86-0261 - Centrally Assessed




            Petitioner,                                                         )


v.                                                                                 )           INFORMAL DECISION



PROPERTY TAX DIVISION OF THE                       :           Appeal No. 86 0261

STATE TAX COMMISSION OF UTAH,                  )


            Respondent.                                                     )



            This is an appeal to the Utah State Tax Commission from a XXXXX tax assessment made by the Property Tax Division of the Utah State Tax Commission (Respondent).

            An Informal Hearing was held on July 1, XXXXX in the offices of the Utah State Tax Commission.  James E. Harward, Hearing Officer, heard the matter for the Commission.  XXXXX represented the Petitioner.  XXXXX and XXXXX represented the Respondent.

            The subject property consists of improvements and equipment on a shale oil site located in XXXXX County.  The site was established in XXXXX pursuant to a contract with the Department of Energy to carry out an oil shale research and development program.  The contract was completed on XXXXX.  Prior to the expiration of the contract, Petitioner organized a joint venture with XXXXX, and submitted the proposal to the XXXXX for price and loan guarantees.  On XXXXX, Congress abolished the XXXXX.  Subsequently, XXXXX withdrew from the joint venture.

            Petitioner asserts that since the demise of the XXXXX, facilities at the shale oil site have no further value, except as salvage.  Petitioner submitted an itemized list of the salvageable equipment with its estimated current sale value and asserted that the remainder of the facilities should have a 100% obsolescence factor.

            Respondent agreed that the oil shale industry is depressed, but asserted that most of Petitioner's equipment is in fairly good operating condition and that there is a use for the property.  Respondent used an obsolescence factor of 42%, i.e., there was a 42% reduction over the XXXXX valuation.  This obsolescence factor was derived from studies of coal companies in the 1980s.


            1.  Petitioner had the burden of proof to establish that the XXXXX assessed value of the subject property was other than the amount assessed by the Respondent.  Petitioner presented no evidence other than the itemized list of salvageable equipment.  This list carries little weight since it was compiled by Petitioner and is not corroborated by figures from independent estimators or by evidence such as sales of similar equipment at other shale oil sites. Petitioner's assertion that the remainder of the facilities should have a 100% obsolescence factor is also unsupported.  Therefore, Petitioner's position is unacceptable.

            Respondent's reliance on the coal industry model is not entirely accurate, but it is helpful since there has been no data compiled for the oil shale industry and since obsolescence due to a market downturn has been a factor in its assessment of coal companies.  The coal industry experienced a downturn in the 1980s and obsolescence was applied in the assessment of coal companies. The obsolescence factor for oil shale companies must be greater than that for coal companies since the oil shale industry has completely collapsed while the coal industry has not.  Respondent adjusted for this difference by increasing the obsolescence factor from that of the coal company model, which used a 25% obsolescence on improvements and a 35% obsolescence on equipment.  The obsolescence factor on the subject property is 42%.


            Therefore, it is the Decision of the Utah State Tax Commission that the Petition of XXXXX be denied.

            The XXXXX assessment of XXXXX is sustained.

            DATED this 3 day of September, 1986.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco