Just received my Notice of Appraised Value for my mineral rights in Ward County. For 8 different wells, 2021 appraisal was $8,000 to the 2022 appraisal of $12,000. Added a new well appraised at $6000. I am interested in whether appealing is warranted and if so what would be the reasoning required other than too high? My Ward County Tax bill was $65 for 2021 which if tax rate is the same, the 2022 tax would be about $150. That does not appear to me to worth the effort. Comments?
You can ask the appraisal district for a copy of the document that was used to determine the appraisal amount. It is usually some variant of their guestimation of what you received in royalties. If your tax bill is that high, you might have some money in suspense that you don’t know about.
Thanks for your reply. On looking at the increases on each well, the majority of the increased valuations were from operators where I had received substantial back royalties in January 2022. How close are the Ward County appraisals to market value?
The Notice gives you the website for Pritchard & Abbot which does the valuations. Select Mineral Property Appraisals and Mineral Owners. Log in with your owner number and the password on the notice. Be sure to select Ward County. You can download the property reports and that provides the basis for the valuation for each well or group of wells referencing the RRC lease number. The main factors for increased valuation is that the average oil price in 2021 (basis for 2022 appraisal value) was significantly higher than the average oil price in 2020 for 2021 appraisal value.
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What is the time it takes to deal with this issue, worth? The maximum you could save would be $85 if they rolled it back to the 2021 rate. Also, I think you should first question the reason for the increase before you conclude the 2022 bill is too high. There may be good reason for it at which time, you would be wasting your time to appeal.
I spoke with Prichard and Abbot last week and they said the valuation was based on perceived royalties for 2022-2026. As he explained it to me, the valuation is based on what we could sell the royalties for to a potential buyer. The oil value they used was $65 a barrel. A few of the properties we haven’t received royalties on in several years. We have until June 6 to appeal.
I have looked at the 2022 Ward County Appraisals vs 2021. 2021 used $41.20 per bbl and 2022 used $70.62 per bbl. That is a 70% increase! My appraisal went up 50% That looks reasonable. I was concerned after seeing all the noise on Reeves County Taxes. I have not got that one yet!
Still, I have the question about market value.
How well does the Ward County Appraisal reflect on market value?
Texas Tax Code 23.175 sets parameters for the valuation of producing minerals. Price is average of monthly price during previous calendar year multiplied by the price adjustment factor (PAF) for 2022 which is projection set by U.S. Energy Information Administration. For 2022, PAF for oil 1.0456 and PAS for gas is 0.9693. For 2022 appraisal, if the average oil price in 2021 was $68 then multiplied by 1.0456 sets a starting price of $71.10 for the appraisal. The valuation reduces the price by 0.046 for severance taxes because the royalty owner is paid after severance taxes. The engineering valuation takes into account the projected decline of production volumes over time (steep early years and flattening out later), the present value of anticipated revenue stream (time value of money) and the economic life of the well. For new wells, the appraisers generally apply a 35 year life. That well life is reduced when the operator demonstrates that given the costs of operating, etc. that a more realistic economic life is significantly less, such as 12 or 15 years, beyond which the well will be plugged rather than operated. It is a best guess estimate of what someone would pay you today for the well. As you can see, in 2023, the 12 month average 2022 price will be much higher than the 2021 average price. If prices are falling at the end of 2022, then the PAF factor may drop below 1.00 and give some relief.
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