KINDER MORGAN SACROC, LP; KINDER MORGAN CO2 CO., LP; KINDER MORGAN PRODUCTION CO., LP; AND KINDER MORGAN PRODUCTION CO., LLC, Appellants
SCURRY COUNTY; SNYDER INDEPENDENT SCHOOL DISTRICT; SCURRY COUNTY JUNIOR COLLEGE DISTRICT D/B/A WESTERN TEXAS COLLEGE; AND SCURRY COUNTY HOSPITAL DISTRICT D/B/A COGDELL MEMORIAL HOSPITAL, Appellees
Appeal from the 132nd District Court Scurry County, Texas
Trial Court Cause No. 26387
consists of: Bailey, C.J., Stretcher, J., and Wright, S.C.J.
M. BAILEY CHIEF JUSTICE
appeal arises out of a proceeding wherein several
governmental entities are seeking to have mineral interests
reappraised by the county appraisal review board. Appellees,
Scurry County, Snyder Independent School District, Scurry
County Junior College District d/b/a Western Texas College,
and Scurry County Hospital District d/b/a Cogdell Memorial
Hospital, each filed a challenge to the appraisal roll for
mineral interest property located in Scurry County, including
the mineral interests of Appellants, Kinder Morgan SACROC,
LP; Kinder Morgan CO2 Co., LP; Kinder Morgan Production Co.,
LP; and Kinder Morgan Production Co., LLC. Appellees filed
these challenges with the Scurry County Appraisal Review
Board. After the Appraisal Review Board denied the
challenges, Appellees filed a petition for review and for
mandamus relief in the district court. Appellees requested
that the district court "fix" the correct value of
Appellants' mineral interests and require the Appraisal
Review Board to reappraise the mineral interests. More than
one hundred days after being served with the original
petition, Appellants filed a motion to dismiss pursuant to
the Texas Citizens Participation Act. Tex. Civ. Prac. &
Rem. Code Ann. ch. 27 (West 2015) (the TCPA). The trial court
denied the motion as untimely.
their first issue, Appellants assert that the trial court
erred when it determined that the motion to dismiss was
untimely. Alternatively, Appellants contend in their second
issue that the trial court abused its discretion when it
found that Appellants failed to demonstrate good cause to
extend the time to file the motion to dismiss. We affirm the
trial court's denial of Appellants' motion to
to Section 23.175 of the Tax Code, the Texas comptroller has
adopted a method to appraise the value of mineral interests
for purposes of assessing ad valorem taxes. See Tex.
Tax Code Ann. § 23.175 (West Supp. 2018). The Scurry
County Appraisal District hired Thomas Y. Pickett & Co.,
Inc. (Pickett) to appraise the value of the mineral interests
of Appellants and other entities in Scurry County. Stephen
Campbell, an appraiser with Pickett, used the method adopted
by the comptroller to conduct the appraisals. To complete the
appraisals, Campbell relied on information related to
production and revenue that the production companies provided
to the Texas Railroad Commission and to the comptroller, as
well as information related to operating expenses that the
production companies provided to him.
filed petitions with the Appraisal Review Board that
challenged both level of the appraisals and the exclusion of
"Category G property: Oil and Gas, Mineral, and other
subsurface interests" from the appraisal records.
Appellees stated in the petitions that the level of
appraisals for mineral interests in Scurry County between
2012 and 2018 were "erroneous, inconsistent, and
insufficient" and that "property was erroneously
and incorrectly omitted (in toto and ab initio) from
Appraisal Review Board held a hearing on Appellees'
challenges on June 21, 2018. At the hearing, Appellees
indicated that they were not requesting "a complete
reappraisal of all of the mineral interests in Scurry
County." Rather, Appellees requested, pursuant to
Sections 41.03(a)(2) and 25.21 of the Tax Code, "a
reappraisal for the 2018 tax year and back appraisal for the
prior five years, which would be 2013-2017, only for
represented to the Appraisal Review Board that they hired a
commercial appraiser to appraise the value of the mineral
interests of the three "top producers" in Scurry
County, which included Appellants. Appellees' appraiser
obtained information on production and revenue from public
filings made by these entities and used that information to
appraise the value of the mineral interests using the method
adopted by the comptroller. As to Appellants, the appraiser
relied on information from public filings made by Appellants
with the Securities and Exchange Commission (SEC), the Energy
Commission, the Railroad Commission, and the comptroller and
from information provided by Appellants to shareholders.
According to Appellees, there was "not a very wide
variance" in values between the appraisals done by
Pickett and the appraisals done by Appellees' expert for
the mineral interests of the production companies other than
Appellants. However, Appellees' appraiser found a
"huge variance" between his appraisal and
Pickett's appraisal of the value of Appellants'
mineral interests. Appellees estimated that, between 2012 and
2018, the value of Appellants' mineral interests in
Scurry County was $14 billion more than the value set by the
Appraisal District and that Appellants owed more than $283
million in unpaid taxes.
the appraiser for Pickett that appraised Appellants'
mineral interests, testified about his experience appraising
mineral interests, the comptroller's audits of his
appraisals, and the level of consistency between specific
appraisals conducted by Campbell and the comptroller or
Campbell and another appraiser. He also testified about
relative expenses related to different levels of oil
recovery, stating that tertiary recovery was the most
expensive and that Appellants' oil production in Scurry
County was tertiary recovery. Campbell testified that, in his
opinion, an appraisal based on information from public
sources without any knowledge of the actual rate of decline
in production and the actual expenses of production could
"badly overstate the value" of the mineral
attorney complained that Appellants and the Appraisal
District had refused to produce the information that
Appellants had provided to Campbell in the appraisal process
and that, without the underlying data used by Campbell, it
was impossible to determine the reason for the variance
between the appraisals by Campbell and by Appellees'
appraiser. To explain the variance, Appellees' counsel
raised before the Appraisal Review Board the possibility of a
misrepresentation by the taxpayer, a misunderstanding between
Appellants and Pickett or between Pickett and the Appraisal
District, an error in the estimated life of production, or
the use of an incorrect discount rate. The Appraisal
District's attorney argued that the Appraisal Review
Board could "reach" appraisals prior to 2018 only
if it found fraud by Appellants and that there had been no
evidence of any fraud.
Appraisal Review Board denied Appellees' challenges to
the appraisal roll, and on August 23, 2018, Appellees filed a
petition for review and writ of mandamus in the trial court.
Appellees asserted that the trial court had jurisdiction to
perform a de novo review of the value of Appellants'
mineral interests, "to fix the correct values," and
to require the Appraisal District to reappraise and
back-appraise the mineral interests.
their petition, Appellees cited Atascosa County v.
Atascosa County Appraisal District, 990 S.W.2d 255 (Tex.
1999); In re ExxonMobil Corp., 153 S.W.3d 605 (Tex.
App.-Amarillo 2004, orig. proceeding [mand. denied]);
Beck & Masten Pontiac-GMC, Inc. v. Harris County
Appraisal District, 830 S.W.2d 291 (Tex. App.-Houston
[14th Dist.] 1992, writ denied); and Chapters 25 and 41 of
the Tax Code. However, the only facts pleaded by Appellees
were that Appellants' "mineral interest real
property" in Scurry County "was erroneously and
incorrectly omitted from appraisal for years 2018, and
2013-2017," that Appellees timely filed challenge
petitions, that the Appraisal Review Board denied the
petitions, and that Appellees timely sought de novo review.
Appellees requested that the trial court either set the value
of Appellants' mineral interests or require the Appraisal
District to reappraise the "omitted (in toto or
ab initio)" mineral interests for the year 2018
and back-appraise the interest for years 2013 through 2017.
In their prayer for relief, Appellants requested that the
a. fix the accurate and correct appraised values of the
mineral interest real property at issue in accordance with
the requirements of law;
b. issue a writ of mandamus requiring the Scurry County
Appraisal District and Chief Appraiser to immediately
re-appraise the mineral interest real property at issue for
2018 and back-appraise the mineral interest real property at
issue for years 2013-2017;
c. enter other orders necessary to preserve rights protected
by and imposed duties required by the law;
d. award costs of court; and
e. and [sic] such further and other relief, whether at law or
in equity, to which [Appellees] show ...