(1) The
Assessor shall value coal reserves by compiling the information necessary to
complete the spreadsheet or a facsimile in Appendix A.
(2) In order to complete the spreadsheet in
Appendix A, the Assessor shall utilize the following procedure to the extent
practicable:
(a) Contact the Office of Surface
Mining ("O.S.M"), or other appropriate entity, to obtain the coal production
for the permitted area for prior years;
(b) Contact the O.S.M., or other appropriate
entity, for information concerning: new permits, the Inspectable Units List,
current coal producers, permit information, renewed permit list, pending
permits, successor list, and listings in the Applicant/Violator
System;
(c) Contact each coal
producer or owner for the royalty rate per the permit;
(d) Estimate a discount rate and management
allowance utilizing the best available market data;
(e) Estimate the economic life of the mine
after consideration of the issue date of the permit, the year production began,
the total production over the life of the permit and the anticipated production
of the life of the mine; and
(f)
Reduce the indicated value by the appraisal ratio for the tax year and
jurisdiction under review.
(3) Where necessary, such as when market data
is limited or unavailable, the Assessor shall utilize appraisal judgment so
long as it is reasonably designed to arrive at the market value of the mineral
reserves being appraised.
(4) The
Assessor's estimates shall be presumed indicative of market rates and the
resulting market value absent evidence from the Taxpayer supporting different
assumptions for the particular reserves being appraised. In order to rebut the
presumption, the Taxpayer must provide the Assessor with either market data or
information specific to the reserves being appraised. Mere criticism of the
Assessor's methodology is not sufficient by itself to overcome the presumption
of correctness.
(5) The following
example illustrates how Assessors should value a parcel with active mining of
coal reserves:
Assume that a coal mine is found to have 50,000 tons of
reserves in place. Its production history establishes that annual production is
10,000 tons. This would indicate an economic life of five years (50,000
÷ 10,000 = 5). Assume an economic royalty rate of $2.00 per ton,
allowable expenses of 10% of gross income and a discount rate of 16%. The
following calculation demonstrates how to calculate the present worth of the
reserve:
|
10,000
|
-- annual production in tons
|
|
x 2.00
|
-- economic royalty in dollars
|
|
$20,000
|
-- gross annual income
|
|
-2,000
|
-- allowable expenses in dollars
|
|
$18,000
|
-- net operating income
|
|
x 3.274294
|
-- the present value of the right to receive $1 per
period
|
|
|
for five years at a 16% discount rate
|
|
$58,937
|
-- present net worth of reserve
|
The above example assumes a level annuity, which would be
appropriate for a coal mine where the coal is being mined at a constant
rate.
