Oil & Gas Tax to the Rights Holder.
By the time the product is in the tank, it is production not a part of the property tax. The money is still a couple of months from the owner of the mineral rights.
First of all, the annual tax paid by the holder of the mineral rights is a property tax based on what the County says the value of the remainder of the oil and/or gas is. Here goes - The first year the well is in production, that production is figured to be 30% of the total. That means the tax you will pay is the 70% figure times the cost of the product on the current market times what ever tax rate they are charging that year. The mill levy or tax rate is basically what they need divided by the value of what is figured to be in the ground. So, you can see that this is kind of a scientific wild assed guess (SWAG) but that's the way they do it the first year. According to the lady I talked to, the owners/operators can deplete the amount of the oil by 30% for the first three years, They figure our the amount of product still in the ground by using some kind of table that takes the first year amount and then figures out by year how much product is remaining.
According to the lady, she figured out what depletion actually was on wells drilled in the 70's, did to the amount of oil in the ground and wells that should have been empty in the mid 80's are still pumping today. Yes, there is some lateral infill from the entire field and some producers are injecting water into the well to drive the oil to the top. Even with all that figured in, The thing that really drives the value crazy is the market price fluctuation. Gas is down almost to 1/3 of what it was last year. This decreased the value of the gas in Clark County by 9 million dollars from last year to this year. Knowing that they did not decrease the amount of money they need, means that they just upped the mill levy to make up the need.
You also need to know that the owners of the mineral rights are not in most cases the people extracting the oil/gas from the ground and seldom on hand when the money changes hands. It looks like a pretty good way to get ripped off but hey, in most cases the people who are getting the money for the oil/gas probably never owned the land, only inherited a percentage of the ownership from deceased relatives.
While I was in Susank, KS I met the brother of the current owner where the shell Oil lease house/yard was located. He and I talked about remembering things from the area as kids. He got there in the early 60's and by then the house my grandparent had lived in, was gone and shell was about wrapping up their drilling operations near there. He said that his dad did not own any of the mineral rights to the land where they live and farm. He said that his mother inherited some mineral rights from her grandfather. The money is divided by his six kids and then by his parents 8 kids. She gets about $3.00 a year. Not enough to go out and try to buy back any of the rights. I would hate to be the county person responsible for figuring out how to collect the tax and from who they should get it from.
So, Boys and Girls, the money you get from the producers is income you pay taxes on and the property tax is based on the SWAG of the value of the product you own that is still in the ground. Clear as MUD?