WEST VIRGINIA Reserve COAL VALUATION process

1. Using GIS Technology for Natural Resource Mass Appraisals WEST VIRGINIA Reserve COAL VALUATION process Tyler P. Bragg, GISP WV Property Tax Division Mined Minerals GIS Section

3. What do you call a map of outhouses in the woods?

4. A shaded relief map!!!

5. What kind of maps do spiders make?

6. Web-based maps!

7. What do you call a map guide to Alcatraz?

8. A con-tour map!

9. Discussion Items • Background Information • Components • Factors and Variables • GIS Analysis • Valuation Map Courtesy of the West Virginia Geological and Economic Survey, www.wvgs.wvnet.edu

10. Background Information • Valuation of Reserve Coal is outlined in WV Legislative Rule §110-1I • West Virginia is estimated to have between 18-52 billion tons of reserve coal. 1 • What is Reserve Coal or “Reserves”? • “those beds of coal, or portions of the beds, which contain mineable coal, but are not active acres on an active mining property.” 2 • Reserve coal owners are required to file a listing of their properties on an annual basis to the State Tax Commissioner

11. Background Information • All coal ownership in West Virginia is to be valued and taxed. 2 • State Tax Department responsibilities • Calculating the appraised value • Providing values to the counties • State “Infers” Coal • 3 mile buffer from known location • USGS Standard (circular 891)

12. GIS Components • Coal Bed Mapping • WV Geological and Economic Survey • Parcel Mapping • Mineral Mapping • State Mappers, Vendors, PTD • Surface Mapping • Key component to mapping Minerals • Factor Mapping

13. How Much is My Coal Worth? • Factors are the characteristics of a given area that have a direct effect on the value of coal in that area and determine the time mining is expected to commence • Variables are information that constantly changes and has a direct effect on the value of coal. This information must be recalculated every year to maintain currency

14. How Much Is My Coal Worth? • Factors • Market Interest • Market Mine-Ability • Conflicts • Volatility • Environmental • Seam/Prime Seam • T Factor • Every factor has scale - 20, 40, 80 (Some can = 0) • Variables • Coal Prices • Royalty Rates • Capitalization Rate • Discount Rate • Criteria for Factors

15. Factors • Market Interest • Density of coal related transactions within 5 miles of property (sales, leases, permit applications, prospecting, etc)

16. Factors • Market Mine-Ability • Density of mines (historic and current) within 5 miles of property • Surface, Deep, Boom, Historic, Current Mines (as defined in the Rule)

17. Factors • Conflict (Wells) • Density of Oil and Gas wells on property

18. Factors Blue = Low Red = High • Volatility • The measure of the coal’s ability to vaporize • Ignition, burn rate, and energy emission • Higher volatility = increased value • Criteria based on characteristics of Steam Coal

19. Factors • Environmental • Reflects environmental restrictions in an area that affects mine-ability and coal value • Data from a variety of sources

20. Factors • Prime Seam Assignment (Based on Coal Bed Mapping) • “thickest, previously mined, stratigraphically-highest coal bed in the area, with sufficient mineable tons to sustain mining for two (2) years…” 2 • T Factor • Reflects the amount of time that mining operations are projected to commence on a given property • Values - 20, 40, 80 (years) • The result of combination of all other factors

21. Factors • (Trans + Mine + Well +Volatility + Environmental + Prime Seam)/3 = T (Time) Factor • 20 – Projected mining in 20 yrs – Higher Values • 40 – mining in 40 yrs – Lower Values • 80 – mining in 80 yrs – Lowest Values

22. Variables • Royalty Rate • Average income collected by a landowner for active mining operations • Surface vs. Deep • Metallurgical vs. Steam • Higher Royalty = More Valuable Coal • Vaggr= (C$ ave)(ROY ave)(PROD ave)/Cap Rate

23. Variables • Average Coal Prices • Forward Weighted Average – 3 Year • Metallurgical vs. Steam • Discount Rate • Rate used to calculate present value of a coal property based on the time expected before mining takes place • Present value of future income (determined by T-Factor) • Capitalization Rate • Used along with discount rate in determining present value of coal properties • Three year running average • Combines Safe Rate, Risk Rate, Non-liquidity Rate, Management Rate, and subtracts Inflation Rate

24. Variables • Factor Criteria • To be evaluated biannually based on geo-statistical analysis of data • Market Interest (Transactions) • Market Mineability (Mines) • Use Conflict (Wells) • Environmental

25. Analysis – Coal Mapping • Core drilling data • Point location • Coal elevation, thickness, additional coal • Key to GIS analysis • Attribute properties with coal information • Mineable/un-mineable acreages for every parcel, per coal seam

26. Analysis – Coal Mapping • Raster Grid (Thickness) created from points • Run 3-mile buffer on all points (inferred coal)

27. Analysis – Coal Mapping • Elevation Grid created from drill data • Subtracted from Statewide DEM to locate absent coal • Result – Elevation Cutter • Cut out areas that have been eroded (rivers/streams) Elevation Cutter Elevation Grid DEM - =

28. Analysis – Coal Mapping • Eroded areas are removed from thickness grid • For every coal seam • Grid is trimmed to 3-mile radius of points

29. Analysis – Coal Mapping • Contours are generated • .5 foot intervals • Mined out areas are removed/cut out • All steps completed for each coal seam (93 total) Contours Mineable/Un-mineable

30. Analysis – Other Factors • BTU Contour Map • Sulfur Contour Map BTU Sulfur

31. Analysis – Other Factors • Production

32. Analysis – Parcel Mapping • Surface Parcels provide a reference for mineral parcel boundaries • Accurate surface parcel mapping is beneficial • Mineral parcels are only as accurate as the surface parcels • WVDTR has field mappers that research deeds and land books in counties to locate unmapped mineral parcels • County GIS contribution • More up-to-date, accurate surface data = better mineral data

33. Analysis –Parcel Mapping • MMD (Mined Minerals Dataset) • Mineral Parcel Boundaries • Includes Surface Parcels with Mineral Rights • All factors and variables are compared to mineral parcels for each seam on property • Pertinent info recorded in attribute table

34. Valuation • Once all information has been associated with each parcel (per coal seam present), values can be determined • Coal values are based on an INCOME approach • Simply put—based on future royalties, discounted by calculated Time Factor • RCVM (Reserve Coal Valuation Model) • $/ac/bed=($/mmBTU)X(Roy)X[1±(BTU+S)]X[(1/(1+I)(t+0.5))x(1/106)]X(BTU)X(2000)X(1800)X(RR)X(Thk)

35. Challenges • Completion of Coal Bed Mapping • Completion of Surface and Mineral Mapping • Until then—Geocoding • 4-Mapped Parcel • 3-Within a tax index map • 2-within a quad 9th • 1-within a district • 0-within a county • Anything less than Geocode 4 is valued based on its respective location (county, district, etc.) • Validating tax returns vs. coal mapping

37. Thank You! Tyler P. Bragg, GISP WV State Tax Department Property Tax Division Mined Minerals GIS Section Phone: (304) 558-4925 Email: Tyler.P.Bragg@wv.gov

38. References • 1 Taxing West Virginia’s Coal Reserves: A Primer, West Virginia Center on Budget & Policy, May 2009. (http://www.wvpolicy.org/downloads/CoalReserveTaxationPrimer-FINAL-5-19-09%20-%20FINAL.pdf) • 2 Title 110, West Virginia Legislative Rule, Series 1l, Valuation of Active and Reserve Coal Property for Ad Valorem Property Tax Purposes, May 1, 2006.