West Virginia Code of State Rules › Agency 110 - Tax › Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT › Series 110-01K - Valuation Of Natural Resources other Than Coal, Oil Or Natural Gas For Ad Valorem Property Tax Purposes › Section 110-1K-3 - Definitions

Current through Register Vol. XLI, No. 28, July 12, 2024
As used in this rule and unless the context clearly requires
				  otherwise, the following terms have the meaning ascribed in this
				  section.
3.1. "Annual acres mined"
				means the average annual production, as defined in subsection 3.3 of this
				section, divided by the product of the average thickness (Thk) in feet of the
				natural resource being mined, as detailed in annual mining reports, multiplied
				by the tons per acre foot (as set out in Appendix A, Formula 2 to this rule)
				multiplied by the clean resource recovery rate (RR) at the mining operation, or
				as calculated from tonnage reported to the West Virginia Office of Miner's
				Health, Safety and Training/Office of Mining and Reclamation if substantially
				different. Appendix A, Formula 1, is the method to be used for calculating
				annual acres mined.
3.2. "Active
				mining property" means a mineable natural resource on a parcel or portion of a
				parcel involved in a mining operation, as defined in this Section, permitted by
				the West Virginia Office of Miner's Health, Safety and Training/Office of
				Mining and Reclamation. Each and every mineable natural resource shall be
				considered a separate active mining property.
3.3. "Average annual production" means the
				arithmetic mean of the annual rate of natural resource production of the three
				(3) most recent calendar years preceding the July 1st assessment date. If
				production during any of these three (3) calendar years involved a period of
				less than eleven (11) months, that production shall be annualized before the
				average annual production is calculated.
3.4. "Bands of investment discount component"
				means a discount rate derived by assigning rates to various debt and equity
				investment financing tiers and summing these rates, weighted by their
				respective percentages of total financing.
3.5. "Barren" means fee or mineral properties
				where other natural resource rights are owned, but a specific natural resource
				may never have been deposited or may have been subsequently removed by
				erosion.
3.6. "Capitalization rate"
				means a rate used to convert an estimate of income into an estimate of market
				value.
3.7. "Clean resource
				recovery rate" means the percentage of marketable resource that is recovered.
				The clean resource recovery rate must reflect the difference between calculated
				whole bed tonnage (tons-in-place) and mined tonnage as reported to the West
				Virginia Office of Miner's Health, Safety and Training/Office of Mining and
				Reclamation.
3.8. "Commissioner" or
				"Tax Commissioner" means the State Tax Commissioner of the State of West
				Virginia, or his or her delegate.
3.9. "Discount component" means a rate
				reflecting a provision for returning to an investor a sum of money equal to the
				aggregate of the anticipated return-on-investment over the economic life of an
				investment.
3.10. "Economic life
				method of recapture" means a method of developing a recapture rate by
				estimating the period of time an investment shall produce a return and
				estimating an equal periodic rate of recapture of the investment over this
				return period.
3.11. "Life of
				mining operation" means the number of years required to exhaust the natural
				resource at the average annual production rate. Fractional years shall be
				rounded to the nearest whole number.
3.12. "Management rate" means a rate
				reflecting a return to an investor for the management of similar investment
				portfolios.
3.13. "Mineable natural
				resource" means a natural resource which is so situated that it may be mined
				using generally accepted mining practices and suitable equipment. The condition
				of mineability presupposes that the resource is under lease and is being or is
				about to be mined.
3.14.
				"Mined-out" means a natural resource, or any portion thereof, determined to be
				depleted by prior mining operations.
3.15. "Mining operation" means an enterprise,
				permitted by the West Virginia Office of Miner's Health, Safety and
				Training/Office of Mining and Reclamation, which is engaged in actively
				obtaining or preparing to obtain a natural resource or its by-products from the
				earth's crust by underground, surface and auger mines. Each mining operation
				may have more than one (1) area designated as "Active Mining Property," as
				defined in this Section.
3.16.
				"Multiplier" means the "Present Worth of One (1) Per Period" for the life of
				the mining operation, as defined in this Section, employing the capitalization
				rate established in Section 4 of this rule, as determined by a standard
				mid-year life Inwood Table.
3.17.
				"Nonliquidity rate" means a rate reflecting a return to an investor
				representing the loss of interest on an investment arising from the time
				required to sell the investment.
3.18. "Operator" means an individual,
				partnership, corporation or other enterprise that is engaged in actively
				obtaining or preparing to obtain a natural resource or its by-products from the
				earth's crust in an active mining property.
3.19. "Property tax component" means a rate
				reflecting a provision for returning to an investor a sum of money equal to
				property taxes paid over the economic life of an investment.
3.20. "Recapture component" means a rate
				reflecting a provision for returning to an investor a sum of money equal to his
				or her investment.
3.21. "Reserves"
				means the natural resource acres or portions of those acres, which: contain the
				mineable natural resources; are within a permitted mining property; and, are
				not within the active mining portion of the property.
3.22. "Risk rate" means a rate reflecting a
				return to an investor necessary to attract capital to an investment containing
				a possible loss of principal and/or interest.
3.23. "Royalty rate" means the rates
				determined annually by the Tax Commissioner which reflect the current market
				royalty rates for willing buyer-willing seller transactions for each of the
				natural resources and types of mining operations derived in Section 4 of this
				rule. The royalty rates are considered to be paid to each owner of a natural
				resource estate for all actively mined resources.
3.24. "Safe rate" means a rate reflecting a
				return to an investor on an investment which has little, if any, likelihood of
				loss of either principal or anticipated return on investment.
3.25. "Summation discount component" means a
				discount rate expressed as the aggregate of a safe rate, risk rate,
				nonliquidity rate, and management rate, adjusted for inflation.
3.26. "Thickness" means the measurement of
				all the visible natural resource, including any thinner resource beds seen
				above or below the main bed that comprise part of what is generally understood
				to be a logical mining unit. The thickness used in calculating the annual acres
				mined are set forth in Section 4 of this rule.
3.27. "Tons per acre foot" means the weight,
				in tons, of a relatively clean resource one foot in thickness and covering one
				acre. Appendix A, Formula 2, in this rule contains the method for calculating
				"tons per acre foot." From this formula, the following in-place tons per
				acre-foot (resource density) figures shall be used:
Limestone = 3,600 tons per acre foot
(2.65 lbs. resource/ 1 lb. water)
Sandstone = 3,400 tons per acre foot
(2.50 lbs. resource/ 1 lb. water)
Clay and Shale = 3,250 tons per acre foot
(2.39 lbs. resource/ 1 lb. water)
Sand and Gravel = 2,400 tons per acre foot
(1.77 lbs. resource/ 1 lb. water)
Salt = 2,950 tons per acre foot
(2.17 lbs. resource/ 1 lb. water)
3.28. "Unmineable natural resource" means a
				natural resource which is not a mineable natural resource as defined in this
				Section 3.