### Txm ATTO~Y GENERNL OF %YExAs

HonorableGeorge~

Ii. Sheppard Comptrollerof Public Accounts Austin, Texas AUSTIN II. TEXAS

Bear Sir: OpinionNo. 

### 0-4188 Re: Taxabilityof the business of maklng core analysis and various fluid tests .ln all and gas wells under the oil well servioingtax statute. This is in reply togDur request for our opinion as to taxability

under Section I of Article 

### 16, H.B. No. 

### 8, Aets of the 47th
zYatures of certain oll'well serglces performedby Core Laboratories,

. Th&partPcular ser+lces about whioh you inquire are describedby yoti

as followst 7 "A part of said s&ices'consists ~ofthe workof the company in.analyzing.co~es taken from 011 wells., Core Laboratodes; Ino.* does not take the coreSfrom the wells, but the cores ax delivered to it. +ls

the **core 1s**  removed froti,,tge well by the operatoror~contract+ engaged in drilling the well, the core is deliveredto Core Laboratories,,Inc. An analysisof the substancesthetiof,is made 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 analysisof bottom-h&i fltiids, and in this servlke Core Laboratories,Inc., lowers it8 oontainerinto the well and obtalna a sample' k&tha'f~uids'akd gaSes from the bottom of the well, which sample does not contain sand or earth. The sample contained in the container Is t&en to Core Laboratbrlest Dallas Lk%boratory and analyzed. The analysisdeterminesthe properties of the gas and fluid content. It does not suryey, test or analyze the sand or formationof the earth in any 011 or gas well.

"A portion of the servleres consists 3.n

the takingby this company of a bottKim-tile PressuIW test.HonorableGeorge A. SheppaPd, Page 2

By means of sure of the determlned.

._ _ . a gauge lowered into tha well the presfluid at the bottom of the weil is The pressure is l+ew+e tested at..
._ -. o-4188

otnar poznte zn tne well m oraer co correlatecne bottom-hole

pressure test above described. The only purpose of this test Is to determineby 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 servicesrelates 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,thepressure at the bottom of the well occasionedby the flow of 011. The amount of 011 which is produced during this lnterval is measurea and Its ratio to the decline ln the bottom-hole

pressure Is known as the productivity tidex of the well. No test **or** survey of sands or formationof the earth in sny o$!l or gas well is made In this test."

It Is out opinion that'all four of the servicesoutlined above come wlthln the Intended scope of .the Act. we quote .irqm.Subsectlon (b) of Section 1 of Artlc.le 

### 16, House Bill No. 

### 8, and underline that portion thereofwhich we billeve cover8 the aescrkbed services.

"(b) Every person @I this State engaged in,thebuslnesaaf**fumniBhi.ng** any **servlC@** or performing any 'duty

for ofhsrs for a OonsMeration or compensation,with the use of ~IQK device, tools, &Hzumenta or equlpm,ent,

eleotrioal,

mec$aniaal, or otherwise **or** by uieans

of anychem%aaX, eleottiioal, or mechanlcai process when such aervlce 18 performed in connecfion lth the %I or tlng f tn

~!?~ho&& ng t f 3.1 or. gas

or"a~~~le~~he"f~t"ion~of such wells or the surveylw ortestingof the sands or other formationsof the earth in any such ol.1 or gas wells."

Although Core Laboratories,Inc.,may not itself "take the .:oores from the wells' it can hardly bye denied that it ,isUfurnishing

. . . service , . . for others for a conaideratlon

. . . by means of

. . . . . chemical,electricalor mechanicalprooess . . . .ln+onnectlon wfth the surveyingor testing of sands or other formationsof thecearth

. . ....' The analylyeis

of samples Is one of the recognizedmethods of test- the formatlone:ln

oil or gas wells. Surely It cannotbe oontendedthat the statutewas Intended to apply only when the analysis ia aotuallymade in the well, or where the same &ersbn or firm both extracts the aoze and snalyeesthe same.

The servicesdescribed in paZ%3graphB fI, III and m all relate to tests of the properties of fluids and grs, In wells as distlnguls~ from tests of solidmaterials found in the wells. The statuteexpressly enumerates 'the suveylng**or** testing of the sands or other formationsof t@cRonorable George H. Sheppard, Page 

### 3 o-418a:

earth ln any such oil or gas wells." We,belleveth@t this language 1s intended to embrace not only the solidmaterial aCtuall$ composingthe sand, but the gas, 011 or water with which the sand may be saturatedor other fqrmatlonspermeated. It Is to be rememberedthat the purpose of drilling oil @nd gas wells is to produce 011 or gas. It would be strange indeed If a statute,patently designedto tsx technlcal'services customarl renderedby persons other than the driller ln connection with the efficientcompletionand operationof ail and gas wells, were construed so as to tax the testing of non-productive formatlonathroughwhich the drill must necessarilypass, and exempt the.testlngof the propertiesof the very product, I.e., gas and 011, whlah Is sought to be produoed. We thereforeare of the opinion that analysis of bottom-holefluids, the testing of pressures at variouspolnts in the well and ascertainment of the productivityindex of the well are all serviceswhich come within the intended scope of the statuteunder consideration.
Yours very truly .ATTQHNKY

QHNERAL OF TEXAS By s/WalterR. Ko& Walter R. Koch Assistant,

APPRUVIDJAR 

### 31, 1942 s/ Qrover Sellers FXRST ASSISTANT ATTQRlWQEbiIEBAL
ApprovedOpinion Committeeby 8.4 C.C.d. Chairman