Scurry County’s four taxing entities will be granted access to limited information in their case against Kinder Morgan properties and the Scurry County Appraisal District.
During a hearing today, District Judge Ernie B. Armstrong allowed the limited release of information, however what will be provided to the entities’ attorney, Brent Lemon, will be decided after Kinder Morgan’s attorneys file their responses over the next few weeks.
Scurry County, Snyder ISD, Western Texas College and Scurry County Hospital District filed a lawsuit in Armstrong’s court protesting the Appraisal Review Board’s decision not to re-appraise Kinder Morgan properties from 2013-18.
Kinder Morgan attorney Jack Shepherd provided the court with paperwork withdrawing the company’s motion to dismiss the case during today’s hearing. Armstrong said today’s hearing was originally scheduled to hear the motion to dismiss, but turned into a hearing on a motion to not release information to Lemon that has been determined confidential by Kinder Morgan.
Shepherd said during a Nov. 8 hearing in Pecos County involving a similar lawsuit, Lemon stated that errors made in appraisals were property omitted from the appraisal rolls.
“Less than a week later, the plaintiffs amended their pleadings here, alleging … Kinder Morgan provided fraudulent information to the appraisal district. That is the first time that allegation has come to light,” he said. “Due to the new filing, Kinder Morgan will be filing a motion or motions addressing this brand new allegation of fraud. We don’t know if the plaintiff’s case can be brought. They have said in this court and elsewhere that they don’t know if fraud took place and we needed these documents to see if fraud took place.”
Lemon said he disagreed, noting the information used to determine Kinder Morgan’s taxable value may have been “misrepresented” when information was provided to Thomas Y. Pickett and Company, the firm contracted to perform mineral valuations in Scurry County, and the appraisal district.
Lemon was granted permission to take a deposition from Scurry County interim Chief Appraiser Toni Shields after Kinder Morgan files what he called “mysterious motions.” That deposition is scheduled for Dec. 19 because Shepherd said Kinder Morgan’s filings will be on file by Dec. 17.
Lemon said the entities want to know what information was provided to Pickett officials and the appraisal district.
“This is a simple case. We have to rely on the information from the oil companies,” Lemon said. “There is a formula that takes into account five to seven elements. It is a very straight forward formula.”
Lemon said his experts took public information and plugged it into the formula. When those numbers were calculated, Lemon said Kinder Morgan had $14.147 billion worth of oil in the ground that was not taxed.
“Kinder Morgan did not pay $283 million it owed in taxes to Scurry County,” he said. “This case can boil down to the taxing units are entitled to these values.”
Shepherd said the case is not that simple and could have a lasting effect on property owners.
“Today, it is Kinder Morgan, tomorrow it could be mom-and-pop shops in downtown Snyder,” he said. “This could affect every property owner.”
Armstrong told both attorneys, as well appraisal district attorney Kirk Swinney, that he wanted all of them to have enough time to file motions and not forget anything. A Jan. 8 hearing was postponed to hear the appraisal district’s summary judgment request to dismiss the case.
As part of the lawsuit’s discovery, Lemon asked for the appraisal district and Kinder Morgan to provide all data used to set the mineral values for the years in question. Those figures include gross oil production, net revenue interest, net oil production, starting gross oil price, escalation rate, oil price, gross income, operating expense details, severance taxes, net income, discount factor and discounted cash flow.
He is also requesting all settlement agreements between Pickett and Scurry County taxing entities since 2015. The school district, college and hospital district reached settlement agreements with Pickett after a mineral value input error was discovered by the Texas Comptroller’s office in 2016. The error was discovered after the three entities set tax rates for the fiscal year.
Armstrong said the attorneys will hold a conference call with him on Jan. 8 to set a hearing date on all the filed motions. He told the attorneys that if the motions are “valid under Texas law, I will follow Texas law and grant the discovery.”
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