Millions missing in unpaid oil and gas taxes

Adrian C Hedden
Carlsbad Current-Argus

Many oil and gas companies could be skimping on millions of dollars in taxes owed to Eddy County.

The county is aiming to find the companies not paying taxes and begin to collect the revenue to increase its bottom line.

County commissioners approved an agreement last year to pay Total Assessment Solutions Corp. $749,500 to audit oil and gas operations in the area and identify sources of tax revenue that could be collected by the county.

The county will also pay TASC’s expenses and taxes for the project, raising the cost to $806,181 for the first year.

The contract could be renewed three times annually for a total of four years. It would cost the county $187,250 to renew in 2017-18, $168,500 for 2018-19 and $150,000 for 2019-20.

The contract and status of the audit was presented to the commissioners Tuesday by County Assessor Gemma Ferguson.

Records from the county assessor show there could be millions of dollars in unpaid taxes from oil equipment omitted from tax payments.

Notices of the values have been sent to three companies so far, records show.

A fourth has been extracting from the county since 2004, with about 60 miles of pipelines, but has never paid taxes to the county, read assessor documents.

Ferguson said many more companies still operating in Eddy County are not paying taxes. She said ignorance could be a factor.

About $500,000 in unpaid taxes have been accounted for by the audit so far, but Ferguson said that number could more than double by the time the survey is completed.

“Some them just have never been told they need to,” she said. “What doesn’t get reviewed doesn’t get done.”

Many oil and gas companies in Eddy County do pay their fair share of taxes, Ferguson said.

“Anything we can do to help,” Ferguson said. “It’s just not fair to the other companies that are paying their taxes.”

TASC is using GPS tracking with an accuracy rate within one meter of all well bores producing or not producing.

The audit will also seek out saltwater disposal wells, compressor stations, meter houses and pipeline crossings.

Information gathered will inform the county of the company’s name, lease information and all equipment on site to be assessed for taxes owed.

The company will also provide legal advice to the county as to possible litigation to gain owed back taxes.

A map will be generated to continue to track oil and gas production for future tax requirements.

Despite the findings, Ferguson said the first four companies notified of back taxes are “just the beginning.”

“Those are just the ones we’ve identified so far,” she said. “There’s more companies out there than I ever knew. We didn’t know they weren’t paying so they weren’t paying.”

In a time of budget shortfalls and cuts at both the state and county levels Ferguson said the added tax revenue is necessary to keep the county afloat.

“My job is to make sure we have all the properties values so we can start collecting the money and keep the county operating,” she said.

Oil and gas tax receipts, down more than 40 percent from last year, are distributed to area school districts, municipalities and the county's general fund, among other groups.

County commissioner James Walterscheid said the audit could prove to be a needed boost to the county’s funding for services and projects.

“I think it’s going to turn out to be the right thing to do,” he said. “It shows you, people either don’t know or they think no one will find out.”

Walterscheid said knowledge of the audit could spread among the oil and gas industry, causing companies to be more accountable for taxes in the future.

“It'll let these guys know the county is looking so they better do what they’re supposed to do,” he said. “It makes everybody more honest.”

Adrian Hedden can be reached at 575-628-5516, or @AdrianHedden on Twitter.