I<. ,/

.;.. .; 'THE.&%TORNEY GENERAL

OF TEXAS

GeneralErnest 0. Thomnson Onlnion No. WW-754 __.~~~ Chairman,Railroad Commission - Tribune Building Re: Austin, Texas Applicability of Article 6060,V.C.S., to gas pipe line operations classi- fied as field sales from the gathering system,and related questions. Dear General Thompson:

We quote fromyour opinion request as follows:

“This application for an opinion concerns the applicabilityof Article 6060, R.C.S. as amended, to gas pipe line operations as hereafter described. The principles Involved are common to several pipe line-operatorsin the State; however, we have chosen one company the Colorado Interstate Qas Company, and will outline its operations and the questionswe have regarding the taxes for whioh they are pliable

under the above statute.

“Colorado InterstateQas Company is a large interstate gas transmission system, purchasing and producing gas principally in the Texas Panhandle and delivering It to market In Colorado.
“(1) For the year 1958, the company regorted in its Annual.

Report to the Railroad Commission of Texas the followi

7 CrossRecipts for Texas operatians: Tnd,ustrlal 2,931; Qovernmental - $989,586, Drilling Fuel - $2,469; Misoellaneous - $5,8C2~ totaling $1,000,788. On this amount the oompany has not pald.the gross reasipts tax, stating that this constitutea field sales frcmmthe gathering system, and, hence3 not taxabla. In thaa oonnection It ehould.~

be pointed out thst the gathe;piag system oonnects to a large number of wells, only about half of which are operated by company.
“(2) The aompany also made In 1958, sales to El Paso Natural Gas.

totaling $2,419,050,delivered at Dumas, Texas. This gas after dellvery to El,Paso undoubtedly enters interstate commerce. On this amount, aleo, the companyhas not paid the gross receipts tax (3) In addition the company also recieved $14,259.during 1958 which It classifiedGen. Ernest 0. Thompson,Page 2

as Rent fromGas Property, classification. (OpinionNo. WW-754)

without any further

"The questionsto be answered for the above numbered paragraphsare as follows:
"(1) Is the Colorado Interstate Gas Company llable for the gross receipts tax on the amount which the companyhas classified as field sales from the gathering system? In this connectionIt shouldbepointed out that a different fact situation exists than existed in the Republic Natural Gas Company situationin the.Opinion of Attorney GeneralGerald C. Mann, No. 0-3524-A.
"(2) Is the Colorado Interstate Gas Company liable for the gross receipts tax on the amount which the companyreceived from El Paso Natural Gas Company for the sale of gas at Bumas,Texas?
“(3) Assumingthat the revenue received classifled.asRent from Gas Properties was all from Texaspropertiesand with no further classifica- ;zr is this amount subject to the gross receipts

Article6060,V.A.C.S., is as follows:

"Everygas utility subject to the provisions of this subdivisionon or before the first day of Januaryand quarterly thereafter, shall filewith the Commissiona statement, duly verified as true and correctby the president, treasurer or generalmanager if a company or corporation;or by the owner or one of them if an individualor copartnership,showingthe gross receipts of such utility for the quarternext preceding or for suchportionof said quarterly period as such utility may have been conducting any business,- and at suchtime shallpay into the StateTreasury at Austina sum equal to one-fourthof one per cent of the gross income received from all businessdone .byit within this State during said quarter."

The scope of the taxes imposed by the foregoing articlewas limitedby Section.10,H.B. 547 of the 42nd Legislature (Actsof 1931, 42nd,Leg., R.S;, Ch. 73, page ill),which reads:.' ii:.Gen. Ernest 0. Thompson,Page~3 (OpinionNo. WW-754)

"Section ;O. That Article 6060 pf the ,:RevisedCivil Statutesof 1925, except insofar as it imposes the license fee or tax of-one-fourth of one per cent againstpersons 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."
The.pertinentportions of Article 6050 are as follows:

"The term 'gasutility' and 'publicutility-'
or 'utility,'as used in this subdivision,means and includespereons, companies and private corporations, their lessees, trustees, and receivers, owning,managing, operating, leasing or controlling within this State any wells, pipe lines, plant,property, equipment, facility, franchise, license, or permit for either one or more of the followingkinds of business:

,,

. . . . "2. Owning or operating or managing a pipe line for the transportationor 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 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; includingalso any natural gas utility authorizedby law to exercise the right of emlnent domain."

The question thatmust be determined Is whether the Colorado InterstateGas Company owns, operates or manages a pipe line within the purview of the forgoing section.

Prom the facts set forth in your letter, it appears that the Colorado InterstateGas Company operates a large interstategas~transmisslonsystem. This system is connected to a'number of wells, abouthalf ofwhich are operated,by Colorado Interstate. The, natural gas transported in the transm%ssion system isdelivered principally to market in Colorado,,

but some is delivered and.sold~to El Paso Natural Gas Company in Pumas,Texas. Colorado Interstate has theGen. Ernest 0. Thompson, Page 4 (OpinionNo. ~~-754)

right of eminent domain.1 Under this set of Circumstances there can be no doubt but that the Colorado InterstateGas' Company is a corporation "owning or operatingor managing
a pipe line for the transportation or carriageof natural gas," within the meaning of Section 2.ofArticle 6050.

In answer to Question No. 1, you are advised that the Colorado Interstate Gas Company is liable for the gross receipts tax on the amount which the companyhas classifiedas field sales from the gathering system. is assumed that all such sales are made in Texas. In $ZZr letteryou state that the company in.its annual report described certain gross receipts from Texas operations, which it classified as field sales from its gathering system. The gross receipts tax is due upon all receipts if actually gained from Texas operations;however, the act has no extra-territorialeffect, and the tax is not due upon out-of-state sales. )

In line with the foregoingdiscussion,Question No. 2 is answered in the afflrmatlve.

Eased on your assumption that all revenue classlfled as rent from gas property was received from Texas properties, Question No. 3 is.also answered in the affirmative.

' Article 1497,V.A.C.S., provides that any corporation created for the purpose of storing,transporting,buying and selling oil, gas, salt, brine and otherminerals, solutions and llquifiedminerals has the right of eminent domain. It Is not necessary that a corporationbe chartered for all of suchpurposes in order to have the right of eminent domain. See note 3 at page 353, Vol. 16, Tex.Jur., Sec. 87. The Colorado InterstateCorporationis a Delaware Corporationhaving a permit to do business in Texas. Any foreign corporationhaving obtained a permit to do business in Texas can exercise the power of eminentdomain in all
cases where corporations createdunder the State lawsmay exercise that power.

westernTelegraph and Telephone C0.3 61 S W 40b T ci App.7901, error refused). The case of ThoApson i.ekitzd Gas Corporation, 190 S.W.2d 504 (Tex.Civ.App.1945 error refused) states at page 509 that the gas utilities'described in each of the Sections 1, 2 and 3 of Article 6050 have the right of eminent domain. Consequently,it is apparent that Colorado Interstate Gas Company~hasthe right of eminent domain.Gen. Ernest 0. Thompson, Page 5 (OpinionNo. WW-754)

SUMMARY

The Colorado Interstate Gas Company is operating a pipe line for the transportation of natural gas within the purview of Section 2 of Article 6050, V.A.C. S. Consequently,It is required to pay the gross receipts tax imposed by Article 6060, V.A.C.S., on its gross receipts from Texas operations,which includes receipts from field sales in Texas and rent received from Texas properties.

Very truly yours,

WILL WILSON Attorney General

JNP:bct

APPROVED:

OPINIONCOMMITTEE: HoughtonBrownlee, Jr., Chairman

Paul Floyd HowardMay-s ElmerMcVey

REVIEWED FOR THE ATTORNEY GENERAL

BJT:W. V. Geppert