Last week I went to an interesting presentation by Raylon Shumaker of AgPreference in Altus, Oklahoma on land values in southwestern Oklahoma. In the presentation he stated that there was only a slight increase in land values for 2011 over 2010 and he expected them to hold steady for 2012.
I will try to recite a few of the figures here, but I may have forgotten a few of them in the past week.
The highest average land price in the region was in Jackson County. In Jackson County in 2011 the average price was $995 per acre. This is based off both private treaty and auction prices and covers both crop and pasture lands. It does not cover irrigated crop land. This price is up $5 from 2010.
Harmon County had the lowest average prices for the region at about $680 per acre. The lower price is due to less demand there and typically less rainfall which results in less production.
Beckham, Tillman, Kiowa, and Greer County all had average land prices between the above figures.
According to one of his slides, if the land is sold at auction as opposed to private negotiation, there is about a $90 difference in the value it will bring. It was not clarified if this premium was the result of bidding wars or if it was just higher quality ground that typically goes to auction.
Although he didn’t address it in the presentation, I followed up with a question on mineral values. The resident expert, Randy Baden, let me know that most of the sales did not deal with minerals, so they likely did not affect the price much. He estimated that if there was actual production the minerals didn’t get sold and that most of the sales generally have retention of 1/2 of the minerals and sell the other 1/2 to the buyer.
On valuation of minerals, the Oklahoma Tax Commission had a few rules of thumb, as follows:
1. If there was no production and no leasing, then it was based on county by county. For far southwestern Oklahoma, these non-leasing values never exceded $50 per acre, but that was before the recent production boom.
2. If there was a lease, but no production, the value was set as three times the leasing bonus.
3. If there was production of oil, the value was set as 60 times the average monthly production for the previous six months. If there was natural gas production, then the value was set as 84 times the average monthly production for the previous six months.
As the oil and natural gas industry develops here in the Altus area, you need to keep in mind that the values of you minerals will affect the value of your estate. As discussed in my previous post, the value of your estate may start being subject to estate taxes once it passes $1,000,000, which only takes a few hundred acres of good minerals.