Board: Old equipment in good shape can be taxed more

CODY — The Wyoming Board of Equalization is standing by a Park County decision that will likely have negative ramifications statewide for oil producers in Wyoming, but will also bring in around $100,000 more in tax revenue to the county annually.

Wednesday, the board ruled in favor of a 2017 Park County Commission decision to accept county assessor Pat Meyer’s valuation of Merit Energy Company’s equipment on its oil field 15 miles southeast of Cody on County Road 3EM.

In his 2017 assessment of personal property taxes to be levied on the company, Meyer said Merit’s equipment, while old, had been well-maintained and should therefore be assessed at 40-45 percent of its original value on its property taxes. Meyer based that valuation on what he referred to as the “effective age” of the equipment in question, which he also compares to residential home depreciation.

In its dissertation, the state board wrote due to Meyer’s diligence in collecting Merit interviews and his own county evaluations of equipment being in “satisfactory condition,” it allowed him to deviate from the state department of revenue’s straight-line depreciation guidelines.

Merit representatives and its Cheyenne-based Holland and Hart attorney Walter Eggers criticized Meyer’s form of valuation as “arbitrary” and therefore unlawful in its appeal. Merit and Eggers appealed the original appraisal to the state board, citing some of the oil site equipment as old as 45 years, and thus deeming the standard 20 percent valuation.

“It’s very important for the assessor to follow these rules. Because if they don’t, we get a patchwork of different application of property tax theory and appraisal theory across the state,” Eggers said in his original county commissioner testimony.

The 25 percent difference or $10 million in taxable valuation means a $100,000 liability increase for Merit.

The ruling could have a domino-effect statewide with how county assessors evaluate oilfields.

“This will have statewide repercussions,” Meyer said. “The state board (of equalization) has already been going to the assessors, ‘How come you guys haven’t been looking into effective age? We have guidelines for it, Park County is doing it.’”

Though Meyer estimated that 69 percent of the Merit equipment is older than 14 years old, he stresses no equipment would ever be used on an oil field that is only 20 percent functional. In 2015, Meyer decided to make this policy change, altering from the standard 20 percent appraisal floor.

“We were giving them 80 percent depreciation and nowhere around the state was considering maintenance,” Meyer said. “Nobody gets a house with 80 percent depreciation on it.”

The board, however, did say it was not impressed by Meyer’s lack of specific date or findings in evaluation, relying completely on generalized assessments.

“Merit’s objections are not without basis,” the board wrote in its dissertation. “We would necessarily conclude that the assessor’s evidence was insufficient to justify departure from department of revenue’s default depreciation schedule.”

But when further looking at the evidence, the board cited prior judicial decisions with two inconsistent conclusions and contended that Meyer had right to deviate from the state guidelines, based off department of revenue guidelines allowing assessors to do such. The board also stated there being enough substantial evidence present to make up for the lack of hard data.

“I’m happy we won,” said Meyer. “I’m happy to say it’s over, although with these things you never know.”

Merit will return to the county Board of Equalization 8 a.m. Oct. 23 at the Park County Courthouse to challenge Meyer’s 2018 assessment, which is similar to the 2017 findings – 45 percent floor intact. If Merit chooses to further appeal the 2017 assessment the state board decided upon, the case will head to U.S. Fifth District Court next.

Eggers did not respond to requests for comment.

“We’ll see what direction they want to go in and if they want to keep trying,” Meyer said.