New York Property Tax on Shale Gas Wells
Like almost all states with oil and gas production, New York has a property tax on gaswells.
Like other property taxes, the beneficiaries are the counties, townships and schooldistricts where the gas is produced. The appraisal methodology is administered by theOffice of Real Property Tax Services (ORPTS), and is similar to that used in Texas.
Theappraised value is based on the income stream expected from the well – in Texas, the“discounted cash flow”:
ORPTS attempts to summarize the value in a Unit ProductionValue (UPV) as a multiplier of the gas produced. Both methodologies are dependent onvaluing the income based on the production history. In a conventional gas well with arelatively flat decline curve, estimating its value can be done more precisely. In ahorizontally hydrofracked shale gas well, the rapid decline of the well’s productionmakes valuation problematic.Decline Curves of Major Shale Gas Formations\ThsThe first year’s production can account for up to 75% of the total production of the well.In New York, the gas production is self –reported by the producer. It is not clear that theORPTS or the DEC has the staff necessary to actually verify these numbers in the field.Those production reports are in turn given to the local county and the township assessorswho are responsible for doing the appraisals. Any lag - from the self reported numbers