Mr. Ben Ramsey, Chairman Opinicn No. C-784 

Railroad Commission of Texas 

Austin, Texas Re: Applicability of Utility 

Dear Mr. 

YOU 

Vernon's 

Tax under Article 6060,- 

V.C.S., concerning certain 

sales of the Shamrock Oil 

Ramsey: & Gas Corporation. 

have requested this office to construe Article 6060, 

Civil Statutes, to determine its application to certain 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 tailgate of the gasoline plant or on sales made 

commerce. 

in interstate 

Shamrock makes . -._.. You further state in your request that 

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 approximately 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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Mr. Ben Ramsey, Page 2 (C-784) 

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 approximately 3 miles long. 

5. To Southwestern Public Service Company as fuel for 

its Nichols Plant in Potter County, Texas. This line, approximately 'rg miles 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 Statutes. The classification of gas utilities set out in Article 

6050 describes three general categories, being persons, companies and corporations engaged in "one or more of the following kinds of business": 

"1. Producing or obtaining, transporting, 

conveying, distributing or delivering natural 

gas: (a) for public use or service for com- 

~~~~",rtii"",~ L!pLies 

or sale to municipalities or 

in those cases referred 

to in Paragraph 3 heieof, engaged in distributing 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 municipality 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 pipeline 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 municipality, or the right of way of any railroad 

or other public utility; including also any 

natural gas utility authorized by law to exercise the right of eminent domain. 

“3. Producing or purchasing natural gas or 

transporting or causing the same to be transported by pipelines to or near the limits of 

any municipality in which said gas is received 

and distributed or sold to the public by another 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 Commission as a gas utility." 

In 1931 the Legislature, however, limited the applicability of the tax by enactment of Section 10, Cha~pter 73, 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 necessarily carries on its utility business by 

the use of pipe lines. The Legislature, however, 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, transportation, 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 

i? 

as utility described in Section 2 of Art. 

050. 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,f the right of way 

for said line has been acquired. . .by the exercise 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,sified as falling within 

Section 2 of Article 6050 since primarily Shamrock is a producer and would come within that part of the Act that was repealed 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 producer was exempt from the tax even though it was engaged in 

the business of producing gas and was operating a gas gathering 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 system 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 
. . 

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 

"processed" gas or 

sas leaving the tailgate of the,,plant is 

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 Article 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 gascline plant to markets is subject to the tax imposed by Article 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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Mr. Ben Ramsey, Page 6 (C-784) 

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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