Department asks committee to lower cap-rate sample size for modified-netback valuation
DOR administrator Matt Sache told the committee industry consolidation has reduced the number of producers with public data for the statutory cap-rate study; the committee directed LSO to draft language requiring at least five qualifying companies and agreed on a 10,000,000-MCF production threshold as a friendly amendment while asking DOR for historic scenario analysis.
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The committee considered a technical but consequential change to how the state values producer-process natural gas for severance tax purposes under the 'modified netback' valuation method. Matt Sache, administrator of the mineral-tax division, explained the statute currently requires using a capitalization-rate study of the top 10 natural-gas-producing companies in the state, but consolidation and private ownership mean the department no longer has public financial data for enough companies. "If you look at the attachment, you'll see that there's 40 companies ... and only 8 of those 40, we can use their data," Sache said, explaining the department's difficulty meeting the statutory sample-size requirement.
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