S.B. No. 1505
 
 
 
 
AN ACT
  relating to the appraisal for ad valorem tax purposes of a real
  property interest in oil or gas in place.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 23.175, Tax Code, is amended to read as
  follows:
         Sec. 23.175.  OIL OR GAS INTEREST. (a)  If a real property
  interest in oil or gas in place is appraised by a method that takes
  into account the future income from the sale of oil or gas to be
  produced from the interest, the method must use the average price of
  the oil or gas from the interest for the preceding calendar year
  multiplied by a price adjustment [market condition] factor as the
  price at which the oil or gas produced from the interest is
  projected to be sold in the current year of the appraisal.  The
  average price for the preceding calendar year is calculated by
  dividing the sum of the monthly average prices for which oil and gas
  from the interest was selling during each month of the preceding
  calendar year by 12.  If there was no production of oil or gas from
  the interest during any month of the preceding calendar year, the
  average price for which similar oil and gas from comparable
  interests was selling during that month is to be used.  The chief
  appraiser [comptroller] shall calculate the price adjustment
  [market condition] factor by dividing the price of imported
  low-sulfur light crude oil in nominal dollars or the spot price of
  natural gas at the Henry Hub in nominal dollars, as applicable, as
  projected for the current calendar year by the United States Energy
  Information Administration in the most recently published Early
  Release Overview of the Annual Energy Outlook [comptroller's
  current calendar year statewide average price for oil or gas, as
  applicable, forecasted for revenue estimating purposes] by the
  price of imported low-sulfur light crude oil in nominal dollars or
  the spot price of natural gas at the Henry Hub in nominal dollars,
  as applicable, for the preceding calendar year as stated in the same
  report [preceding calendar year actual statewide average price for
  oil or gas, as applicable.   For purposes of calculating the market
  condition factor, "price" means the market value of oil or gas as
  determined under Subchapter C, Chapter 201, or Section 202.053, as
  applicable.   The comptroller shall calculate the preceding calendar
  year actual statewide average prices for oil and gas and the market
  condition factors for oil and gas and publish that information to be
  used for ad valorem tax appraisal purposes concurrently with the
  current calendar year statewide average prices for oil and gas
  forecasted for revenue estimating purposes].  The price for the
  interest used in the second through the sixth [or a subsequent]
  calendar year of the appraisal may not reflect an annual escalation
  or de-escalation rate that exceeds the average annual percentage
  change from 1982 to the most recent year for which the information
  is available in the producer price index for domestically produced
  petroleum or for natural gas, as applicable, as published by the
  Bureau of Labor Statistics of the United States Department of
  Labor. The price for the interest used in the sixth calendar year
  of the appraisal must be used in each subsequent year of the
  appraisal [shall reflect the same percentage rate increase or
  decrease in the price for oil or gas, as applicable, as projected
  for that calendar year by the comptroller for revenue estimating
  purposes].
         (b)  The comptroller by rule shall develop and distribute to
  each appraisal office appraisal manuals that specify the formula to
  be used in computing the limit on the price for an interest used in
  the second through the sixth year of an appraisal and the methods
  and procedures to discount future income from the sale of oil or gas
  from the interest to present value.
         (c)  Each appraisal office shall use the formula, methods,
  and procedures specified by the appraisal manuals developed under
  Subsection (b) [of this section].
         SECTION 2.  This Act applies only to the appraisal for ad
  valorem tax purposes of a real property interest in oil or gas in
  place for a tax year beginning on or after the effective date of
  this Act.
         SECTION 3.  This Act takes effect January 1, 2012.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1505 passed the Senate on
  April 28, 2011, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1505 passed the House on
  May 11, 2011, by the following vote:  Yeas 142, Nays 0, two
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor