New Mexico Administrative Code › Title 3 - TAXATION › Chapter 6 - PROPERTY TAXES › Part 5 - CLASSIFICATION OF PROPERTY › Section 3.6.5.34 - SPECIAL METHOD OF VALUATION - PIPELINES, TANKS, SALES METERS AND PLANTS USED IN THE PROCESSING, GATHERING, TRANSMISSION, STORAGE, MEASUREMENT OR DISTRIBUTION OF OIL, NATURAL GAS, CARBON DIOXIDE OR LIQUID HYDROCARBONS

Current through Register Vol. 35, No. 13, July 16, 2024
A.
OIL &
				GAS PIPELINES - VALUATION METHOD:
(1)
				All pipelines, tanks, sales meters and plants as defined in Section
				7-36-27
				NMSA 1978 which are used in the processing, gathering, transmission, storage,
				measurement or distribution of oil, natural gas, carbon dioxide, or liquid
				hydrocarbons are valued by the division or county assessors in accordance with
				the valuation methods found in Section
				7-36-27
				NMSA 1978 and Section 3.6.5.34 NMAC.
(2) PIPELINES, DIRECT CUSTOMER DISTRIBUTION
				PIPELINES, LARGE INDUSTRIAL SALES METERS, TANKS AND PLANTS.
(a) Pipelines, direct customer distribution
				pipelines, large industrial sales meters, tanks and plants are valued in
				accordance with the method described in Subsection D of Section
				7-36-27
				NMSA 1978.
(b) For purposes of
				calculating depreciation or related accumulated provision for depreciation,
				straight line depreciation over the useful life of the property, as determined
				by the federal energy regulatory commission, is used. Property that does not
				fall within the federal energy regulatory commission's reporting requirements
				is assumed to have a useful life of twenty-five (25) years, unless substantial
				evidence of another useful life is accepted by the division.
(3) For purposes of Subsection B
				of Section
				7-36-27
				NMSA 1978, "other justifiable factors" includes, but is not limited to,
				functional and economic obsolescence.
(a)
				Functional obsolescence is the loss in value that is caused by functional
				inadequacies or deficiencies caused by factors within the property, and is a
				loss in value that is in addition to a loss in value attributable to physical
				depreciation.
(b) Economic
				obsolescence is the loss in value that is caused by unfavorable economic
				influences or factors outside the property, and is a loss in value that is in
				addition to a loss in value attributable to physical depreciation.
(c) Requests for economic or functional
				obsolescence must be made at the time the annual report is filed. The request
				must be supported with sufficient documentation, and must be based on a
				situation present at least six (6) months prior to January 1 of the tax year.
				In addition to other information that may be required pursuant to this section,
				an economic or functional obsolescence factor must be provided together with
				documentation to support and demonstrate how the factor was arrived at. Such
				documentation shall consist of objective evidence demonstrating functional or
				economic obsolescence such as comparisons to a documented industry standard, to
				a close competitor or to an engineer's or appraiser's valuation, or any other
				comparable objective evidence of functional or economic obsolescence.
(d) If requested by the taxpayer, the
				department shall provide guidance to a taxpayer as to the documents necessary
				to support a request for obsolescence for a pipeline, customer distribution
				pipeline, large industrial sales meter, tank or plant as defined in Section
				7-36-27
				NMSA 1978. Upon request, the department shall name, in addition to the other
				information required by this section, any specific documentation that would
				support a request for obsolescence. Such specific documentation may include:
(i) a report of audited or FASB
				writedowns;
(ii) partnership
				agreements and narrative explanations of the mechanism for distributing profits
				and maintenance responsibilities for the property;
(iii) for a functional obsolescence claim, an
				explanation of how scheduled depreciation will not sufficiently restore the
				cost of the property before its usefulness is over;
(iv) a report comparing the replacement cost
				new, less physical depreciation, with the value of the property as estimated
				under an income approach;
(v) a
				report comparing output, or cost of operation or capacity utilization of the
				property, to output, or cost of operation or capacity utilization of comparison
				property;
(vi) long term strategic
				plans for the property, including an analysis of market share, barriers to
				competitive entry and transportation alternatives; and
(vii) a report addressing the reasons the
				taxpayer has not sold or written off the property for which the obsolescence is
				claimed.
(e) The
				department shall provide guidance to a taxpayer as to documents necessary to
				support a request for obsolescence for a pipeline that may be in addition to
				any documents specified in Subparagraph (d) of this paragraph. Upon request,
				the department shall name, in addition to the other information required by
				this section, any specific documentation that would support a request for
				obsolescence. Such specific documentation may include:
(i) reserve estimates and projections made at
				the time the pipeline was planned and prior to construction;
(ii) current reserve estimates and
				projections;
(iii) income
				projections for the pipeline, including assumptions as to throughput, rates and
				customers, at the time that the pipeline was planned and prior to
				construction;
(iv) income and
				expense statements of the pipeline for each of the last three most recent
				years, including assumptions as to throughput, rates and customers; provided
				that the statement shall conform to the taxpayer's annual reports, FERC
				documents; or other audited sources;
(v) a statement of actual throughput for the
				past five years of operation; and
(vi) transportation contracts.
(f) In reviewing a request for
				obsolescence pursuant to Section
				7-36-27
				NMSA 1978, the department shall determine whether a taxpayer has provided
				documentation sufficient to establish a reduction in taxable value for
				functional obsolescence or economic obsolescence. If the department determines
				the documentation is not sufficient because the taxpayer failed to submit
				documents required by Subparagraph (c) of this paragraph, the department shall
				inform the taxpayer of that failure in a notice provided by April 1 or thirty
				days after the return is filed but no later than April 15 of the tax year. If
				the taxpayer does not file the report by March 15 of the property tax year, the
				department shall not be required to furnish a timely notice of deficiency by
				April 15 of the property tax year. In the case of properties regulated by the
				federal energy regulatory commission, the notice of deficiency shall be
				provided to the taxpayer within fifteen days after the filing of the report.
				Such notice shall the list the specific documents that the department would
				require to support the requested reduction for functional obsolescence or
				economic obsolescence.
(g) If a
				taxpayer is notified of a deficiency pursuant to Subparagraph (f) of this
				paragraph, the taxpayer shall have ten days to correct the deficiency. The
				department will determine whether the documentation timely submitted by the
				taxpayer adequately supports the taxpayer's request for obsolescence and cures
				the deficiency. The department's final valuation of the taxpayer's property
				will reflect the department's approval or denial of the taxpayer's request for
				obsolescence.
(h) In order to
				allocate value to the taxing jurisdiction wherein the property (valued in
				accordance with the method described in Subsection D of Section
				7-36-27
				NMSA 1978) is located the following formula is used, where:
A = Pipe size in inches
B = Miles of pipe
C = Inch miles
D = Total tangible property cost less depreciation (all
				  sizes)
E = $ Per inch mile
F = Inch miles of pipe in taxing jurisdiction
G = $ Value of pipe in taxing jurisdiction
(i) A x B = C
(ii) D / Total C = E
(iii) E x F = G; or
(iv) G = (D/(A x B)) x F
(4) SALES METERS.
(a) The value of sales meters, other than
				large industrial sales meters, is determined in accordance with the following
				schedule:
SCHEDULE
Sales Meters
Value per meter
Type I
$ 52.14
Type II
109.90
Type III
477.35
(b)
				In preparing the above schedule, all partial statutory exemptions have been
				considered. Therefore, no such exemptions are allowed in determining net
				taxable value by means of the above schedule. For purposes of the above
				schedule, the types of sales meters, other than large industrial sales meters,
				are:
(i) TYPE I - sales meters with a
				capacity of less than 250 cubic feet per hour at one-half inch differential.
				These generally include meters providing residential service.
(ii) TYPE II - sales meters with a capacity
				from 250 cubic feet to 950 cubic feet per hour at one-half inch differential.
				These generally include meters providing commercial or public authority
				service.
(iii) TYPE III - sales
				meters with a capacity greater than 950 cubic feet per hour at one-half inch
				differential and those meters providing industrial service with an installed
				cost including the associated regulator, appurtenances and devices of less than
				two thousand five hundred dollars ($2,500.00).
(5) CONSTRUCTION WORK IN PROGRESS.
(a) For those persons who maintain their
				records in accordance with a uniform system of accounts approved by the federal
				energy regulatory commission, the total amount entered into the construction
				work in progress account shall be reported to the assessing authority as
				construction work in progress.
(b)
				For other persons, the total of the balances of work orders for pipelines,
				plants, large industrial sales meters and tanks in the process of construction
				on the last day of the preceding calendar year, exclusive of land and land
				rights, is reported to the assessing authority. Construction work in progress
				is reported as follows:
(i) total
				construction work in progress;
(ii)
				fifty percent (50%) of the construction work in progress as the value for
				property taxation purposes; and
(iii) value of construction work in progress
				by taxing jurisdiction in which the construction is located.
(c) The value as stated in Item
				(iii) of Subparagraph (b) of this paragraph is the value reported. No
				deductions for depreciation or any other purposes apply. Exemptions have been
				considered. Therefore, the taxable value and the net taxable value are the
				same.