Gas processing plants
This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.
1.1 This section applies to gas processing plants used to treat natural gas predominately piped ashore from gas fields located under the seas around the UK.
2.1 List Description: Gas Processing Plant and Premises IX
2.2 SCAT code: 115 suffix: V
3.1 This class of property is the responsibility of the Industrial and Crown Team within the National ValuationUnit (NVU).
4.1 This will be conducted between the nominated Valuers within NVU Industrial and Crown Team.
5.1 No special legal requirements for this class.
5.2 Valuers should treat the issue of gas turbine driven gas compressors in line with the guidance given in the Lands Tribunal case Church (VO) v Phillips Petroleum Company (United Kingdom) Limited [RA 1989 233].
5.3 Provided the gas turbine is physically capable of separation from the gas compressor it should be regarded as rateable under the Plant and Machinery Order Class1 (Power).
5.4 In a case where the gas driven engine or turbine is physically integrated as part of the gas compressor it will be not rateable. This is because as a matter of fact it will be part of the item described as a gas compressor.
5.5 More detail on this case is given at 8.2 below.
6.1 Buildings
6.1.1 The buildings housing process plant are similar to conventional industrial buildings and should be referenced to GIA. In addition there are a range of support buildings such as offices, laboratories, control rooms etc.
6.2 Plant
6.2.1 The plant comprises mainly steel vessels, heat exchangers and tanks, the vast majority of which will be excluded from rateability by virtue of exception (a) in Class 4 of The Valuation for Rating (Plant and Machinery) Regulations.
6.2.2 Most of these items are however supported by structural steelwork and it is anticipated that all but the smallest of items will include elements in respect of foundations, settings, fixed gantries, supports, platforms and staging.
6.2.3 Gas processing plants are also equipped with extensive fire-fighting systems incorporating both foam and water and including ring sprays on the storage tanks. These form part of the hereditament by virtue of their inclusion in Class 2 Table 2 (f), except for any equipment attached to non rateable tanks which will not form part of the hereditament and will not be rateable.
6.2.4 When the gas processing plants were initially set up in the late 60s they relied on the National Grid for electrical power supply. Over the years they have utilised their own product as a source of power generation so that there are now usually a variety of gas fuelled engines, both reciprocating and turbine, driving electricity generators. Engines and generators are rateable under Class 1 Table 1 of the Plant and Machinery Regulations.
6.2.5 In addition to engines driving electricity generators there are installed at most plant sites gas fuelled engines, both reciprocating and turbine, powering either reciprocating or multi-stage centrifugal compressors used in the gas cooling process. Also as the gas pressure within the wells declines, it is necessary to introduce further compression facilities. These are again in the form of gas turbines or reciprocating gas-fuelled engines driving compressors. Although the gas compressors themselves are not rateable (not a named item whereas “air” compressors are named), the engines powering them are rateable where they are separable from their compressors, being used or intended to be used exclusively in connection with the generation of power in or on the hereditament. This point was considered by the Lands Tribunal in the case of Church (VO) v Phillips Petroleum Company (United Kingdom) Limited [RA 1989 233] referred to at 8.2 below.
7.1 Survey records are held in binders located at NVU Industrial in Leeds VO. The survey data is shown electronically in valuations held on the Non Bulk Server (NBS).
8.1 These is no rental evidence for undertakings of this type and a contractor’s basis of valuation should therefore be adopted.
8.2 Case Law
8.2.1 Church (Valuation Officer) v Phillips Petroleum Company (United Kingdom) Limited [RA 1989 233.]
This case concerned the rateability of ten gas turbines and two reciprocating gas fuelled engines used to drive gas compressors at the Gas Processing Plant at Bacton Norfolk. Each of the machines was attached to its respective compressor by means of a coupling. If the coupling was removed the gas turbine or reciprocating engine could be used, if desired or needed, for providing power to some other machine.
The ratepayers drew an analogy between landlord’s plant (providing the main source of power and rateable) and tenant’s plant (providing power as part of an industrial process and not rateable). Their main contention however was that plant and machinery was not rateable under Class 1A of the Plant and Machinery (Rating) Order 1960, as amended, unless used or intended to be used mainly or exclusively in connection with the generation, storage, primary transformation or main transmission of power on the hereditament, and the disputed items did not satisfy that requirement because the generation and storage of power referred to in Class 1A is a reference to the main power provided for the hereditament which is made available to be tapped into by different machines. According to the ratepayers the purpose of the disputed items was not to supply the main source of power to the hereditament but to supply individual sources of power to machines engaged in a trade process.
It was held that the twelve items of plant and machinery were rateable because:-
1.in Class 1A of the Plant and Machinery (Rating) Order 1960 as amended, the words “the generation” were not qualified in any way;
2.the gas turbines and reciprocating gas fuelled engines were used and intended to be used exclusively in connection with the generation of power in or on the hereditament;
3.the introduction of a distinction between operational and ancillary plant, the introduction of an analogy with landlord and tenant’s fixtures, and a consideration of the proviso to Class 1B of the Schedule to the Order, or Class 1 of Schedule 3 to the General Rate Act 1967, were irrelevant and unhelpful and it was desirable as far as possible to avoid putting a gloss on the words of the statute and the Order;
4.all the disputed items were capable of being separated from their gas compressors and of being used to provide power to other machines.
8.2.2 Shell UK Exploration and Production Ltd v Grampian Assessor [2000] RA 295, LTS.
This case concerned the principle of the modern substitute, rateability and value of slugcatchers, fire protection and security equipment, and skirts to high pressure vessels, at the St Fergus Gas Terminal in Scotland. It was decided that:-
1.the ratepayer’s approach of a costing of a modern cheaper alternative should be rejected because the traditional starting point must be a costing of the actual property. The modern alternative should only be looked at to quantify allowances for proven deficiencies in the actual property, which had not been shown to exist here
2.the slugcatcher was rateable plant being a separator or vessel; should be costed using unit costs; and required no allowance for age and obsolescence as it has no moving parts and very little deterioration over time
3.fire protection and security equipment was rateable
4.four knock out drums were not rateable because they were below the minimum size specified in the Regulations since the skirts attached to them were not to be included for measurement purposes as they functioned solely as supports.
9.1 Valuations are held on the NBS
9.2 Specific List practice note.
1. Market appraisal
1.1 Volumes of gas coming from the North Sea and other UK gas fields have been in decline in recent years and existing facilities may well be underutilised.
1.2 The individual operators have been approached to provide information regarding the maximum daily volumes of gas processed in the last 3 years and the maximum capacity of each facility.
2. Changes from the last practice note
2.1 There have been no material changes.
3. Ratepayer discussions
3.1 There have been no discussions with the gas processing operators.
4. Valuation scheme
4.1 There is no scheme of valuation as gas processing facilities are valued by a limited number of specialist caseworkers who are part of the Industrial Commercial and Crown Team of the National Valuation Unit. These properties are valued using the contractor’s basis of valuation (VOA - Part 3: the contractor’s basis of valuation) with the majority of costs being derived from the VOA Cost Guide.
4.2 Allowances have been made in previous rating lists to have regard to the volumes of gas being processed in relation to the maximum capacities of the individual plants – this reflects the recognition that depletion of the field from which gas is drawn is a material change of circumstances, applying an end allowance to half the difference between throughput and capacity at the material day. Therefore, the processing position as at 1 April 2023 needs to be reflected in the compiled list valuation.
1. Market Appraisal
The individual operators have been approached to provide information regarding the maximum daily volumes of gas processed in recent years and the maximum capacity of each facility.
Volumes of gas coming from the North Sea gas fields have been in decline in recent years and existing facilities may well be under utilised.
2. Changes from the last Practice Note
The Practice Note for the 2000 Rating List included co-ordination arrangements which are now dealt with in the Rating Manual section for the class.
3. Ratepayer Discussions
There have been no discussions with the gas processing industry.
4. Valuation Scheme
There is no scheme of valuation as gas processing facilities are valued by a limited number of specialist caseworkers who are part of the Industrial and Crown Team of the National Valuation Unit. The properties will be valued using the contractor’s basis of valuation with the majority of costs being derived from the Rating Cost Guide.
Allowances have been made in previous Rating Lists to have regard to the volumes of gas being processed in relation to the maximum capacities of the individual plants. The position as at 1 April 2017 needs to be reflected in the Compiled List valuation.