JOAN BARRON Star-Tribune capital bureau | Posted: Sunday, December 18, 2005 12:00 am
CHEYENNE - The state will appeal to the Wyoming Supreme Court a District Court ruling that helium gas produced by ExxonMobil at its LaBarge well field in Sublette County is not taxable, Attorney General Pat Crank said.
Since 1989 the state has been taxing the helium produced by the company as a result of a settlement agreement between Exxon (later merged with Mobil) and Sublette County. The agreement governed how the company's natural gas production would be valued for mineral severance tax and ad valorem, or property tax purposes.
Exxon agreed to pay taxes on the helium, the most valuable component of the raw gas stream, in 1989, but reserved the right to challenge the taxability if the settlement agreement of ceased to apply.
The settlement stemmed from a Exxon's claim of zero tax valuation on its LaBarge operation because of the deductions allowed under the valuation method then in use.
On May 21, 2004, the state Department of Revenue sent the company a letter notice terminating the 1989 settlement agreement and directing it to use a different valuation method on its 2003 natural gas production.
The termination, ExxonMobil said in court documents, put the helium tax issue back on the table, and the company went back to court.
Department of Revenue Director Ed Schmidt said Thursday he terminated the agreement because the valuation method it called for was not producing full market value.
"I think Exxon is thumbing its corporate nose at the state of Wyoming," Schmidt said. "I hope the Wyoming Legislature takes a good, hard look at this."
Helium and raw gas produced from the LaBarge well field in Sublette County is transported to the company's Shute Creek plant in Lincoln County, where the helium is extracted from the raw gas stream and the refined helium is sold to a third party.
The company's brief filed with the District Court said the federal government owns the helium in three units in Sublette County operated by ExxonMobil. Neither the state nor the county can tax the federal government.
About 95 percent of the company's helium production is from wells on federal lands.
In a Dec. 5 ruling from the bench, retired District Judge Dan Spangler, presiding in Laramie County District Court, granted summary judgment to ExxonMobil and ruled that county ad valorem and state severance taxes do not apply to the helium production on federal lands in Sublette County.
In an earlier lawsuit in 1999, Exxon officials warned the state that any changes in the valuation method on the LaBarge operation would reopen the helium tax issue and could trigger a $10 million refund of helium taxes.
Crank, however, said last week the company is not entitled to a refund in any event because it agreed voluntarily to pay taxes on the helium as part of the 1989 settlement agreement.
ExxonMobil attorney Brent Kunz of Cheyenne said he could not comment on the case, as it is still in litigation.
John McKinley, attorney for the Sublette County Commission, defendants in the lawsuit along with the state, said he could not comment on what the county will do now.
Capital bureau reporter Joan Barron can be reached at (307) 632-1244 or at joan.barron@casperstartribune.net.