§ 592 — Determination of unit of production values

New York § 592

• Jurisdiction: New York
• Law RPT: Real Property Tax
• Title 5: Oil and Gas Economic Units
• Art. 5: Assessment Procedure

Text

§ 592. Determination of unit of production values. 1. (a) The\ncommissioner shall annually develop one or more economic profiles for\ngas and one or more economic profiles for oil for use in the\ndetermination of unit of production values. The establishment of more\nthan one economic profile for either gas or oil shall be based upon\ncommon factors such as geologic formation, geographic region, economic\nand cost characteristics of such profiles and such other criteria as the\ncommissioner may deem appropriate.\n (b) At least forty-five days prior to the tentative roll date each\nyear, the commissioner shall establish a tentative unit of production\nvalue for each economic profile and shall provide to appropriate local\nofficials and industry representatives notice of the tentative unit of\nproduction values. The commissioner shall conduct at least one public\nhearing to receive comments on the tentative unit of production values.\nAt least fifteen days prior to the tentative roll date, the commissioner\nshall certify to each assessor appropriate unit of production values for\nuse in the assessment of oil and gas economic units.\n (c) Unit of production values shall be based upon the average of\ntypical income, expense and operating data for five consecutive calendar\nyears beginning with the sixth calendar year preceding the year in which\nthe unit of production values are to be certified. In determining unit\nof production values, the commissioner shall use a discounted net cash\nflow approach in which gross income shall be reduced by the following:\noperating expenses; landowner royalty payments, which the commissioner\nshall deem to be the value of one-eighth of the economic unit's\nproduction; and other costs, if any, such as overriding royalty\ninterests not retained by the owners of the working interest, additional\ncapital investment required, depletion and depreciation. In determining\nthe unit of production values, the minimum discount rate or rates\napplied by the commissioner shall be the sum of (1) the average of the\ndiscount rates established by the United States federal reserve board on\nthe first business day of each month for each of the five calendar years\nupon which the economic profiles are based and that precede the year in\nwhich the unit of production values are to be certified, plus (2) a\nseventeen and one-half percent factor to account for risk, nonliquidity,\nmanagement, real property taxes, intangible drilling costs and income\ntaxes.\n 2. For the purpose of developing economic profiles and determining\ndiscounted net cash flow, the commissioner may require producers to\nsubmit statements of income and expenses related to the economic units\nfor five consecutive calendar years beginning with the sixth calendar\nyear preceding the year in which the unit of production values are to be\ncertified. Such statements of income and expenses shall consist of\ninformation usually kept in the ordinary course of business. This\nsubdivision is not applicable to producers of one thousand barrels of\noil or two hundred million cubic feet of gas per year or less.\n 3. The commissioner shall promulgate rules establishing the\nmethodology for determining unit of production values pursuant to\nsubdivision one of this section. Such rules shall include a description\nof the economic data to be compiled, the method for their compilation\nand a delineation of the process to be followed in applying the\ndiscounted net cash flow methodology. Such rules shall provide that,\nsubject to the availability of suitable economic data, the establishment\nof unit of production values shall take into account and reflect varying\neconomic and operating conditions and characteristics.\n