Wyodak Resources Development Corp. v. Wyoming Department of Revenue

IN THE SUPREME COURT, STATE OF WYOMING

2017 WY 6

OCTOBER TERM, A.D. 2016

January 23, 2017

WYODAK RESOURCES
DEVELOPMENT CORP.,

Appellant
(Petitioner),

v. S-16-0075

WYOMING DEPARTMENT OF
REVENUE,

Appellee
(Respondent).

W.R.A.P Rule 12.09(b) Certification from
the District Court of Campbell County
The Honorable Michael N. Deegan, Judge

Representing Appellant:
Lawrence J. Wolfe, P.C. and Jenifer E. Scoggin, P.C. of Holland & Hart, LLP,
Cheyenne, Wyoming. Argument by Mr. Wolfe.

Representing Appellee:
Peter K. Michael, Wyoming Attorney General; Ryan Schelhaas, Deputy Attorney
General; Karl D. Anderson, Senior Assistant Attorney General. Argument by Mr.
Anderson.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third.
Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building,
Cheyenne, Wyoming 82002, of typographical or other formal errors so correction may be made
before final publication in the permanent volume.
KAUTZ, Justice.

[¶1] Appellant Wyodak Resources Development Corp. (Wyodak) is a coal producer in
Campbell County, Wyoming and reports the taxable value of its coal to Appellee
Department of Revenue (Department) using the proportionate profits valuation method.
Wyodak claims the Department improperly applied Wyoming law when it set the point of
valuation for its coal for production years 2009 through 2011. It also challenges the
Department’s categorization of certain government-imposed and environmental expenses
in the tax valuation formula. The Board of Equalization (Board) upheld the Department’s
determinations, and Wyodak petitioned for judicial review. We conclude the Board’s
decision on the point of valuation was correct and affirm that ruling.

[¶2] The environmental and government-imposed expenses were under audit at the
time of the hearing before the Board. Given the audit will result in a more complete
factual record and the results are subject to further administrative and, if necessary,
judicial review, the Board’s decision on the categorization of the costs was not final and
the issue is not ripe for judicial review.

ISSUES

[¶3] The issues which must be resolved in this appeal1 are:

1. Did the Board err by upholding the Department’s determination that the
mouth of the mine and, consequently, the point of valuation for Wyodak’s coal, was
located where the coal actually reached the surface of the ground rather than where
Wyodak calculated it to be?

2. Was Wyodak’s right to equal and uniform taxation under the Wyoming
Constitution violated by the Board’s decision on the point of valuation?

3. Did the Board issue a final decision on whether the Department’s
classification of Wyodak’s environmental and government-imposed costs was correct and
is that issue ripe for review?

FACTS

[¶4] Wyodak owns a surface coal mine approximately five miles east of Gillette in
Campbell County, Wyoming. During the years in question, Wyodak mined out of the
Clovis Pit which is located north of I-90. The Gillette Energy Complex is a group of

1
Wyodak initially raised an additional issue regarding classification of its conveyor costs. However, at
oral argument, it stated that it was not going to pursue the issue.

1
several power plants located south of I-90 and is the primary customer for Wyodak’s
coal.

[¶5] During the mining process, the topsoil and overburden are removed to expose the
coal seam. The removed material is used to backfill mined areas. The Clovis Pit coal
seam is divided into two benches -- the top bench is approximately fifty feet deep and the
bottom bench is approximately thirty feet deep. The bottom bench contains higher
quality coal than the top bench. Wyodak severs the coal from the vertical coal face of
each bench by blasting explosives. As the coal is extracted, the coal face moves in a
northerly direction, away from I-90.

[¶6] For the Wyodak coal destined for the energy complex, front end loaders take the
severed coal to a primary crusher located near the coal face of each bench. The primary
crushers break it into uniform pieces about eight inches in diameter and dump it onto
mobile conveyors. The mobile conveyors transport the coal to a permanent conveyor,
where coal from the two benches is blended to the customer’s specifications.

[¶7] The permanent conveyor is located in a “transportation corridor,” which was
formed when the top bench of coal was mined and not backfilled. The transportation
corridor is 50 to 250 feet lower than the surrounding topography. The permanent
conveyor carries the coal south, crosses under I-90 via a tunnel and delivers the coal to
the energy complex.

[¶8] The coal that is not transported on the permanent conveyor is hauled out of the pit
in trucks via a haul road. The road begins in the pit and climbs until it reaches the surface
of the surrounding land. The trucks carry the coal along the haul road to a train load-out
facility north of the mine, where it is transported by train to the Dave Johnston power
plant in Glenrock, Wyoming.

[¶9] Wyodak annually reports its coal production, expenses and resulting taxable value
to the Department. Wyoming statutes establish that the point of valuation for coal, when
reporting its value for tax purposes, is the mouth of the mine. Wyo. Stat. Ann. § 39-14-
103(b)(ii) (LexisNexis 2015); DOR Rules, ch. 6, § 4(b)(i) (2006). The Department and
Wyodak historically recognized the mouth of the mine for coal sent to the energy
complex at the point where the permanent conveyor entered the I-90 tunnel.2

[¶10] Wyodak initially reported its 2009, 2010 and 2011 taxable values for the coal sent
to the energy complex using the entry to the I-90 tunnel as the mouth of the mine. We
will explain the tax structure in more detail later, but in general, costs incurred before the

2
The Department understands that the conveyor does not rise completely to the surface until shortly after
it exits the tunnel on the south side of I-90, but agreed that the inlet to the tunnel was the mouth of the
mine because the additional distance did not have any appreciable effect on taxable value.
2
mouth of the mine are considered direct mining costs and increase the taxable value of
the mineral. Because the I-90 tunnel was the mouth of the mine, most of the permanent
conveyor costs were considered direct mining costs. Wyodak subsequently reevaluated
the location of the mouth of its mine because each year the coal face had moved farther
north, away from I-90, increasing the direct mining costs associated with the conveyor
system, and thereby increasing the taxable value of the coal. By 2011, the transportation
corridor was 8,080 feet, or approximately one and one-half miles, long.

[¶11] Wyodak used a 1999 Wyoming Mining Association memorandum prepared by
Donald Coovert to “relocate” its mine mouth for tax purposes by assuming that the
conveyor system did not exist. Mr. Coovert is a coal tax consultant who testified for
Wyodak at the hearing before the Board. The memo provided a method to calculate
where the mouth of the mine would be if Wyodak used a truck haul road, instead of the
permanent conveyor, to transport its coal to the energy complex. Wyodak’s calculations
artificially moved the mouth of the mine significantly closer to the coal face, thereby
reducing its direct mining costs and, accordingly, the taxable value of its coal.

[¶12] In 2013, Wyodak filed amended returns for production years 2009, 2010 and
2011. The amended returns reflected the calculated locations of hypothetical mouths of
the mine for each year assuming no permanent conveyor system existed and re-
categorized various environmental and government-imposed expenses as indirect instead
of direct costs, resulting in a reduction of Wyodak’s taxes. The Department did not agree
with Wyodak’s new calculated mouth of the mine locations or its re-categorization of
expenses and rejected the amended returns.

[¶13] Wyodak appealed the Department’s decision to the Board, and the Board held a
contested case hearing on November 12 through 14, 2013. It issued its findings of fact,
conclusions of law and order on December 18, 2015, ruling that the Department’s
determinations on Wyodak’s mouth of the mine and categorization of mining expenses
were correct. Wyodak filed a petition with the district court for review of the Board’s
decision. The parties and the district court agreed that the case should be certified to this
Court pursuant to W.R.A.P. 12.09, and we accepted the certification.3
3
W.R.A.P. 12.09 states in relevant part:

(b) Upon such review, or in response to a motion for certification or interlocutory appeal
by any party within 30 days of the filing of the petition for review and after allowing
fifteen (15) days from service for response, the district court may, as a matter of judicial
discretion, certify the case to the supreme court. In determining whether a case is
appropriate for certification, the district court shall consider whether the case involves:

(1) a novel question;

(2) a constitutional question;

(3) a question of state-wide impact;
3
 STANDARD OF REVIEW

[¶14] When an administrative agency case is certified to this Court under W.R.A.P.
12.09(b), we apply the standards for judicial review set forth in Wyo. Stat. Ann. § 16-3-
114(c) (LexisNexis 2015). Wyodak Resources Dev. Corp. v. Dep’t of Revenue, 2002 WY
181 ¶ 9, 60 P.3d 129, 134 (Wyo. 2002). The Board’s findings of fact are reviewed under
the substantial evidence standard. Dale v. S & S Builders, LLC, 2008 WY 84, ¶ 22, 188
P.3d 554, 561 (Wyo. 2008); Section 16-3-114(c). Substantial evidence means “such
relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.” Bush v. State ex rel. Wyo. Workers’ Comp. Div., 2005 WY 120, ¶ 5, 120
P.3d 176, 179 (Wyo. 2005) (citation omitted). Findings of fact are supported by
substantial evidence when we can discern a rational premise for those findings from the
evidence preserved in the record. Id.

[¶15] We review an agency’s conclusions of law de novo and affirm when they are in
accordance with the law. However, when the agency has failed to properly invoke and
apply the correct rule of law, we correct the agency’s error. Dale, ¶ 26, 188 P.3d at 561-
62. This case requires interpretation of the relevant statutes, which is a matter of law
subject to de novo review. DB v. State (In re CRA), 2016 WY 24, ¶ 15, 368 P.3d 294,
298 (Wyo. 2016).

DISCUSSION

[¶16] Resolution of this case requires interpretation and application of Wyoming mineral
taxation statutes. In order to provide proper context for the specific issues presented by
Wyodak, we will begin by describing the statutory framework used to value its coal.

1. General Law on Coal Taxation/Direct Cost Ratio

(4) an important local question which should receive consideration from the district court
in the first instance;

(5) a question of imperative public importance; or

(6) whether an appeal from any district court determination is highly likely such that
certification in the first instance would serve the interests of judicial economy and reduce
the litigation expenses to the parties. . . .

(c) Not later than 15 days after its receipt of the completed record, the district court shall
notify the parties of its decision concerning certification by order, which shall include a
concise statement of the issues raised in the petition and findings which support the
determination concerning certification. . . .

(d) The Supreme Court, in its discretion, may accept or reject a certified case, and it shall
accept or reject the case within 30 days of receiving the certification order. . . .
4
[¶17] Wyo. Const. art. 15, § 3 provides that all coal mines “shall be taxed ... in lieu of
taxes on the lands[ ] on the gross product thereof ...; provided, that the product of all
mines shall be taxed in proportion to the value thereof.” “The legislature is directed to
define full value for the classes of property and to enact laws securing “‘a just valuation
for taxation of all property ....’” RME Petroleum Co. v. Dep’t of Revenue, 2007 WY 16,
¶ 14, 150 P.3d 673, 679 (Wyo. 2007), quoting Wyo. Const. art. 15, § 11. Exercising that
power, the legislature has imposed ad valorem and severance taxes on the value of gross
mineral production. Wyo. Stat. Ann. § 39-13-103 (LexisNexis 2015) (ad valorem tax), §
39-14-103 (severance tax). Coal is valued for purposes of taxation at “the fair market
value of the product at the mouth of the mine where produced, after the mining or
production process is completed.” Section 39-14-103(b)(ii).4

[¶18] Pursuant to Wyo. Stat. Ann. § 39-14-101(a)(vi), the mouth of the mine is defined
as:
[t]he point at which a mineral is brought to the surface of the
ground and is taken out of the pit, shaft or portal. For a
surface mine, this point shall be the top of the ramp where
the road or conveying system leaves the pit. For an in situ
mine, the point shall be the wellhead.

Section 37-14-101(a)(v) defines mining or production as:

drilling, blasting, loading, roadwork, overburden removal,
pre-mouth of the mine reclamation, transportation from the
point of severance to the mouth of the mine, and maintenance
of facilities and equipment directly relating to any of the
functions stated in this paragraph.

[¶19] Like most Wyoming producers, Wyodak sells its coal away from the mouth of the
mine. For coal sold away from the mouth of the mine pursuant to a bona fide arms-
length sale, § 39-14-103(b)(vii) establishes a formula, commonly known as the
proportionate profits valuation method, to determine what portion of the sales value is
attributable to the value of the gross product at the mouth of the mine. Powder River
Coal Co. v. Wyo. State Bd. of Equalization, 2002 WY 5, ¶ 8, 38 P.3d 423, 427 (Wyo.
2002). Section 39-14-103(b)(vii) states in part:

(vii) For coal sold away from the mouth of the mine pursuant
to a bona fide arms-length sale, the department shall calculate

4
The Department’s rules in effect at the relevant time stated the “mouth of the mine” was the point of valuation and
defined the term consistent with the definition in Wyo. Stat. Ann. § 39-14-101(a)(vi) (LexisNexis 2015). The point
of valuation was defined consistent with § 39-14-103(b)(ii). DOR Rules, ch. 6, § 4a(b) (2006) (definition of mouth
of the mine); ch. 6, § 4(i) (2006) (definition of point of valuation).

5
 the fair market value of coal by multiplying the sales value of
extracted coal, less transportation to market provided by a
third party to the extent included in sales value, all royalties,
ad valorem production taxes, severance taxes, black lung
excise taxes and abandoned mine lands fees, by the ratio of
direct mining costs to total direct costs. Nonexempt royalties,
ad valorem production taxes, severance taxes, black lung
excise taxes and abandoned mine lands fees shall then be
added to determine fair market value.

[¶20] This Court expressed the proportionate profits method as a mathematical formula
in RME, ¶ 17, 150 P.3d at 681:

Pair Total Exempt Royalties -‘ x Direct Nonexempt
Madmt Sales Cost + Royalties
Value Nonexempt Royalties Ratio
Revenue
(Taxable Production
Production TUGS Taxes
Value)

Direct Direct Costs of Producino
Cost Direct Costs of Producing,Processing and Transporting
Ratio

[¶21] Wyoming’s proportionate profits formula uses a ratio of direct mining costs to
total direct costs (the direct cost ratio). Section 39-14-103(b)(vii). More direct mining
costs result in a higher direct cost ratio. The taxable value of the mineral increases or
decreases as the direct cost ratio does, so the higher the direct cost ratio, the higher the
taxable value. To determine the correct direct cost ratio and, thereby, the proper taxable
value, costs have to be correctly categorized as direct mining costs, total direct costs or
indirect costs. Direct mining costs are defined as:

mining labor including mine foremen and supervisory
personnel whose primary responsibility is extraction of coal,
supplies used for mining, mining equipment depreciation,
fuel, power and other utilities used for mining, maintenance
of mining equipment, coal transportation from the point of
severance to the mouth of the mine, and any other direct costs
incurred prior to the mouth of the mine that are specifically
attributable to the mining operation[.]

Section 39-14-103(b)(vii)(B). Section 39-14-103(b)(vii)(C) defines total direct costs:

6
 (C) Total direct costs include direct mining costs determined
under subparagraph (B) of this paragraph plus mineral
processing labor including plant foremen and supervisory
personnel whose primary responsibility is processing coal,
supplies used for processing, processing plant and equipment
depreciation, fuel, power and other utilities used for
processing, maintenance of processing equipment, coal
transportation from the mouth of the mine to the point of
shipment, coal transportation to market to the extent included
in the price and provided by the producer, and any other
direct costs incurred that are specifically attributable to the
mining, processing or transportation of coal up to the point of
loading for shipment to market[.]

[¶22] In general, costs incurred prior to the mine mouth are direct mining costs and are
included in the numerator of the direct cost ratio. Costs incurred after the mine mouth are
included in the total direct cost category which is the denominator of the direct cost ratio.
Indirect costs “include but are not limited to allocations of corporate overhead, data
processing costs, accounting, legal and clerical costs, and other general and
administrative costs which cannot be specifically attributed to an operational function
without allocation.” They are not included in the direct cost ratio at all. Section 39-14-
103(b)(vii)(D).

[¶23] The primary dispute in this case is over how to assign the costs associated with the
permanent conveyor. The legislature recognized that transportation would occur both
prior to and after the mouth of the mine. It included “transportation from the point of
severance to the mouth of the mine” in the definition of mining or production at § 39-14-
101(a)(v), and “transportation from the mouth of the mine to the loadout” in the
definition of processing at § 39-14-101(a)(vii). The location of the mouth of the mine,
therefore, determines whether transportation costs will be classified as direct mining costs
or total direct costs.

[¶24] If, as the Department ruled, the mouth of Wyodak’s mine is at the I-90 tunnel, the
transportation costs associated with the permanent conveyor are direct mining costs
(which increases the taxable value). If Wyodak is correct and the mouth of the mine is
closer to the coal face, the costs associated with the conveyor are included only in the
total direct cost category (which decreases the taxable value). Assignment of the
disputed costs to direct mining costs results in a direct cost ratio of approximately .89,
while the assignment of the costs to the total direct cost category results in a direct cost
ratio of approximately .83. The difference in Wyodak’s tax obligation totals
approximately $880,000 for all three years.

2. The Mouth of the Mine

7
 a. Statutory Interpretation

[¶25] The parties disagree on the proper location of the mouth of Wyodak’s mine for tax
purposes. To decide this issue, we must interpret the relevant statutes. When interpreting
statutes, this Court searches for the legislature’s intent as reflected in the language of the
statute. Vance v. City of Laramie, 2016 WY 106, ¶ 12, 382 P.3d 1104, 1106 (Wyo.
2016). Our first task is to determine, as a matter of law, whether the statute is clear or
ambiguous. Lance Oil & Gas Co. v. Dep’t of Revenue, 2004 WY 156, ¶ 4, 101 P.3d 899,
901 (Wyo. 2004).

“We look first to the plain and ordinary meaning of the words
to determine if the statute is ambiguous. A statute is clear and
unambiguous if its wording is such that reasonable persons
are able to agree on its meaning with consistency and
predictability. Conversely, a statute is ambiguous if it is found
to be vague or uncertain and subject to varying
interpretations.”

RME, ¶ 25, 150 P.3d at 683. See also Powder River Coal, ¶ 6, 38 P.3d at 426. The fact
that the parties have differing opinions on the statute’s meaning is not conclusive as to
ambiguity. Bd. of County Comm’rs of Sublette County v. Exxon Mobil Corp., 2002 WY
151, ¶ 24, 55 P.3d 714, 721 (Wyo. 2002).

[¶26] “If the statutory language is sufficiently clear and unambiguous, the Court simply
applies the words according to their ordinary and obvious meaning.” In re CRA, ¶ 16,
368 P.3d at 298. We give effect to each word, clause and sentence chosen by the
legislature, and construe them in pari materia. Pedro/Aspen, Ltd. v. Bd. of County
Comm’rs, 2004 WY 84, ¶ 27, 94 P.3d 412, 420 (Wyo. 2004). A statute is not interpreted
in a way that renders a portion of it meaningless or adds language to it. Id. See also MF
v. State, 2013 WY 104, ¶ 11, 308 P.3d 854, 858 (Wyo. 2013) (stating this Court does not
add language to a statute in interpreting it).

[¶27] We look beyond the language of the statute and apply rules of statutory
construction to determine the legislature’s intent only when the language is ambiguous.
A statute is ambiguous if it is vague or uncertain and susceptible to more than one
reasonable interpretation. RME, ¶ 25, 150 P.3d at 683; Chevron, U.S.A. Inc. v. Dep’t of
Revenue, 2007 WY 43, ¶ 10, 154 P.3d 331, 334 (Wyo. 2007).

When the language is not clear or is ambiguous, the court
must look to the mischief the statute was intended to cure, the
historical setting surrounding its enactment, the public policy
of the state, the conclusions of law, and other prior and

8
 contemporaneous facts and circumstances, making use of the
accepted rules of construction to ascertain a legislative intent
that is reasonable and consistent.

Chevron, ¶ 15, 154 P.3d at 335, quoting State ex rel. Motor Vehicle Div. v. Holtz, 674
P.2d 732, 736 (Wyo. 1983) (other citations omitted).

[¶28] As noted above, the legislature defined the mouth of the mine in relevant part as:

the point at which a mineral is brought to the surface of the
ground and is taken out of the pit, shaft or portal. For a
surface mine, this point shall be the top of the ramp where the
road or conveying system leaves the pit.

Section 39-14-101(a)(vi).

[¶29] Neither party argues the definition of mouth of the mine is ambiguous. They
simply have differing views of the plain meaning of the statutory language. The
Department interprets the statute as placing the mouth of the mine at the point where the
coal reaches the surface of the surrounding topography which, for Wyodak’s mine, is at
the I-90 tunnel. Wyodak asserts the “mouth of the mine” is the point where the coal
leaves the “active pit,” which it defines as “the area or hole where a coal company takes
possession of the coal through active mining activities described in [§] 39-14-101(a)(v),
such as mining or blasting.” In its view, active mining activities do not include
transportation on the permanent conveyor. Its interpretation places the mouth of its mine
at a point near where the coal is placed on the permanent conveyor. We conclude that the
statutory definition of mouth of the mine is not ambiguous. The legislature provided
clear directions to locate the mouth of the mine.

[¶30] Wyodak focuses on the word “pit” in arguing for a mouth of the mine closer to the
coal face. That word is certainly important to the analysis. The legislature located the
mouth of the mine at the point at which a mineral is brought to the surface of the ground
and is taken out of the pit. . . . It further clarified that, “for a surface mine, this point
shall be the top of the ramp where the road or conveying system leaves the pit.” Section
39-14-101(a)(vi) (emphasis added).

[¶31] “Pit” is not defined by statute or the Department’s rules, so the Board
appropriately looked to common dictionary definitions of the word “pit” in the context of
mining:

Mining.
a. An excavation made in exploring for or removing a mineral deposit, as
by open cut methods.

9
 b. The shaft of a coal mine.
c. the mine itself.

The definition clearly states that the pit is the excavation made in exploring for or
removing a mineral deposit. It does not limit the “pit” to the area where the mining
company takes possession of the coal. Although “pit” is also defined as “the mine itself,”
the definition does not include the “active mining” concept championed by Wyodak. In
fact, its argument that the word “pit” means the “active pit,” adds the word “active” to the
statutory language. This Court is not at liberty to add words to a statute that the
legislature chose to omit. See MF, ¶ 11, 308 P.3d at 858 (stating “we will not supply
missing terms or expand a statute’s meaning beyond its plain language”).

[¶32] Furthermore, Wyodak’s interpretation ignores the other language the legislature
used in § 39-14-101(a)(vi) to define the mouth of the mine. The legislature specifically
stated the mouth of the mine is where the coal is brought to the surface of the ground and
taken out of the pit. This language demarcates the end of the pit as the surface of the
ground and locates the mouth of the mine at that distinct point. The legislature reinforced
the importance of the physical point where the mineral reaches the surface when it
specified that, for surface mines, the mouth of the mine is “the top of the ramp where the
road or conveying system leaves the pit.” “Ramp” is defined as “a sloping floor or walk
leading from one level to another.” Webster’s New Third Int’l Dictionary 1879 (2002).
Reading the two sentences together, it is clear that the ramp rises out of the pit, the top of
the ramp is at the surface, and the surface is the mouth of the mine.

[¶33] Wyodak’s concentration on the “active pit” fails to give full effect to the
legislature’s demarcation of the surface of the ground as the end of the pit and the mouth
of the mine. See Clark v. State ex rel. Dep’t of Workforce Servs., 2016 WY 89, ¶ 16, 378
P.3d 310, 314-15 (Wyo. 2016) (refusing to accept claimant’s interpretation of statutory
language that did not give effect to all of the words). There is no indication in the
statutory language that the legislature intended to change the mouth of the mine for
surface mines from a distinct point on the ground to the end of the “active pit” or the area
of active mining, as defined by Wyodak.

[¶34] Wyodak also argues that our interpretation of the mouth of the mine has to be
informed by Section 39-14-103(b)(iii) which states that the “mining or production
process is deemed completed when the mineral product reaches the mouth of the mine”
and further states that “[i]n no event shall the value of the mineral product include any
processing functions or operations regardless of where the processing is performed.”
Processing is defined as

(vii) “Processing” means crushing, sizing, milling, washing,
drying, refining, upgrading, beneficiation, sampling, testing,
treating, heating, separating, tailings or reject material

10
 disposal, compressing, storing, loading for shipment,
transportation from the mouth of the mine to the loadout,
transportation to market to the extent included in the price
and provided by the producer, processing plant site and post-
mouth of mine reclamation, maintenance of facilities and
equipment relating to any of the functions stated in this
paragraph, and any other function after severance that
changes the physical or chemical characteristics or enhances
the marketability of the mineral[.]

Section 39-14-101(a)(vii).

[¶35] According to Wyodak, the legislature’s exclusion of processing costs from the
value of the mineral “reinforces the definition of pit as the active mining area by
clarifying the definition of mine mouth – it is located where mining activities end and
processing activities begin.” It claims that, by locating the mouth of the mine at the I-90
tunnel, the Department improperly included processing costs in the value of the mineral
as direct mining costs, which is prohibited by § 39-14-103(b)(iii).

[¶36] Wyodak again ignores other words in the statutory provision. Section 39-14-
103(b)(iii) prohibits inclusion of processing costs in the value of the minerals. However,
the sentence concludes with: “regardless of where the processing is performed.” Id.
There would be no reason to include that phrase at the end of the sentence if processing
always occurs beyond the mouth of the mine. The statutory language does not, therefore,
mandate that the mouth of the mine be located before any processing activities.

[¶37] Furthermore, Wyodak’s argument that the mouth of the mine has to be located
prior to any processing is contradicted by the testimony of its witnesses about processing
activities that take place within its own designated active pit. Mr. Coovert testified that
crushing and blending are processing functions and, at Wyodak’s mine, “some of those
processing functions actually occur literally in the pit, very, very close to the [coal] face.
Like the primary crushers are in the pit, and the blending is occurring in the pit[.]” Kurt
Triscori, Wyodak’s engineering superintendent, also testified that the coal was crushed
and blended in the pit.

[¶38] Wyodak acknowledges that its primary crusher costs are considered processing
costs and assigned to the total direct costs category. So, the processing costs are not
included in the value of Wyodak’s coal even though they occur prior to the mouth of the
mine. This complies with § 39-14-103(b)(iii)’s prohibition on including processing costs
in the value of the mineral, “regardless of where the processing is performed.” Given
crushing and blending are processing functions and they occur within Wyodak’s “active
pit,” its argument that the mouth of the mine must be located prior to any processing is
contradicted by its own mining activities and tax history.

11
[¶39] Wyodak also claims the Board did not follow or misinterpreted its earlier
decisions by accepting the Department’s definition of mouth of the mine. We disagree;
the Board’s prior decisions are consistent with its decision in this case. The first case
discussed by Wyodak is Matter of Appeal of Triton Coal Co, SBOE Doc. No. 99-64
(2000). Wyodak asserts the Board adopted the “active pit” concept in that case.
Although the Board used the term “active pit” in Triton, ¶ 7, its decision was not based
on a particular definition of that term.

[¶40] Triton took the position that its mine mouth was at a truck dump approximately
292 feet below the natural land surface. The Board rejected Triton’s position and agreed
with the Department’s location of the mouth of the mine at the point where Triton’s
conveyor, which transported coal from the truck dump to a secondary crusher, left the pit
and intersected the surface of the ground. Id., ¶¶ 96-98. In support of its decision, the
Board in Triton quoted Amax Coal which stated “all transportation from the face of the
coal seam to the elevation of the natural land surface constitutes pre-mine-mouth
transportation, and is not deductible." Id., ¶ 93, quoting Matter of the Appeal of Amax
Coal Company From a Decision of the Department of Revenue, SBOE Doc. No. 92-198
(1994), affirmed in Amax Coal West, Inc. v. State Bd. of Equalization, 896 P.2d 1329
(Wyo. 1995). Therefore, in Triton and Amax, the Board marked the end of the pit at the
surface of the ground and designated it as the mouth of the mine.

[¶41] The Board also relied on the Matter of Appeal of Kerr-McGee Coal Co., SBOE
Doc. No. 92-283 (1994). In Kerr-McGee, the Board determined that costs incurred in
transporting the coal along an un-reclaimed, inactive pit (referred to as “the slot”), which
was lower than the surface of the surrounding land, were direct mining costs because the
coal had not yet reached the mouth of the mine. Id., ¶¶ 18-19. Like in the case at bar, the
Board expressly rejected the taxpayer’s argument that “the transportation distance in the
‘slot’ should be deductible as transportation costs, leaving as ‘pre-mine mouth
transportation,’ the expense and distance from the coal seam to the lip of the active pit.”
Id. (emphasis added). Although the Kerr-McGee decision addressed the netback
valuation method, it demonstrates the Board’s long standing position that the mouth of
the mine is where the coal reaches the elevation of the surrounding land not where the
“active pit” ends.

[¶42] Wyodak insists that, in a prior appeal—Wyodak Res. Dev. Corp., SBOE Doc. No.
2000-99 (2001), the Board recognized the mouth of its mine was close to the coal face.
The Board’s decision in that case stated “[t]he ‘mouth of the mine’ in the South Pit was
within the mine itself near where the coal face would have been at the time of mining.”
Wyodak, ¶ 87. That case involved a different pit and a different mine setup, and the issue
of whether the mouth of the mine was located at the surface was not addressed.
Consequently, the Board’s statement that the mouth of the mine was within the mine near
the coal face is not definitive as to where to locate the mine mouth in this case.

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[¶43] The plain language of § 39-14-101(a)(vi) specifies where the mouth of the mine is
located. The legislature clearly intended the mouth of the mine to be at the point where
the coal reaches the surface of the ground. Wyodak’s interpretation of the statutory
language as placing the mouth of the mine at a point below the surface where the “active
pit” ends is incorrect. The Board properly accepted the Department’s interpretation of
the statute.5

b. Wyodak’s Calculated Mine Mouth

[¶44] Wyodak used Mr. Coovert’s formula to calculate mine mouths for both benches
for each year and used those calculations to amend its returns. Although the formula had
never been adopted by the legislature or the Department, Wyodak used it to determine
where a truck haul road would reach the surface if it used trucks to haul its coal instead of
the conveyor. The calculations were performed by Mr. Triscori.

[¶45] Mr. Triscori testified that he started each calculation by using aerial photographs
to determine where the centroid (the calendar year average center) of the coal face of
each bench was located. He then applied a working setback distance of 300 feet from the
centroid. The setback is the area needed for front end loaders and trucks to operate safely
and efficiently while retrieving the coal. Next, he “chose a route that a truck would travel
and where that intersected the . . . setback . . . on both benches.” The distance between
the centroid and where “it intersected the setback” was the “in-pit travel distance, and it
also represent[ed] the point at which the toe of the ramp would begin.” The toe of the
ramp is the start of the truck ramp leading out of the pit. He then used an eight percent
grade to calculate how long the ramp had to be to reach an elevation of 4,420 feet. An
eight percent grade is the industry standard for an efficient, safe ramp, and the target
elevation of 4,420 feet is the elevation of the I-90 tunnel. Using those calculations, he
located a mine mouth for each bench at the top of the ramp for each year. The calculated
mine mouths were used to determine the direct mining costs and total direct costs for the
direct cost ratios used in Wyodak’s amended returns.

[¶46] The Board rejected Wyodak’s calculated mine mouths. It concluded that “[t]he
current statutory valuation methods do not envision hypothetical points of valuation or
costs.” We agree. The plain language of the statute places the mouth of the mine at a

5
Wyodak argues that legislative history supports its interpretation of the statute. We do not consider legislative
history unless the statutory language is ambiguous. Mathewson v. City of Cheyenne, 2003 WY 10, ¶ 6, 61 P.3d
1229, 1232 (Wyo. 2003). In addition, we note that, while some of Wyodak’s legislative history evidence may have
been appropriate to construe an ambiguous statute, other aspects of its evidence clearly were not. Mr. Coovert
testified at length about his participation, as a mine industry representative, in the legislative process that led to the
adoption of the proportionate profits valuation methodology and his view of the legislature’s intent in passing the
statutes. Given we have said that the subjective intent of any particular legislator is not appropriate evidence of
legislative intent, Mountain Cement Co. v. South of Laramie Water & Sewer Dist., 2011 WY 81, ¶ 55, n. 12, 255
P.3d 881, 902, n. 12 (Wyo. 2011), the subjective intent of a lobbyist certainly would not be.

13
physical location. If the legislature had intended for the mine mouth to be located at a
hypothetical point without any reference to the mining and transportation systems
actually used by the taxpayer, it would have said so and provided a method to calculate
the mouth of the mine.

[¶47] In Hillard v. Big Horn Coal Co., 549 P.2d 293 (Wyo. 1976) and State Bd. of
Equalization v. Monolith Portland Midwest Co., 574 P.2d 757 (Wyo. 1978), we
emphasized the importance of establishing the value of minerals based upon the
taxpayer’s true circumstances. Although these cases were decided prior to the
legislature’s adoption of the proportionate profit valuation method in 1990, they
demonstrate that the valuation of minerals in Wyoming is based on actual, not
hypothetical, factors. We said in Hillard, 549 P.2d at 301, that the actual royalty, rather
than “an artificial amount” must be used as a cost in valuing coal for taxation. Similarly,
in Monolith, 574 P.2d at 760-61, we rejected the Department’s use of presumed costs of
transporting Monolith’s minerals to a hypothetical storage facility in valuing its mineral
production.

[¶48] Wyodak insists its calculated mine mouths are not hypothetical because they were
determined by examining aerial photographs and maps of the mine and using engineering
calculations. We disagree. There are no ramps that exit the Wyodak pit at the calculated
mine mouths; there are no trucks that haul the coal to the surface; there are no drivers
who operate the trucks; and Wyodak does not incur the costs associated with the fictional
ramps and haul roads. Like in Monolith, Wyodak’s calculations are based upon
circumstances that do not exist.

[¶49] Wyodak asserts that its calculations are acceptable even though the actual
conditions do not exist because other mines use similar procedures to determine the
mouth of the mine. Craig Grenvik, the Department’s Mineral Tax Division
Administrator, testified at the hearing. He agreed that other mines use topographical
maps and engineering calculations to determine their points of valuation for the year.
However, he pointed out an important distinction between those situations and
Wyodak’s:

Q [by Wyodak’s counsel]. [S]o the fact that Mr.
Triscori has done this [used engineering calculations to
establish the mouth of the mine], there’s nothing unique about
really what he’s done at all, is there?
A. It’s unique in the fact that he isn’t basing the
calculations upon a known point. He’s making calculations
to determine a point.

14
[¶50] Mr. Grenvik also testified that by using a hypothetical ramp with hypothetical
trucks, Wyodak’s calculations avoid many real-world situations such as haul roads that
are not perfectly straight or are longer than Wyodak’s calculated road because of
circumstances on the ground. The calculated mine mouths also avoid the difficulties and
costs associated with actually moving the ramp and haul road as the coal face moves.
Wyodak would just perform new calculations as its mine moved, unlike other mine
operators who have to actually construct new ramps and sections of the haul road.

[¶51] The Board correctly upheld the Department’s rejection of Wyodak’s amended
returns modifying the location of its mine mouth. The record contains substantial
evidence to support the Board’s factual findings about Wyodak’s mine and calculations,
and the Board’s interpretation of the pertinent statutory language is in accordance with
the law.

3. Constitutional Principles of Uniformity and Equality in Taxation

[¶52] Wyodak claims the Board’s decision violates the Wyoming Constitution’s
requirements of uniformity and equality in taxation. Wyo. Const. art. 15, § 11 states in
relevant part:

(a) All property, except as in this constitution otherwise
provided, shall be uniformly valued at its full value as defined
by the legislature, in three (3) classes as follows:

(i) Gross production of minerals and mine products in lieu
of taxes on the land where produced[.] . . .

(d) All taxation shall be equal and uniform within each class
of property. The legislature shall prescribe such regulations as
shall secure a just valuation for taxation of all property, real
and personal.

The constitution does not require that all minerals of like kind be assessed the same.
“Uniformity of assessment requires only that the method of appraisal be consistently
applied.” Monolith, 574 P.2d at 761. See also Hillard, 549 P.2d at 300-01.

[¶53] The crux of Wyodak’s argument is that the location of the mouth of the mine at
the I-90 tunnel shackles it with a permanent mine mouth, so that, as the coal face moves
northward, it amasses higher direct mining costs. It claims the permanent mine mouth
results in non-uniform taxation because mines with traditional truck haul systems get to
move their mine mouths by moving their ramps.

15
[¶54] The Board ruled that Wyodak’s constitutional right to uniform and equal taxation
was not violated by the Department’s decision. Mr. Grenvik’s testimony supports the
Board’s determination. He explained that the Department consistently applies the
statutory language to determine the mouth of the mine for Wyoming coal mines. It sets
the mouth of the mine at the surface of the ground and relies on the actual mine
conditions in locating it. Mr. Grenvik testified that if the Department allowed Wyodak to
use its calculated mine mouths based upon hypothetical conditions, it would actually be
treating it differently than other mines. If that were to happen, the Department would be
required to let other mines calculate a hypothetical mine mouth closer to the coal face
even if they chose to avoid the cost and inconvenience associated with actually moving
the ramp when the coal face advanced. Mr. Coovert conceded this possibility. He
testified that the ramp for the trucks hauling Wyodak’s coal to the train loadout is “way
too far from the pit” and the cost of relocating it is prohibitive, so Wyodak could have
calculated a mouth of the mine closer to the coal face, but decided against it.

[¶55] The Board concluded that Wyodak’s fixed mine mouth is due to its own business
decisions.

110. If Wyodak is the only mine in the Powder River
Basin with a permanent mine mouth location for the life of its
pit, that is the result of its business choice to rely on a
conveyor system through a transportation corridor it has not
reclaimed. In other words, Wyodak’s permanent mine mouth
is the result of Wyodak’s business decision and mine plan, not
the result of the Department’s failure to consistently apply the
tax valuation statutes.

Wyodak acknowledged that it chose the conveyor system for its economic benefits over a
truck haul system. The consequences of that choice were a more favorable cost structure
and a less favorable tax situation.

[¶56] The testimony at the hearing and the Board’s prior decisions demonstrate that the
Department has consistently applied the statute to locate Wyoming mine mouths at the
point where the minerals actually reach the surface. Although it has negative tax
consequences for Wyodak, application of the statutory definition to its chosen situation
does not violate its constitutional right to uniform and equal taxation. The Department,
the Board and this Court are obligated to follow the statutes as written. If Wyodak wants
to alter its tax situation, it can either change its mining practice or attempt to convince the
legislature to enact an amendment.

4. Environmental and Government-Imposed Costs

16
[¶57] The Board upheld the Department’s rejection of Wyodak’s amended returns which
attempted to classify its environmental and government-imposed costs, including the
costs of water and air quality testing, wildlife monitoring, weed control and aerial
photography, as indirect instead of direct costs. Section 39-14-103(b)(vii)(D) defines
indirect costs:

Indirect costs include but are not limited to allocations of
corporate overhead, data processing costs, accounting, legal
and clerical costs, and other general and administrative costs
which cannot be specifically attributed to an operational
function without allocation.

Id. The effect of the reclassification of the costs from direct to indirect would be to
remove them from the direct cost ratio. Id.

[¶58] The Board disagreed with Wyodak in principal, stating that the environmental and
government-imposed costs were not similar to the indirect costs specifically identified in
§ 39-14-103(b)(vii)(D) and were related to direct mining functions. It, therefore,
concluded that the Department properly rejected Wyodak’s reclassification of the
expenses as indirect costs. However, the Board also stated:

104. The parties recognized during the hearing that the
[Department of Audit (DOA)] was performing an audit to
analyze the exact nature of the costs and their possible
allocations. When the audit is complete[] and the Department
issues its final determination based upon the DOA audit
findings, Wyodak may appeal that final determination. If
Wyodak and the Department cannot come to an agreement on
the manner in which to treat these expenses following the
results of the audit, Wyodak may come before the [Board]
again, and the [Board] will explore those issues at that time
with a more fully developed record.

[¶59] The deficiency of the record is clear from the hearing testimony. Mr. Coovert
testified that the actual source documents, including the invoices associated with the
claimed costs, were not submitted with the amended tax returns, but they would be
examined during the audit.6 Mr. Grenvik testified that the Department had not had the
opportunity to examine the source documents such as the general ledger account, cost
allocation worksheets, payments to the federal government and actual invoices, but that
the DOA would examine that information during the audit. He agreed that the
6
Although this information is not part of the record on appeal, the Department stated in its brief and at oral
argument that the audit was completed while this appeal was pending and “[t]he resultant Department tax
assessment is currently under appeal before the Board.”

17
Department reserved “the right to be persuaded” by Wyodak’s evidence they were not
direct mining costs.

[¶60] Under Wyo. Stat. Ann. § 16-3-114(a) (Lexis Nexis 2015), a person aggrieved or
adversely affected by a final agency decision after a contested case hearing may seek
judicial review of the decision.

“An aggrieved or adversely affected person is one who has a
legally recognizable interest in that which will be affected by
the action. A potential litigant must show injury or potential
injury by ‘alleg[ing] a perceptible, rather than a speculative,
harm resulting from the agency action.’ ‘ “The interest which
will sustain a right to appeal must generally be substantial,
immediate, and pecuniary. A future, contingent, or merely
speculative interest is ordinarily not sufficient.” ’

Jacobs v. State ex rel. Wyo. Workers’ Safety & Comp. Div., 2004 WY 136, ¶ 7, 100 P.3d
848, 850 (Wyo. 2004) (citations omitted).

[¶61] The Board’s decision upheld the Department’s rejection of Wyodak’s amended tax
returns reclassifying the environmental and government-imposed expenses as indirect
costs. However, it expressly recognized that its decision was not a final ruling on the
costs. The Department reserved the right to be persuaded by Wyodak that its costs were
not direct mining costs, and the Board stated it would revisit the exact same costs in the
event that Wyodak was not satisfied with the audit results. These circumstances
demonstrate that Wyodak did not suffer a substantial, immediate and pecuniary harm as a
result of the Board’s decision. See Douglass v. Wyo. Dep’t of Transp., 2008 WY 77, ¶
19, 187 P.3d 850, 854-55 (Wyo. 2008) (email from the appellant’s supervisor notifying
him that another agency had denied his request for a salary increase, but also stating that
the supervisor would “continue to look at the issue and wanted to discuss it further” was
not a final agency decision).

[¶62] Merit Energy Co. v. Dep’t of Rev., 2013 WY 145, 313 P.3d 1257 (Wyo. 2013)
addressed a similar issue, though at a different level of review. The question in that case
was whether the Department’s notices of assessment were final administrative decisions
subject to appeal to the Board. The taxpayer argued that the decisions were not final
because it could have filed an amended return or an audit could have been performed.
However, the facts were that the taxpayer had not filed an amended return and no audit
had been commenced. We ruled that, in the absence of the additional proceedings, the
Department decision was final. Id., ¶ 25, 313 P.3d at 1262. The opposite happened here–
the costs were under audit and the parties recognized that the categorization of the costs
could change based upon the audit result. Under the specific circumstances of this case,
the Board’s decision on the environmental and government-imposed costs was not final.

18
[¶63] The ripeness doctrine also applies to these circumstances.

The ripeness doctrine is a category of justiciability
“developed to identify appropriate occasions for judicial
action.” 13 Wright, Miller & Cooper, Federal Practice and
Procedure: Jurisdiction § 3529, p. 146 (1975). The basic
rationale of the ripeness requirement, like that of the
justiciability requirement,
“ * * * is to prevent the courts, through avoidance of
premature adjudication, from entangling themselves in
abstract disagreements over administrative policies, and also
to protect the agencies from judicial interference until an
administrative decision has been formalized and its effects
felt in a concrete way by the challenging parties. The problem
is best seen in a twofold aspect, requiring us to evaluate both
the fitness of the issues for judicial decision and the hardship
to the parties of withholding court consideration.” Abbott
Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 1515,
18 L.Ed.2d 681 (1967).

Jacobs, ¶ 8, 100 P.3d at 850-51, quoting Industrial Siting Council of State of Wyo. v.
Chicago & North Western Transp. Co., 660 P.2d 776, 779 (Wyo. 1983).

[¶64] In the first part of the ripeness analysis, we consider the fitness of the issue for
judicial decision. The Board recognized that its ruling on this issue was made without a
complete record which would be forthcoming as part of the audit. It also stated that “the
exact nature of the costs and their possible allocations” was directly at issue in the audit
and it would explore the issue in a future proceeding if Wyodak was not satisfied with the
audit results. If we were to decide this issue now, this Court would be entangling itself in
the agency’s decision-making and interfering with its efforts to make a final decision on
the proper classification of the expenses based upon a complete record. The question of
the proper classification of the costs, therefore, is not fit for judicial decision at this time.

[¶65] The second part of the ripeness analysis examines the hardship to the parties from
withholding a decision at this time. We see no such hardship. The parties are addressing
the issue as part of the audit and will, in fact, benefit from a decision to withhold review
at this time so that the factual record can be developed and the agency can make a fully
informed decision. Under these circumstances, we conclude the issue of whether the
Department properly classified the environmental and government-imposed expenses is
not ripe for review. See Seckman v. Wyo-Ben, Inc., 783 P.2d 161 (Wyo. 1989) (issue of
whether injured employee was entitled to a higher grade prosthetic device was not ripe
for review because the parties agreed he would be evaluated in the future and his request

19
would be treated as a new claim which then could be reviewed through the administrative
process).

CONCLUSION

[¶66] The plain language of § 39-14-101(a)(vi) places the mouth of the mine at the point
where the mineral reaches the surface of the ground. The Board properly concluded that
Wyodak’s calculated mine mouths were hypothetical and did not comply with Wyoming
law. The Department applies the statutory definition of mouth of the mine consistently,
and Wyodak was not subjected to unequal or non-uniform taxation when the Department
applied the statute to its true mine configuration. Additionally, the Board did not finally
determine whether Wyodak’s environmental and government-imposed costs are direct or
indirect costs and the issue is not ripe for review because the exact same costs, with a
more complete factual record, are subject to review in the audit process.

[¶67] Affirmed.

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