Legislative Messages of Hon. James V. Allred, Governor of Texas 1935-1939 Page: 46 of 263
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as wrong to permit the exploitation of our sulphur deposits without
substantial contribution not only to carry on the government, but for the
education of our children as well, as it is to stand idly by and see our
natural gas either blown into the air or transported to other states.
There is no doubt that the large sulphur companies operating in Texas
have paid themselves out many times over. Their profits have been
stupendous. There is likewise no doubt that in the past they have not
contributed anything like their fair share to the support of either State
or local government.
Several bills are now pending before you proposing to increase the
tax on sulphur. In my opinion, the increase should not be nominal, but
Tax On Pipe Lines
In discussing with this Legislature last week the causes of the shameful
waste of natural gas in the Panhandle fields, I pointed out the shocking
evil in our corporate existence of giant integrated concerns engaged in the
production, transportation and sale of natural gas. This same evil is
perhaps more pronounced in the oil business. It has become a matter of
common knowledge that the average independent producer, refiner or
marketer is waging a one-sided and losing battle against giant integrated
concerns authorized by law to produce, refine, transport and market oil
and petroleum products. What fair chance does the independent producer
of oil have when he must pay a tremendous tariff to transport his
oil through the lines of his giant competitors?
This unfair competitive condition was recognized by the entire industry
and by the government in the promulgation of the petroleum code adopted
under the National Recovery Act. It was provided in this code that each
branch of the industry-that is, the producing, the refining, the marketing
and the pipe line department-should stand on its own bottom and operate
at a profit in that particular department. This was necessary because
undeniably most of the major companies doing business in this state carried
on the marketing, refining and, ofttimes, producing ends of their business
at a loss, only to more than make up for this loss in unconscionable profits
derived from their pipe lines. Shocking figures showing the staggering
profits made by these companies are on file with the Railroad Commission
In 1934, while operating at a loss in the refining and marketing ends of
the business, twenty pipe line companies (owned by their producing,
refining and marketing brethren) reported to the Secretary of State a total
net profit of more than $78,000,000.00. One giant concern made more than
$13,000,000.00 net. Another more than $11,000,000.00 net. Another more
than $10,000,000.00 net. Another more than $8,000,000.00 net.
At present Texas collects an ad valorem tax against these pipe lines;
and, in addition, an intangible assets tax and one-fifth of a franchise taxan
extremely limited sum.
As pointed out above, the net profit of twenty pipe line companies is
more than $78,000,000.00, an average of 25% profit in one year upon their
investments. At the same time these companies all together pay the
State the munificent sum of $10,030.79 in one-fifth of a franchise tax. If
they had paid the whole five-fifths, it would only have been a total of about
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Allred, James V. Legislative Messages of Hon. James V. Allred, Governor of Texas 1935-1939, book, 1939; (texashistory.unt.edu/ark:/67531/metapth3899/m1/46/: accessed August 16, 2017), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; .