New Reeves County "income tax"

Texas statute sets the process for appraisals of wells.

Appraisals are based on the 12-month average oil and gas price for the well. Price data is compiled from sales revenue reported to Texas Comptroller CONG for severance taxes. Anyone can access this information on the CONG website based on the RRC lease number, or the permit number if the well is producing before the lease number is assigned. If there are not sales every month, then the average oil or gas price for each missing month is based on the county-wide well sales.

Well life is based on averages and value is calculated by decline curves over the years based on similar horizontal or vertical wells in same formations. Operators can get prove that the estimated economic life of a well is shorter than the physical life. That is the number of years over which the company can profitably operate the well, where demonstrated expenses will exceed potential revenues. There is a factor for increasing oil and gas prices over time which is set by the federal government. Texas statute specifies that this factor is used.

If the economic life is reduced then the assessed value of the well will be reduced for both the operator and for the mineral owners. Mineral owners can ask for the underlying data for each well and see how value is determined. If royalty checks have costs deducted and that is not on the appraisal, then copies of the check with costs can be provided to the appraisal company (not the Reeves County tax office) and value may be reduced.

Or if the royalty decimal is too large, then the mineral owner can provide the division order or check to show the correct decimal. It is time-consuming to sort through all the data on the wells and you only have about one-month to protest. You should ask for the detailed appraisal reports immediately after getting the Notice of Appraised Value in the spring.

There are services that will protest for mineral owners and the charge is a percentage of the reduction of estimated taxes for each well. In 2018, prices were falling and the 2019 taxes were based on the average price, not the end-of -the-year price. The 2019 prices are still lower and so the 2020 tax valuations will be reduced based on the pricing factor.

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