Tensions were at times high Thursday in Artesia as Eddy County assessor Gemma Ferguson and representatives of Total Assessment Solutions Corp. (TASC) provided updates on the county’s ongoing audit of oil and gas properties.
The county assessor’s office contracted with TASC in 2016 to conduct the audit, a culmination of sorts of an effort launched in 2012 to ensure all relevant oil and gas equipment was included on the county’s tax rolls.
Then-assessor Karen Robinson sued the Eddy County Commission for the right to hire an outside auditor, an action that was granted in October 2015 by the New Mexico Supreme Court.
While those events were before Ferguson and the current commission’s time, the assessor said during Thursday’s town hall at the Artesia Public Schools Administration Building the audit remains relevant and necessary to ensure all companies doing business in the county’s oil patch are contributing their fair share – and that those contributions are of far less benefit to the county’s coffers than they are to those of the public schools.
“Really the main reason we’re here today is to clarify a lot of misconceptions that are out there,” Ferguson said. “The duties of an assessor, of my office, are to discover, list and value, so according to state statute, my job is to go out there and find all the property that should be on the tax rolls.”
Ferguson said she resents the implication the assessor’s office is “out to get” the oil and gas industry in Eddy County and said the issue was a basic matter of fairness; just as homeowners would be displeased to learn their neighbors weren’t paying their property taxes, so too are companies accurately reporting their holdings while others are not.
“The other day in Santa Fe, somebody called assessors a ‘bunch of vultures,’” said Ferguson. “I’ve been called worse, no doubt, and I’ve been called better, but we’re not out to point fingers at any industry; we’re just out there to try to do the right thing for everybody in the county.
“If you have Company A over there that’s paying their taxes and Company B I not, the whole county ends up paying more taxes just because that one company never rendered.”
New Mexico is a self-rendering state, meaning it is the responsibility of the companies to declare their property and, if they do not, up to the assessor’s office to make that discovery. That’s something Ferguson says is beyond the capabilities of her office.
“To get the kind of expertise (TASC) has, we’d have to have somebody in training for 10 years plus, and we don’t have the money,” she said. “It would take a lot of money to get those extra employees and send them to school for 10 years to make them even capable of doing this.”
In the time TASC has been on the job, Jerry Wisdom, oil and gas manager for Arkansas, Oklahoma, New Mexico and Colorado, says the company discovered of the 318 rigs active from Jan. 1, 2007, to Jan. 1, 2016, 111 has not been listed on the tax roll; to date, the county has recovered $131,309 in back taxes – going back the allowable 10 years – for these rigs.
Notice of values have also been sent for 323.47 omitted miles of pipeline and approximately half of the 623 gas compressors inspected. Wisdom said TASC also identified 132 different companies listed at pipeline crossings, with 88 of those not reporting; of the 44 reporting, only 23 were doing so in all of the tax districts in which crossings bearing their company name were found.
Ferguson says once undeclared property has been identified, letters are sent to the companies asking them to provide an accurate list of their holdings. They have 30 days to respond, and if they do not, TASC assigns a value to the discovered property and a notice of value is sent, to which companies have another 30 days to respond.
“A few don’t ever respond; we send a tax bill, they pay it, and everything’s hunky dory,” said Ferguson. “Some have a lot of questions, as they should, and we try to work with them to get that done and try to find an answer.
“We try to give companies as much time as they need, and if we’re disagreeing on the values of the equipment out there, let’s look at t, see what’s there, and come to a consensus on that.”
Ferguson also stressed the primary beneficiaries of unpaid tax dollars in the county are the public school systems of Artesia, Carlsbad and Loving.
“The school systems get about 40 to 45 percent of every tax dollar that’s paid,” she said. “All the school systems will benefit from this audit.”
TASC’s estimated total of unpaid tax dollars stood at $3,006,041 as of Thursday, with dollars owed in the APS district at $5,152,024.
Some oil and gas representatives in attendance at Thursday’s meeting, however, said they don’t see the issue as cut and dried, and they feel the industry is being portrayed as a villain.
“One thing that would be interesting to know, once we get all this information, is to compare the value of what hasn’t been assessed versus what is currently being assessed, including state and county, just to get a feel for the flavor,” said Dennis Maupin, Artesia resident and employee of EOG Resources. “Because I think what you’re going to find is the bulk of the companies’ values are being reported to the state.
“The oil and gas companies are getting a black eye over this. By and large, the industry is doing a great job; that doesn’t mean it’s perfect, but no company, even non-oil and gas, is totally reporting what they should be doing.”
The Daily Press attempted to obtain figures regarding the industry’s overall tax payments; due to county office closures on Fridays, those numbers were unavailable by press time.
Maupin also cautioned companies to thoroughly review the valuations they receive from the county for potential errors. Ferguson agreed.
“Please review the notice of values when you get them,” she said. “That’s the majority of our problem, not just in this industry. Any time you get a notice of value, open it up. Even though it says it’s not a tax bill, there’s a lot of vital information in there, and people need to read them.”
Two state representatives in attendance questioned the accuracy of TASC’s method of property discovery.
Larry Scott, representative from District 62 in Lea County and an independent oil and gas producer, vehemently questioned Wisdom on the type of equipment being taxed and TASC’s identification of companies as “gas-gathering.”
“Those property taxes are paid on production facilities and equipment as a percentage of the proceeds from the oil and gas that is produced,” said Scott. “Production taxes are paid ad valorem rather than having to go count valves, bolts, phalanges, and other pieces of associated equipment.”
“We’re not taxing your separator, we’re not taxing your production unit,” said Wisdom. “The only equipment we’re concerned about is the equipment that’s not part of subsection G of 7-34-2.”
That subsection of the New Mexico Oil and Gas Production Equipment Ad Valorem Tax Act states “‘equipment’ means wells and nonmobile equipment used at a production unit on connection with severance, treatment or storage of production unit products.”
Scott also said he’d be “very surprised” to find more than 20 gas-gathering companies currently operating in Eddy County. Wisdom stated TASC had stopped at each pipeline marker and entered it into GPS by company name, phone number, and size of pipeline, if available.
“That seems like a bit of a haphazard methodology to me,” said Scott. “Did it occur to you to identify major gathering system and processing system companies and to write them a letter and ask for a map?”
“We wrote letters to 37 different companies and have only gotten responses from three,” Wisdom said.
Rep. Jim Townsend of District 54, representing Eddy, Chaves and Otero counties also questioned the number of companies listed as owning pipeline.
“I’ve only been working in Eddy and Lea Counties for about 40 years; there is not 132 pipeline companies,” Townsend said. “There may be 132 companies that own a pipeline asset, whether it’s a gathering or production asset, but sir, you can certainly go on a number of websites and look and find how many real pipeline companies there are in New Mexico.”
Wisdom said some of those companies may be operating production lines, some water lines, some gas, etc., but checking and mapping each one is part of TASC’s process.
“I would just encourage you to look for a more efficient way to gather this information than the process that has been undertaken,” Townsend told Ferguson. “Because I think that information… well locations is certainly known, pipeline locations, right-of-ways, they have websites where you can go and you can pull every one of those up and it will tell you the size, the commodity, and the owner.
“I just can’t believe that this is the most efficient way to go about it, and I think the process has caused some dissent that probably should’ve been avoided if at all possible.”
Raye Miller, president of Regeneration Energy Corp., also questioned the need for the outside audit.
“This winds up being a thing where there is a cost to the county for you to do this,” said Miller. “It’s fine that there’s been a determination that some of these things are not being fully reported to the assessor’s office … but it would behoove the county assessor’s office to look at the cost of your project.”
Miller says his company employs a geologist who receives weekly updates of every drilling rig in every county in New Mexico, including the company for which it is drilling, rig number, and location.
“I think it is probably a thing where (Ferguson) should actually have a little better system in place in the future than driving around and looking for signs at road crossings,” Miller said. “Every pipeline, probably the first item that happens is a right of way, and a right of way, if it’s on private land, is filed in the county clerk’s office, if it’s on state land, it’s filed with the commissioner of public lands, and if it’s on federal or some combination of those, it’s filed with the BLM in Carlsbad.
“I honestly believe that if the assessor’s office was trying to determine where projects were occurring so that they might inquire of companies whether or not pipeline property in the future should be reported, if they actually work through identifying those right-of-ways, that would be the most cost-effective way of contacting the parties they want to be talking to.”
Aimee Barabe, director of stakeholder relations for the New Mexico Oil and Gas Association, questioned the audit’s price tag of around $850-900,000 total for four years.
Ferguson said she firmly believes the audit will pay for itself – “not in the first year or the first two years, because it takes this long to get all the information,” she said. “But with the majority of the money going back to all the schools, that’ll pay for itself probably by next tax season.”
Ferguson also pointed out the money for the audit was not paid out of the county’s general fund but out of the assessor’s office’s 1-percent reappraisal fund, which exists specifically to finance projects such as the audit.
Barabe inquired about the options for protest for companies feeling they have been inaccurately assessed.
“Say Company A, we tried to work with them and tried to work with them and just couldn’t come to a consensus, we’ve have to contact the Property Tax Division, who would send a judge over, and we’d have a hearing,” Ferguson said. “There’s a protest board in every county, they would meet with the protest board, and then if you don’t like that decision, you can always protest that, as well, and take it to district court.”
Barabe also asked if the assessor’s office had done any type of outreach with companies prior to the audit.
Ferguson and Wisdom reiterated companies are aware of New Mexico’s self-rendering status.
“Companies weren’t reporting, and that is their obligation to do that,” said Wisdom. “I think full disclosure should come from the industry through assessors.”