Mr. Ben Ramsey, Chairman     Opinicn No. C-784
Railroad Commission of Texas
Austin, Texas                Re: Applicability of Utility
                                  Tax under Article 6060,-
                                  V.C.S., concerning certain
                                  sales of the Shamrock Oil
Dear Mr. Ramsey:                  & Gas Corporation.

     YOU have requested this office to construe Article 6060,
Vernon's Civil Statutes, to determine its application to cer-
tain sales of Shamrock Oil and Gas Corporation. Shamrock Oil
and Gas Corporation produces oil and gas, operates a refinery
and gasoline plant in Moore County, Texas, and markets refined
products. Natural gas is gathered from approximately 450 wells
from an extensive gathering system and processed at the Moore
County, Texas, plant. You state in your opinion request that
the Rnilroad Commission has never attempted to collect the tax
imposed by Article 6060 on sales made at or prior to the tail-
gate of the gasoline plant or on sales made in interstate
commerce.
     You further state in your request that.Shamrock
                                               -._.. makes
five certain sales not at the tailgate of tne plant but at a
distance varying from one and one-half milesfrom the plant
up to 49 miles from the tailgate of the plant. In order to
serve these markets, it was necessary for Shamrock to build
pipelines which cross var%ous State highways or farm roads. In
your opinion request you gave this office five instances of
sales by Shamrock and asked us to determine whether the sales
are exempt from the gross receipts tax imposed by Article 6060.
     The five illustrations were as follows:
     1. To Southwestern Public Service Company for use as
fuel in its Moore County Plant. The line used in connection
with this sale is owned by Shamrock and is crossed by a road
which runs a short distance from Farm Road 119 to Continental
Carbon Company's carbon black plant. This line is approxi-
mately l-1/2 miles long. The pipeline, although crossed by
a road, was put in before the road right of way was established.

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     2.  To Continental Carbon Company for use in its carbon
black plant. The line used in connection with this sale is
owned by Shamrock and is crossed by the above-mentioned road
running from Farm Road 119 to Continental's plant. This line
is approximately 2 miles long.

     3.  To American Zinc Company for use as fuel in its
smelter. The line used in connection with this sale is owned
by Shamrock and is crossed by ~Farm Road 119. This line is
approximately 3-i/2 miles long.
     4.  To Western Gas Service Company for its own use and
for resale to others. The Shamrock line used in connection
with this sale is crossed by Farm Road 119 and is approxi-
mately 3 miles long.

     5.  To Southwestern Public Service Company as fuel for
its Nichols Plant in Potter County, Texas. This line, approxi-
mately 'rgmiles in length, is owned by Shamrock and is crossed
by several public roads.
     Article 6060 places a tax on one of the three types of
gas utilities described in Article 6050, Vernon's Civil Stat-
utes. The classification of gas utilities set out in Article
6050 describes three general categories, being persons, com-
panies and corporations engaged in "one or more of the follow-
ing kinds of business":
           "1. Producing or obtaining, transporting,
           conveying, distributing or delivering natural
           gas: (a) for public use or service for com-
                           or sale to municipalities or
           ~~~~",rtii"",~
                      L!pLies    in those cases referred
           to in Paragraph 3 heieof, engaged in distrib-
           uting or selling natural gas to the public;
           (c) for sale or delivery of natural gas to
           any person or firm or corporation operating
           under franchise or a contract with any munici-
           pality or other legal subdivision of this
           State; or (d) for sale or delivery of natural
           gas to the public for domestic or other use.
           “2.  Owning or operating or managing a pipe-
           line for the transportation or carriage of
           natural gas, whether for public hire or not,
           if any part of the right of way for said line
           has been acquired, or may hereafter be acquired
           by the exercise of the right of eminent domain;
           or if said line or any part thereof is laid
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Mr. Ben Ramsey, Page 3 (C-784)


            upon, over or under any public road or highway
            of this State, or street or alley of any muni-
            cipality, or the right of way of any railroad
            or other public utility; including also any
            natural gas utility authorized by law to exer-
            cise the right of eminent domain.
            “3.  Producing or purchasing natural gas or
            transporting or causing the same to be trans-
            ported by pipelines to or near the limits of
            any municipality in which said gas is received
            and distributed or sold to the public by an-
            other public utility or by said municipality,
            in all cases where such business is in fact the
            only or practically exclusive agency of supply
            of natural gas to such utility or municipality,
            is hereby declared to be virtual monopoly and
            a business and calling affected with a public
            interest, and the said business and property
            employed therein within this State shall be
            subject to the provisions of this law and to
            the jurisdiction and regulation of the Commis-
            sion as a gas utility."
     In 1931 the Legislature, however, limited the applica-
bility of the tax by enactment of Section 10, Cha~pter73, Acts
42nd Legislature, which provided as follows:
            "That Article 6060 of the Revised Civil
            Statutes of 1925, except insofar as it imposes
            a license fee or tax of one-fourth of one per
            cent against persons owning, operating or
            managing pipe lines, as provided in Section
            2 of Article 6050, is hereby repealed and said
            fund shall be used for enforcing the provisions
            of Articles 6050 to 6066, inclusive."
      In construing the 1931 statute, the court said in
Thompson v. United Gas Corp., 190 S.W.2d 504 (Tex.Civ.App.
1945,  error ref.):
            II
               . .The gas utility described in each of
            Sections 1, 2 and 3 of Art. 6050 has the
            right of eminent domain, and each neces-
            sarily carries on its utility business by
            the use of pipe lines. The Legislature, how-
            ever, in regulating and controlling all such
            utilities had theretofore classified them into
            three classifications in accordance with the
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Mr.   Ben Ramsey, Page 4 (C-784)


            character of business done by each group.
            These groups generally represent three
            businesses, namely, production, transporta-
            tion, and distribution and sale of gas.
            Before the repeal of a portion of Art. 6060
            the Legislature had imposed the tax upon
            'every gas utility' described in all three
            classifications. By the repealing Act it
            continued to impose the tax only upon the
             as utility described in Section 2 of Art.
             050.
            i?     Thus it definitely and clearly imposed
            the tax upon the gas utility described as
            being persons engaged in 'owning or operating
            or managing a pipe line for the transportation
            or carriage of natural gas, whether for public
            hire or not, if any part o,fthe right of way
            for said line has been acquired. . .by the ex-
            ercise of the right of eminent domain. . .I
            The distinguishing feature of this section,
            however, is that the business is a pipe line
            for transportation or carriage of natural gas
            by pipe line, and the repealing Act continued
            to impose the tax upon it only."
     In view of the Thompson v. United Gas Corp. case, the gas
utility tax provided in Article bob0 only applies to those gas
utilities described in Section 2 of Article 050.
     The basic question to be determined is whether part of
Shamrock's operations can be clas,sifiedas falling within
Section 2 of Article 6050 since primarily Shamrock is a pro-
ducer and would come within that part of the Act that was re-
pealed in 1931. Of course, an operator might well be engaged
in more than one of the three types of businesses described in
Article 6050.
     Prior Attorney General opinions have held that a gas pro-
ducer was exempt from the tax even though it was engaged in
the business of producing gas and was operating a gas gather-
ing system for its own gas. 0-3524-A; w-625.
     However, those opinions can be distinguished from the
questions here presented. As stated in your opinion request,
there is no attempt to collect any tax on the gathering of
gas from approximately 450 wells by means of a gathering sys-
tem which undoubtedly crosses under many public roads.
     All the gas gathered is processed for the removal of
liquid hydrocarbons and the3Tgfetening of sour gas at the
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Mr. Ben Rnmsey, Page 5 (C-784)



Shamrock gasoline plant. Once the gas goes into the Moore
plant, the producing and gathering of gas comes to a definite
stopping place and sas leaving the tailgate of the,,plantis
"processed" gas or treated" gas and thus must be transported
by pipeline" to markets. It is the general and accepted
practice in the gas industry that contracts usually require
 'takes" from the tailgate of gasoline plants. A producer
that operates a pipeline to transport his "processed" gas
from his gasoline plant to markets should not be classified
as a producer of gas, but must fall within Section 2 of Arti-
cle 6050 and is therefore "operating or managing a pipeline
for the transpcrtation or carriage of natural gas."
         Therefore, it is the opinion of this office that gas
    transported by pipeline from the tailgate of the Shamrock gasc-
    line plant to markets is subject to the tax imposed by Arti-
    cle 6060, "if any part of the pipe line is laid upon, over or
    under any public road. . ."
         In the five sales of gas by Shamrock only the gas sold
    to Southwestern Public Service Company (Question Number 1)
    would be exempt since the pipeline was built before the road
    was established. The utility tax is therefore applicable to
    the other four sales by Shamrock.
                              SUMMARY
             A gas producer that transports gas from
             the tailgate of a gasoline plant by means
             of a pipeline that is crossed by a public
             road is subject to the utility tax imposed
             by Article 6060, V.C.S.
                                  Yours very truly,
                                  WAGGONER CARR
                                  Attorney General of Texas




                                    Assistant Attorney General
    LS:bp



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APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
J. Arthur Sandlin
Jim Broadhurst
Milton Richardson
Paul Phy
APPROVED FOR THE ATTORNEY GENERAL
BY: T. B. Wright




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