Study to review well-pad tax valuation methods
Colorado assessors plan to contract for a study that will help the state update how they value oil and gas well pad equipment for personal property tax purposes.
Garfield County is poised to play a lead role in funding the $94,000 study, which Garfield Assessor Jim Yellico said is designed to better account for multiwell pads, technological advances and other trends.
He said it’s not yet clear what if any change in valuation levels the update will bring. Garfield County’s 2013 tax abstract attributed about $162 million to the valuation of equipment on well sites. That compared to $350 million worth of residential property valuation in the county.
The current valuation method dates back to 1990 and is designed to prevent assessors from having to visit every well pad and value each tank, separator and other piece of equipment. Rather, working with the state property tax administrator, assessors came up with a well site basic equipment list that takes into account different geological basins, well depth, and whether gas or oil is being produced.
Yellico said that method has been updated over the years to reflect changes in equipment value. And there has been an attempt to reflect the fact that pads with multiple wells share some equipment, resulting in a lesser valuation ascribed to each well. But the state property tax administrator has told assessors it’s time to study what’s actually on well pads now, to account for changes in technology and well pad configurations.
Counties are being asked to contribute to the study based on the valuation of their well pads. Garfield has nearly 11,000 active wells, the second most in the state behind Weld County, and is being hit up for about $28,000 for the study, an amount Yellico said he expects county commissioners will approve.
He said it’s possible well pad equipment is being overvalued if more equipment is being shared between wells on pads, “but I’m not sure — we’ll have to look.”
He said the industry hasn’t complained about possible overvaluation, at least in Garfield County.
The industry has participated in the valuation process over the years to make sure it makes sense, and will be interviewed as part of the study, which will be undertaken by a company represented by an appraiser, petroleum engineer and geologist, Yellico said.
He said assessors plan to update their well-pad assessment process on a more regular basis going forward.
“We’re not going to wait 24 years to do this again,” he said.