West Virginia Code of State Rules
Agency 110 - Tax
Title 110 - LEGISLATIVE RULE STATE TAX DEPARTMENT
Series 110-01I - Valuation Of Active And Reserve Coal Property For Ad Valorem Property Tax Purposes
Section 110-1I-3 - Definitions
Current through Register Vol. XLI, No. 38, September 20, 2024
As used in this rule, and unless the context clearly requires a different meaning, the following terms have the meaning ascribed in this section:
3.1. "Active acre" means mineable acreage of a bed of coal on an active mining property that will be extracted within the maximum "life of mining" on the property.
3.2. "Active mining property" means a mineable bed of coal on a property or portion of a property involved in a mining operation. Each and every bed of coal being mined in a permitted mining operation is a separate active mining property.
3.3. "Adjusted property value" means the sum of the adjusted individual coal bed values contained within a property.
3.4. "Adjusted individual coal bed value" means the individual coal bed index for each coal bed on a property, multiplied by the aggregate ratio.
3.5. "Aggregate value" means the total value of in-place mineable coal in the State.
3.6. "Aggregate active value" means the total value of active acres on an active mining property in the State on the November 15th next succeeding the July 1st assessment date.
3.7. "Aggregate ratio" means aggregate reserve value divided by the aggregate reserve index.
3.8. "Aggregate reserve value" means the aggregate value less the aggregate active value.
3.9. "Aggregate reserve index" means the sum of products of the individual property calculations as determined by the reserve coal valuation model (RCVM).
3.10. "Annual acres mined" means the annual production (as defined in this Section 3) divided by the product of the average thickness in feet of the coal bed being mined (as detailed in annual mining reports), multiplied by eighteen hundred (1800) tons per acre-foot coal density, multiplied by the clean coal recovery rate (either run-of-mine or washed). Appendix A, Formula 1, of this rule is the formula used for calculating annual acres mined.
3.11. "Annual production" means the production of coal from mining operations as reported by coal bed and by mine.
3.12. "Average coal price" for purposes of the reserve coal valuation model, means the arithmetic mean of the sum of the last three calendar years of total FOB-source (point of sale, no transportation) values of steam coal mined in West Virginia and sold on the spot market as reported on FERC Form 423 to the United States Department of Energy (USDOE) and to the West Virginia Public Service Commission (WVPSC), divided by annual production, expressed in dollars/ton. Average coal price can also be expressed in dollars per million BTU and is determined by dividing the arithmetic mean of the sum of coal sales, by the sum of all steam coal BTU mined in West Virginia and sold on the "spot" market as reported on FERC Form 423 to the United States Department Of Energy and to the West Virginia Public Service Commission for the three most recent calendar years preceding the July 1st assessment date, calculated for the entire state as well as by coal bed and by location.
3.13. "Average royalty rate" for purposes of the reserve coal valuation model, means the arithmetic mean of blended underground and surface coal royalty rates, for leases that have occurred within at least the five (5) calendar years immediately preceding the July 1st assessment date.
3.14. "Barren" means fee/mineral/coal properties where the coal rights are owned but the coal was never deposited and/or has been subsequently removed by erosion.
3.15. "Base market location value" means the coal price per million BTU by coal bed by location, multiplied by the royalty rate by coal bed by location.
3.16. "BTU content" means number of British thermal units (BTU) in one pound of dry coal.
3.17. "BTU adjustment factor" means the penalties or bonuses on price related to the BTU content versus market price interaction.
3.18. "Capitalization rate" means the rate used to convert an estimate of income into an estimate of market value. The method for calculating the capitalization rate is set forth in Subsection 4.1 of this rule.
3.19. "Clean coal recovery rate" means:
3.20. "Coal bed" means all the coal and associated rock partings, if any, lying between logical and/or practical roof and floor strata.
3.21. "Coal bed index factor" is the sum of all reserve coal bed valuation factors, divided by three and rounded to the nearest value of 20, 40, or 80.
3.22. "Coal in-place price" means the price per million BTU of estimated clean and marketable coal, before mining. Coal in-place price equals coal price multiplied by the average royalty rate.
3.23. "Coal Price" means the FOB-source (point of sale, no transportation) price per million BTU of clean, marketable coal.
3.24. "Coal property transfer" means the transfer of coal rights on properties by sale or lease.
3.25. "Commissioner" or "Tax Commissioner" means the Tax Commissioner for the State of West Virginia, or his or her delegate.
3.26. "Discount component" means a rate reflecting a provision for returning to an investor a sum of money equal to the aggregate of the anticipated return-on-investment over the economic life of an investment.
3.27. "Environmental factor" means an index that reflects the environmental impediments to mining, such as wild and scenic rivers, severe acid mine drainage problems, areas designated unsuitable for mining as identified by the Division of Environmental Protection, and other identified impediments.
3.28. "GIS" means a geographical information system, which, for purposes of this rule, is a computerized system to map and manage coal-related data.
3.29. "Individual coal bed index" means the preliminary derived value for a specific coal bed on a property before adjustment using the aggregate ratio.
3.30. "Life of mining (mine life)" means the number of years required to exhaust a coal bed on a particular mining operation.
3.31 "Local Drainage" means the base-stream-bed elevation of local permanent streams.
3.32 "Management rate" means a rate reflecting a return to an investor for the management of similar investment portfolios.
3.33. "Market interest factor" means an index that indicates the relative coal market activity in a specified area.
3.34. "Market mineability factor" means an index that indicates the relative cost of mining in a specified area.
3.35. "Metallurgical coal" means bituminous coal that is suitable for making coke by industries that refine, smelt, and work with iron and/or steel.
3.36. "Mineable coal bed" means coal which is situated so that it may be mined using generally accepted mining practices and suitable equipment. Coal beds which are of a thickness of less than thirty inches (30") shall not be classified as mineable coal unless there is evidence to the contrary.
3.37. "Mined-out coal bed" means a bed of coal, or any portion of the bed, which has been depleted by prior mining operations and from which no additional coal is recoverable by generally accepted mining practices and suitable equipment, unless there is evidence to the contrary.
3.38. "Mining operation" means an enterprise permitted by the West Virginia Office of Miner's Health Safety and Training/Office of Mining and Reclamation to engage in actively obtaining or preparing to obtain coal or its by-products from the earth's crust, including underground, surface and/or auger mines. Each mining operation may have more than one (1) area designated as "Active mining property."
3.39. "Multiplier" means the "Present Worth of One (1) Per Period" for the life of the mining operation employing the capitalization rate determined in Subsection 4.1 of this rule, through application of a standard mid-year life calculation.
3.40. "Nonliquidity rate" means a rate reflecting a return to an investor representing the loss of interest on an investment arising from the time required to sell the investment.
3.41. "Operator" means an individual, partnership or corporation that is engaged in actively obtaining or preparing to obtain coal and/or its by-products from the earth's crust on an active mining property.
3.42. "Present value per acre" means the present value per acre of a coal bed on a reserve property.
3.43. "Prime coal bed" means the thickest, previously mined, stratigraphically-highest coal bed in an area, with sufficient mineable tons to sustain mining for two (2) years in a specified area at the average rate of mining in the bed, in the general area, for the most recent three (3) calendar years or at a default rate of 100,000 tons per year.
3.44. "Prime coal bed factor" means an index that indicates the relative profitability of a set of coal beds in a specified area.
3.45. "Properties" means a parcel or group of parcels that are owned or otherwise controlled by a single entity, that are contiguous or otherwise so situated that they could all be treated as a single parcel for purposes of exploiting the coal contained therein.
3.46. "Property tax component" means a rate reflecting a provision for returning to an investor a sum of money equal to property taxes paid over the economic life of an investment.
3.47. "Recapture component" means a rate reflecting a provision for returning to an investor a sum of money equal to his or her investment.
3.48. "Reserves" means those beds of coal, or portions of the beds, which contain mineable coal, but are not active acres on an active mining property.
3.49. "Reserve coal property" means any property for which coal rights are part of the owned estate and which is not part of an active mining property.
3.50. "Reserve coal valuation model" is a computerized valuation method applied in a mass appraisal environment to estimate value of reserve coal property for ad valorem property tax purposes.
3.51. "Risk rate" means a rate reflecting a return to an investor necessary to attract capital to an investment containing a possible loss of principal and/or interest.
3.52. "Safe rate" means a rate reflecting a return to an investor on an investment which has little, if any, likelihood of loss of principal or of loss in anticipated return on investment.
3.53. "Steam coal" means bituminous coal that is mineable but that is not suitable for coking by industries that refine, smelt, and work with iron and/or steel.
3.54. "Sulfur adjustment factor" means the penalties or bonuses on price related to the Sulfur content versus market price interaction.
3.55. "Sulfur content" means a decimal representing the percent of sulfur in dry coal.
3.56. "Summation discount component" means a discount rate expressed as the aggregate of a safe rate, risk rate, nonliquidity rate, and management rate, adjusted for inflation.
3.57. "Thickness" means the measurement of all coal, including any thinner coals (splits) and also rock partings seen above or below the main block of coal, that comprises part of what is generally understood to be a logical mining unit. Methods of determining thickness for valuation are described in Subsection 4.1 and Subsection 4.2.
3.58. "Unmineable coal bed" means coal which is not in a mineable coal bed.
3.59. "Volatility content" means a decimal representing the percentage of volatile matter in dry coal.
3.60. "Volatility factor" means a factor that identifies coal with a volatility content sufficiently low to render it unsuitable for steam coal markets.
3.61. "1800 tons per acre foot" means the weight, in tons, of a relatively clean coal bed one (1) foot in thickness (Thk) and covering one (1) acre, that has an assumed specific gravity of 1.32. The formula for calculating "1800 tons per acre foot" is set forth in Appendix A, Formula 2 of this rule.
