Colorado § 39-7-101 - Statement of owner or operator.

§ 39-7-101. Statement of owner or operator.

(1) Every operator of, or if there is no operator, every person owning any oil or gas leasehold or lands within this state, either as a single lease or as a unit, that are producing or are capable of producing oil or gas on the assessment date of any year, shall, no later than the fifteenth day of April of each year, prepare, sign under the penalty of perjury in the second degree, and file in person or by mail with the assessor of the county in which the wellhead producing the oil and gas leaseholds or lands is located a statement for the lease or unit. For purposes of this article, irrespective of the physical location of the producing leaseholds or lands, the point of taxation is the same as the point of valuation, which is the wellhead. The statement must be made on a form prescribed by the administrator, showing:

(a) The wellhead location thereof and the name thereof, if there is a name;

(b) The name, address, and fractional interest of the operator thereof;

(c) The number of barrels of oil, or the quantity of gas measured in thousands of cubic feet, sold or transported from the wellhead during the calendar year immediately preceding, after separately reporting the number of barrels of oil, or the quantity of gas measured in thousands of cubic feet, delivered to the United States government or any agency thereof, the state of Colorado or any agency or political subdivision thereof, or any Indian tribe as royalty during the calendar year immediately preceding;

(d) The selling price at the wellhead. As used in this article, "selling price at the wellhead" means the net taxable revenues realized by the taxpayer for sale of the oil or gas, whether such sale occurs at the wellhead or after gathering, transportation, manufacturing, and processing of the product. The net taxable revenues shall be equal to the gross lease revenues, minus deductions for gathering, transportation, manufacturing, and processing costs borne by the taxpayer pursuant to guidelines established by the administrator.

(e) The name, address, and fractional interest of each interest owner taking production in kind and the proportionate share of total unit revenue attributable to each interest owner who is taking production in kind;

(f) A declaration made under the penalty of perjury in the second degree that includes the following:

(I) A statement that the owner or operator has personally examined the statement described in this section and that such statement sets forth, to the best of the owner's or operator's knowledge and belief, the information required by this section; and

(II) A statement by the owner or operator as follows:

No representations are made as to the accuracy of the value of any portion of the production from subject property that is taken in kind by any owner other than the undersigned.

(1.5) Any nonoperating interest owner in an oil or gas well may, on or before the fifteenth day of March each year, submit to the operator by certified mail a report of the actual net taxable revenues received at the wellhead and the actual exempt revenues received at the wellhead by such owner for production taken in kind from the property during the calendar year immediately preceding. Operators shall use the information reported pursuant to this subsection (1.5) to determine the selling price at the wellhead. If any nonoperating interest owner fails to provide to the unit operator the information required under this subsection (1.5) by March 15 of each year, such operator shall use the selling price at the wellhead received by such operator for such operator's share of production from such unit in place of such nonreported information, and the amount of tax for which such nonreporting, nonoperating interest owner is liable shall be calculated based on the selling price at the wellhead reported by the operator.

(2) (a) If a statement of an owner or operator is not received or postmarked on or before the fifteenth day of April of each year, the assessor may impose on such owner or operator a late filing penalty in the amount of one hundred dollars for each calendar day the statement is delinquent; except that such late filing penalty shall not exceed three thousand dollars in any calendar year. The assessor may grant an extension of time for filing a statement to any operator or owner. Any extension, and its length, shall be granted solely at the discretion of the assessor.

(b) This subsection (2) is effective January 1, 1997.

(3) (a) The assessor may require the owner or operator to submit written documentation supporting the information provided in the statement. Such documentation shall be supplied within thirty days after either the date of the postmark on the assessor's written request for such documentation or the date that an owner or operator is required to file a statement pursuant to subsection (1) of this section, whichever is later. Any owner or operator who willfully fails or refuses to comply with the assessor's request for written documentation may be assessed a fine of one hundred dollars for each day of such willful failure or refusal. The total amount of all fines that may be assessed by an assessor against an owner or operator in any calendar year shall not exceed three thousand dollars, regardless of the number of leases or units owned or operated by such owner or operator or the number and length of such willful failures or refusals by such owner or operator.

(b) This subsection (3) is effective January 1, 1997.

(4) All statements and documentation filed with the assessor shall be considered private documents and shall be available on a confidential basis only to the assessor, the administrator, the annual study contractor hired pursuant to section 39-1-104, the executive director of the department of revenue, the county treasurer, and their employees. Such statements and documentation shall be available on a confidential basis to the board of assessment appeals and the county board of equalization when information in such statements and documentation is pertinent to an appeal or protest.

(5) (a) Fines imposed pursuant to this section shall be fees of the office of the county assessor. Any unpaid fines imposed pursuant to this section shall be certified to the county treasurer by January 1 of each year and shall be included in the delinquent owner's or operator's property tax statement issued pursuant to section 39-10-103.

(b) This subsection (5) is effective January 1, 1997.

Source: L. 64: R&RE, p. 710, § 1. C.R.S. 1963: § 137-7-1. L. 69: p. 1120, § 1. L. 72: p. 570, § 55. L. 81: (1)(c) and (1)(d) amended, p. 1857, § 1, effective January 1, 1982. L. 93: (1)(d) amended and (1)(e) and (2) added, pp. 241, 242, §§ 1, 2, effective March 31. L. 96: Entire section amended, p. 107, § 1, effective March 25. L. 2007: (4) amended, p. 498, § 1, effective April 16. L. 2009: (3)(a) amended, (HB 09-1161), ch. 44, p. 166, § 1, effective August 5. L. 2014: IP(1), (1)(a), and (1)(c) amended, (HB 14-1371), ch. 400, p. 2012, § 1, effective August 6. L. 2020: (4) amended, (HB 20-1077), ch. 80, p. 325, § 10, effective September 14.

Cross references: For perjury in the second degree and the penalty therefor, see §§ 18-8-503 and 18-1.3-501.

ANNOTATION

Selling price for the purposes of this article means the actual amount received by the seller. This amount most closely reflects the market value in the ordinary course of trade and is consistent with the requirement that actual value of real property be determined for tax assessment purposes. Yuma County Bd. of Equaliz. v. Cabot Petroleum, 856 P.2d 844 (Colo. 1993).

Where the selling price cannot be determined within a short period of time, it is incumbent upon owners and operators of oil and gas leaseholds and lands to report in mandatory annual statements any dispute concerning the selling price or the fact that the owner or operator have agreed to delayed payments. Yuma County Bd. of Equaliz. v. Cabot Petroleum, 856 P.2d 844 (Colo. 1993).

Processing costs occurring on oil leasehold site are properly deducted from the sale price of the oil in valuing the unprocessed material at the wellhead under subsection (1)(d) of this section and art. X, § 3 (1)(b), of the state constitution. The legislature, consistent with the constitution, intended "wellhead" to mean the physical location where the extracted material emerges from the ground. The statute defines "selling price at the wellhead" as the "next taxable revenues realized by the taxpayer for sale of the oil or gas, whether such sale occurs at the wellhead or after gathering, transportation, manufacturing, and processing of the product". In determining whether on-site processing costs are properly deductible in arriving at the wellhead value of the unprocessed material, the essential practice and lesson of the industry is that there is no market for the material until the initial steps of processing the unprocessed material have occurred. Here, the selling price of the separated oil was established at the storage tanks. Because gathering, processing, and transportation occurred before the product was valued at the tank battery, those costs are properly deductible in arriving at the value of the "unprocessed material" at the wellhead. Wash. County Bd. of Equaliz. v. Petron Dev. Co., 109 P.3d 146 (Colo. 2005).

In disallowing taxpayer's deductions, county's determination that "gathering, processing, and transportation" expenses could not be deducted unless they occurred "away from" or "beyond" the leasehold property surrounding the well would result in non-uniform treatment of similarly situated taxpayers within the same class and is contrary to both subsection (1)(d) of this section and art. X, § 3 (1)(b), of the state constitution. County was required to allow for deduction of processing costs on the leasehold site to comply with the constitutional and statutory provisions. Wash. County Bd. of Equaliz. v. Petron Dev. Co., 109 P.3d 146 (Colo. 2005).

Statutory definition of "selling price at the wellhead" required assessor to allow deductions for gathering, transportation, manufacturing, and processing costs incurred between the wellhead and the point of sale of crude oil. Article X, § 3 (1)(b), of the Colorado Constitution requires valuation of an oil leasehold to be based upon the value of unprocessed oil, and removal of water from and injection of chemicals into oil between the wellhead and the point of sale constituted processing even though the oil remained crude oil. Petron Dev. Co. v. Wash. County Bd. of Equaliz., 91 P.3d 408 (Colo. App. 2003), aff'd on other grounds, 109 P.3d 146 (Colo. 2005).

Moreover, a definition of "well site" that includes an entire oil or gas leasehold violates the uniformity of taxation requirement. Leaseholds vary in size and number of wells, and the definition would force oil and gas producers with larger leaseholds who are able to gather, transport, manufacture, and process material entirely on their leaseholds to pay higher taxes by preventing them from deducting the costs of those activities. Petron Dev. Co. v. Wash. County Bd. of Equaliz., 91 P.3d 408 (Colo. App. 2003), aff'd on other grounds, 109 P.3d 146 (Colo. 2005).

A nonoperating fractional interest owner does not have a legally protected interest in the valuation and taxation of their oil and gas leasehold and land and, therefore, lacks standing to challenge a retroactive assessment and property tax increase. Colo. Prop. Tax Adm'r v. CO2 Comm., 2023 CO 8, 527 P.3d 371.