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With more than $460,000 of unpaid taxes already discovered and much ground still to cover, Eddy County could be in for a significant and much-needed payday by the time the ongoing audit of oil and gas properties in the county is complete.

In a story first reported Feb. 23 in the Daily Press, the Little Rock, Ark.-based company – Total Assessment Solutions Corp. (TASC) – with whom Eddy County contracted last year to conduct the audit on behalf of the County Assessor’s Office had, as of Feb. 21, discovered 111 drilling rigs and 101 miles of pipeline omitted from the county’s tax rolls.

The estimated value of the unreported property was $53,147,942, which – going back the 10 years allowable for the assessment of back taxes – should have resulted in $464,369 in tax money paid to the county.

And TASC still has yet to assess some of the industry’s most active areas.

“They haven’t done the far east side and far south yet,” Eddy County Assessor Gemma Ferguson said last week. “They haven’t started working on compressors yet, and they’re not actually through finding all the different well points all over the county, either. They started on the west side.”

The property audit has been about four years in the making.

It was in 2012 that former county assessor Karen Robinson sued the Eddy County Board of Commissioners after they denied her request to hire an outside auditor. Robinson had determined the lack of property reporting was “significant” and its assessment beyond the capabilities of her office alone.

The county appealed the decision after the courts ruled in Robinson’s favor, and eventually, in October 2015, the case made it all the way to the New Mexico Supreme Court, which ordered the commission to approve the audit.

Jerry Wisdom, TASC Oil and Gas manager for Arkansas, Oklahoma, New Mexico and Colorado, says his team is only around one-third of the way through its evaluation of pipelines in the county, with approximately $200,000 of the back taxes from 2007-17 resulting from that portion of the audit.

Within those 100 miles of pipe, Wisdom says, about 27 different companies have property unreported to the county.

“We expect to find exponentially a lot more value through that,” Wisdom said.
In the area of drilling rigs, Wisdom says “only about 42 percent of the companies were reporting, with 58 percent of the companies not reporting drilling rigs for the last 10 years.”

The specific companies in violation will not be named until the audit is complete. The companies will then have the opportunity to protest the values if they wish.

“We expect to be through with the field work by July 1, and hopefully we’ll have all of our values then,” Wisdom said. “The mapping will be done by Aug. 1, and then we will send out other notices. As we go across the county, we’ll send notices out as soon as we find that they’re 100-percent correct and we have 100 percent of the property found to be omitted.”

Wisdom has been performing oil and gas property audits since 1997, and TASC currently has around 65 projects active in six different states. In New Mexico, Wisdom is also heading an audit of oil and gas equipment in Rio Arriba County and has found $16,000 in unpaid taxes there thus far.

Both Wisdom and Ferguson say there are a variety of reasons companies don’t report property. Often it’s intentional, but it can be an innocent mistake, as well.

“Some may have purchased property and the last company that owned it didn’t report it,” Wisdom said. “Some may think it’s a part of production and they don’t have to. Others, of course, just say, ‘We won’t turn it in unless they find it.’

“That’s just some of what happens when it’s a self-reporting issue.”

Ferguson says the contract between TASC and Eddy County is for four years, meaning once TASC has completed its full audit this summer, it will perform an annual review for three more years.

“Because they keep drilling every day, we just don’t have the experience or the expertise within our office to go out there and find these things, much less value them,” Ferguson said.

While the funds that stand to be gleaned from the audit are clearly the focal point for the currently-cash-strapped county, the assessor notes there will be added benefits to TASC’s work, which involves GPS mapping of all oil and gas properties.

“Emergency crews, fire crews, they’ll be able to pull up a specific location and see what equipment’s out there so they’re not going out there blind,” Ferguson said. “If there’s a tank battery fire, for instance, they’ll be able to get a GPS location of exactly where it is, which is a lot better than ‘about five miles down this dirt road and about two miles down another dirt road.’”