Roberts v. Gulf Oil Corp.
| Citation | 147 Cal.App.3d 770,195 Cal.Rptr. 393 |
| Court | California Court of Appeals Court of Appeals |
| Decision Date | 04 October 1983 |
| Parties | Herbert E. ROBERTS, as Assessor, etc., Plaintiff and Appellant, v. GULF OIL CORPORATION et al., Defendants and Appellants. Civ. 5934/F100. |
We are called upon to decide to what extent a county tax assessor may compel disclosure of interpretative data from taxpayers.
Pursuant to Revenue and Taxation Code section 468 1 plaintiff Kern County Assessor Herbert E. Roberts ("Assessor") secured a subpoena duces tecum compelling defendant Gulf Oil Corporation ("Gulf"), through one of its employees, 2 to appear in court, answer questions concerning certain properties owned by Gulf and to produce records concerning same. Gulf then moved to modify, limit or quash the subpoena duces tecum and for protective orders. After a hearing on the motions, the trial court ordered an evidentiary hearing.
In 1977 and 1978, Gulf acquired oil and gas properties located in Kern County. By written request the Assessor asked for, but was denied, information relating to the acquisitions. The request was for raw data, such as measurements of oil gravity, and for interpretative data, such as an isopachous map of the net sand on the productive zones, any report or study on fire-flood projects to be carried out on some of the newly acquired properties and studies of other enhanced recovery projects on others.
At the hearing, Gulf conceded that it was required to furnish raw data, but not what it termed interpretative data. Gulf acknowledges that it was obligated to furnish the following information:
After the evidentiary hearing, the trial court ordered Gulf to supply the following documents with respect to eight properties it had recently purchased:
By stipulation before and during the hearing below, Gulf agreed to provide the following additional information: items (5), (6)(a), (6)(b), (6)(f), (6)(g), (6)(l), (6)(m), as measured but not as estimated or averaged and (7).
On appeal Gulf contends it is not required to provide to the Assessor the following items: (1), (2), (3), (4), (6)(c), (6)(d), (6)(e), (6)(h), (6)(i), (6)(j), and (6)(k). Gulf also contends it is not required to provide as estimated or averaged the following: (5), (6)(a), (6)(b), (6)(f), (6)(g), (6)(l), and (6)(m).
With respect to all oil and gas properties owned by Gulf and located in Kern County, Gulf was ordered to provide "The pertinent portions of Gulf's proved reserves ledger." 3 Gulf also appeals this order.
Finally, the trial court ruled that Gulf was not required to make available to the Assessor the following documents:
"Unit engineering reports, or records containing any report or study on the fire-flood project to be carried out on the Fruitvale NW Unit and relied on in the purchase of leases in 1977 and 1978, and any report or study on any other enhanced recovery project to be carried out on leases purchased in 1977 and 1978 in Kern County and relied on in the purchase of such leases."
The Assessor contends that the above information is necessary to determine the estimated reserves and cross-appeals from this portion of the order.
The Assessor established and the court below found that the Assessor must appraise and place a fair market value on approximately 2,700 parcels of oil and gas producing properties, which constitute 42 percent of the secured roll of the county in terms of value. At the time of the hearing, an additional 2,500 wells were being drilled each year in Kern County.
The court issued findings in which it found that oil and gas producing properties are generally appraised by the so-called income method, although the comparative sales approach is sometimes used in combination with it. 4 Application of the income method of valuation requires the determination of: (1) the future recoverable oil and gas by primary and secondary recovery; 5 (2) the future price and cost; and (3) the discount of the net dollars to be received by a capitalization rate which reflects the overall risk of a project and the return on investment. (Ehrman and Flavin, Taxing California Property (2d ed. 1979) p. 473.)
The court further found the accuracy of the income method can be no greater than the validity of the basic assumptions or data on which it is based. Each of the basic steps is complex and involves many technical determinations and estimates. Even a small error in the determination of the net income to be capitalized or the selection of the proper capitalization rate will, through the process of multiplication, be greatly magnified in the value conclusion. Consequently, it is very important that the relevant data be current.
The evidence established that up until 1977 a number of operators provided the Assessor upon request with the data Gulf now contends it does not have to supply. Apparently when the price of oil was stable, the industry cooperated with assessors on a statewide basis, but with the escalation of prices, the oil industry has become more and more reluctant to provide information. Due to the failure of Gulf and other operators to provide allegedly relevant and essential information on their properties purchased in 1977 and 1978, the Assessor prepared a roll for 1978, 1979 and 1980 based on information dating back to 1977, which was outdated and possibly resulted in undervaluation of those properties.
The court also found:
The trial court also found:
The court found that the Assessor does not have the office staff and petroleum engineers/geologists necessary to assess Gulf's properties from what Gulf terms raw data. Such expertise would be difficult to obtain because of civil service constraints. Further, the Assessor's office does not have an employee or consultant who is an expert or who has experience in secondary recovery technologies and it is unlikely such expertise could be obtained. Experience and expertise in the fire-flood method of recovery is limited to a very few oil producers.
The court below stated:
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