FAQ's: Minerals

What is a Mineral Tax?

• Mineral taxes present a confusing topic for many people.  
• A mineral interest is real property, but you can’t see it like you can a home, a lot, an apartment, or a farm. 
• The topic becomes more confusing in Tarrant County, which is the largest oil or gas field ever developed in an urban area. 
• Thousands of homeowners own very small interests in gas units that have been developed under large residential developments, and the small interests result in small amounts of taxes. 
• The taxes may be small, but the number of questions caused by those taxes is large.

Why do I have to pay property taxes on my mineral interest?

• Mineral interests are defined by the Texas Property Tax Code as real property and are subject to taxes the same as all other real property.

When do mineral interests become taxable?

• Mineral interests become taxable on January 1 of the year following the first production of the unit.
• The first tax bill for the interest should be sent in early October of that year.

Who is responsible for imposing property taxes on my mineral interest?

• The Appraisal District is responsible for determining the existence of taxable gas units, the names and addresses of owners of interests in the units, the value of the interests, and exemptions that apply to interests. 
• Tarrant Appraisal District contracts with Pritchard & Abbott, Inc., an expert in oil and gas property appraisal, to assist the Appraisal District in its responsibilities.
• The Tarrant County Tax Assessor-Collector’s office bills and collects the taxes following the Appraisal District’s completion and certification of the appraisals.

Is the value of my mineral interest included in the value of my home for property taxes?  Why or why not?

• The value of a mineral interest is not included in the value of the home. 
• The mineral interest is completely separate from the home. 
• It is an interest in a portion of the underground gas reservoir which may, and usually does, extend far beyond the boundaries of the lot upon which the home sits.

Is the value of my mineral interest included in the value of my home for property taxes?  Why or why not?

• The value of a mineral interest is not included in the value of the home. 
• The mineral interest is completely separate from the home. 
• It is an interest in a portion of the underground gas reservoir which may, and usually does, extend far beyond the boundaries of the lot upon which the home sits.

I only have one gas lease.  Why do I receive multiple tax bills?

• Many gas units have more than one well. 
• Each gas well is a separate property, each interest in each well is a separate property tax account, and each interest receives a separate tax bill.

Can you tell me the address of my mineral interest?

• The mineral interest is a fractional ownership interest in the underground gas reservoir, and the reservoir is situated under many surface lots. 
• Therefore, the unit does not have a specific surface address. 
• The unit is identified by the name of the unit and the unit’s identification number assigned by the Texas Railroad Commission, the agency that regulates the oil and gas industry in Texas.

Where can I view the mapped location of the unit?

• Tarrant Appraisal District maintains maps of gas units.

What is the Railroad Commission, and why does it have anything to do with gas leases?

• The Railroad Commission is the agency of the State of Texas that regulates the oil and gas industry in Texas. 
• The Commission assigns a unique identification number and maintains extensive records of each oil and gas well in the State. 
• The records include the geologic structure and monthly production of each well. 
• The records are highly useful to the Appraisal District and appraisal firm in determining the precise location and the value of each well.

How is the value of my mineral interest determined?

• The value of a mineral interest is the current value of the income the interest will receive in the future from the unit's production. 
• Section 23.175 of the Property Tax Code prescribes the method to be followed.  
• The prior year's average price of production from the unit must be used. 
• Future prices and discount factors are derived from Bureau of Labor Statistics and industry publications. 
• The productive life of the unit is determined by the actual production history of the unit shown by the records of the Railroad Commission. 

Who determines the value?

• The value is determined by the Appraisal District with the assistance of consultants who are experts in the profession of appraisal of oil and gas properties. 
• Tarrant Appraisal District contracts with Pritchard & Abbott, Inc., an expert in oil and gas property appraisal whose home office is in Fort Worth, to assist the Appraisal District in determining the values of mineral interests.

How can I protest the value of my mineral interest?  I don’t know anything about the value of the well.

• The Property Tax Code contains provisions that are designed to assure equitable treatment for all mineral owners. 
• First, all protests of interests in a unit must be combined into a single hearing. 
• This provision results in royalty owners having the benefit of the information presented by the operator, who is the largest owner in the unit. 
• Another section of the Property Tax Code provides that all owners in a unit will receive value adjustments equivalent to any adjustment made to another interest in the unit.

Are there any tax exemptions available for my mineral interest?

• The Property Tax Code exempts from taxation mineral interests with low values. 
• If the values of a taxpayer's mineral interests in a taxing unit total less than $500, the mineral interests are exempt from property taxes.

I did not receive my first tax bill for more than a year after the well began producing.  Why was it so late?

• The information that indicates that production has begun is maintained and furnished by the Texas Railroad Commission. 
• Frequently the information is not available from the Railroad Commission until the well has been producing for some time. 
• If the Railroad Commission’s published initial production data is delayed the first year’s tax appraisal may not be completed in a timely manner, and the tax bills for the first taxable year for the interests in the unit will be delayed from the normal October mailing. 
• If the appraisal completion is delayed so that tax bills cannot be mailed until after January 10 of the tax year, the payment and delinquency dates are adjusted to allow time for payment of the bills.

I received a tax bill for my mineral interest, but I have not received any royalty checks.  Why?

• Royalty payments from the first sale of production from a lease are due 120 days after the end of the month of the first production. 
• In addition, a royalty payment may not be made unless the owner has signed and filed a Division Order with the Operator of the unit.

What is a Division Order?

• A Division Order is a document that each owner of an interest in a mineral unit must sign and file with the Operator of the unit. 
• The Division Order sets out the name and address of the owner and the fractional interest owned in the unit. 
• Royalty payments are based on the information included in the Division Order. 
• The Operator cannot release royalty payments to the owner of an interest until the owner has furnished a signed Division Order.

What determines the address where my tax bill is mailed?

• By law, the address where the tax bill is mailed must be determined by the Appraisal District where the unit is located. 
• The Appraisal District uses the address listed on the Division Order because that is the address used by the Operator for royalty payments.

If my address changes, who should I tell?

• Royalty payments are mailed to the address listed on the Division Order. 
• Tax bills are mailed to the address on record with the Appraisal District. 
• To be sure that you receive both royalty checks and tax bills in a timely manner, you should notify both the Unit Operator and the Appraisal District of an address change.