Assessment protest

[Cindy_Frakes]

I filed notice with Reeves Co of my intention to protest, based on income vs assessment. We were not taxed last year and now they want to double whammy us. Is this normal? Typical? Fair? I received their form today of information they require and I’m not sure it’s worth it. Should we get an atty or landman to help? Very confused about this process. I served on our county vsluecadjustemt board for several years so understand how protestsxwork but I’m wondering if this is even worth it.

[J_Walker]

My understanding of the method mandated by the Texas State Comptroller, is that the Discounted Cash Flow approach is used to evaluate producing minerals. It includes factors a) production decline rate, b) average price for preceding 12 months c) lease operating expense and d) discount rate. You would more likely need a Texas ad valorem mineral appraisal professional than a landman or attorney for that. I have protested before on value, but luckily the O&G company themselves protested and the value was reduced, as I do not have the experience to determine or defend a value. I have been successful on less subjective protests, such as an incorrect decimal interest. Also, in regard to the “double whammy”, an appraisal district can go back 4 years to supplement omitted property. When you say last year, was the well producing as of January 1, 2021? If so, there could be a supplemental assessment for the 2021 tax year if it had been omitted.

[Cindy_Frakes]

Thank you J_Walker, for your reply. Yes, the well was producing in Jan 21 but no production for the next 5 months due to a Maintenence issue and difficulty getting replacement parts. Are taxes based on Jan production (someone mentioned that) or annual production? I appreciate your insight.

[NMoilboy]

The nice thing is that ANY protest by any owner that is successful will affect ALL of the owners. The biggest owners have the most reason to protest. The biggest owners are the oil companies. Who have $ and professional tax folks who will protest these things regularly, particularly ones where there is a huge swing from year to year. Like J_Walker says above.

So, no, I would not hire people to protest for you. Ever. If there is a reason to protest, the operator is likely already protesting. I’ve submitted a few protests before I figured this out. If your lease had not been set up for taxes last year (but you got paid) then you are likely getting a legitimate assessment for the prior year.

[J_Walker]

Texas ad valorem taxes are based on fair market value as of January1 (If your house burns down the next day, you still pay on that valuation, for that year ) The FMV of a well goes as far into the future as the predicted paying quantities of that well, which is brought back to net present value, using the previously describes methods, from my understanding. All our wells had a huge jump in value, too. And as NMoilboy pointed out, the Appraiser let me know that they were working with the operator on the valuations, so I only protested the incorrect decimal interest on a well this year.