Texas Attorney General Opinion: WW-431 Page: 4 of 9
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Hon. Frank R. Nye, Jr., page 4, Opinion No. WW-431
designated as "plant operator's portion" is real property
subject to ad valorem taxes. To answer this question it
becomes necessary to examine and construe the contracts
between the Sun Oil Company, the processor and the pro-
ducers of owners of the leases from which the gas is
produced.
It appears that Sun Oil Company, plant operator,
processes gas from the leases involved under two types of
contracts. We have been furnished copies of these con-,
tracts. The first is a casinghead gas contract. Under the
terms of this contract Sun agrees to buy the casinghead gas
produced by the lessee owner. The title to the gas is
transferred to Sun at a certain delivery point, usually at
the casinghead at the well. Sun agrees to pay for said gas,
a price based upon what Sun receives for the gasoline pro-
cessed (up to 1/3 of proceeds) and up to 50% of net pro-
ceeds from the sale of the residue gas, and we construe net
proceeds to mean gross proceeds less cost of purifying,
boostIngahnd transporting the gas. Also, the'price paid
shall be based on a percent of the price received for sale
of butane and propane. The contract is for a term of ten
years, either party having the right to terminate the cqn-
tract on any anniversary date by thirty days)' notice.
The second contract as related to the problem here
involves a processing of the gas by Sun from various leases,
none of which are owned by Sun. In this processing contract
Sun agrees to process the gas, remove all liquids and im-
purities and deliver the residue gas back to the producer.
This contract further provides that title to the gas re-
mains in the producer who delivers the gas to Sun at the
junction point on the gathering line in close proximity,
to the gas wells. The producer assigns to Sun 100% of the
plant products recovered from gas delivered under the con-
tract when, as and if recovered. The price paid for the
product is the price received for such products o4 the
basis of a scale attached to the contract showing gasoline
content of the raw gas processed. There is by terms of,
the contract also a permissible deduction from producer's
credit for a dehydration fee. This processing contract is
on a year to year basis, terminable at the option of either
party on sixty days' notice prior to the end of any calendar
year.
It is stated in the opinion request that the full 1/8
royalty and the 7/8 working interest in the gas has been
rendered and assessed for taxation for each year the plant
has been in operation. In other words, 8/8 or all of the
gas has been rendered for taxation by the owners in propor-
tion to their respective interest.
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Texas. Attorney-General's Office. Texas Attorney General Opinion: WW-431, text, May 21, 1958; (https://texashistory.unt.edu/ark:/67531/metapth267043/m1/4/: accessed July 16, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu; crediting UNT Libraries Government Documents Department.