195 Devon Energy Prod., L.P. v. Hockley County Appraisal Dist.

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
 
Devon Energy Prod., L.P. v. Hockley County Appraisal Dist. 178 S.W. 3d 879 (Tex. App. – Amarillo 2006, pet. denied) held that a county appraisal district can assess for ad valorem taxation only that portion of a producing formation lying within the county. In this case, the lease was located in Hockley County (84%) and in Terry County (16%). The smaller producing formation, the Clearfork Formation, was located in Hockley County (50%) and in Terry County (50%). Terry County assessed tax on 50% of the value of the Clearfork. Instead of using the geographic boundaries of the Clearfork as determinative, Hockley County began with the boundaries of Devon’s lease and assessed tax based on the surface acres of the lease located in Hockley County (84%). Combining the assessments, the Clearfork was effectively valued for tax purposes at 134% of its fair market value. The court held that no property can be assessed for ad valorem taxes at a greater value than its fair cash market value, that the taxes must be assessed and paid in the county where the property is situated, and an appraisal district may only assess for taxation that property located within its district (which in this instance was limited to Hockley County).  The burden of proving the location of the property is on the taxing unit.