Honorable Robert S. Calvert          Opinion         No. M-80
Comptroller of Publl .c Accounts
Austin, Texas                        ?e :     Whether the Texas gas and
                                              oil productlon    taxes pro-
                                              vided for by Chapters 3
                                              and 4 of Title 122A,
                                              Taxation-General,    Vernon’s
                                              Civil Statutes,    apply to
                                              gas and oil which is severed
                                              in Texas, but which 1s pro-
                                              duced from a restpvoir
                                              located entirely outside
Dear Mr. Calvert:                             of Texas.
       Your request   for   an opinion      states     in part:
                 “A question has artsen in connection
           with the gas production   tax provided for
           bv Chapter 3, Title 122A, Taxation-Ctenenal,
           Vernon’s Civil Statutes, and the crude oil
           production  tax provided for by Chapter 4,
           Title 122A, Taxation-General,   Vernon’s
           Civil Statutes,
                 “I have been, advised by Magna Oil
           Corporation that they are drilling   @ well
           for oil and/or gas which is to be surfaced
           on the C. C. Hutchinson Lease, Samuel Stewart
           No. 1069 Survey, Girayson County, Texas,    The
           well will be bottomed holed on the Foster-
           Davls Lease, Marshall County, Oklahoma.
                 “In order to drill the well, it was
           necessary for Magna 011 Corporation to obtain
           a permit from the Railroad Commission of Texas,
           however, the well will have an Oklahoma allow-
           able.
                “Y * + *


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     Honorable   Robert S. Calvert,      Page 2 (M-80)


                       “Please advise me whether or not
                 the Texas gas and oil production    taxes
                 provided for by Chapters 3 and 4 of Title
                 122A, Taxation-‘General,  Vernon’s Civil
                 Statutes,   applies to the gas and/or oil
                 which Is severed In Texas, but which Is
                 produced from a reservoir   located entirely
                 outside of Texas .”
             Article 3.01 of Title 122A levies    “an occupation  tax
     on the business or occupation   of producing gas within this
     State” and Article  4.02 levies   “an occupation  tax’on oil
     produced within this State .”
            Article  3.01 further provides that a “tax shall be paid
     by each producer on the amount of gas produced and saved within
     this State” and Article   3.04 defines “producer” as “any person
     who produces In any manner any gas by taking It from the-earth
     or waters in this State.”     (Underlining added. )
             Article 4.03 provides that the tax “Imposed on the pro-
     ducing of crude petroleum shall be the primary liability   of
     the wroducer as hereinbefore  defined.” Article 4.01 havina
     defined “producer” as ‘any person who produces in any manner
     any oil by taking it from the earth or waters In this State.’
     (Underlining added s )
             Since the taxes in question are occupation       taxes, undoubt-
     edly the Legislature    could have provided for the taxes to be
     based on the amount OP value of minerals extracted        through
     well mouths located on the surface of this State, irrespective
     of whether the underground mineral reservoirs       might be located
     beneath the surface of this State or not.       However, the use
     of the limiting   phrase “from the earth or waters in this State”
     in both tax statutes    clearly indicates  a legislative     intent
     that the reservoir   source of minerals must be located beneath
     the surface of this State.
            Given the fact situation   set out in your oplnlon request
     that the reservoir   Is located entirely outside of Texas, this
     office Is of the opinion that the taxes imposed by Chapters
     3 and 4 of Title 122A do not apply to oil or gas extracted
     from such reservoir,   even though the well mouth is located
     on the surface in Texas.



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    Honorable   Robert   S. Calvert,        Page 3 (M-80)


                            SUMMARY
               The Texas gas and oil production   taxes
           provided for by Chapters 3 and 4 of Title
           122A, Taxation-General,   Vernon's Civil
           Statutes,  do not apply to gas and 011 which
           is severed in Texas, but which Is produced
           from a reservoir  located entirely   outside
           of Texas.
                                                  truly    yours,


                                                          C. MARTIN
                                                          General of Texas
    Prepared by Nell Williams
    Assistant Attorney General
    NW/fb
    APPROVED:
    OPINION COMMITTEE
    Hawthorne Phillips, Chairman
    W. V. Geppert, Co-Chairman
    J. Arthur Sandlin
    Mario Obledo
    John Banks
    Houghton Brownlee
    STAFF LEGALASSISTANT
    A. J. Carubbi, Jr.




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