2023 New York Laws › RPT - Real Property Tax › Article 5 - Assessment Procedure › Title 5 - Oil and Gas Economic Units › 592 - Determination of Unit of Production Values.

§  592.  Determination  of  unit  of  production  values.  1.  (a) The
commissioner shall annually develop one or more  economic  profiles  for
gas  and  one  or  more  economic  profiles  for  oil  for  use  in  the
determination of unit of production values. The  establishment  of  more
than  one  economic  profile  for  either gas or oil shall be based upon
common factors such as geologic formation, geographic  region,  economic
and cost characteristics of such profiles and such other criteria as the
commissioner may deem appropriate.
(b)  At  least  forty-five  days prior to the tentative roll date each
year, the commissioner shall establish a tentative  unit  of  production
value  for  each economic profile and shall provide to appropriate local
officials and industry representatives notice of the tentative  unit  of
production  values.  The  commissioner shall conduct at least one public
hearing to receive comments on the tentative unit of production  values.
At least fifteen days prior to the tentative roll date, the commissioner
shall certify to each assessor appropriate unit of production values for
use in the assessment of oil and gas economic units.
(c)  Unit  of  production  values  shall  be based upon the average of
typical income, expense and operating data for five consecutive calendar
years beginning with the sixth calendar year preceding the year in which
the unit of production values are to be certified. In  determining  unit
of  production  values, the commissioner shall use a discounted net cash
flow approach in which gross income shall be reduced by  the  following:
operating  expenses;  landowner royalty payments, which the commissioner
shall deem to  be  the  value  of  one-eighth  of  the  economic  unit's
production;  and  other  costs,  if  any,  such  as  overriding  royalty
interests not retained by the owners of the working interest, additional
capital investment required, depletion and depreciation. In  determining
the  unit  of  production  values,  the  minimum  discount rate or rates
applied by the commissioner shall be the sum of (1) the average  of  the
discount rates established by the United States federal reserve board on
the first business day of each month for each of the five calendar years
upon  which the economic profiles are based and that precede the year in
which the unit of production values are to  be  certified,  plus  (2)  a
seventeen and one-half percent factor to account for risk, nonliquidity,
management,  real  property  taxes, intangible drilling costs and income
taxes.
2. For the purpose of developing  economic  profiles  and  determining
discounted  net  cash  flow,  the  commissioner may require producers to
submit statements of income and expenses related to the  economic  units
for  five  consecutive  calendar years beginning with the sixth calendar
year preceding the year in which the unit of production values are to be
certified. Such statements of  income  and  expenses  shall  consist  of
information  usually  kept  in  the  ordinary  course  of business. This
subdivision is not applicable to producers of one  thousand  barrels  of
oil or two hundred million cubic feet of gas per year or less.
3.   The   commissioner   shall   promulgate  rules  establishing  the
methodology for  determining  unit  of  production  values  pursuant  to
subdivision  one of this section. Such rules shall include a description
of the economic data to be compiled, the method  for  their  compilation
and  a  delineation  of  the  process  to  be  followed  in applying the
discounted net cash flow methodology. Such  rules  shall  provide  that,
subject to the availability of suitable economic data, the establishment
of unit of production values shall take into account and reflect varying
economic and operating conditions and characteristics.