In Texas, a royalty interest, as well as an overriding royalty interest and NPRI, in a producing well is considered to be real estate and is subject to ad valorem taxes. Method of valuation is based on fair market value, with statutory methods. The rates are high, just as with other real estate such as your house, largely because that is how elementary and secondary schools are funded. The way to reduce the tax rates is to get the Texas legislature to devise another way to raise money to fund schools.
Roy, I apologize for not replying until now. I’m not aware of any publication put out by the Comptroller’s office that folks such as you and I would understand. I was not involved with the mineral valuations when I worked for the Comptroller, but was an appraiser of primarily ranch properties. GAW
Pritchard & Abbott has handled valuations for counties for some time - they published an interesting set of FAQ’s that may provide some background.
Pritchard & Abbott, Inc. “Frequently Asked Questions (FAQs) Regarding the Ad Valorem Tax Appraisal of Oil and Gas Mineral Interests” March 24, 2017 http://www.pandai.com/faq/2017_Mineral_FAQ_for_Website_linked.pdf
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Thank you very much for this link. My family was surprised at how high our Appraisal was based on how the checks keep sinking lower and lower. Knowing this year’s appraisal is based on last year’s taxes and that Jan 1 is the day they decide also helps. The terrible drop in oil prices did not occur until March or so.
Well for oil, the big drop did not occur until March. For those of us with all NG wells, it dropped well before that. Hope this year’s appraisals reflect that. Our last check, if it was not for Apache’s catch up work for some condensates and such from 2018, would have been next to nothing for our 6 wells.