After searching through the threads for this topic, the most recent I could find was in May 2018. I started a new topic since that thread didn’t cover my specific questions. As a long time Reeves County mineral owner, but only a recent royalty recipient, I am confused by a tax notice I received today regarding appraised value.
It appears this notice is based on the well that began producing in October 2018, described on the form as “Pipeline State 58 10-3” (AB 5490, API 389-37243) which is part of a pooling agreement. The form shows 2018 value of “$O” and a 2019 value of “$85,020”. Estimated taxes are slightly over $1500 for the county, school district, county hospital and Reeves County OWCD.
I assume this notice and proposed taxes are calculated on the well valuation rather than the surface acreage.
So my question is…does this sound normal and what if any recourse do I have? Should I protest the valuation and if so, what do I base my protest on? I live out of state and have until May 30 to submit my protest to the Appraisal Review Board. At this point I really have no idea what I should do.
I protested for the first time last year. It is worth it to have the appraiser go back out and
verify or adjust his valuation. It doesn’t cost you anything to protest - just pick a reason like
valuation is too high.
Minerals are only taxed when producing, ie when wells have been drilled. Surface is taxed separately every year. Wells are taxed at calculated market value, similar to a building, on Jan 1 based on volumes, production decline rate, current oil price and estimated life of well.
Daniel, I’m assuming since that well started producing last October that by now you have signed a division order and started receiving royalty payments. I would first make sure Reeves County Appraisal District has your ownership percentage in that unit correct. In other words, compare what they are showing as your ownership interest on the appraisal notice to the decimal interest that was shown on your division order.
So far only five months of production from that well have been reported to Texas Railroad Commission (Oct '18 - Feb '19) so the appraisal district doesn’t have much data to based their value estimate on. It looks like a strong well but from its peak production level in December of about 725 BPD of condensate and 6 MMCF/day of gas, by February it had already declined to about 470 BPD and 4.4 MMCF/D. Assuming no downtime was involved that would be about a 30% decline in just two months.
The early months of a wells production are always the highest and if the appraisers aren’t taking that into account on this new well they could be overvaluing it. In cases like this the appraisers often have the operator provide updated production information so they will have more data to evaluate.
I definitely think it is logical to protest, or to at least contact the appraisal district and ask them for a copy of the backup calculations they used to arrive at that appraised value so you can decide if you want to protest. If going through this doesn’t help you this year you’ll at least be more knowledgeable about how things work next year when the impact of the decline rate will be more obvious.
Thanks very much for your thorough explanation! Very helpful for the novice receiving royalties for the first time. I will definitely look into how the appraisal district arrived at their valuation numbers.
You may be able to save a step by contacting Capital Appraisal Group the outside consulting firm in Austin that does all the mineral appraisals for Reeves and lots of other counties.
Their website www,cagi.com gives information on how their mineral appraisals are made. It shows the consultant in charge of Reeves Co. is named Trent Johnson. I haven’t work with him but in a couple of other counties that Capital handles I’ve been able to get backup information by emailing the person handling the county and sometimes have been able to work out reductions without having to file a protest. It will probably be hard to get Johnson on the phone but you might try calling their central number 512-346-5480 and ask for his email address. I’d try emailing him your account number and asking him to send you the backup on your appraisal. If it turns out Capital based their valuation on only a few months of actual production you can request that they contact the operator for an update on the volumes so they will have more history on the decline rates.
Great info. I will follow your suggestions as that certainly seems like a realistic first step. I have read that wells coming online in the late part of the year, particularly the fourth quarter, are generally over valued by appraisers. Will let you know what I find. Thanks!
I protested my Reeves County appraisal last year. Capital Appraisal went back to review.
You’ll have a very hard time reaching the Appraiser. My protest resulted in my valuation being
lowered.
Haven’t received mine yet for two different wells in sections that went on-line, one the last half of 2018, One in December 2018. I’m sure I’ll be protesting. Although I’ve never protested a Texas County before other than my own homestead in Central Texas. The experience should be similar though I hired someone to protest for me at my home. In Reeves I’ll be flying solo.
Your first shot is to go ahead and file the protest by the deadline (check the box “incorrect appraised (market) value”. Then I would contact the operator of the well to see if they are protesting their Working Interest Value (as they probably should). If they get their appraised value lowered, then it should pass along to the royalty owners as well. (exception- if they got their value lowered because they got the appraiser to increase their Lease Operating Costs, this will probably not change your royalty valuation).
My experience has been, unless you own large royalty interest, you will not have as much “clout” with the appraiser as the working interest operator has…
We have two wells that started producing in 2018. We have not received the tax valuations information on either well that are in different sections. I thought we should have received something by now that we could contest if warranted???
What is Reeves County Appraisal district going to do just send out tax bills when they come due at the end of the year? Without the ability to contest?
You are "Lucky". This year I was presented with a tax bill that started in 2016 for the 1st well and the second in 2017! For several years I could not believe that our property taxes did not increase until this year. Thank God they finally caught us! We were beset by some huge taxes that the Reeves County Appraisal and the Reeves County Tax Authorities levelled on us when they got caught up!
These were not a pleasant surprise, needless to say! This year was a very tough year for sure!
Did they charge you back taxes when they finely realized exactly what was the situation?
In my case, realestate is improperly designated. I have been trying for 8 months to get the percentage of ownership corrected with them. We have not seen drilling yet, but have several complications regarding the top real estate come up this year. There are 5 other owners besides me. 3 of them have tried to make shaky deals/misrepresentation of percentage of ownership, based on the incorrect tax information. Fortunately, the proposed “buyers” did their home work and looked beyond the tax records.
We received six appraisal notices this past week from Reeves County Appraisal District. Our wells are producing nearly all natural gas with some condensate. Like others our royalties started dropping after a few months - our first check was received in Sept 2018. The checks we are receiving now are 1/4 the value of the original ones. Would it be likely we might be good candidates for re-appraisal?
You should be receiving (or have received) tax notices this week or so from Reeves County. If you don’t get them by next week, I would contact Reeves County Appraisal District or Capital Appraisal Group.
If your wells are horizontals, I would expect the production to rapidly drop off in the first few months after they started producing. As far as valuation for property taxes, the first thing I would do is call the operator and see if they protested the values. They may have settled with the appraisal district before the notices went out.