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2003 General Session
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HB 87 proposed a new method for setting a value on producer-processed natural gas. To understand this bill, a little history is in order.
In 2001, the Legislature created a Select Committee on Mineral Taxation and Valuation. Its charge was to recommend "…a fair, viable and simplified system of valuation and taxation for minerals." The Select Committee, which was disbanded in 2002, did not accomplish this task, but did offer several bills related to mineral taxation in the 2002 legislative session.
One of these was HB 95, the forerunner of the current HB 87. It proposed the netback method for valuing producer-processed natural gas.
Producer-processed gas is sour gas produced and processed by the same company. Sour gas is gas containing lethal hydrogen sulfide and other impurities, which must be processed before sale.
This presents two valuation problems. First, Wyoming statutes require valuing minerals at the point of production, but because sour gas must be processed before its value can be realized, the valuation method has to work back from the point of sale to the point of production.
Second, because the same company or consortium of companies both produces and processes the gas, there is no third-party sale between production and processing that could be used to set a value on the gas.
Currently, most producer-processors use a valuation method called proportionate profits.
According to the Department of Revenue, proportionate profits does not accurately determine fair market value as required by the Wyoming Constitution. It overvalues gas at low prices and undervalues gas at high prices.
The 2002 HB 95 proposed switching from proportionate profits to another method, netback, which allows the producer to net back, or deduct, certain costs from the sales price of the gas to arrive at the value at the wellhead.
HB 95 also included a "floor" to ensure the taxable value of the gas never will be less than the producer's actual costs of producing the mineral, thereby avoiding the problem that occurred some years ago when a producer used netback to arrive at a zero value for its gas.
(For more details, view the ESPC's report, Wyoming's Wealth for Wyoming's People, Part II.) HB 95 failed introduction in the 2002 session (in a budget session, non-budget bills must receive a two-thirds majority - 40 votes - to be considered, and HB 95 received 39 votes). The subject of natural gas valuation was then transferred to the Joint Revenue Interim Committee.
During the 2002 interim, representatives of the producer-processors and the Department of Revenue got together for additional work on valuation of producer-processed gas. Their efforts resulted in HB 87.
HB 87 differs from HB 95 in two significant ways. First, depreciation deductions were thrown out, but were replaced by a different type of deduction for return on investment. Second, the floor in HB 87 is much thinner than it was in HB 95 - that is, fewer components of the cost of producing gas are included.
The Senate amended HB 87 to clarify that it does not apply to coalbed methane. They also added language to require that the netback method be used for three years and then re-evaluated.
HB 87 passed the House, 59-0 (one excused) and passed the Senate, 23-7. Governor Freudenthal vetoed the bill on the day before the 2003 legislative session adjourned, and the House and Senate chose not to conduct an override vote, so the bill failed.
The votes listed below are Third Reading (final passage) votes in the House and Senate.
A YES vote means the legislator supported changing the method by which natural gas is valued to the netback method.
A NO vote means the legislator opposed changing the valuation method for natural gas.
| Bighorn Basin Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
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| S 18 | Hank Coe (R) | Yes | |
| H 24 | Colin Simpson (R) | Yes | |
| H 50 | Pat Childers (R) | Yes | |
| S 19 | Laness D. Northrup (R) | Yes | |
| H 25 | Alan Jones (R) | Yes | |
| H 26 | Elaine Harvey (R) | Yes | |
| S 20 | Gerald E. Geis (R) | Yes | |
| H 27 | Jane Wostenberg (R) | Yes | |
| H 28 | Micheal Baker (R) | Yes | |
| Casper-Area Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 27 | John Barrasso (R) | Yes | |
| H 35 | Roy Cohee (R) | Yes | |
| H 36 | Liz Gentile (D) | Yes | |
| S 28 | Keith Goodenough (D) | Yes | |
| H 56 | Tom Walsh (R) | Yes | |
| H 57 | Thomas A. Lockhart (R) | Yes | |
| S 29 | Bill Hawks (R) | Yes | |
| H 37 | Steve Harshman (R) | Yes | |
| H 59 | Mary Gilmore (D) | Yes | |
| S 30 | Charles K. Scott (R) | Yes | |
| H 38 | Bob Brechtel (R) | Yes | |
| H 58 | Ann Robinson (D) | Yes | |
| Cheyenne-Area Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 4 | April Brimmer Kunz (R) | Yes | |
| H 7 | Tony Ross (R) | Yes | |
| H 41 | Becket Hinckley (R) | Yes | |
| S 5 | John Hanes (R) | Yes | |
| H 8 | Larry Meuli (R) | Yes | |
| H 42 | Pete Illoway (R) | Yes | |
| S 6 | Rich Cathcart (D) | No | |
| H 9 | Wayne Johnson (R) | Yes | |
| H 10 | Rodney "Pete" Anderson (R) | Yes | |
| S 7 | Kathryn Sessions (D) | Yes | |
| H 11 | Wayne Reese (D) | Yes | |
| H 43 | Ed Prosser (R) | Yes | |
| S 8 | E. Jayne Mockler (D) | Yes | |
| H 12 | Layton Morgan (D) | Yes | |
| H 44 | Floyd Esquibel (D) | Excused | |
| Gillette-Area Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 23 | John Hines (R) | Yes | |
| H 31 | Jene Jansen (R) | Yes | |
| H 52 | George McMurtrey (R) | Yes | |
| S 24 | Richard A. Erb (R) | Yes | |
| H 32 | Jeff Wasserburger (R) | Yes | |
| H 53 | Frank Latta (R) | Yes | |
| Lander/Riverton-Area Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 25 | Cale Case (R) | No | |
| H 33 | Harry Tipton (R) | Yes | |
| H 54 | Del McOmie (R) | Yes | |
| S 26 | Robert A. Peck (R) | Yes | |
| H 34 | Frank Philp (R) | Yes | |
| H 55 | David Miller (R) | Yes | |
| Northeast/East Central WY Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 1 | Bill Barton (R) | Yes | |
| H 1 | Mark Semlek (R) | Yes | |
| H 2 | Ross Diercks (D) | Yes | |
| S 2 | Jim Anderson (R) | Yes | |
| H 5 | James C. Hageman (R) | Yes | |
| H 6 | Dave Edwards (R) | Yes | |
| S 3 | Curt Meier (R) | No | |
| H 3 | Deborah Alden (R) | Yes | |
| H 4 | Edward A. Buchanan (R) | Yes | |
| Sheridan-Area Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 21 | Bruce Burns (R) | No | |
| H 29 | Jerry Iekel (R) | Yes | |
| H 51 | Rosie Berger (R) | Yes | |
| S 22 | John Schiffer (R) | No | |
| H 30 | Jack Landon (R) | Yes | |
| H 40 | Doug Osborn (R) | Yes | |
| South Central WY Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 9 | Mike Massie (D) | No | |
| H 13 | Jane Warren (D) | Yes | |
| H 45 | Lorna Johnson (D) | Yes | |
| S 10 | Irene Devin (R) | Yes | |
| H 14 | Phil Nicholas (R) | Yes | |
| H 46 | James Slater (R) | Yes | |
| S 11 | Bill Vasey (D) | Yes | |
| H 15 | George Bagby (D) | Yes | |
| H 47 | Kurt Bucholz (R) | Yes | |
| Southwest WY Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 12 | Rae Lynn Job (D) | No | |
| H 48 | Marty Martin (D) | Yes | |
| H 16 | Pete Jorgensen (D) | Yes | |
| S 13 | Tex Boggs (D) | Yes | |
| H 17 | Fred Parady (R) | Yes | |
| H 60 | Bill Thompson (D) | Yes | |
| S 14 | Larry Caller (D) | Yes | |
| H 18 | Mick Powers (R) | Yes | |
| H 39 | Chris Boswell (D) | Yes | |
| S 15 | Ken Decaria (D) | Yes | |
| H 19 | Owen Petersen (R) | Yes | |
| H 49 | Saundra Meyer (D) | Yes | |
| West Central WY Legislators | House 3rd 1/23/03 | Senate 3rd 3/1/03 |
|
| S 16 | Delaine Roberts (R) | Yes | |
| H 20 | Stan Cooper (R) | Yes | |
| H 21 | Randall Luthi (R) | Yes | |
| S 17 | Grant Larson (R) | Yes | |
| H 22 | Monte Olsen (R) | Yes | |
| H 23 | Clarene Law (R) | Yes | |
See Southwest Region for H 16 and S 12 | |||