Honorable Ernest 0. Thompson, Chairman
Railroad Commission of Texas
Austin, Texas
Opinion No. WW-625
Re: Applicability of Articles 6060
and 6050 to a gas plpeline
operation which crosses a pub-
lic road In one or more places
Dear General Thompson: .:.
Your request for an opinion states the following:
"If a gas producer is required, in order to
sell his gas, to construct approximately five miles
of pipeline: which crosses a publlc;.roadin one or
more places and for which eminent domain proceedings
were not used in obtaining the right-of-way; and if
the purchaser of said gas Is a public utility pay-
ing the tax provided in Article 6060; Is the~pro-
ducer liable for the tax provided In Article 6060?"
Article 6060, Vernon's Texas Civil Statutes, places
a tax on one of the three types of gas utilities described in
Article 6050. The classification of gas utilities set out in
Article 6050 describes three general categories, being persons,
companLes, and corporations engaged in 'one or more of the
following kinds of business:
"1 . Producing or obtalnlng, transporting, convey-
ing, distributing or delivering natural ga31b)(;Lr
for public use or service for compensation;
sale to municipalities or persons or companies, In
those cases referred to in paragraph 3 hereof, en-
gaged in distributing or selling natural gas to the
public; (c) for sale or delivery o@natural gas to
any person or firm or:corporation 'operatingunder
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.
. -
Honorable Ernest 0. Thompson, page 2 (~~-625)
"2 . Owning or operating or managing a plpeline
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 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 exer-
cise the right of eminent domain.
“3. Producing or purchasing natural gas or trans-
porting or causing the same to be transported by
pipelines to or near the limits of any municipality
in which said gas is received and distrLuu.Ledor
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 munlci-
, pality, Is hereby declared to be virtual monopoly .
and a business and property employed therein within
this State shall be subject to the provisions of
this law and to the jurisdiction and re~gulatlonof
the Commission asa gas utility."
Sections 4 and 4a of Article 6050,have no application
to this case, being exemption3 of natural gas used for argicul-
tural purposes.
The ga3 utility tax provided in Article 6060, since
the Act of 1931, applle3 only to gas utilities described in
section 2 of Article 6050.
Questions have arisen in the application of the classl-
ficatlon statute because of the fact that a business in one
category may have some of the.attributes of a business in
another cate.&ory. An opinion of Attorney General'Gerald C.
Mann, No. 0-3524-A, held that the gas gathering system of
Republic Natural Gas Company on its lease in the Saxet Field
in Nueces County did not come under Section 2 of Article 6050
because Republic Natural Gas Company was engaged in the busi-
ne3s of producing gas and the gathering:lines, which were pipes
running from it3 wells to a central point on its own lease,
did not put it in the business of transportation of natural
gas.
. -
t!onorableLrncst 0. Thompson, page 3 (WW-625)
The opinion in Thompson vs United Gas Corporation,
190 S.W.2d 504,509, confirms the emphasis which the 1942
opinion of the Attorney General had placed upon making a
determination of the kind of business in which the operator
is engaged, although the Court did not mention the opinion
of the Attorney General. The Court's opinion states that the
classifications in Article 6050 "generally represent three
businesses, namely, production, transportation, and distrl-
bution and sale of gas." United Gas Corporation was held
in that case to be in the business of distribution and sale
of gas a3 described in section 3 rather than in the business
of transportation of gas as described In Section 2. There-
fore, the corporation was not subject to the gas utilities
tax in question.
The Court pointed out that gas utilities described
in all three sections of Article 6050 would have the right
of eminent domain. It is to be assumed also that a company
In the business of distributing gas would likely have pipe-
lines laid across public roads and highways as well as would
companies in the business of transportation or transmission
of gas. Such facts did not convert the distribution business
of United Gas Corporation into a transportation or transmis-
sion business as a matter of law when, In the cited case,
the trial court had found the business to be that of a gas
distributing company. -I*
It is our opinion that each such case involves a
fact question: What type of business is %he operator actually
engaged in? Of course, an operator might well be engaged in
more than one of the three types of business described in
Article 6050.
The fact3 stated in your request for an opinion des-
cribe the subject a3 a gas producer who, in order to nell gas
from his well, found it necessary to lay approximately five
milco of 3" line to connect with a transmlnnion line The lint
cro33cc a public road in one or more place::,btltall of the
pipeline right of way was obtained by purchase wi.thoutresort
to eminent domain proceedings.
It 13 our opinion that such facts do not establish
that this gas producqr is also in the business of transporta-
tion of gas a3 described In section 2 of Article 6050. While
this is a fact question, we do not believe that the fact3
stated would be sufficient to support a determination by the
Railroad Commission that this operator entered into the busi-
ness of transportation or transmission of gas by the construc-
tion and use of such pipeline. Therefore, the producer would
not be subject to the tax provided in Article 6060.
Honorabl~eErnest 0. Thompson, page 4 (WW-625j
SUMMARY
Under the facts as stated, the utility
tax of Article 6069 does not apply to gas pipe
line owned by a gas producer crossing a public
road when the producer, in order to sell gas
from his well, constructed approximately five
miles of 3” line to connect with transmission
line, because producer did not thereby engage
in the business of transportation Bf gas as
described in Section 2 of Article 6050.
Very truly yours,
WILL WILSON
Attorney General of Texas
'+ Assistant
JW/grb
APPROVED: .
OPINION COMMITTEE
George P. Blackburn
Houghton Brownlee, Jr.
James Irlon
W. Ray Scruggs
Joe G. Rollins
APPROVED FOR THE ATTORNEY GENERAL
BY:
W. V. Geppert