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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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How does Montana address ad valorem taxes on a non producing

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How does Montana address ad valorem taxes on a non producing (oiland gas) mineral interest?

Does current mineral production have to exist before Montana can assess ad valorem taxes?

Thank you for your question. The Montana Tax Code states that only a oil and gas well is taxed based on a percentage of oil and gas that is produced at the wellhead. This is the only tax on oil and gas. Ad valorem taxes do not actually apply to oil and gas production. Accordingly, it should not be counted towards the overall value of the land in connection with the general valuation procedures in an ad valorem tax.

If all you own is the mineral interest, then you should not pay an ad valorem tax unless the well is producing. However, you could potentially owe tax on the equipment and actual constructed well if you have any ownership interest in them. The Montana Tax Code classifies the following as taxable property:

(c) for oil and gas production, all:

(i) machinery;

(ii) fixtures;

(iii) equipment, including flow lines and gathering lines, pumping units, oil field storage tanks, water storage tanks, water disposal injection pumps, gas compressor and dehydrator units, communication towers, gas metering shacks, treaters, gas separators, water flood units, and gas boosters, together with equipment that is skidable, portable, or movable;

(iv) tools that are not exempt under 15-6-219; and

(v) supplies except those included in class five;

Mont. Code Anno., § 15-6-138

Generally, a mineral interest owner who has a lease (producing or non-producing) does not have an interest in the equipment used by the production company.

Please let me know if you need further information or would like to discuss this matter in more detail.

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