The State Tax Division is experiencing a high volume of calls on the oil and gas appraisals. Please bear with us as we work to manage all incoming calls.
Oil and Gas Clerical Error Notice: 2023
The State Tax Division calculates the value of oil and gas royalty interests using an income approach to value. This serves as a calculation to determine the value the interest would receive if sold at market value, not the actual income received.
This calculation is performed using a number of factors, including:
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Whether the producing well is horizontal or vertical;
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The geographic location of the well;
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The formation that the well is producing from (Marcellus, Utica, Onondaga, etc.)
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The age of the well.
These factors are supplied by the producer along with the actual royalty paid in 2022 to a royalty owner. Some royalty interests are expected to produce more income over the life of the well than others, and these factors help determine what that income is expected to be (based upon current price of gas).
For a typical royalty interest, the income approach will produce a value of the interest that is anywhere between 1.5 and 7 times the actual income received by a royalty owner as reported by the producer.
Example: A royalty owner receives royalty payments in 2022 for their interest totaling $1,000. Depending on the factors above, the value of that interest will be anywhere between $1,500 and $7,000. This is based on all projected future income of the well (and the royalty on the well).
The State Tax Division appraises more than 1.3 million oil and gas property tax interests. We may not be able to answer any question about any particular interest in a timely manner due to the overwhelming number of requests we receive for an explanation.