FISCAL NOTE (HB0049) - Natural gas valuation.

Natural gas valuation.

05LSO-0265.C2

FISCAL NOTE

	FY 2006	FY 2007	FY 2008
NON-ADMINISTRATIVE IMPACT
Anticipated Revenue Increase:
PERM. MINERAL TRUST FUND	1,874,982	1,711,195	1,569,097
SEV TAX DISTRIBUTION ACCT	5,624,946	5,133,584	4,707,291
AD VALOREM TAX	7,499,928	6,844,779	6,276,388

Source of revenue increase:

The figures set forth above were calculated based on changing the mineral valuation methodologies from those currently reported by the taxpayers to the modified Netback methodology as proposed in this bill. Note: the Department has assessed some of the producer/processor properties (Lost Cabin and LaBarge/Shute Creek) using the proportionate profits methodology utilizing taxes and royalties in the direct cost ratio. This methodology is currently under appeal to both the State Board of Equalization (SBOE) and Supreme Court and could be changed by judicial decision.

Likewise, the Department has assessed the Whitney Canyon and Carter Creek properties using the comparable value method. This methodology is also under appeal to both the SBOE and the Supreme Court. Should either or both of the Department’s application of these methodologies be reversed, the impact of this legislation would change substantially.

Assumptions:

1. Painter and Brady properties will be unaffected due to the fact there are settlement methodologies in place.

2. ExxonMobil’s recent investments in the LaBarge/Shute Creek facility and the prospect of revenues generated from the electrical cogeneration facility were not taken into consideration for future year’s valuations.

3. Production volumes were forecast to remain constant for the Exxon LaBarge/Shute Creek and Burlington Resources Lost Cabin Properties.

4. Production volume decline for Whitney Canyon and Carter Creek fields were calculated from average decline reported to WOGCC 2000-2004.

5. Future natural gas prices were based on the October, 2004 CREG estimates.

6. Exxon Labarge/Shute Creek and Burlington Resources plant operating costs and plant depreciation were forecast to remain constant as per 2003 levels.

7. Whitney Canyon and Carter Creek Plant depreciation projected as per 2002 levels.

8. Whitney Canyon and Carter Creek operating expenses were based on the average of 2000-2002 levels.

9. Return on Investment (ROI) based on B bond rating 9.2% (December of 2003) and remains constant.

10. Reported Proportionate profits method estimated by average ratio of gross revenue to reported taxable value for 2000-2003.

The producer/processor taxpayers affected by this bill reported their taxable values to the Department of Revenue using either a tax settlement agreement no longer accepted by DOR (LaBarge/Shute Creek) or using the proportionate profits methodology without taxes and royalties in the ratio (Lost Cabin, Whitney Canyon, Carter Creek). Their taxes were paid in protest into an Escrow Account pending a decision from the Courts. If in the future the taxpayer’s position were to be upheld by the Supreme Court, the baseline for measuring the difference in this proposed modified netback methodology would be the reported values, not the values assessed by DOR. This would result in a significant revenue increase as is set forth above.

In an effort to present the most accurate picture of what could happen as a result of the passage of this bill, we have presented a second scenario based on a different result coming from the Wyoming Supreme Court. What these two different revenue forecasts illustrate is that the proposed bill will be a compromise between the department’s and the taxpayer’s relative positions.

	FY 2006	FY 2007	FY 2008
NON-ADMINISTRATIVE IMPACT
Anticipated Revenue (Decrease):
PERM. MINERAL TRUST FUND	(1,060,077)	(1,136,078)	(1,199,559)
SEV TAX DISTRIBUTION ACCT	(3,180,231)	(3,408,233)	(3,598,676)
AD VALOREM TAX	(4,947,027)	(5,301,695)	(5,597,941)

Source of revenue decrease:

The figures set forth above were calculated based on changing the mineral valuation methodologies from those currently assessed by the Department to the modified Netback methodology as proposed in this bill. Note: the Department has assessed some of the producer/processor properties (Lost Cabin and LaBarge/Shute Creek) using the proportionate profits methodology utilizing taxes and royalties in the direct cost ratio. This methodology is currently under appeal to both the SBOE and Supreme Court and could be changed by judicial decision.