ADMINISTRATIVE NOTICE 92-03



SUBJECT:	Property Tax -- State Tax Commissioner's Policy Statement for the Determination of Production Decline Rates for Producing Oil and Gas Properties for Property Tax Purposes for Tax Year 1992, Pursuant to §
110-1J-4.6.

	On July
1, 1991, the Department of Tax and Revenue filed valuation variables to be used in conjunction with legislative regulations for the appraisal of oil and gas properties.  (See:  110 CSR 1J-1 et seq.)  These variables were amended and refiled on December
26, 1991.

	This notice will address one of the variables, the production decline rate(s), setting forth the procedures used in developing the rate(s) for tax year 1992.

	The income stream generated from a producing oil or gas well is directly dependent upon production from the well.  Once drilled an oil or gas well will experience a sharper production decline, typically for the first two (2) years of production, flush production; thereafter production decline levels off, settled production.  The rate of production decline is dependent upon the physical location of the well and the stratigraphic formation(s) from which the well is producing.

	The West Virginia Geological and Economic Survey has in past years created a data base that contains well by well production data by producing formation(s).  The Department contracted with the "Survey" to develop an analytical model to plot current production declines by location/formation throughout the State using the most recent data available.

	The "Survey" has divided the State into ten
(10) regions that contain similar oil and gas geological characteristics.  Attachment
I is a map of the State depicting each of these ten
(10) regions.  The regions were then analyzed by production formation(s), and production decline curves were plotted (see Attachment
II) for each formation.  A complete list of the oil and gas decline rates can be found in the above referenced variables prefiled on December
26, 1991.

	The production decline rate(s) thus developed were applied to individual well gross receipts to develop a probable future income series (declining-terminal income series) that is discounted to present worth.

	For more information concerning the development of oil and gas well production decline rates contact the Department of Tax and Revenue at (304)
348-3940.

						Issued:  January 29, 1992




Department of Tax and Revenue			Operator on Duty 8:30 am - 4:00 pm
Property Tax Division				Monday through Friday
P. O. Box 1345					Phone:  (304)
348-3940
Charleston, WV  25325-1345			FAX:    (304)
348-2324