wv reserve coal valuation process (2010)
TRANSCRIPT
Using GIS Technology for Natural Resource Mass Appraisals
Tyler P. Bragg, GISP
WV Property Tax Division
Mined Minerals GIS Section
Discussion Items
Background Information Components Factors and Variables GIS Analysis Valuation
Map Courtesy of the West Virginia Geological and Economic Survey, www.wvgs.wvnet.edu
Background Information Valuation of Reserve Coal is outlined in
WV Legislative Rule §110-1I West Virginia is estimated to have between
18-52 billion tons of reserve coal. 1
What is Reserve Coal or “Reserves”?○ “those beds of coal, or portions of the beds, which
contain mineable coal, but are not active acres on an active mining property.” 2
Reserve coal owners are required to file a listing of their properties on an annual basis to the State Tax Commissioner
Background Information
All coal ownership in West Virginia is to be valued and taxed. 2
State Tax Department responsibilitiesCalculating the appraised valueProviding values to the counties
State “Infers” Coal3 mile buffer from known location
○ USGS Standard (circular 891)
GIS Components
Coal Bed MappingWV Geological and Economic Survey
Parcel MappingMineral Mapping
○ State Mappers, Vendors, PTDSurface Mapping
○ Key component to mapping Minerals
Factor Mapping
How Much is My Coal Worth? Factors are the characteristics of a given
area that have a direct effect on the value of coal in that area and determine the time mining is expected to commence
Variables are information that constantly changes and has a direct effect on the value of coal. This information must be recalculated every year to maintain currency
How Much Is My Coal Worth? Factors
Market Interest Market Mine-AbilityConflictsVolatilityEnvironmentalSeam/Prime SeamT Factor
○ Every factor has scale - 20, 40, 80 (Some can = 0)
VariablesCoal PricesRoyalty RatesCapitalization RateDiscount RateCriteria for Factors
Factors
Market InterestDensity of coal related
transactions within 5 miles of property (sales, leases, permit applications, prospecting, etc)
Factors Market Mine-Ability
Density of mines (historic and current) within 5 miles of property
Surface, Deep, Boom, Historic, Current Mines (as defined in the Rule)
Factors Volatility
The measure of the coal’s ability to vaporize○ Ignition, burn rate,
and energy emission
○ Higher volatility = increased value
○ Criteria based on characteristics of Steam Coal
Blue = Low Red = High
Factors
Environmental Reflects
environmental restrictions in an area that affects mine-ability and coal value
Data from a variety of sources
Factors Prime Seam Assignment (Based on Coal
Bed Mapping)“thickest, previously mined, stratigraphically-
highest coal bed in the area, with sufficient mineable tons to sustain mining for two (2) years…” 2
T FactorReflects the amount of time that mining
operations are projected to commence on a given property
Values - 20, 40, 80 (years)The result of combination of all other factors
Factors
(Trans + Mine + Well +Volatility + Environmental + Prime Seam)/3 = T (Time) Factor
20 – Projected mining in 20 yrs – Higher Values
40 – mining in 40 yrs – Lower Values 80 – mining in 80 yrs – Lowest Values
Variables Royalty Rate
Average income collected by a landowner for active mining operations○ Surface vs. Deep○ Metallurgical vs.
SteamHigher Royalty =
More Valuable Coal
Vaggr = (C$ ave )(ROY ave)(PROD ave)/Cap Rate
Variables Average Coal Prices
Forward Weighted Average – 3 Year Metallurgical vs. Steam
Discount Rate Rate used to calculate present value of a coal property
based on the time expected before mining takes place Present value of future income (determined by T-Factor)
Capitalization Rate Used along with discount rate in determining present
value of coal properties Three year running average Combines Safe Rate, Risk Rate, Non-liquidity Rate,
Management Rate, and subtracts Inflation Rate
Variables
Factor CriteriaTo be evaluated biannually based on geo-
statistical analysis of data○ Market Interest (Transactions)○ Market Mineability (Mines)○ Use Conflict (Wells)○ Environmental
Analysis – Coal Mapping Core drilling data
Point location○ Coal elevation,
thickness, additional coal
Key to GIS analysisAttribute properties
with coal informationMineable/un-
mineable acreages for every parcel, per coal seam
Analysis – Coal Mapping Raster Grid (Thickness) created from
points Run 3-mile buffer on all points (inferred
coal)
Analysis – Coal Mapping Elevation Grid created from drill data
Subtracted from Statewide DEM to locate absent coal
Result – Elevation Cutter ○ Cut out areas that have been eroded
(rivers/streams)
=-
DEM Elevation GridElevation Cutter
Analysis – Coal Mapping Eroded areas are removed from thickness
gridFor every coal seam
Grid is trimmed to 3-mile radius of points
Analysis – Coal Mapping Contours are generated
.5 foot intervals Mined out areas are removed/cut out All steps completed for each coal seam (93 total)
Contours Mineable/Un-mineable
Analysis – Parcel Mapping
Surface Parcels provide a reference for mineral parcel boundaries
Accurate surface parcel mapping is beneficialMineral parcels are only as accurate as the
surface parcels WVDTR has field mappers that research
deeds and land books in counties to locate unmapped mineral parcels
County GIS contributionMore up-to-date, accurate surface data = better
mineral data
Analysis –Parcel Mapping
MMD (Mined Minerals Dataset) Mineral Parcel
Boundaries○ Includes Surface Parcels
with Mineral Rights
All factors and variables are compared to mineral parcels for each seam on property
Pertinent info recorded in attribute table
Valuation
Once all information has been associated with each parcel (per coal seam present), values can be determined
Coal values are based on an INCOME approachSimply put—based on future royalties,
discounted by calculated Time Factor
RCVM (Reserve Coal Valuation Model) $/ac/bed=($/mmBTU)X(Roy)X[1±(BTU+S)]X[(1/(1+I)(t+0.5))x(1/106)]X(BTU)X(2000)X(1800)X(RR)X(Thk)
Challenges Completion of Coal Bed Mapping Completion of Surface and Mineral
MappingUntil then—Geocoding
○ 4-Mapped Parcel○ 3-Within a tax index map○ 2-within a quad 9th
○ 1-within a district○ 0-within a county
Anything less than Geocode 4 is valued based on its respective location (county, district, etc.)
Validating tax returns vs. coal mapping
Tyler P. Bragg, GISPWV State Tax Department
Property Tax DivisionMined Minerals GIS Section
Phone: (304) 558-4925Email: [email protected]
Thank You!
References
1 Taxing West Virginia’s Coal Reserves: A Primer, West Virginia Center on Budget & Policy, May 2009. (http://www.wvpolicy.org/downloads/CoalReserveTaxationPrimer-FINAL-5-19-09%20-%20FINAL.pdf
) 2 Title 110, West Virginia Legislative
Rule, Series 1l, Valuation of Active and Reserve Coal Property for Ad Valorem Property Tax Purposes, May 1, 2006.