting principles.