Txm ATTO~Y GENERNL
OF %YExAs
AUSTIN II.TEXAS
Honorable George~Ii.Sheppard
Comptrollerof Public Accounts
Austin, 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
taxabilityunder Section I of Article 16, H.B. No. 8, Aets of the 47th
of certain oll'well serglces performed by Core Laboratories,
zYatures
.
Th&partPcular ser+lces about whioh you inquire are
describedby yotias followst
7
"A part of said s&ices'consists ~ofthe
workof the company in.analyzing.co~estaken from
011 wells., Core Laboratodes; Ino.* does not take
the coreSfrom the wells, but the cores ax delivered
to it. +lsthe core 1s removed froti,,tgewell by the
operator or~contract+ engaged in drilling the well,
the core is delivered to Core Laboratories,,Inc. An
analysisof the substancesthetiof,ismade 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
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 con-
tain sand or earth. The sample contained in the con-
tainer Is t&en to Core LaboratbrlestDallas 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 servleresconsists 3.nthe
taking by this company of a bottKim-tilePressuIW test.
Honorable George A. SheppaPd, Page 2 o-4188
By means of a gauge lowered into tha well the pres-
sure of the fluid at the bottom of the weil is
determlned.
._ _ . The._pressure is l+ew+e tested-. at..
otnar poznte zn tne well m oraer co correlate cne
bottom-holepressure 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 occasionedby the flow of 011.
The amount of 011 which is produced during this ln-
terval is measurea and Its ratio to the decline ln
the bottom-holepressure Is known as the productivity
tidex of the well. No test or survey of sands or
formation of the earth in sny o$!lor gas well is made
In this test."
It Is out opinion that'all four of the services outlined
above come wlthln the Intended scope of .theAct. we quote .irqm.Subsectlon
(b) of Section 1 of Artlc.le16, House Bill No. 8, and underline that por-
tion thereof which we billeve cover8 the aescrkbed services.
"(b) Every person @I this State engaged
in,the buslnesaaf fumniBhi.ng any servlC@ or perform-
ing any 'dutyfor ofhsrs for a OonsMeration or compen-
sation, with the use of ~IQKdevice, tools, &Hzumenta
or equlpm,ent,eleotrioal,mec$aniaal, or otherwise or
by uieansof anychem%aaX, eleottiioal, or mechanlcai
process when such aervlce 18 performed in connecfion
lth the tlng f tn ng t f 3.1 or. gas
%I or ~!?~ho&& 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.1or
gas wells."
Although Core Laboratories, Inc., may not itself "take the
.:ooresfrom the wells' it can hardly byedenied that it ,isUfurnishing . . .
service , . . for others for a conaideratlon . . . by means of . . . . .
chemical,electrical or mechanical prooess . . . .ln+onnectlonwfth the
surveyingor testing of sands or other formations of thecearth . . ....'
The analylyeis
of samples Is one of the recognized methods of test- the
formatlone:lnoil or gas wells. Surely It cannot be oontended that the
statutewas 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%3graphBfI, 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 fqrmatlonspermeated. 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'servicescustomarl
rendered by persons other than the driller ln connectionwith the
efficient completion and operation of ail and gas wells, were construed
so as to tax the testing of non-productiveformatlona through which the
drill must necessarily pass, and exempt the.testlngof 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-holefluids, the
testing of pressures at various polnts in the well and ascertainmentof
the productivityindex of the well are all services which come within the
intended scope of the statute under consideration.
Yours very truly
.ATTQHNKYQHNERAL OF TEXAS
By s/Walter R. Ko&
Walter R. Koch
Assistant,
APPRUVIDJAR 31, 1942
s/ Qrover Sellers
FXRST ASSISTANT
ATTQRlWQEbiIEBAL
Approved Opinion Committee by 8.4C.C.d. Chairman