                               ATTORNEY GENERAL OF TEXAS
                                             GREG        ABBOTT




                                                 March 20, 2008



The Honorable Richard L. "Rick" Hardcastle                 Opinion No. GA-0610
Chair, Committee on Energy Resources
Texas House of Representatives                             Re: Whether a state agency must use an average
Post Office Box 2910                                       of 100 Mcf per day of natural gas in order to
Austin, Texas 78768-2910                                   qualify for the exemption provided by section
                                                           104.202 of the Utilities Code (RQ-0617-GA)

Dear Representative Hardcastle:

        You ask whether a state agency must use an annual average of 100 Mcf! of natural gas per
day in order to qualify for the exemption provided in section 104.202 of the Texas Utilities Code,
and, in addition, whether annual average usage is to be calculated per agency or per site. 2

        In 1983, the Legislature enacted the Gas Utility Regulatory Act ("GURA"), now codified as
subtitle A of title 3 of the Utilities Code. Act of May 5, 1983, 68th Leg., R.S., ch. 263, § 20, 1983
Tex. Gen. Laws 1188. Chapter 104 thereof relates to calculation of "rates and services," and
subchapter E of chapter 104 describes "rates for governmental entities." Legislation, adopted in
1993, added section 104.202, which provides, in relevant part, that "[t]he rates that a gas utility or
municipally owned utility charges a state agency may not include an amount representing a gross
receipts assessment, regulatory assessment, or similar expense ofthe utility." Act ofMay 30, 1993,
73d Leg., R.S., ch. 660, § 4, 1993 Tex. Gen. Laws 2447, 2448-49; TEX. UTIL. CODE ANN.
§ 104.202(a) (Vernon 2007). The same bill added a definition of the term "state agency." "State
agency" is defined for purposes ofthe GURA as having "the meaning assigned by Section 572.002,3


        IMcf is an abbreviation for 1000 cubic feet.      THE NEW OXFORD AMERICAN DICTIONARY 1058 (2001).
Therefore, 100 Mcf equals 100,000 cubic feet.

        2Letter from Honorable Richard L. "Rick" Hardcastle, Chair, Committee on Energy Resources, Texas House
of Representatives, to Honorable Greg Abbott, Attorney General of Texas (Aug. 22, 2007) (on file with the Opinion
Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

        3S ection 572.002 defines "state agency" in the usual sense, as:

                 (A) a department, commission, board, office, or other agency that:

                       (i)   is in the executive branch of state government;

                                                                                                    (continued...)
The Honorable Richard L. "Rick" Hardcastle - Page 2                             (GA-0610)




Government Code, to the extent that the state agency must obtain the approval described by Section
31.401(a), Natural Resources Code." TEX. UTIL. CODE ANN. § 101.003(15) (Vernon 2007)
(emphasis added)4. Thus, the "to the extent'; language modifies the definition of "state agency"
found in section 572.002 of the Government Code.

        Section 31.401(a) ofthe Natural Resources Code declares that"[t]he land offices shall review
and must approve any contract entered into by a state agency for the acquisition ofan annual average
of 100 MCF per day or more of natural gas used to meet its energy requirements." TEX. NAT. REs.
CODE ANN. § 31.401(a) (Vernon 2001). See also 31 TEX. ADMIN~ CODE § 8.4 (2008) (Gen. Land
Office, Review Criteria for All Contracts) ("GLO will review all new and existing contracts entered
into by a state agency for the acquisition of an average volume of 100 Mcf ... or more per day of
natural gas, calculated on an annual basis, to' ensure that the agency is using natural gas produced
from state lands for the production of energy to the greatest extent practical."). With the caveat of
section 31.041(a) in mind, a "state agency," for present purposes, is one that is within the generally
understood meaning of the term, but only if the agency contracts for the acquisition of an annual
average of 100 Mcf of natural gas.

        You first ask whether "a state agency [must] use an annual average of 100 Mcfper day or
more of natural gas to meet its energy requirements in order to qualify for the exemption found" in
section 104.202 of the Texas Utilities Code. Request Letter, supra note 2, at 2. In construing
statutes, we strive "to determine and give effect to the Legislature's intent." In re Energy Corp., 142
S.W.3d 316,322 (Tex. 2004) (citing City ofSan Antonio v. City ofBoerne, 111 S.W.3d 22,25 (Tex.
2003)). In order to ascertain that intent, we look to the "plain and common meaning ofthe statute's
words." Id. (quoting State v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002)). "When a statute's
meaning is unambiguous, we interpret that statute according to its plain language." Id. The plain
language of the relevant statutes, as we indicated in the previous paragraph, demonstrates that a
"state agency" for purposes of section 104.202(a) of the GURA is an agency that (1) is within the
executive branch of state government; (2) exercises statewide jurisdiction; and (3) was created by
statute or by the Texas Constitution. That definition is, however, applicable to an agency only to the
extent that it enters into a contract to acquire an annual average of at least 100 Mcfper day of
natural gas to meet its energy requirements. Thus, for example, an entity that enters into two


         3(... continued)
                            (ii)   has authority that is not limited to a geographical portion of the
                            state; and

                            (iii) was created by the Texas Constitution or a statute of this state.

TEX. GOV'T CODE ANN. § 572.002(10) (Vernon Supp. 2007).

        4S ubsection 104.202(b) ofGURA declares that "[a]n expense under Subsection (a) that is reasonable and is not
recovered from a state agency under this section may be recovered from other customers ofthe gas utility or municipally
owned utility." As a result, ifthe state agency is entitled to the discounts ofsubsection (a), the cost to the gas utility may
be passed along to private consumers.

         S"Land office" means "the General Land Office." TEX. NAT. REs. CODE ANN. § 31.001(3) (Vernon 2001).
The Honorable Richard L. "Rick" Hardcastle - Page 3                         (GA-0610)



contracts, one for at least an annual average of 100 Mcf per day of natural gas and another for less
than an annual average of 100 Mcf per day, is a "state agency" for purposes of the first contract but
it is not a "state agency" for purposes of the second contract. The basis for the calculation is
therefore not annual usage; rather, it is the specific amount for which the entity has contracted.

        Even if sections 101.003(15) and 104.202 of the Utilities Code were deemed to be
ambiguous, their legislative history supports our conclusion. The same bill adopted the predecessors
to both provisions, and they were added to the bill by a single floor amendment. See Act ofMay 30,
1993, 73d Leg., R.S., ch. 660, 1993 Tex. Gen. Laws 2447 (Senate Bill 83), H.J. of Tex., 73d Leg.,
R.S. 3550 (1993) (amendment to Senate Bill 83). Thus, the section 101.003(15) definition of state
agency was intended to apply to section 104.202. Consequently, in answer to your first question, we
conclude that, in order to qualify for the exemption in section 104.202 of the Utilities Code, a state
agency must contract to acquire "an annual average of 100 Mcfper day or more of natural gas" that
is used to meet its energy requirements. See TEX. UTIL. CODE ANN. §§ 101.003(15), 104.202
(Vernon 2007); TEX. NAT. REs. CODE ANN. § 31.401(a) (Vernon 2001); TEX. GOV'T CODE ANN.
§ 572.002(10) (Vernon Supp. 2007). We emphasize again that it is not the amount of natural gas
used by a state agency that is significant, but rather the amount that the agency, as statutorily defined,
has contracted for.

        We note that a brief submitted to this office argues that "[d]ue to the absence of evidence of
legislative intent to require a state agency to use an annual average of at least 100 Mcf per day in
order to qualify for the expense exemption found in GURA section 104.202, it is unreasonable for
smaller gas volume consuming agencies to be excluded from such expense exemption."6 While we
empathize with this reasoning, we believe that it belies the plain language of section 104.202(a) of
GURA. As we have indicated, both section 101.003(15) and section 104.202 ofGURA were added
by a single floor amendment. That floor amendment indicates that it was in fact the intent of the
Legislature to enact those provisions. And, as we have previously observed, the combination of
plain language and legislative intent mandates that we construe the statute as written. 7



         6See Brief from Larry C. Buch, Public Agency Representation Section ofthe Consumer Protection and Public
Health Division ofthe Office of Attorney General, to Opinion Committee, Office of the Attorney General, at 8 (Oct. 8,
2007) (on file with the Opinion Committee) [hereinafter CPPHD Brief]. The CPPHD represents state agencies in utilities
matters.

         7We also note that representatives of three energy companies originally submitted briefs arguing that a state
agency must use an annual average of 100 Mcf per day or more to meet its energy requirements in order to qualify for
the exemption found in section 104.202 ofGURA. See Brief from Dane McKaughan, Attorney for Texas Gas Service
Company, to Honorable Greg Abbott, Attorney General of Texas (Oct. 4, 2007); Brief from Louis P. Gregory, Senior
Vice President and General Counsel, Atmos Energy, to Honorable Greg Abbott, Attorney General of Texas (Oct. 4,
2007); Brieffrom Andrew M. Taylor, Attorney for CenterPoint Energy Resources, to Honorable Greg Abbott, Attorney
General ofTexas (Oct. 12,2007). These briefs incorrectly argue that it is the amount that a state agency uses, rather than
the amount it contracts for, that resolves the fIrst question. Interestingly, a subsequent brief submitted by all three of
these attorneys, or their representatives, agrees entirely with our analysis of the first question. See Brief from Dane
McKaughan, on behalfofTexas Gas Service Co., Douglas Walther, on behalfofAtmos Energy, and Andrew M. Taylor,
~n behalfofCenterPoint Energy Resources, to Honorable Greg Abbott, Attorney General ofTexas (Jan. 25,2008). (All
briefs on file with the Opinion Committee.)
The Honorable Richard L. "Rick" Hardcastle - Page 4             (GA-0610)



        We recognize that the conclusion we reach here may be counter-intuitive. As we have earlier
noted, the CPPHD briefmakes a strong case that the Legislature simply could not have intended the
result we reach here. See CPPHD Brief, supra note 6, at 8. But all the evidence points in the
~pposite direction: this was indeed the intent ofthe Legislature. The Attorney General does not, of
course, enact the law: that function is reserved to the Legislature. And it is thus the responsibility
ofthe Legislature, if it wishes to do so, to amend this law to make it more compatible with common
sense.

        You next ask whether, "for state agencies having facilities in more than one geographical
location[,] the calculation of annual average usage ... include[s] only natural gas provided to a
single service site," or whether "the calculation include[s] the aggregate usage by an 'agency' at
multiple, geographically separate locations." Request Letter, supra note 2, at 2. As we noted in
answer to your first question, a "state agency" for purposes of section 104.202(a) of the GURA is
an agency that (1) is within the executive branch of state government; (2) exercises statewide
jurisdiction; and (3) was created by statute or by the Texas Constitution. That definition is limited,
however, to agencies that contract to acquire an annual average ofat least 100 Mcfper day ofnatural
gas to meet its energy requirements. Because the required calculation is not the amount actually used
by a state agency, but the amount it has contracted for, "the aggregate usage by an 'agency' at
multiple, geographically separate locations" is irrelevant. Accordingly, we need not address your
second question.

        We conclude that, in order to qualify for the exemption in section 104.202 of the Utilities
Code, a state agency must contract to acquire an annual average of 100 Mcf per day or more of
natural gas to meet its energy requirements.
The Honorable Richard L. "Rick" Hardcastle - Page 5               (GA-0610)



                                      SUMMARY

                      In order to qualify for the exemption in section 104.202 ofthe
              Utilities Code, a state agency, as statutorily defined, must contract to
              acquire an annual average of 100 Mcf per day or more of natural gas
              to meet its energy requirements.

                                              Your£ truly,

                                               /!;
                                         hREG Attorney,'Ge
                                                             B      OTT
                                                                 ralofTexas


KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General, Opinion Committee
