Header image

Leader in the Appraisal of

Complex Properties Since 1926

 
 
 
 
 
 
 



News & Interest

 

Oil and Gas Price Escalation Factors per Property Tax Code, Section 23.175

P&A has finalized the Section 23.175 calculation  required to derive the oil and gas price escalation scenarios for the 2017 tax year.

It should be noted the EIA has published a current Annual Energy Outlook (AEO) which can be used to calculate the Price Adjustment Factors (that are a part of the derivation of the year 1 price in our discounted cashflow appraisals of mineral interests) referencing prices published in Tables 12 and 13. The EIA's most recent version of their AEO can be found at http://www.eia.gov/forecasts/aeo/ .

In addition, see how these factors produce P&A's reference price forecasts  for oil and gas, with a comparison to the previous tax year's oil and gas price forecasts. The oil and gas price forcasts for tax year 2017 are more optimistic than for the previous tax year, particularly for oil. However, it should be noted that the valuation of mineral interests depends on more than price alone. Forecasts of oil and gas production and expense levels as of January 1 also figure prominently into the calculations. Expense levels tend to follow price movement in a lagging (less volatile) fashion, while production tends to decline over time as a natural result of changing reservoir conditions (pressure loss, recovery percentage, etc.). Therefore a price difference by itself does not fully indicate how current valuations will compare with valuations performed for any previous tax year.

As always, we welcome any thoughts or suggestions you have regarding our appraisal work, etc. We are here to serve the taxpayers in the most efficient, timely and fair manner possible.




Attorney General Letter Ruling OR2015-16025


Revisions to Tax Code Section 23.175, per SB 1985

Property Tax Code Section 23.175 (Oil and Gas Interest) has been amended once again by the Texas Legislature, in their 84th Regular Session in 2015, via SB 1985 , effective beginning tax year 2016. This “new and improved” version of Sec. 23.175 is essentially unchanged from the version we’ve had in place since 2012, the major exception being that the Price Adjustment Factor is to be calculated with reference to a different EIA publication (the “Short-Term Energy Outlook” (STEO), which is published monthly) rather than the “Annual Energy Outlook” (AEO) if the current year AEO is not published by March 1. SB 1985 specifies we use the current January STEO if or when this situation arises.

This bill also made some needed “house-keeping” language changes. What has not changed is that we're still starting with last year's average monthly price for each property, to which the Price Adjustment Factor is applied to derive the forecasted year-1 price. As always we’ll be making all these oil and gas price calculations on behalf of the chief appraiser in the normal course of fulfilling our contractual duties to appraise oil and gas mineral interests in each county we’re employed.

We welcome any thoughts or suggestions you have regarding all aspects of our appraisal work for property tax purposes. We are here to serve the taxpayers in the most efficient, timely and fair manner possible.


Appraising Mineral Interests in the Eagle Ford Shale

Pritchard & Abbott, Inc. was pleased to recently make a presentation to La Salle, Frio and Zavala county taxpayers in Cotulla, Texas, regarding the appraisal of oil and gas mineral interests for property tax purposes. Click on this << link >>  to view the PowerPoint presentation we showed last Friday, May 15, 2015. To view this file you may need to download free viewer software from Microsoft that works with PowerPoint "show" files:
Download Microsoft PowerPoint Viewer Here


New Economic Obsolescence Appraisal Policy for Pipelines

P&A is committed to the uniform and accurate appraisal of all pipelines. Beginning tax year 2015 we’ve instituted a new policy regarding pipelines we appraise using the Cost Approach. Specifically, we’re amending the way we provide for Economic Obsolescence (a form of depreciation) based on “utilization” (throughput versus capacity of the pipeline). Although we’re not amending the formula itself we’ve used for many years now (a variation of the Chilton equation), we are striving for more clarity in the throughput and capacity figures required in the formula. Please see this throughput appraisal policy memo  for details. Thank you for your understanding and cooperation. Please feel free to contact any of our utility appraisers if you have any questions.



New Hyperbolic Production Forecast Feature in P&A Mineral Appraisals


We've improved our production forecast abilities by incorporating a hyperbolic formula using parameters from Aries decline curve software. See this explanation  for more details.




Business Personal Property Renditions are due by April 15!

Rendition statements and property reports must be delivered to the chief appraiser after January 1 and not later than April 15, except as provided by Tax Code §22.02. On written request by the property owner, the chief appraiser shall extend a deadline for filing a rendition statement or property report to May 15. The chief appraiser may further extend the deadline an additional 15 days upon good cause shown in writing by the property owner.

Each year the comptroller and each chief appraiser shall publicize in a manner reasonably designed to notify all property owners the requirements of the law relating to filing rendition statements and property reports and of the availability of forms. A person required to render property or to file a report as provided by this chapter shall use a form that substantially complies with the appropriate form prescribed or approved by the comptroller.

Appraisal districts are not obligated to mail rendition forms to property owners, although many do only as a courtesy. Property owners can find and print approved rendition forms directly from the Comptroller’s website:

https://www.comptroller.texas.gov/taxes/property-tax/forms/

Which form to use depends on the type of property being rendered. Each form requires a property owner to furnish the information necessary to identify the property and to determine its ownership, taxability, and situs. A property owner can (but is not required to) furnish additional information on the form, including a good faith estimate of value. A tax agent (but not the property owner) is required to swear that the information provided in the rendition is true and accurate to the best of their knowledge and belief.

Substantial tax penalties can accrue for failure to timely file a rendition or if the property owner or agent is found to have committed fraudulent conduct in an inspection, determination, or other proceeding before the appraisal district.

More information is available in the Texas Property Tax Code, Chapter 22 (Renditions and Other Reports), such as what persons and which property is covered by this business personal property rendition law.



Outsourcing to Contract Appraisal / Software Firms

From time to time we get questions from clients (or potential clients) who want to know the functions or purpose of a private consulting firm like Pritchard & Abbott, Inc. What role(s) do appraisal and software firms have regarding ad valorem tax in Texas, when Appraisal Districts and taxing entities were specifically created by the Texas legislature to handle these matters? See this outsourcing discussion  for more details.




Web Links:

    APPRAISAL DISTRICT DIRECTORY

    LEGISLATIVE                                     ORGANIZATIONS - TEXAS

    OIL/GAS ASSOCIATIONS                    RAILROAD COMMISSION OF TEXAS                   

    OIL/GAS PRICING                               SEARCHERS / MAPS