FRANCHISE TAX BASED ON PERCENTAGE OF GAS SALES DID NOT REQUIRE PAYMENT FOR GAS TRANSPORTED FOR OTHERS, INCLUDING AFFILIATES

摘要

Southern Union Co. v. City of Edinburg, 129 S.W.3d 74 (Tex. 2003), involved a franchise granted by the City of Edinburg to Rio Grande Valley Gas Company (RGVG), a predecessor by merger to Southern Union Company, authorizing the gas company to install and operate pipelines under public rights-of-way and public lands within the city. The franchise agreement, embodied in the city's Ordinance No. 1129, required the gas company to pay a franchise tax of 4 percent of its gross income from all sales of gas within the city. At the time of the franchise agreement in 1985, RGVG was selling gas to consumers in Edinburg. As the natural gas industry changed over the next few years, its business shifted to the transportation of gas for other suppliers, including companies affiliated with RGVG by common ownership. The city sued Southern Union for unpaid franchise taxes, taking the position that all gas sold by any seller to consumers within the city was subject to the 4 percent franchise tax if delivered by means of Southern Union facilities. The trial court rendered judgments against Valero Energy Corporation, RGVG's parent company until 1993 when RGVG was sold to Southern Union, and against Southern Union. Valero and Southern Union appealed.