§ 39-14-203 — Imposition

(a) Taxable event. The following shall apply:
(i) There is levied a severance tax on the value of
the gross product extracted for the privilege of severing or
extracting crude oil, lease condensate or natural gas in the
state. The tax imposed by this subsection shall be in addition
to all other taxes imposed by law including, but not limited to,
ad valorem taxes imposed by W.S. 39-13-101 through 39-13-111.
(b) Basis of tax. The following shall apply:
(i) Crude oil, lease condensate and natural gas shall
be valued for taxation as provided in this subsection;
(ii) The fair market value for crude oil, lease
condensate and natural gas shall be determined after the
production process is completed. Notwithstanding paragraph (x)
of this subsection, expenses incurred by the producer prior to
the point of valuation are not deductible in determining the
fair market value of the mineral;
(iii) The production process for crude oil or lease
condensate is completed after extracting from the well,
gathering, heating and treating, separating, injecting for
enhanced recovery, and any other activity which occurs before
the outlet of the initial storage facility or lease automatic
custody transfer (LACT) unit;
(iv) The production process for natural gas is
completed after extracting from the well, gathering, separating,
injecting and any other activity which occurs before the outlet
of the initial dehydrator. When no dehydration is performed,
other than within a processing facility, the production process
is completed at the inlet to the initial transportation related
compressor, custody transfer meter or processing facility,
whichever occurs first;
(v) If the crude oil, lease condensate or natural gas
production as provided by paragraphs (iii) and (iv) of this
subsection are consumed as defined by W.S. 39-14-201(a)(xv)(B),
processed or transported, sold to a third party or processed or
transported by a third party, at or prior to the point of
valuation provided in paragraphs (iii) and (iv) of this
subsection, the fair market value shall be the value established
by bona fide arms-length transaction;
(vi) In the event the crude oil, lease condensate or
natural gas production as provided by paragraphs (iii) and (iv)
of this subsection is not sold at or prior to the point of
valuation by bona fide arms-length sale, or, except as otherwise
provided, if the production is used without sale, the department
shall identify the method it intends to apply under this
paragraph to determine the fair market value and notify the
taxpayer of that method on or before September 1 of the year
preceding the year for which the method shall be employed. The
department shall determine the fair market value by application
of one (1) of the following methods:
(A) Comparable sales-The fair market value is
the representative arms-length market price for minerals of like
quality and quantity used or sold at the point of valuation
provided in paragraphs (iii) and (iv) of this subsection taking
into consideration the location, terms and conditions under
which the minerals are being used or sold;
(B) Comparable value-The fair market value is
the arms-length sales price less processing and transportation
fees charged to other parties for minerals of like quantity,
taking into consideration the quality, terms and conditions
under which the minerals are being processed or transported;
(C) Netback-The fair market value is the sales
price minus expenses incurred by the producer for transporting
produced minerals to the point of sale and third party
processing fees. The netback method shall not be utilized in
determining the taxable value of natural gas which is processed
by the producer of the natural gas;
(D) Proportionate profits – The proportionate
profits method shall only be used as a method in conjunction
with the provisions of the modified netback method in
subparagraph (E) of this paragraph. The fair market value is:
(I) The total amount received from the sale
of the minerals minus exempt royalties, nonexempt royalties and
production taxes times the quotient of the direct cost of
producing the minerals divided by the direct cost of producing,
processing and transporting the minerals; plus
(II) Nonexempt royalties and production
taxes.
(E) Modified netback – The fair market value is:
(I) The total amount received from the sale
of the natural gas minus the total direct processing and
transportation costs, any arms-length transportation fees from
the point of valuation to the point of arms-length sale,
overhead costs directly related to facility operations not to
exceed ten percent (10%) of the total direct processing and
transportation costs, exempt royalties and return on investment
incurred by the taxpayer from the point of valuation to the
point of arms-length sale;
(II) There shall be one (1) point of
valuation for all interest owners of the processing facility;
(III) Any producer utilizing the modified
netback method set forth in this subparagraph shall be required
to calculate the taxable value for the tax year under the
methods of both this subparagraph and subparagraph (D) of this
paragraph (hereafter referred to as the "annual floor test").
The taxable value for the year shall be the higher of the two
(2) taxable values determined under the annual floor test. If
the valuation method is changed as a result of the provision in
this subparagraph, no interest or penalties shall be due if the
taxpayer files the amended returns and remits the additional
severance tax due under this subparagraph not later than May 25
of that calendar year. After the first year of applicability of
this subparagraph, for each succeeding year the taxpayer's
monthly severance tax returns shall be filed using the valuation
method determined under the annual floor test for the
immediately preceding calendar year.
(vii) When the taxpayer and department jointly agree,
that the application of one (1) of the methods listed in
paragraph (vi) of this subsection does not produce a
representative fair market value for the crude oil, lease
condensate or natural gas production, a mutually acceptable
alternative method may be applied;
(viii) If the fair market value of the crude oil,
lease condensate or natural gas production as provided by
paragraphs (iii) and (iv) of this subsection is determined
pursuant to paragraph (vi) of this subsection, the method
employed shall be used in computing taxes for three (3) years
including the year in which it is first applied or until changed
by mutual agreement between the department and taxpayer. If the
taxpayer believes the valuation method selected by the
department does not accurately reflect the fair market value of
the crude oil, lease condensate or natural gas, the taxpayer may
appeal to the board of equalization for a change of methods
within one (1) year from the date the department notified the
taxpayer of the method selected;
(ix) If the department fails to notify the taxpayer
of the method selected pursuant to paragraph (vi) of this
subsection, the taxpayer shall select a method and inform the
department. The method selected by the taxpayer shall be used
in computing taxes for three (3) years including the year in
which it is first applied or until changed by mutual agreement
between the taxpayer and the department. If the department
believes the valuation technique selected by the taxpayer does
not accurately reflect the fair market value of the crude oil,
lease condensate or natural gas, the department may appeal to
the board of equalization for a change of methods within one (1)
year from the date the taxpayer notified the department of the
method selected;
(x) If crude oil is enhanced prior to the point of
valuation as defined in paragraph (iii) of this subsection by
either a blending process with a higher grade hydrocarbon or
through a refining process such as cracking, then the fair
market value shall be the fair market value of the crude oil
absent the blending or refining process;
(xi) For natural gas, the total of all actual
transportation costs from the point where the production process
is completed to the inlet of the processing facility or main
transmission line shall not exceed fifty percent (50%) of the
value of the gross product without approval of the department
based on documentation that the costs are due to environmental,
public health or safety considerations, or other unusual
circumstances.
(c) Taxpayer. The following shall apply:
(i) In the case of ad valorem taxes on crude oil,
lease condensate or natural gas produced under lease, the lessor
is liable for the payment of ad valorem taxes on crude oil,
lease condensate or natural gas production removed only to the
extent of the lessor's retained interest under the lease,
whether royalty or otherwise, and the lessee or his assignee is
liable for all other ad valorem taxes due on production under
the lease;
(ii) In the case of severance taxes, any person
extracting crude oil, lease condensate or natural gas and any
person owning an interest in the crude oil, lease condensate or
natural gas production to the extent of their interest ownership
are liable for the payment of the severance taxes together with
any penalties and interest;
(iii) Any taxpayer paying severance taxes on any
crude oil, lease condensate or natural gas production may deduct
the taxes paid from any amounts due or to become due to the
interest owners of such production in proportion to the interest
ownership.