§ 39-14-201 — Definitions

Wyoming § 39-14-201

• Jurisdiction: Wyoming
• Title 39: Taxation and Revenue
• Ch. 14: MINE PRODUCT TAXES
• Art. 2: OIL AND GAS

Text

(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:
(A) 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;
(B) Natural gas that is consumed on the site
where the natural gas is produced for any purpose except for
those specified in W.S. 39-14-205(j) and (m).
(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;
(xxxvii) "Qualifying well" means a well in which:
(A) A well site is already connected to a
pipeline, pipeline capacity is unavailable on the existing
pipeline and the producer and the pipeline operator jointly have
filed an application with the Wyoming oil and gas conservation
commission attesting to the lack of existing pipeline takeaway
capacity;
(B) A producer's well is not connected to an
existing pipeline but the producer's lands, leases, wells or gas
are contractually dedicated to a pipeline operator and the
producer and the pipeline operator to which the lands, leases,
well, or gas are dedicated jointly have filed an application
with the Wyoming oil and gas conservation commission attesting
that it is either technically or commercially unfeasible to
connect a pipeline to the producer's well; or
(C) A producer's well is not already connected
to an existing pipeline and the producer's lands, leases, wells
or gas are not contractually dedicated but the producer
unilaterally has filed an application with the Wyoming oil and
gas conservation commission attesting to these facts.