Txm ATTO~Y GENERNL 

OF %YExAs 

Honorable George~ Ii. Sheppard 

Comptroller of Public Accounts 

Austin, Texas 

AUSTIN II. 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 

taxability under Section I of Article 16, H.B. No. 8, Aets of the 47th 

zYatures 

of certain oll'well serglces performed by Core Laboratories, 

. 

Th&partPcular ser+lces about whioh you inquire are 

described by yoti as followst 

7 

"A part of said s&ices'consists ~of the 

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 

operator or~contract+ engaged in drilling the well, 

the core is delivered to Core Laboratories, ,Inc. An 

analysisof the substances thetiof,is made by Core 

Laboratories ln its Iaboratories, which analysis is 

furnished ,to the client; Core LaboFatorles, Inc., '~ 

ln connection with 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 contain sand or earth. The sample contained in the container Is t&en to Core Laboratbrlest Dallas 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 servleres consists 3.n the 

taking by this company of a bottKim-tile PressuIW test. 
Honorable George 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 correlate cne 

bottom-hole pressure 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 occasioned by 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 

formation of the earth in sny o$!l or 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 .the Act. we quote .irqm .Subsectlon 

(b) of Section 1 of Artlc.le 16, House Bill No. 8, and underline that portion thereof which we billeve cover8 the aescrkbed services. 

"(b) Every person @I this State engaged 

in,the buslnesaaf 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 ortesting of the sands 

or other formations of 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 ,is Ufurnishing . . . 

service , . . for others for a conaideratlon . . . by means of . . . . . 

chemical, electrical or mechanical prooess . . . .ln+onnectlon wfth the 

surveying or testing of sands or other formations of thecearth . . . ...' 

The analylyeis of samples Is one of the recognized methods of test- the 

formatlone:ln oil or gas wells. Surely It cannot be oontended that the 

statute was 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%3graphB fI, 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 fqrmatlons permeated. 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'services customarl 

rendered by persons other than the driller ln connection with the 

efficient completion and operation of ail and gas wells, were construed 

so as to tax the testing of non-productive formatlona through which the 

drill must necessarily pass, and exempt the.testlng of 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-hole fluids, the 

testing of pressures at various polnts in the well and ascertainment of 

the productivity index of the well are all services which come within the 

intended scope of the statute under consideration. 

Yours very truly 

.ATTQHNKY QHNERAL OF TEXAS 

By s/Walter R. Ko& 

Walter R. Koch 

Assistant, 

APPRUVIDJAR 31, 1942 

s/ Qrover Sellers 

FXRST ASSISTANT 

ATTQRlWQEbiIEBAL 

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