         OFFICE   OF THE ATTORNEY GENERAL   OF TEXAS
                            AUSTIN




gonorable Ueo. H. Aeppsrd
Comptrollar of Fublic Aocountr
Aurtin, Texar;

Derr 3ir:
                           upinion No. O-3817




                                          tion to the questions
                                        ioh we shall teko up




            Article 6008, Seotion 2(d), Tornonvr Annotated Civil
Stetutss, defines E eges well" RS follonrl
            "The term 'gss well' i6 eny well (e) which produoota
     natural gsa not E~ssocl:tedor blended with mudo petroleum
     oil at the time of production, or (b) which produoe8more
     thsn one hundred thoussnd (100,OCO) cubie femt of naturnl
     g3.sto e&i b;.rl.elof crude petroleum 011 from the sama
     p:roducinFhorizon, or (0) which produce8 nature1 ges from
Honorable Gao. Ii.Sheppud, mga 2                                    ,i:

                                                                         ..
     8 fdnmtfon or pradualag horiron roduatita of gas only
     lnaouatored in a wall bore throu$: rhiah trudo ~tralaum            ,'
     oil also la produaed through tha inaldo o anot of atrlq             ,,
     of oaaing.”
            Paragraph (a) of arid Article 6008, Seotlon 2,
deflnea an oil wall as followar
            “The term @all wall' 10 sny wall which produoos
     one (1) barrel or more of orudo petroleum 011 to leah
     one hundred thouaand (100,000)cubla fret of~natural gas.*
            In opinion go. O-1760,addressed to MS. John E.
Taylor, Chief s'upenlaor, Oil and Gas Diriaion, Railroad
Commission of Texas, we oonatruod the above provlslona of
hrtiola 6008 and iield that:
                                       H
            I
                    li8o0 the wall pr‘aduoaaoil   at a bigbar
     o:ll-gas;a:& than 100,000 aubic feat of gas per barrel
     of arudo-petroleum oil, the well would ba a gas wall aad
     not an 011 roll, and the gas producod from auoh well would
     not ba (oaslnghaadgaa~.R                     .

            It is our opinion that a-well which pkduera crude
oil with ~   in oxaoaa of lQQ&OLmief_    eqt par barrel of oil     I/
10 a “gas wall" within the maaning of the definition aoatalnad
in Article 6008, and auah gas 18 taxable at tha minImum of
ll/lsO of 1 sent par W,C,F, provldod in Articla If of H. B.
No, 8, rbould itr market mluo not amount t.2 a8 muoh as I.f+l#
per bi.C.F.
                                  Guaation II
            ‘tine well produori oil cad aa from on0 formation,
     gma all&yfr?   aaothar forpst~on, f.b pr?duct? a=fg*    _
     from the well; ape thbOugJbt&o tubing, the otAac through
L.   tha lpaoe botwaon the tubing and o(.singthrough a -den-
     heed at tha vail haad. Thrf :ue produced frua aaparatrly
     sealed-off fchatlona and ara matered separately. Art5810
     0008, Saotlon &(a).,ltrt-a th a tluah an operation ahall ba
     ro ardad AS two aaparate wells4 Artlole 6008, Station 3,
     (lf pmhiblta th0 paaduatiotr  of nature1 ,geafrm~ ah oil
     well unlass auah gaa is p&cad     in a separate string of
     casing.  IS gas from  the gea formation conaldorod *natural
     gee* undrr tiiolr II of Hour. Bill &or 8, aacitberafore
     aubjeot to the mi~i~ma tax rate?P
.   ...




    lbnmehle bc. 11.shepperd,   page 3




          .   .   .

              “A tax equivalentto         r cent (J$) of the
          limrketvalue of the total      OS Ea8 preduced6&t
          wwed within t.hi~SthJ, o-         ;
: :.




                   Wmt~hembfilevied     ah&l be n UabUiw
              of the producerof $eh , .n




                    8inec Kay 1, l$M& eaarbaa_beeaq&?&J&-      ,
                          House Dill 40. 8, Acts, Wgular 5%an+
                            u n the various formlae dlscu8eedin
                          &-3g6, '
              We come now to the questfon.ofwhethera produoer
   af gm is exempt fron the papent   of Wan ooc:.pati tax on
   the blle~ss or aooupatim of prodlleing  gas" by VELof         -
   the iactthat   ,mchgas maybe u&l or <!zdto       amuni&ality,

       'exa6in
       h3   S.W.   w2                         f#bi~thg d-r y&f
                                                       &
    a PbaoUOQli              B tax of 4# per pllen on
   d&h    SC hot&$& in thi State'of New Mexico and aged &n-the
   operatim   of ito police uar8, etu., in the city lSmit8, in '
   8 te of Artkle VIII, Sootion1, of ihe T.#xzsComtitut&m,
   weWI rlso&lin partr
.Wwarable Cleo.H. Shexmd, pegs 5


                                                 'ABfind thnt




                                 0 w; thus nloRaur8
                                                  an ocaupaticmtw,
             even when
                  -t liltor
                       9    stat4BtF'ansactioIis are t&en          i!lts'awHl!unt;
             ;g vm reco&kitionin G.H.&.A. Ry. Co. v. Tour,
                 rs. 217. . . .
                 uInre~~ct to that
             u on0 of the factorsfor
             tL tax,Graybur~OilCoPpany~~
             S~totee mid purchaser.     The rf3Uer    (a Texa8
             had m ml&ion with tht?federal
             mated la the agreementfor the
             *Uvee and mcwe~ and haa ltr being' beyond the field
                                agenciessuch aa apwared %a lWW.l&

            This decision         by   the   Tmaa CWsion         of A
     m nwersed on
r 929,        278.U. S.
nyamal to-be on
ST??IL S. 2118.
Ccmrt oxpro
unan(lmu8opi3 on wrltt
Kin& and 5oowr, not
of       *     rex8.i ccklmkas
would tbrefore appe
          In A‘lAhm*7*       &%ooeer,mgra,the~ted
 t&J Supwm Court, in9ho ding that a cOftrclct0T  wb0 la8
tll      a fedmaILpro ect on a ncont plU0 contra n,aot
oxarsDt
     ?Ln           -  i of a 2% atote tie tax on"tr
            the -~~m.mn                           WMr,
bnoroble Oeo,11.Shepperd,
                        pege6


         *So far a8 uwhenondlacri.minatory stat43tuupoa
    the controctor~0ntereintothe cost of the meterlabto
    the Qovernmnt that2 yAat;2         lnoidontto tbr
    org4dcation d                        of two indecent
                 a    00~T h ela 8er-to
                                      l&dbt of the on to
    ~~s~~thn,the              otherdoes nctepellimramct+
               the addedo o stsltlr r fb utato h
                                               thle
                                                  stma t%o n
          9 o fb r niB h sup p ll~r to th e ~r nluenta nd~
    d theee
    huna been ~anSe4 au tax imimnity.”




         Wherema is prooaswdby a
ir payableunder that prrt of the ect 3
                                     de $%!d%?h?5% *
OUT Opinion No, O-5516,.\1Nchreads’
    HonorableUeo.Ii.Sheppnt, page7


           ’   In   our   opinion   l?o,
    therein w stated that that
    Ch8 re&ue  of whioh ti used
    tlwydl*    antshauldktaxadunder
     widerat Pon is pert of BxtraatedProducts
    8,                          tion) rather &ma      under
    ~~~~~~~~~~~~~~~~~id~~~~~~M~~r~
    tion w.have reachedthe ooaclwion th& we ,?p3,adnBO
    holding. The use of a mall      Of the rd    e gas for Are1
    in the 0 ation of the recycp"t phnt i.8 we fmo advfsed,0
          Bar pmicticeand the use7o ouch fuel constituted an
    UJliVOl-
     aaentialand into
    t@g&m     n'ilertrl
                    0
    %5 the effect tha
c   extractionof ll
    use6 for Fuel




    on tbu buiiineasor
    Who proboer or
    pramted in this
    Qf tall,
           groer v&due
    the mqmling process
    operatorof the recyciingplants
                                    QUE3TIOBVI
              Whore a reoydllngplant has contrwte
                for the gas by the*latterreooi
         2 ii% productsextraotedt&en in
         Flant&gees-tom           be goduaerm!
         she pro eta, buad on th. fo owing p’4.e~
              "Distillate-pricr~prr
                                 bumlof          Refugio on&& oil   I
         per daily quot tionr
              9utane-14
                      : pr gallon8
               *The plant then sells theeo products,to&-ether
                                                            kth
         tbir mm fifty per oent of the products at appcOJdm&trly
         :50# profit per barrel v    t price of klfu&o erado"wa
         lhe6 the tax aocsud ~0z.i
                                 the 3  ue of the pro&ota
                                produoeror on the gross v&e Of
&prbred sec. 3, lw.
waver aellars
tirst   Assistant
AttorneyGeneral
                      Approved: Cpiition
                                       Cocmi+tee
                      ~&2...&-
                                    .
