NORWICH – Lawmakers are beginning to consider the property tax implications for Chenango County in light of the potential windfall from natural gas production in the future.
The New York State Department of Environmental Conservation has permitted companies to drill for gas in 72 wells in towns from Otselic and Smyrna in the north down through Plymouth, Preston and Smithville in the south. Thousands more acres of Bullthistle land is posed to be leased for future drilling or pipeline easements, at prices that could soon reach the $3,000 an acre mark, plus up to 15 percent in royalties.
Local real estate brokers say farmland has already gone from $750 to $1,000 an acre to $2,000 to $2,400.
Chenango County Real Property Tax Services Assistant Director Donald MacIntosh attempted to define New York’s real property tax law as it relates to gas producing properties to members of the full board of supervisors Monday. However, several town leaders questioned specific aspects of it.
“Assessors have a whole manual of procedures to do this (to follow the state’s valuing process),” MacIntosh said. “The value is constantly changing as production escalates and falls off.”
According to the law, an assessment will target natural gas production as a property unit separate from all other interests in the property. Gas companies that are leasing the specific unit for drilling would be billed directly based on the unit’s gas rights and unextracted gas as well as the equipment, fixtures and pipeline necessary to drill, extract, deliver or sell the gas to a commercial purchaser.
Town of Columbus Supervisor George B. Coates questioned whether the state’s Real Property Tax Office or the natural gas companies themselves determine the amount of real estate defined within the unit.
MacIntosh said the economic unit is set by the gas company’s report to the state.
“That’s my point. They are going to be ending up saying how much,” Coates said.
Town of Preston Supervisor Peter C. Flanagan said meters at the well head are generally read by technicians who work for private gas companies as well. Moreover, gas companies may choose to use a drilled well for storing gas indefinitely instead of piping it into the marketplace.
Flanagan, who heads up a committee created to monitor the burgeoning industry in Chenango County, also pointed to future problems between municipalities if land defined within a particular unit laid in several towns.
MacIntosh said the state would “make an appropriation” in such cases.
“I’m sure there’s going to be all kinds of fights about this between towns,” said Supervisor Dennis Brown, D-Pharsalia.
Town of Smyrna Supervisor James Bays said a real property tax levy that took into account a meter reading conducted by independent regulators “would make this convoluted process much simpler.”
Because the result of the property tax calculation is multiplied by the most recent state equalization rate, some towns with higher equalization rates could lose out on school aid. A handful of supervisors have long contended that natural gas production would eventually drive equalization rates further down and mean more taxes for all.
Supervisor Ross Iannello, unaffilliated-New Berlin, said in a conversation with The Evening Sun earlier this summer, “The more property value you get, the less school aid you’re going to get here.”
Supervisor David C. Law, R-Norwich, said, “Somebody’s going to win, but a lot of us are going to loose.”
In a separate conversation Tuesday morning, Coates asked, “If I’m getting royalties on my well, how can’t that affect my property’s value?”
Several layers of the substrata here contain pockets of the highly valued energy source, but it is the newfound technology for extracting the abundant amounts from the Marcellus Shale formation that has drawn the most attention. Geologists predict the formation, which extends from Ohio to New York, holds enough recoverable natural gas to supply the entire nation’s needs for more than two years. Some say the Marcellus is at its thickest in the southern towns of Chenango County.