October 28, 2020
Supreme Court Ruling: Louisiana Property Tax
Recently, the Louisiana Supreme Court made the choice to slash the valuation of three oil wells after it determined that the fair market sales price of the wells provided a better valuation indicator than the parish’s estimation. This reversed the decision of an appeals court that had ruled that these particular Louisiana oil and gas wells were worth significantly more than they could possibly be sold for. The oil and gas property tax is not the same as the standard Louisiana property tax, and the owner of the wells had been fighting the valuations with the argument that they were much too high for the actual value of the wells themselves.
The justices on the court sided with the district court and the state tax commission and rejected the multi-million dollar valuations that were placed on the oil wells by the assessor of Jefferson Davis Parish. The wells are owned by D90 Energy LLC, which is an oil and gas operator with a multi-state presence. The assessor’s valuations were $3.3 million in 2013 and 2014, along with $3.1 million in 2015 and $1.8 million in 2016. Those valuations were replaced by the valuations arrived at by the commission, which was $235,000 for 2013, 2014, and 2015, along with $145,000 for 2016.
The assessor of the parish made the argument that he had the sole right to decide the fair market value under the constitution of the state, and that the valuation of the commission wasn’t accurate. He also said that the commission used information that the assessor didn’t have. But the justices determined that the constitution gave the commission the right of review, and that the evidentiary hearing was required by law. The commission was able to review the valuation and hear new evidence as part of its duties, allowing it to make a new determination for the valuation of the Louisiana oil and gas wells.
The argument was also made that the commission’s hearing would not have meaning if the commission was only allowed to review evidence that an assessor provided. The justices looked at all the evidence that was given to the commission, and determined that the owner of the wells was correct in saying that the assessor had overvalued those wells. Other sales of similar wells helped the commission establish a fair market value and a fair valuation for Louisiana property tax, as well. The assessor wanted the court to rule that D90 Energy was not able to contest the valuation for 2015 and 2016 since it did not pay taxes those years under protest.
The justices disagreed with the assessor, and said that was only for the district court. D90 energy won its case, and sees the case as a victory for anyone in the state who has to pay property tax. It may be particularly important for oil and gas companies, but others who have property tax concerns may also be able to have their voices heard and focus on the important ways they can reach out for justice if they feel their valuations are far higher than they rightfully should be under the circumstances.