The West Virginia Department of Revenue (DOR) has decided not to assign assessed value to oil and natural gas wellpad sites in the state, heeding the advice of a special committee of county assessors that doing so would pose a hardship to farmers who own surface, but not mineral, rights to their land.
Ohio County Assessor Kathie Hoffman told NGI’s Shale Daily that the West Virginia Association of Assessors placed her and four other county assessors on the committee, which began meeting in February. She said officials with the DOR’s Property Tax Division had tasked the committee with trying to figure out where to peg the value of wellpad sites.
Hoffman said the state had initially suggested wellpads be carved out — a process known as a “county court split” — into parcels at least five acres in size and valued at $5,000/acre. A typical wellpad would therefore be appraised at $25,000. For reporting purposes, the wellpad would be in the state’s Class 3 tax category, and the other property would remain at Class 2.
But Hoffman said the committee was concerned farmers would be impacted if they had to pay an extra $25,000 a year in taxes. There was also the possibility that farmers could lose their Class 2 tax status or a tax exemption from farming, which requires at least $500 of income from farming on at least five acres of land, or $1,000 of farming income from more than five acres.
“In particular we were worried about the people that had signed leases a long time ago and sold the surface rights to someone else, as several people have done in Ohio County,” Hoffman said Wednesday. “The people that have the surface rights are the ones that have to put up with the drilling and the mess. And then we’re going to tax them on top of that? We all felt that wasn’t fair.”
According to the rates of levy by the West Virginia State Auditor, the state tax rate for 2012-13 is 50 cents/$100 of valuation for Class 2 property, and $1.00/$100 for Class 3 property. County, municipal and school district tax rates also double from one class to the other.
Hoffman emphasized that despite the decision on wellpad assessments, oil and natural gas operators were still subject to personal property taxes for their activities at drilling sites.
“We are not in any way releasing the oil and gas tax burden on those people at all,” Hoffman said, adding that the state has been supportive of the committee’s suggestion. “They are paying their fair share of it right now. We all didn’t feel that this should be the way this should be done [with assessments].”
According to the West Virginia Department of Environmental Protection, Chesapeake Appalachia LLC has permits to drill about 90 natural gas wells in Ohio County. None have been drilled so far.
“Gas and oil is new to us, especially up here in the northern panhandle,” Hoffman said. “We’ve just gotten the boom up here. We don’t have any producing wells in Ohio County and probably won’t for awhile because of the low natural gas prices. But production will be here some day.”
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