                Txm    ATTO~Y             GENERNL
                            OF %YExAs
                           AUSTIN   II.TEXAS



Honorable George~Ii.Sheppard
Comptrollerof Public Accounts
Austin, Texas
Bear Sir:                   Opinion No. 0-4188
                            Re:  Taxability of the business of maklng
                                 core analysis and various fluid tests
                                .ln all and gas wells under the oil well
                                 servioing tax statute.
               This is in reply togDur request for our opinion as to
taxabilityunder Section I of Article 16, H.B. No. 8, Aets of the 47th
            of certain oll'well serglces performed by Core Laboratories,
zYatures
   .
                Th&partPcular ser+lces about whioh you inquire are
describedby yotias followst
     7
                "A part of said s&ices'consists ~ofthe
    workof the company in.analyzing.co~estaken from
     011 wells., Core Laboratodes; Ino.* does not take
     the coreSfrom the wells, but the cores ax delivered
     to it. +lsthe core 1s removed froti,,tgewell by the
     operator or~contract+ engaged in drilling the well,
     the core is delivered to Core Laboratories,,Inc. An
     analysisof the substancesthetiof,ismade by Core
    Laboratoriesln its Iaboratories,which analysis is
     furnished,tothe client; Core LaboFatorles,Inc., '~
     ln connectionwith this.'work does~not make sny survey
     or test In any oil or gas well.


                “A,Portion of &he Berviaes~ relates Co,the
     analysis of bottom-h&i fltiids,and in this servlke
     Core Laboratories,Inc., lowers it8 oontainer into
     the well and obtalna a sample'k&tha'f~uids'akd gaSes
    from the bottom of the well, which sample does not con-
     tain sand or earth. The sample contained in the con-
     tainer Is t&en to Core LaboratbrlestDallas Lk%boratory
     and analyzed. The analysis determines the properties
     of the gas and fluid content. It does not suryey, test
     or analyze the sand or formation of the earth in any
     011 or gas well.


                "A portion of the servleresconsists 3.nthe
     taking by this company of a bottKim-tilePressuIW test.
Honorable George A. SheppaPd, Page 2                                o-4188



    By means of a gauge lowered into tha well the pres-
    sure of the fluid at the bottom of the weil is
    determlned.
     ._     _ . The._pressure is l+ew+e tested-. at..
    otnar poznte zn tne well m oraer co correlate  cne
    bottom-holepressure test above described. The only
    purpose of this test Is to determine by the pressure
    gauge the preseure exerted at the bottom of the well
    by the column of fluid ln the well.
                               "Iv.
               “A portion of the services relates to a
    test m&de by Core Laboratories,Inc., by means of
    placing an instrument In the bottom of the hole of
    the wall to record decreases lr,the pressure at the
    bottom of the well occasionedby the flow of 011.
    The amount of 011 which is produced during this ln-
    terval is measurea and Its ratio to the decline ln
    the bottom-holepressure Is known as the productivity
    tidex of the well. No test or survey of sands or
    formation of the earth in sny o$!lor gas well is made
    In this test."
                It Is out opinion that'all four of the services outlined
above come wlthln the Intended scope of .theAct. we quote .irqm.Subsectlon
(b) of Section 1 of Artlc.le16, House Bill No. 8, and underline that por-
tion thereof which we billeve cover8 the aescrkbed services.
               "(b) Every person @I this State engaged
    in,the buslnesaaf fumniBhi.ng  any servlC@    or perform-
    ing any 'dutyfor ofhsrs for a OonsMeration or compen-
    sation, with the use of ~IQKdevice, tools, &Hzumenta
    or equlpm,ent,eleotrioal,mec$aniaal, or otherwise or
    by uieansof anychem%aaX, eleottiioal,      or mechanlcai
    process when such aervlce 18 performed in connecfion
     lth the     tlng f tn        ng      t f         3.1 or. gas
    %I   or ~!?~ho&&      or"a~~~le~~he"f~t"ion~of
     such wells or the surveylw ortesting of the sands
    or other formations of the earth in any such ol.1or
    gas wells."
                Although Core Laboratories, Inc., may not itself "take the
.:ooresfrom the wells' it can hardly byedenied that it ,isUfurnishing . . .
service , . . for others for a conaideratlon . . . by means of . . . . .
chemical,electrical or mechanical prooess . . . .ln+onnectlonwfth the
surveyingor testing of sands or other formations of thecearth . . ....'
The analylyeis
             of samples Is one of the recognized methods of test- the
formatlone:lnoil or gas wells. Surely It cannot be oontended that the
statutewas Intended to apply only when the analysis ia aotually made in
the well, or where the same &ersbn or firm both extracts the aoze and
snalyees the same.
                The services described in paZ%3graphBfI, III and m all
relate to tests of the properties of fluids and grs,In wells as distlnguls~
from tests of solid materials found in the wells. The statute expressly
enumerates 'the suveylng or testing of the sands or other formations of t@c
Ronorable George H. Sheppard, Page 3                        o-418a:


earth ln any such oil or gas wells." We,belleve th@t this language 1s
intended to embrace not only the solid material aCtuall$ composing the
sand, but the gas, 011 or water with which the sand may be saturated or
other fqrmatlonspermeated. It Is to be remembered that the purpose of
drilling oil @nd gas wells is to produce 011 or gas. It would be strange
indeed If a statute, patently designed to tsx technlcal'servicescustomarl
rendered by persons other than the driller ln connectionwith the
efficient completion and operation of ail and gas wells, were construed
so as to tax the testing of non-productiveformatlona through which the
drill must necessarily pass, and exempt the.testlngof the properties of
the very product, I.e., gas and 011, whlah Is sought to be produoed. We
therefore are of the opinion that analysis of bottom-holefluids, the
testing of pressures at various polnts in the well and ascertainmentof
the productivityindex of the well are all services which come within the
intended scope of the statute under consideration.
                                    Yours very truly
                                   .ATTQHNKYQHNERAL OF TEXAS
                                    By s/Walter R. Ko&
                                         Walter R. Koch
                                         Assistant,



APPRUVIDJAR 31, 1942
s/ Qrover Sellers
FXRST ASSISTANT
ATTQRlWQEbiIEBAL

Approved Opinion Committee by 8.4C.C.d. Chairman
