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Judge: Natural gas speculation can't raise assessments

8:51 PM, Jan 16, 2013   |  
Web graphic Marcellus Shale

RICHFORD — A recent court decision in a property assessment dispute determined that natural gas speculation should not impact the taxable value of land, prompting some area attorneys to contend landowners may soon file similar lawsuits seeking to reduce their property tax bills.

The Tioga County Supreme Court lawsuit pitted four landowners on Victory Hill Road against the Town of Richford, a farming community with about 1,200 residents.

The town contended one of the properties — a 250-acre-plus parcel owned by Charles Holcomb and Beverly Peppin — had a $375,000 valuation based on comparable land sold in other nearby communities, court documents said. The owners argued in the lawsuit that this was excessive, noting their land should be valued based on its agricultural use rather than natural gas speculation.

Broome County Supreme Court Judge Jeffrey A. Tait, who handled the case, last month ordered the town to reduce the property valuation by $93,100, or 33 percent. Tait noted in his decision that the state’s moratorium has left natural gas drilling’s fate “uncertain” in the “reasonably near future.”

“While it does appear to be true that sales of acreage in Tioga County and the surrounding counties have been affected by natural gas speculation, at this point it is, in fact, only speculation,” Tait said.

In the Dec. 13 decision, Tait said the market for buying land based on natural gas speculation is “simply too volatile” to involve setting assessed values, which are based on property valuation and determine how much landowners pay in property taxes.

“Given this situation, this court is unwilling to value property based on any purchase that appears to be driven by natural gas,” he said.

Natural gas development in New York has been on hold since 2008, when the state Department of Environmental Conservation began its review of hydrofracking, a controversial drilling technique that involves injecting a combination of water, sand and chemicals deep underground to unlock natural gas from shale formations.

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Attorney David Cohen, of Binghamton, represented the Richford landowners in the lawsuit, which also involved two other parcels that had valuations reduced based on factors unrelated to natural gas speculation.

Cohen described the court’s decision to reduce the valuation for the 315 Victory Hill Road parcel as a green light for landowners to file similar lawsuits involving natural gas speculation.

“The judge decided that it’s too speculative to assess land based on (gas) leases,” Cohen said, adding this opens the door for other landowners in Richford and across the Southern Tier who had their assessments increased based on natural gas speculation.

But Richford’s Town Assessor Frances Butler, this week, continued to argue that the town has not based any property assessments on natural gas speculation, despite the recent court ruling to the contrary.

“There are zero properties in the town that had the assessment raised because of (natural gas) speculation,” Butler said, contending all of her assessments are based on comparable property sales.

“Any increase in assessments that occurred was based on valid sales,” she said, noting there was a townwide revaluation in 2010.

Attorney Khandikile Sokoni, of the True & Walsh firm in Ithaca that represents Richford, said the town also hired an appraiser during the lawsuit. The appraiser contended the 315 Victory Hill Road valuation was based on sales of comparable parcels and free of any influence by natural gas speculation, she said.

“We disagree because our appraiser came up with values and his analysis is that his values were not based upon the natural gas speculation,” Sokoni said.

Supervisor Martin Wilcox called the decision “very disappointing,” adding the town believes it had a “valid case” to defend the valuation.

Wilcox would not discuss Cohen’s comments about similar lawsuits getting filed in the future, noting the town board has yet to decide whether to appeal the recent decision.

Cohen, who formerly served as town attorney in Vestal, noted there was a natural gas lease for 315 Victory Hill Road, though he was unable to provide details. The owners did not return a request for comment.

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A valuable precedent?

Attorney Robert Wedlake, who represents several area landowner groups, believes Tait’s decision could prompt a flood of similar property assessment disputes across the Tier, where thousands of landowners have signed leases in anticipation of the state’s decision on whether to allow hydrofracking in the gas-rich Marcellus Shale.

“It will be a valuable legal precedent for landowners who want to question their assessment and determine if it is unfair and too high as a result of the natural gas speculation,” Wedlake said.

As of Nov. 30, 2012, there were 1,799 parcels in Broome County that had active leases signed with natural gas companies, a county official said. Tioga County officials were unable to provide data on leases.

Sokoni disagreed with Wedlake’s assessment that future lawsuits may be forthcoming based solely on the Richford case.

Tait’s decision would have to be upheld through the appeal process before it could be used widely as a legal precedent, Sokoni said, citing New York state law.

“That’s a trial court decision based on a set of facts ... and it binds these particular parties on these particular facts,” she said.

Wedlake, a partner at Hinman, Howard & Kattell in Binghamton, agreed that the case’s value as a legal precedent would be strengthened if it were upheld through appeal, though he said other lawsuits could be filed based on the recent decision alone.

“It’s not that another judge couldn’t decide otherwise ... but I would rather be walking into a court with that (decision) in my back pocket than nothing,” he said.

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