Signed 12/9/91







Petitioner, :







Respondent. )




This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Paul F. Iwasaki, Administrative Law Judge and Presiding Officer, and Joe B. Pacheco, Commissioner, heard the matter for and on behalf of the Commission. Present and representing the Petitioner were XXXXX and XXXXX of XXXXX, XXXXX, XXXXX and XXXXX, Attorney's at Law. Present and representing the Respondent was XXXXX, Assistant Attorney General. Present and representing XXXXX and XXXXX Counties was XXXXX, Special Deputy Salt Lake County Attorney.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is property tax.

2. The period in question is XXXXX.

3. The Petitioner operates an oil refining facility, the majority of which is located in XXXXX County; however, a portion of it crosses into XXXXX County.

4. Sixty‑three percent of the oil refined at the refinery is equity crude. Equity crude is that crude oil which is owned by the Petitioner.

5. Of the 63% equity crude, 51% comes from wells located outside the state of Utah.

6. The crude oil delivered to the refinery is drawn from approximately XXXXX oil fields located in XXXXX. The number of wells from which production is drawn is in excess of that number.

7. The crude oil is delivered to the refinery primarily by connecting pipelines; however, some crude oil is delivered by truck.

8. Prior to XXXXX, the refinery had been assessed by XXXXX and XXXXX Counties. In XXXXX it was determined by the Property Tax Division of the Utah State Tax Commission that the refinery should be assessed by the Division as centrally assessed property.


The following property shall be assessed by the Commission at 100% of fair market values valued on January 1: (a) All property which operates as a unit across county lines, if the values must be apportioned among more than one county or state;...(f) All machinery used in mining, all property or surface improvements upon or appurtenant to mines or mining claims. For the purposes of assessment and taxation, all processing plants, mills, reduction works, and smelters which are primarily used by the owner of a mine or mining claim for processing, reducing, or smelting minerals taken from a mine or a mining claim, shall be considered appurtenant to that mining claim, regardless of actual location. (Utah Code Ann. '59‑2‑201.)


In the present case, the Petitioner argues that: (1) The refinery in question is not properly subject to central assessment under Utah Code Ann. '59‑2‑201; and (2) Even if the refinery was properly subject to central assessment, it should receive the 20% discount for intangible expenses which is given to locally assessed property under Article XIII, Section 2(I) of the Utah Constitution.

In support of its first argument, the Petitioner claims that a literal and strict reading of Utah Code Ann. '59‑2‑201(1)(f) requires that for a processing plant to be considered appurtenant to a mine, it must process minerals taken primarily from a single mine. The Petitioner goes on to argue the oil processed at its refinery comes from a number of different fields. Therefore, the Petitioner argues the refinery cannot be found to be appurtenant to a single mine.

At the outset, the Commission finds that the Petitioner's refinery is properly centrally assessed on the grounds that it operates as a unit across county lines as mandated by Utah Code Ann. '59‑2‑201(1)(a). The facts are not in dispute that a portion, albeit a small portion, of the refinery crosses into XXXXX County from XXXXX County.

Given that fact, and the fact that '59‑2‑201(1)(a) makes no distinction regarding the degree to which a property crosses a county line, the conditions for central assessment are clearly met.

Even if the Commission were to find that '59‑2‑201(1)(a) does not apply, the Commission rejects the Petitioner's argument regarding the "appurtenant" issue as being without merit. In Amax Maqnesium Corporation v. Utah State Tax Commission (No. 880251, filed July 18, 1990), the Utah Supreme Court addressed the appurtenant issue. In that case, the Petitioner operated a plant which extracted magnesium from the brine waters of the Great Salt Lake. The Petitioner owned the plant, however, the evaporation ponds from which the brine solution was obtained was located away from but near the plant along the shores of the Great Salt Lake.

The appellant argued, inter alia, that it was neither a mine nor a mine operation, and therefore, its facility should not be "deemed appurtenant" to a mining operation subjecting it to central assessment.

The Utah Supreme Court held that the plant was appurtenant to the mine (evaporation ponds) in that the plant and evaporation ponds functioned as a unit and the plant was generally dependent upon the ponds for the magnesium it produced. The Supreme Court went on to state "the integration of the plant and the evaporation ponds (mine) and the magnesium extracting process and the practical interpretation and literal wording of the statute make it clear that the Amax plant falls under the category of all property or surface improvements upon or appurtenant to mines or mining claims."

The Utah Supreme Courts holding in Amax is dispositive of the "appurtenant" issue in this case. Here the refinery and the oil fields are linked by pipeline and function as a unit with the refinery generally dependent upon the oil fields for the crude oil it refines. Therefore, the refinery is incorporated as a property or surface improvement upon or appurtenant to the Petitioner's mines.

The Petitioner's argument that '59‑2‑201(f) does not apply because part of the subsection is written in the singular rather than the plural is illogical and inconsistent when read in conjunction with the preceding sentence of that portion of the subsection. The preceding sentence states "...(f) All machinery used in mining, all property or surface improvements upon or pertinent to mines or mining claims" (emphasis added). Clearly, that sentence when read with the sentence cited by the Petitioner does not demonstrate the legislative intent to require all mineral production to come from a single mine as the Petitioner argues and only a tortured reading of the subsection in question could render such a result.

Turning next to the 20% issue, the Tax Commission finds that the Petitioner failed to present evidence with respect to the method of assessment used by the Tax Commission and by the county assessors, thereby leaving open the question as to whether or not similar valuation methods were used by the two entities which in turn led to different results. Therefore, the Petitioner failed to meet its burden of proof to prove by a preponderance of the evidence that it has been arbitrarily discriminated against when compared with locally assessed properties which were assessed by the same appraisal method.

Based upon the foregoing, the Tax Commission affirms the determination of the Property Tax Division. It is so ordered.

DATED this 9th day of December, 1991.


R. H. Hansen Roger O. Tew

Chairman Commissioner


Joe B. Pacheco S. Blaine Willes*

Commissioner Commissioner


NOTICE: You have twenty (20) days after the date of the final order to file a request for reconsideration or thirty (30) days after the date of final order to file in Supreme Court a petition for judicial review. Utah Code Ann. ''63‑46b‑13(1), 63‑46b‑14(2)(a).


*Since the hearing on this case, Commissioner G. Blaine Davis has been replaced by S. Blaine Willes. Commissioner Willes has been duly advised of the facts and circumstances regarding this case, and is qualified to sign this decision.