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Home My WebLink About20110927.tiff , BOARD OF ASSESSMENT APPEALS STATE OF COLORADO _ 7_ RULE 11 DISCLOSURES SCHEDULE NO. 00186987+28 DOCKET NO. 56146 DIVERSIFIED OPERATING CORPORATION, Tax Year: 2009 Petitioner, v. WELD COUNTY BOARD OF COMMISSIONERS, Respondent. Petitioner submits the following pursuant to Rule 11 of the Board's procedures of review: WITNESSES TO BE CALLED 1. Terry J. Cammon, President, Diversified Operating Corporation, 15000 W. 6th Avenue, #102, Golden, Colorado 80401. DOCUMENTARY EVIDENCE (Copies Attached) 1. Petition for Abatement. 2. Resolution denying petition. 3. Explanation of Denial. 4. Section 39-7-101, 102, C.R.S. 5. Yuma County BOE v. Cabot Petroleum, 856 P.2d 844 (Colo. 1993). 6. Letter from Redmond&Nazar, L.L.P. - 10/19/2010. 7. Notice to Creditors from Bankruptcy Court. L:.)An""�J.1�U C -tov, tt , i � 2011-0927 u-\\- V\ Respectfully submitted, FORRES EWIS, P.C. st W. Lewis, #5817 1600 Broadway, Suite 1525 Denver, Colorado 80202 Telephone: (303) 830-2190 Facsimile: (303) 830-1466 Email: flewispc@aol.com CERTIFICATE OF MAILING & FACSIMILE I hereby certify that a true and correct copy of the foregoing RULE 11 DISCLOSURES was placed in the U.S. mail, postage prepaid and faxed, on this 6`1' day of April, 2011, to the following address/facsimile number: Weld County Commissioners 915 10th Street P.O. Box 758 Greeley, Colorado 80632 Facsimile No.: 970-352-0242 / d 1 . Petition for Abatement 08/16/2010 13:50 3033849612 DIVERSIFIED OP CORP PAGE 03/04 PETITION FOR ABATEMENT OR REFUND OF TAXES County:Weld a75,��'I ived t;/0/0 f L p �''" a or Commissioners'bate Stamp) Section Petitioner,please complete Section I only. 2010 JUN I l P 3: SO RECE1 e Date: January 29 2010 ''�aa eee/er RAt lSr, ''w��7Lpp31 Month Day Year R L G FEB 05 2010 Petitioner's Name:Diversified Operating Corporation EL ONt AssksstR GREPetitioner's Mailing Address: Ho K E.Andrews&Company 3615 S.Huron Street.Suite 200 COLORADO Englewood CO 80110 City or Town Slate ZIP Code SCHEDULE OR PARCEL NUMBER(S) PROPERTY ADDRESS OR LEGAL DESCRIPTION OF PROPERTY Various-See Attached file Oil and Gas Wells-See Attached file 3.10 93f Petitioner states that the taxes assessed against the above property for the property tax year 2009 are Incorrect for the following reasons: (Briefly describe the circumstances surrounding the incorrect value or tax. Attach additional sheets If necessary.) Actual Value Assessed Value Tax Original 9,374,540 8,180,450 $468,841.87 The original values were incorrect Revised 7,131,060 6,225,910 $355,218.78 Refund 2.243.480 1.954.540 5113.623.09 Petitioner's estimate of value: $7,131,060 Actual (2009 ) Value Year Petitioner requests an abatement or refund of the appropriate taxes- I declare,under penalty of perjury in the second degree,that this petition,together with any accompanying exhibits or statements,has been prepared or examined by me,and to the best of my knowledge,information and belief,is true,correct,and complete. Daytime Phone Number( ) Petitioner's signature By /N— '.e�/4 Daytime Phone Number(J0S )£36 86(—, Z b O Agent's Signe re' 'Letter of agency must be attached when petition is submitted by an agent. If the board of county commissioners,pursuant to section 39-10-114(1),or the property tax administrator, pursuant to section 39-2.116,denies the petition for refund or abatement of taxes In whole or in part,the petitioner may appeal to the board of assessment appeals pursuant to the provisions of section 39.2'125 within thirty days of the entry of any such decision,§39-10-114.5(1),C.R.S. Section II: Assessors Recommendation (For Assessor's Use Only) Tax Year 7�G `L [� yII wall/ pAssaseo1d` �azQ� p�/l p1 Original ,31`YIG`fd D,'qo,TsD 3 !a"a, OTI•D I . • LI Assessor recommends approval as outlined above. ?o protest was filed for the year: (If a protest wasfiled,please attach a copy of the NOD.) Assessor recommends denial for the following reason(s): Src anal. dl t plancti*.on �d2ti (4 \rltas/ �R1� Assessors or puty sea s Signature 15.DPT-AR No.920.86/06 2010-1482 2 . Resolution 08/16/2010 13:50 3033849612 DIVERSIFIED OP CORP PAGE 02/04 + RESOLUTION RE: ACTION OF THE'BOARD CONCERNING PETITION FOR ABATEMENT OR REFUND OF TAXES-DIVERSIFIED OPERATING CORPORATION WHEREAS, the Board of County Commissioners of Weld County, Colorado, pursuant to Colorado statute and the Weld County Home Rule Charter, is vested with the authority of administering the affairs of Weld County, Colorado, and WHEREAS, the Board of County Commissioners of Weld County, State of Colorado, at a duly and lawfully called regular meeting held on the 12th day of July, 2010, at which meeting there were present the following members: Chair Douglas Rademacher, and Commissioners Sean P. Conway;William-F. Garcia, Barbara-Kirkmeyer, David E.tong, and WHEREAS, notice of such meeting and an opportunity to be present has been given to the taxpayer and the Assessor of said County, with said Assessor, Christopher Woodruff, being present, and Richard Logan, representative for Diversified Operating Corporation, and Terry Cammon, President of Diversified Operating Corporation, being present, and WHEREAS, the Board of County Commissioners has carefully considered the attached petition, and is fully advised in relation thereto. • NOW, THEREFORE, BE IT RESOLVED by the.Board of County Commissioners of Weld County, Colorado, that the Board concurs with the recommendation of the Assessor and the petition be and hereby is, denied, and an abatement or refund be denied as follows: olis'ET Ib,N iItiatatittO �hC9iak E1 E:N, i ' rw' Fl a fi� RiCT'GI`1� ' � 5T�L7Nfv'�:7✓ Nq : W>�r,H cmfamyn .tit 4d; y q w m m v*'M;ad i4 w,.“rit 1%t;h $0.00 $0.00 2009 Ce, .IPc5R, 2010-1482 t0'10 AS0075 3 . Explanation of Denial 08/16/2010 13:50 3033849612 DIVERSIFIED OP CORP PAGE 04/04 Explanation of Denial The Petitioner, Diversified Operating Corporation(DOC), believes the 2009 value is incorrect because they did not receive payment from the CKC company for oil that was sold and transported. CKC filed bankruptcy prior to paying DOC for the received oil. DOC has filed a claim in bankruptcy court to attempt to collect the money they are owed. According to 39-7-102, C.R.S.,the assessor shall value such oil and gas leaseholds and lands for assessment,as real property, at an amount equal to eighty-seven and one-half percent of: (a) The selling price of the oil or gas sold therefrom during the preceding calendar year.... or (b)The selling price of oil or gas sold in the same field area for oil or gas transported from the premises which is not sold during the preceding calendar year.... In this case,the oil was transported,and,therefore,we are required to value it. We are recommending that the Assessed value of$8,180,450 be sustained and the petition for abatement be denied. 4 . Section 39-7- 101 , 102, C .R. S . Page 2 of 8 Westtaw C.R.S.A. § 39-7-101 Page 1 C West's Colorado Revised Statutes Annotated Currentness Title 39.Taxation Property Tax ' Valuation and Taxation c Article 7.Valuation of Oil and Gas Leaseholds and Lands (Refs&Annos) .� §39-7-101.Statement of owner or operator (1)Every operator of,or if there is no operator,every person owning any oil or gas leasehold or lands within this state, either as a single lease or as a unit,which leaseholds or lands are producing or are capable of produ- cing oil or gas on the assessment date of any year,shall,no later than the fifteenth day of April of each year, prepare,sign under the penalty of perjury in the second degree,and file in person or by mail with the assessor of the county wherein such oil and gas leaseholds or lands are located a statement for such lease or unit,on a form prescribed by the administrator, showing: (a)The location thereof and the name thereof,if there is a name; (b)The name,address,and fractional interest of the operator thereof; (c)The number of barrels of oil, or the quantity of gas measured in thousands of cubic feet, sold or transported from the premises during the calendar year immediately preceding, after separately reporting the number of bar- rels of oil,or the quantity of gas measured in thousands of cubic feet,delivered to the United States government or any agency thereof,the state of Colorado or any agency or political subdivision thereof, or any Indian tribe as royalty during the calendar year immediately preceding; (d)The selling price at the wellhead. As used in this article, "selling price at the wellhead"means the net taxable revenues realized by the taxpayer for sale of the oil or gas,whether such sale occurs at the wellhead or after gathering,transportation,manufacturing, and processing of the product.The net taxable revenues shall be equal to the gross lease revenues,minus deductions for gathering,transportation,manufacturing, and processing costs borne by the taxpayer pursuant to guidelines established by the administrator. (e)The name,address,and fractional interest of each interest owner taking production in kind and the propor- tionate share of total unit revenue attributable to each interest owner who is taking production in kind; (f)A declaration made under the penalty of perjury in the second degree that includes the following: (I)A statement that the owner or operator has personally examined the statement described in this section and ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 3 of 8 C.R.S.A. § 39-7-101 Page 2 that such statement sets forth,to the best of the owner's or operator's knowledge and belief, the information re- quired by this section; and (II)A statement by the owner or operator as follows: No representations are made as to the accuracy of the value of any portion of the production from sub- ject property that is taken in kind by any owner other than the undersigned. (1.5)Any nonoperating interest owner in an oil or gas well may,on or before the fifteenth day of March each year, submit to the operator by certified mail a report of the actual net taxable revenues received at the wellhead and the actual exempt revenues received at the wellhead by such owner for production taken in kind from the property during the calendar year immediately preceding. Operators shall use the information reported pursuant to this subsection(1.5)to determine the selling price at the wellhead.If any nonoperating interest owner fails to provide to the unit operator the information required under this subsection(1.5)by March 15 of each year,such operator shall use the selling price at the wellhead received by such operator for such operator's share of produc- tion from such unit in place of such nonreported information,and the amount of tax for which such nonreport- ing,nonoperating interest owner is liable shall be calculated based on the selling price at the wellhead reported by the operator. (2)(a)If a statement of an owner or operator is not received or postmarked on or before by the fifteenth day of April of each year,the assessor may impose on such owner or operator a late filing penalty in the amount of one hundred dollars for each calendar day the statement is delinquent; except that such late filing penalty shall not exceed three thousand dollars in any calendar year. The assessor may grant an extension of time for filing a statement to any operator or owner. Any extension, and its length,shall be granted solely at the discretion of the assessor. (b)This subsection(2) is effective January 1, 1997. (3)(a)The assessor may require the owner or operator to submit written documentation supporting the informa- tion provided in the statement. Such documentation shall be supplied within thirty days after either the date of the postmark on the assessor's written request for such documentation or the date that an owner or operator is re- quired to file a statement pursuant to subsection(1)of this section,whichever is later. Any owner or operator who willfully fails or refuses to comply with the assessor's request for written documentation may be assessed a fine of one hundred dollars for each day of such willful failure or refusal.The total amount of all fines that may be assessed by an assessor against an owner or operator in any calendar year shall not exceed three thousand dollars, regardless of the number of leases or units owned or operated by such owner or operator or the number and length of such willful failures or refusals by such owner or operator. (b)This subsection(3) is effective January 1, 1997. (4)All statements and documentation filed with the assessor shall be considered private documents and shall be ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 4 of 8 C.R.S.A. § 39-7-101 Page 3 available on a confidential basis only to the assessor, the administrator,the annual study contractor hired pursu- ant to section 39-1-104,the executive director of the department of revenue,and their employees. Such state- ments and documentation shall be available on a confidential basis to the board of assessment appeals and the county board of equalization when information in such statements and documentation is pertinent to an appeal or protest. (5)(a)Fines imposed pursuant to this section shall be fees of the office of the county assessor.Any unpaid fines imposed pursuant to this section shall be certified to the county treasurer by January 1 of each year and shall be included in the delinquent owner's or operator's property tax statement issued pursuant to section 39-10-103. (b)This subsection(5) is effective January 1, 1997. CREDIT(S) Amended by Laws 1981,S.B.94, § 1;Laws 1993, H.B.93-1039, §§ 1,2,eff. March 31, 1993; Laws 1996, H.B.96-1075, § 1, eff. March 25, 1996; Laws 2007, Ch. 135, § 1,eff. April 16, 2007; Laws 2009, Ch. 44, § 1, eff Aug. 5, 2009. HISTORICAL AND STATUTORY NOTES 2007 Main Volume The 1993 amendment inserted the designation for subpar. (1)(d)(I); and added subpar. (1)(d)(II),par. (1)(e), and subsec. (2). Section 5 of Laws 1993,H.B.93-1039,adding subpar. (1)(d)(II),par. (I)(e),and subsec. (2),provides: "Applicability. This act shall apply to property tax years beginning on or after January 1, 1994." The 1996 amendment, in subsec. (1), in the introductory portion, inserted"in person or by mail"and",on a form prescribed by the administrator,"; in par. (1)(c),substituted"or political subdivision thereof, or any Indian tribe"for"thereof, or any political subdivision of the state";rewrote par. (1)(d),which prior thereto read: "(I)The selling price at the wellhead of all oil or gas sold or transported from the premises during the calendar year immediately preceding,after separately reporting the selling price at the wellhead of all oil or gas delivered to the United States government or any agency thereof,the state of Colorado or any agency thereof,or any polit- ical subdivision of the state as royalty during the calendar year immediately preceding. "(II)Any nonoperating interest owner in an oil or gas well may,on or before the fifteenth day of March each year,submit to the operator by certified mail a report of the actual net taxable revenues received at the wellhead C 2011 Thomson Reuters.No Claim to Orig.US Gov.Works. 3 http://web2.westlaw.com/print/printstream.aspx?sv=Split&pi ft—HTMLE&fn=_top&mt—Co1... 4/6/2011 Page 2 of 8 WestLaw C.R.S.A. § 39-7-102 Page 1 C West's Colorado Revised Statutes Annotated Currentness Title 39. Taxation Property Tax cg Valuation and Taxation '\J Article 7.Valuation of Oil and Gas Leaseholds and Lands(Refs &Annos) §39-7-102.Valuation for assessment (1)Except as provided in subsection(2)of this section,on the basis of the information contained in such state- ment,the assessor shall value such oil and gas leaseholds and lands for assessment, as real property, at an amount equal to eighty-seven and one-half percent of: (a)The selling price of the oil or gas sold therefrom during the preceding calendar year, after excluding the selling price of all oil or gas delivered to the United States govemment or any agency thereof,the state of Color- ado or any agency thereof, or any political subdivision of the state as royalty during the preceding calendar year; (b)The selling price of oil or gas sold in the same field area for oil or gas transported from the premises which is not sold during the preceding calendar year,after excluding the selling price of all oil or gas delivered to the United States government or any agency thereof;the state of Colorado or any agency thereof, or any political subdivision of the state as royalty during the preceding calendar year. (2)In order to promote the initiation or continuation of secondary recovery,tertiary recovery,or recycling projects which conserve and avoid waste of oil and gas,the assessor shall value oil and gas leaseholds and lands employing such projects for assessment as provided in subsection(1)of this section but at an amount equal to seventy-five percent of: (a)The selling price of the oil or gas sold therefrom during the preceding calendar year,after excluding the selling price of all oil or gas delivered to the United States government or any agency thereof,the state of Color- ado or any agency thereof, or any political subdivision of the state as royalty during the preceding calendar year; (b)The selling price of oil or gas sold in the same field area for oil or gas transported from the premises which is not sold during the preceding calendar year,after excluding the selling price of all oil or gas delivered to the United States govemment or any agency thereof,the state of Colorado or any agency thereof, or any political subdivision of the state as royalty during the preceding calendar year. CREDIT(S) ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. 4 http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 5 . Yuma County BOE v. Cabot Petroleum , 856 P .2d 844 (Colo. 1993 ) Page 2 of 8 West[aW Page 1 856 P.2d 844 (Cite as: 856 P.2d 844) H 371 Taxation Supreme Court of Colorado, 371111 Property Taxes En Banc. 371111(H)Levy and Assessment 371III(H)5 Valuation of Property YUMA COUNTY BOARD OF EQUALIZATION, 371k2569 k. Additional or Supple- and Board of Assessment Appeals of the State of mental Assessment and Original Assessment of Colorado,Petitioners, Property Omitted. Most Cited Cases v. (Formerly 371k362) CABOT PETROLEUM CORPORATION,Re- Gas well owner's annual statements regarding spondent. selling prices were both willfully false and mislead- ing, warranting retroactive assessment of property No. 92SC597. taxes, where owner reported price paid, rather than July 26, 1993. greater price due from buyer pursuant to contract Rehearing Denied Aug. 23, 1993. on which owner brought successful suit against buyer; owner's actions regarding lawsuit and letters Gas well owner appealed county board of to royalty interest owners regarding litigation re- equalization's retroactive assessment of additional vealed that owner knowingly reported selling prices property taxes against owner's oil and gas leasehold that it did not believe to be the selling price. West's interests. The State Board of Assessment Appeals C.R.S.A. §§ 39-7-101, 39-7-101(1)(d), upheld the assessment, but reduced the total amount 39-7-102(1)(a),39-7-104 to 39-7-106. of additional taxes. Taxpayer appealed, and board of equalization cross-appealed. The Court of Ap- [21 Taxation 371 X2525 peals, 847 P.2d 152, reversed and remanded. Grant- ing certiorari, the Supreme Court, Vollack, J., held 371 Taxation that: (1) well owner's annual statements regarding 371II1 Property Taxes selling prices were both willfully false and mislead- 371III(H) Levy and Assessment ing, warranting retroactive assessment of property 371III(H)5 Valuation of Property taxes, and (2) term "selling price," within meaning 371k2520 Valuation of Particular Real of property taxation statutes addressing valuation of Property oil and gas leaseholds and lands, refers to amount 371k2525 k. Mineral or Mining of money actually received by well owner or oper- Property.Most Cited Cases ator, though there may be cases in which actual (Formerly 371k348.1(5)) selling price received is not ascertained until after Term "selling price," within meaning of prop- completion of lawsuit or after specified calendar erty taxation statutes addressing valuation of oil year has ended, in which case owners or operators and gas leaseholds and lands refers to amount of must inform tax assessor of dispute in annual state- money actually received by well owner or operator, ments. though there may be cases in which actual selling price received is not ascertained until after comple- Reversed and remanded. tion of lawsuit or after specified calendar year has ended, in which case owners or operators must in- West Headnotes form tax assessor of dispute in annual statements. West's C.R.S.A. §§ 39-7-101 to 39-7-108. [1] Taxation 371 X2569 [3] Statutes 361 €--'181(1) ©2011 Thomson Reuters.No Claim to Orig.US Gov. Works. http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 3 of 8 Page 2 856 P.2d 844 (Cite as: 856 P.2d 844) 361 Statutes tion (BOE) and the Board of Assessment Appeals 361V1 Construction and Operation of the State of Colorado (BOAA), petition from the 36I VI(A)General Rules of Construction court of appeals opinion in Cabot Petroleum Cor- 361k180 Intention of Legislature poration v. Yuma County Board of Equalization, 361k181 In General 847 P.2d 152 (Colo.App.1992), wherein the court 361k181(l) k. In General. Most of appeals determined that certain property tax as- Cited Cases sessments imposed on oil and gas leasehold in- When construing statutes, it is Supreme Court's terests were impermissibly retroactive and could primary task to give effect to intent of General As- not stand. We reverse and remand for further pro- sembly. ceedings consistent with this opinion. 141 Statutes 361 G X223.2(.5) I. On May 13, 1982, Cabot Petroleum Corpora- 361 Statutes tion (Cabot) entered into a gas purchase contract 361V1 Construction and Operation with Cities Service Gas Company wherein Cabot 361 VI(A) General Rules of Construction agreed to sell a proportionate share of gas produced 361k223 Construction with Reference to from wells owned by Cabot on certain oil and gas Other Statutes leases on land located in Yuma County, Colorado. 361k223.2 Statutes Relating to the F"' The price term of the contract stated in part as Same Subject Matter in General follows: 361k223.2(.5) k. In General. Most Cited Cases FN1. Some of the wells were located in Kit Supreme Court construes statutes related to Carson County,Colorado. same subject matter in pari materia, in order to give consistent, harmonious and sensible effect to all of (a) For gas received during the month of April, their parts. 1982, the price shall be three dollars and nine and three-tenths cents ($3.093) per million *845 Benedetti and Dee, Robert H. Dee, Yuma (1,000,000)Btu's.F"'- County Atty., Wray and Francis A. Benedetti, Delray Beach, FL, for petitioner Yuma County Bd. FN2. The gas purchase contract specified of Equalization. that "Btu shall mean a British thermal unit, which is the amount of heat required to Gale A. Norton, Atty. Gen., Raymond T. Slaughter, raise the temperature of one pound of wa- Chief Deputy Atty. Gen., Timothy M. Tymkovich, ter one degree(1[degree] )Fahrenheit." Sol. Gen., Maurice G. Knaizer, Deputy Atty. Gen., and Larry A. Williams, First Asst. Atty. Gen., Gen. (b) For gas received during each succeeding Legal Services Section, Denver, for petitioner Bd. month thereafter, the price per million of Assessment Appeals of State of Colo. (1,000,000) Btu's shall be the applicable price de- termined in accordance with the Natural Gas Gorsuch, Kirgis, Campbell, Walker and Grover, Policy Act of 1978, as such price may be revised Robert J. Kapelke and Andrew D. Cohen, Denver, from time to time by the Federal Energy Regulat- for respondent. ory Commission. *846 Northwest Central Pipeline Corporation, later renamed Williams Natural Gas Company, Justice VOLLACK delivered the Opinion of the subsequently succeeded Cities Service Gas Com- Court. pany as the purchaser under the gas purchase Petitioners, Yuma County Board of Equaliza- C 2011 Thomson Reuters.No Claim to Orig.US Gov.Works. http://web2.westlaw.com/print/printstream.aspx?Sv=Split&pI fl—HTMLE&fn=_top&mt=Col... 4/6/2011 Page 4 of 8 • Page 3 856 P.2d 844 (Cite as: 856 P.2d 844) contract. are urging the judge to move our case more rap- idly so that our contract can be enforced as In January 1985, Williams Natural Gas Com- quickly as possible. pany (Williams) ceased paying Cabot the contract price for the gas. Shortly thereafter, Cabot com- menced an action against Williams in district court. FN3. See Northwest Central Pipeline In March 1985, Cabot sent a letter to its royalty in- Corp. v. JER Partnership, 943 F.2d 1219 terest owners,stating as follows: (10th Cir.1991). Under our division orders, we have been set- In October 1985, Cabot sent a third letter to its tling for your royalty share of gas from each well royalty interest owners indicating that Williams had you participate in at the unit price [Williams] again reduced the price for gas purchased, and that pays to Cabot. [Williams] began paying us less the decrease would be reflected as of August 1985. for the gas for January 1985 production and they have asserted our contract with them permits the On June 25, 1986, Cabot filed a second price reduction. amended complaint against Williams, contending that, since 1985, Williams purchased gas from Because of [Williams'] price reduction, your Cabot, but paid Cabot an amount three to four times March 1985 royalty check has been reduced to less than the price specified in the gas purchase the price for the gas paid to Cabot. contract. Cabot sought to recover the difference between the price paid and the contract price, Cabot is taking action through the courts to among other things. protect our mutual interests and we will continue to notify you from time to time of developments Approximately four years later, on December that may affect your payments. We regret the in- 14, 1988, Cabot and Williams entered into a settle- convenience to you that [Williams] has caused by ment agreement and release wherein Williams their price reduction. agreed to pay Cabot $6,200,000. Of the total, $4,700,000 represented value for gas sold to Willi- In May of 1985, Cabot sent a second letter to ams from February 1985 through September 1988. rN4 its royalty interest owners,stating the following: With reference to our letter to you dated March FN4. In 1988, Cabot's wells were "shut 22, 1985, please be advised that [Williams] has in," and no gas was produced in 1989 or again reduced the price they pay for gas from thereafter. An examination of the settle- wells in which you participate as a royalty owner. ment reveals that, from the period com- Because of [Williams'] price reduction, your mencing in November 1987 and ending in April, 1985 check has been reduced to the price April 1988, Williams paid Cabot the con- for the gas paid to Cabot. tract price for gas sold. Cabot has taken action against [Williams] in During the years 1986, 1987, and 1988, Cabot the District Court of Yuma County, Colorado. filed annual statements pursuant to section The case is titled Cabot Petroleum Corporation 39-7-101, 16B C.R.S. (1982), which requires all v. [Williams] and can be found at Case No. operators of oil or gas leaseholds to file a statement 85-CV-13. Although Cabot is vigorously prosec- showing "[t]he selling price at the wellhead of all uting the case, the Court has entered a temporary oil or gas sold or transported from the premises stay of proceedings because of a case filed by during the calendar year." § 39-7-101(1)(d), 16B [Williams], in U.S. District Court. [[[ FN3i We C.R.S. (1982).FN5 Cabot, however, reported the ©2011 Thomson Reuters.No Claim to Orig. US Gov. Works. 3 http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 5of8 Page 4 856 P.2d 844 (Cite as: 856 P.2d 844) actual amount received from Williams as the selling [Cabot] failed to report for the years 1986, 1987 price, despite the *847 existence of the contract and 1988." The new tax assessment was estimated price term. Thus, during the years 1986, 1987, and in the amount of$315,511. 1988, Cabot paid real property taxes assessed on the amount actually received from Williams and not On August 25, 1989, Cabot protested the as- on the higher price. sessment by letter, which protest was subsequently denied. Cabot appealed the denial of its protest to FN5. The information contained in the an- the BOE, and the BOE subsequently issued a report nual statement provides the basis upon on October 31, 1989, wherein the BOE noted that which the county assessor values oil and Cabot received $4,700,000 "as an adjustment to the gas leaseholds for the purpose of real prop- well head price of gas produced by Cabot" during erty taxation. See § 39-7-102, 16B C.R.S. the years 1986, 1987, and 1988. The BOE denied (1982). Cabot's protest to the new tax assessment in the amount of$315,511. On February 24, 1989, Cabot mailed a fourth letter to its royalty interest owners stating that Cabot appealed the determination to the "Cabot has communicated with you from time to BOAA. After a hearing, the BOAA concluded that time concerning its litigation against Williams ... the Yuma County Board of Commissioners had the for their action in reducing the price paid Cabot for authority to retroactively impose ad valorem taxes gas sales from our wells in Yuma County, Color- upon Cabot for the years in question, pursuant to ado."Cabot continued, stating that section 39-5-125, 16B C.R.S. (1982), and to Chew v. Board of Assessment Appeals, 673 P.2d 1028 Cabot has reached a settlement of its litigation (Colo.App.1983).FN7 The BOAA additionally con- against Williams, which results in the enclosed eluded that Cabot, check for your share of the added payment for royalty from gas sales.... The value of the addi- FN7. Section 35-5-125, 16B C.R.S. (1982), tional price is shown in the appropriate line on permits assessors to retroactively assess your check and is computed after reduction by taxes when taxable property has been omit- the amount necessary to pay ... ad valorem taxes. ted from an assessment roll. In March, the Yuma County Assessor learned the royalty interest owners, and the Assessor did that Cabot had received $4,700,000 from Williams not consider the price paid by Williams for the in settlement of its claims against Williams.FNO gas the true "selling price." It is undisputed that the "selling price" was three to four times greater FN6. The Yuma County Assessor, Roberta than that paid by Williams, and, because of that, Helling, testified at a hearing before the [Cabot] sued Williams for the difference between BOAA that she was a royalty interest own- price paid and contract price. er in this case and did receive the letters The BOAA determined that the $4.7 million set- from Cabot. tlement should be reduced by litigation costs and expenses prior to being assessed for taxes. The On August 7, 1989, the Yuma County Assessor BOAA stated that "such costs and expenses shall provided Cabot with "new tax notices for the years be prepared, submitted, and verified by [Cabot's] 1986, 1987 and 1988, showing the adjusted taxes counsel." The BOAA entered an order on March based on the 4.7 million dollar settlement for gas 25, 1991,setting the total tax due at$200,967.40. production revenue received from Williams" The assessment was made "on gas revenue which Cabot appealed to the court of appeals, and the ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. A http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 6 of 8 Page 5 856 P.2d 844 (Cite as: 856 P.2d 844) BOE filed a cross-appeal. The court of appeals con- icle 7 is to ensure that real property is uniformly eluded that "the retroactive property tax assess- taxed, premised on uniform assessment of property ments are unlawful because there was no statutory values. See Colo. Const. art. X, § 3 (each property authority for the assessor to make such assessments tax levy shall be uniform upon all real and personal under the circumstances" of the present case. Cabot property); see also Denver Urban Renewal Auth. v. Petroleum Corp. v. Yuma County Board of Equaliz- Byrne, 618 P.2d 1374 (Colo.1980) (holding that the ation, 847 P.2d 152, 154 (Colo.App.1992). The burden of property taxation must be uniform on the court of appeals premised its conclusion in part on same class of property within the jurisdiction levy- the fact that Cabot did not omit property from its ing the tax); Citizens' Comm. for Fair Property annual statement. The court of appeals found that Taxation v. Warner, 127 Colo. 121, 254 P.2d 1005 sections 39-5-125 and 39-10-101(2)(a), 16B C.R.S. (1953) (holding that the assessment of all property (1982), "authorize retroactive assessments of addi- throughout the state be relatively uniform and at its tional property taxes only against `omitted property true and just cash value). Under Article 7, assessors ' and not against `omitted value. ' " *848 Id. at 155. "shall value ... oil and gas leaseholds and lands for The court of appeals additionally rejected the assessment, as real property, at an amount equal to BOE's argument that it had authority to retroact- eighty-seven and one-half percent of: (a) The ively impose ad valorem taxes on the ground that selling price of the oil or gas sold therefrom during Cabot's annual statements were "willfully false and the preceding calendar year." § 39-7-102(1)(a), 16B misleading."Id. C.R.S. (1982). Accordingly, every operator of any oil or gas leasehold must "sign under the penalty of The BOE sought review in this court, raising perjury in the second degree, and file with the as- several issues for our review. sessor of the county wherein such oil and gas lease- holds or lands are located a statement ... showing: II. ... (d) [t]he selling price at the wellhead of all oil or [1] The first issue on which we granted certior- gas sold." § 39-7-101(1)(d). ari is The act emphasizes the requirement of accur- [w]hether the court of appeals erred in its opin- acy in the content of annual statements by punish- ion that §§ 39-7-104 and -105, I6B C.R.S. ing as second degree perjury any false statement (1982), do not permit retroactive assessments for willfully and knowingly made in a mandatory annu- ad valorem taxes when the gas leaseholds had not al statement. § 39-7-106, 16B C.R.S. (1982). Addi- been correctly valued because of actions taken by tionally, if an assessor discovers that a statement, or the taxpayer. any part of an annual statement filed, is "willfully false or misleading," the assessor may then re-value The BOE and BOAA contend that the court of and re-assess taxes on the same property "on the appeals erred in its determination that sections basis of the best information available to and ob- 39-7-104 and 39-7-105 are "inapplicable and tamable by him[or her]." § 39-7-105, §39-7-104. provide no authorization for the retroactive assess- ments in this case." Cabot, 847 P.2d at 156. We In the present case,the BOAA found that Cabot agree, and conclude that those sections permit the retroactive assessment of taxes in the present case. did not consider the price paid by Williams for the gas the true "selling price." It is undisputed Sections 39-7-104 and 39-7-105 are part of that the "selling price" was three to four times Article 7 of Title 39, which governs the valuation greater than that paid by Williams, and, because of oil and gas leaseholds and lands for the purpose of that, [Cabot] sued Williams for the difference of property taxation. Generally, the purpose of Art- ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. i http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 7 of 8 Page 6 856 P.2d 844 (Cite as: 856 P.2d 844) between price paid and contract price. sider whether These findings, which are supported by the re- the term "selling price," as used in §§ 39-7-101 cord, reveal that Cabot knew that it was not accur- to -108, I6B C.R.S. (1982), means the amount of ately reporting the selling price as required by sec- money actually received by the owner or operator tion 39-7-101 when it filed animal statements in the at the time the oil or gas is delivered from the years in question. wellhead, or the amount of money that is provided in a contract of sale between the owner A lawsuit regarding the disputed contract or operator and the purchaser of the oil or gas and selling price was commenced in 1985. Approxim- collected under the contract at a later date. ately four years later, in December 1988, Cabot entered into a settlement agreement with Williams. We find that the term "selling price" refers to During that four-year period, Cabot sent letters to the amount of money actually received; we con- its royalty interest owners, informing them of the dude that, when purchasers and sellers dispute the status of the litigation initiated in order to recover selling price, it is incumbent upon the seller to in- the difference between the contract price and the form the assessor of such dispute. price Cabot received. *849 Cabot's actions, with re- spect to the lawsuit and to the letters, reveal that As previously noted, under section 39-7102, Cabot knowingly reported selling prices that it did "the assessor shall value ... oil and gas leaseholds not believe to be the selling price in its annual and lands for assessment, as real property, at an statements. amount equal to eighty-seven and one-half percent of: (a) The selling price of the oil or gas sold there- We thus disagree with the finding of the court from during the preceding calendar year." § of appeals that "nothing in the record would war- 39-7-102(1)(a). The assessor's valuation is rant a finding that [Cabot] filed willfully false and premised upon the owner or operator's annual state- misleading annual statements." Cabot, 847 P.2d at ment filed pursuant to section 39-7-101. 156. We find that Cabot's annual statements were both willfully false and misleading when con- These statutory provisions are part of the stat- sidered in light of the purposes of the statutory utory scheme regulating the imposition of property scheme. See Goebel v. Department of Institutions, taxes. In section 39-1-101, the General Assembly 830 P.2d 1036, 1040 (Colo.1992) (holding that this has declared that "it intends to prescribe methods court's primary task in construing statutes is to give by which the actual value of all taxable property in effect to the intent of the General Assembly; we the state shall be determined, and to fix the percent- first look to the language of the statute and give age of such determined actual value at which all words their commonly accepted meanings); Dunlap such property shall be assessed for taxation." § v. Colorado Springs Cablevision, Inc., 829 P.2d 39-1-101, 16B C.R.S. (1982) (emphasis added). 1286, 1298 (Colo.1992) (holding that this court With respect to real property other than oil and gas should adopt a construction that best effectuates the leaseholds and lands, the General Assembly has purposes of a legislative scheme); Webster's Third provided that "[t]he actual value of such property ... New International Dictionary 819, 1444 (1969) shall be that value determined by consideration of (defining misleading as "so vague as to be really the following factors, insofar as the same are ap- meaningless, if not inaccurate," and defining false plicable to any property: ... market value in the or- as"not corresponding to truth or reality."). dinary course of trade." § 39-1-103(5)(a), 16B C.R.S. (1982). III. [2] We additionally granted certiorari to con- [3][4] When construing statutes, it is our ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 Page 8 of 8 Page 7 856 P.2d 844 (Cite as: 856 P.2d 844) primary task to give effect to the intent of the Gen- ceived during the preceding year. eral Assembly. Goebel, 830 P.2d at 1040; Dunlap, 829 P.2d at 1298. We construe statutes related to Whether the taxpayer is entitled to an exemp- the same subject matter in pari materia, in order to tion from ad valorem taxation pursuant to article give consistent, harmonious, and sensible effect to X,section 3 of the Colorado Constitution. all of their parts. Dunlap, 829 P.2d at 1298; Wal- green Co. v. Charnes, 819 P.2d 1039, 1043 With respect to the first issue, the BOE and the (Colo.1991). We conclude that the term "selling BOAA contend that the court of appeals erred in price" refers to the actual amount of money re- determining that omitted value of property is the ceived by the owner or operator for the sale of oil equivalent of omitted property for the purposes of or gas, as it is the value most closely indicative of section 39-5-125, 16B C.R.S. (1982), and that the market value in the ordinary course of trade. See settlement should be taxed accordingly. With re- Cecil L. Smith, Federal Taxation of Oil and Gas spect to the latter issue, the BOE and the BOAA Transactions § 13.03, at 13-4 (1987) ("Perhaps the contend that the effect of the court of appeals opin- best evidence of the value of a producing oil and ion is to give Cabot an exemption from property gas property is the price for which it was sold in an taxation during the years in dispute, which is not arm's length sale within a short *850 time of the legally justifiable. valuation date."). The actual selling price most closely effectuates the General Assembly's ex- Since we conclude that Cabot must pay prop- pressed intent that the actual value of property erty taxes as assessed under sections 39-7-105 and should serve as the basis for real property tax as- 39-7-104, we do not address these issues. The judg- sessments.See§ 39-1-101. ment of the court of appeals is reversed, and the case is remanded for further proceedings consistent We note, however, that there may be cases with this opinion. such as the present case where the actual selling price may not be determined within one calendar Colo.,1993. year; for example, when owners or operators dis- Yuma County Bd. of Equalization v. Cabot Petro- pute the actual amount of the selling price, or cases leum Corp. when owners or operators agree to accept delayed 856 P.2d 844 payments. In such cases, the actual selling price re- ceived may not be ascertained until after the com- END OF DOCUMENT pletion of a lawsuit or after a specified calendar year has ended. In these cases, it is incumbent upon owners or operators of oil or gas leaseholds and lands to report this information in mandatory annu- al statements, in order to accurately reflect the selling price of all oil or gas sold. IV. We granted certiorari to consider the following additional issues: Whether taxable property has been omitted from the assessment rolls where the owner of an oil or gas leasehold intentionally reports only that portion of the selling price that is actually re- ©2011 Thomson Reuters.No Claim to Orig.US Gov.Works. http://web2.westlaw.com/print/printstream.aspx?sv=Split&prft=HTMLE&fn=_top&mt=Col... 4/6/2011 6 . 10/ 19/2010 Letter from Redmond & Nazar, L.L.P . 10/20/2010 16:13 FAX 316 262 9006 JOSEPH & HOLLANDER 2002 , 4, l Redmond & Nazar, L.L.P. Attorneys at Law ROWE)J,NAZAR 245 North Waco,Suite 402 NICHOLASILGRILLOI' MARTIN R.UFFORD sr h'ta,Kansas 67202 JEFFREY W.ROCKET(' W,THOMAS GILMAN PATRICIA A.OILMAN (316)262.8361 Telephone (316)263.0610 Facsimile osOP OUNIL SSEI.I. OWEN J.REDMOND. SENDER'S EMAIL:n,&riIloi(ulwt{ron}Iniw.ar.<gnl (19I9-inn) October 19, 2010 Michael A. Priddle Joseph&Hollander,P.A. 500 North Market Street Wichita, KS 67214 Re: Central Kansas Crude,LLC; Chapter 11 Bankruptcy Case No. 09-13798 Dear Mike: I am in receipt of your e-mail dated September 30,2010 and your follow up e-mail of October 8, 2010. I apologize for the delayed response,however,between your September 30,2010 e-mail and your email of October 8, 2010 email,it was my intent to file the Disclosure Statement and Plan so that we will resolve your questions. However, I have been unsuccessful in doing so. I am also writing this letter as a much better avenue to outline these positions than in an e-mail. To answer your questions regarding the proposed settlement of adversary claims of Oklahoma and Kansas producers,it is my estimation that approximately 5.8 million dollars of that money will be paid out to Oklahoma and Kansas producers on their July claims only. It is also my anticipation, that administrative claims in this matter will be at a minimum, and may be approximately $50,000.00 at best. Then remains unsecured priority creditors, namely the Kansas Department of Revenue,which is owed approximately$350,000.00 and the Oklahoma Tax Commission,which has an estimated claim of$133,000.00. That amount will be applied to the remaining funds leaving approximately,$1,000,000.00 dollars to distribute to unsecured creditors on a pro rata basis. The unsecured creditors in this particular case will include Oklahoma and Kansas producers for their June 2010 production, all trade creditors of Central Kansas Crude, and all claims relative to Colorado producers. Please let me know if you have any questions. Very truly yours, REDMOND &NAZAR, L.L.P. Nicholas R. Grillot NRG/dmh • . a 7 . Notice to Creditors from Bankruptcy Court - IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF KANSAS IN RE: Central Kansas Crude, LLC Case Number: 09-13798 Chapter : 11 Debtor(s) NOTICE TO CREDITORS AND OTHER PARTIES IN INTEREST Notice is hereby given that the Debtor has filed a Disclosure Statement Dated October 21, 2010, and a Chapter 11 Plan, Dated October 21, 2010. The Honorable Robert E. Nugent, United States Bankruptcy Judge, has directed that all creditors listed and those not listed but filing claims herein, and the United States Trustee be noticed and supplied a copy of the Disclosure Statement, and Chapter 11 Plan. Separate evidentiary hearings will be held on December 14, 2010 beginning at 9:00 a.m. before the United States Bankruptcy Court, 150 U. S. Courthouse, 401 N. Market, Wichita, Kansas. A hearing on the Disclosure Statement will begin at 9:00 a.m. on that date. Should the Disclosure Statement be approved, a confirmation hearing may be immediately convened. Based upon a preliminary review, the Court has approved the Disclosure Statement, subject to objections as hereinafter provided. All objections to the Disclosure Statement should be in writing and filed with the Clerk of the Bankruptcy Court, 167 U. S. Courthouse,401 N. Market,Wichita, Kansas 67202 on or before December 6, 2010 and served upon counsel for the Debtor. If no objections to the Disclosure Statement are timely filed or received, the Disclosure Statement may be approved without further hearing. All objections to the Chapter 11 Plan should be filed with the Clerk of the Bankruptcy Court, 167 U. S. Courthouse, 401 N. Market, Wichita, Kansas 67202 on or before December 6, 2010 and served upon counsel for the Debtor. There should be mailed to all parties in interest, or parties required to receive notice by the Code, on or before November 8, 2010 a copy of this Notice and appropriate forms for the acceptance or rejection of the Plan. December 6, 2010 is fixed as the last day for receipt of acceptances or rejections of the Chapter 11 Plan. All BALLOTS must be received by prior to 4:00 p.m. on that date to be counted. Certificate of Service of such mailing should be filed by November 15, 2010. DATED AT WICHITA, KANSAS THIS 26th DAY OF OCTOBER, 2010. s/ ROBERT E. NUGENT United States Bankruptcy Judge Case 09-13798 Doc# 222 Filed 10/26/10 Page 1 of 1 Hello