Honorable Robert S. Calvert Opinion No. M-80
Comptroller of Publl .c Accounts
Austin, Texas ?e : Whether the Texas gas and
oil productlon taxes pro-
vided for by Chapters 3
and 4 of Title 122A,
Taxation-General, Vernon’s
Civil Statutes, apply to
gas and oil which is severed
in Texas, but which 1s pro-
duced from a restpvoir
located entirely outside
Dear Mr. Calvert: of Texas.
Your request for an opinion states in part:
“A question has artsen in connection
with the gas production tax provided for
bv Chapter 3, Title 122A, Taxation-Ctenenal,
Vernon’s Civil Statutes, and the crude oil
production tax provided for by Chapter 4,
Title 122A, Taxation-General, Vernon’s
Civil Statutes,
“I have been, advised by Magna Oil
Corporation that they are drilling @ well
for oil and/or gas which is to be surfaced
on the C. C. Hutchinson Lease, Samuel Stewart
No. 1069 Survey, Girayson County, Texas, The
well will be bottomed holed on the Foster-
Davls Lease, Marshall County, Oklahoma.
“In order to drill the well, it was
necessary for Magna 011 Corporation to obtain
a permit from the Railroad Commission of Texas,
however, the well will have an Oklahoma allow-
able.
“Y * + *
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_. -
Honorable Robert S. Calvert, Page 2 (M-80)
“Please advise me whether or not
the Texas gas and oil production taxes
provided for by Chapters 3 and 4 of Title
122A, Taxation-‘General, Vernon’s Civil
Statutes, applies to the gas and/or oil
which Is severed In Texas, but which Is
produced from a reservoir located entirely
outside of Texas .”
Article 3.01 of Title 122A levies “an occupation tax
on the business or occupation of producing gas within this
State” and Article 4.02 levies “an occupation tax’on oil
produced within this State .”
Article 3.01 further provides that a “tax shall be paid
by each producer on the amount of gas produced and saved within
this State” and Article 3.04 defines “producer” as “any person
who produces In any manner any gas by taking It from the-earth
or waters in this State.” (Underlining added. )
Article 4.03 provides that the tax “Imposed on the pro-
ducing of crude petroleum shall be the primary liability of
the wroducer as hereinbefore defined.” Article 4.01 havina
defined “producer” as ‘any person who produces in any manner
any oil by taking it from the earth or waters In this State.’
(Underlining added s )
Since the taxes in question are occupation taxes, undoubt-
edly the Legislature could have provided for the taxes to be
based on the amount OP value of minerals extracted through
well mouths located on the surface of this State, irrespective
of whether the underground mineral reservoirs might be located
beneath the surface of this State or not. However, the use
of the limiting phrase “from the earth or waters in this State”
in both tax statutes clearly indicates a legislative intent
that the reservoir source of minerals must be located beneath
the surface of this State.
Given the fact situation set out in your oplnlon request
that the reservoir Is located entirely outside of Texas, this
office Is of the opinion that the taxes imposed by Chapters
3 and 4 of Title 122A do not apply to oil or gas extracted
from such reservoir, even though the well mouth is located
on the surface in Texas.
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.
.
Honorable Robert S. Calvert, Page 3 (M-80)
SUMMARY
The Texas gas and oil production taxes
provided for by Chapters 3 and 4 of Title
122A, Taxation-General, Vernon's Civil
Statutes, do not apply to gas and 011 which
is severed in Texas, but which Is produced
from a reservoir located entirely outside
of Texas.
truly yours,
C. MARTIN
General of Texas
Prepared by Nell Williams
Assistant Attorney General
NW/fb
APPROVED:
OPINION COMMITTEE
Hawthorne Phillips, Chairman
W. V. Geppert, Co-Chairman
J. Arthur Sandlin
Mario Obledo
John Banks
Houghton Brownlee
STAFF LEGALASSISTANT
A. J. Carubbi, Jr.
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