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EXHIBIT 8.1
Vinson & Elkins
Attorneys At Law
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Telephone (214) 220-7700
Fax (214) 220-7716
May 6, 1998
Mewbourne Development Corporation
3901 South Broadway
Tyler, Texas 75701
Re: MEWBOURNE ENERGY 98 DRILLING PROGRAM
Gentlemen:
You have requested our opinion with respect to certain of the anticipated
United States federal income tax consequences of the organization and operation
of Mewbourne Energy Partners 98-A, L.P. (the "Partnership") formed pursuant to
the form of limited partnership agreement (the "Partnership Agreement") included
as Exhibit A to the Registration Statement on Form S-1 filed with the Securities
and Exchange Commission (the "Prospectus") and (ii) the drilling program related
to the Partnership (the "Program") to be formed pursuant to the form of drilling
program agreement (the "Drilling Program Agreement") included as Exhibit B to
the Prospectus. Capitalized terms contained herein and not otherwise defined are
attributed the meaning given to them in the Partnership Agreement, the
Prospectus or the Drilling Program Agreement, as appropriate.
Our opinion is based and conditioned upon the initial and continuing
accuracy of (i) the facts and the factual matters stated and assumed as set
forth in the Prospectus (including the form of Partnership Agreement, Drilling
Program Agreement and other documents appended to the Prospectus) and (ii) the
representations with respect to the organization and operation of the
Partnership and the Program contained in the Prospectus, including without
limitation those set forth as having been made by you under the caption "Tax
Aspects."
Based upon our analysis of the form Partnership Agreement, the form
Drilling Program Agreement and the other documents appended to the Prospectus,
the facts and factual matters stated and assumed as set forth in the Prospectus,
the representations set forth in the Prospectus, and subject to the
qualifications set forth herein, we are of the opinion that, as to the
Partnership or Program formed pursuant to the form Partnership Agreement or the
form Drilling Program Agreement, respectively, under Current Law (as defined
below):
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A. At formation, the Partnership and the Program will be classified as
partnerships for federal income tax purposes.
B. The Partnership will not be classified as an association taxable as a
corporation pursuant to the "publicly traded partnership" rules of
Section 7704 of the Code.
C. Except as noted below, the allocation of income, gains, losses and
deductions between the General and Limited Partners and the Managing
Partner under the Partnership Agreement and between the Partnership
and Mewbourne Development Corporation under the Drilling Program
Agreement will be respected for federal income purposes.
D. The passive activity loss limitations of Section 469 of the Code will
not apply to General Partners in the Partnership (prior to any
conversion of a General Partner Interest in the Partnership to a
Limited Partner Interest) to the extent that the Partnership drills or
operates wells pursuant to working interests.
E. The Partnership will not be treated as a "publicly traded partnership"
for purposes of the application of the passive activity loss
limitations of Section 469 of the Code.
F. The conversion of a General Partner Interest to a Limited Partner
Interest pursuant to the terms of the Partnership Agreement will be
non-taxable provided, however, that any reduction in a Partner's share
of Partnership debt resulting from such conversion will be treated as
a cash distribution to such Partner and will cause gain to be
recognized to the extent such cash distribution exceeds the adjusted
tax basis of such Partner's Interest.
The foregoing opinions, as well as the other conclusions set forth below
with respect to the tax aspects of an investment in the Partnership (and,
indirectly, the Program) are based upon the Code, regulations promulgated or
proposed thereunder, and the interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, as of the date
hereof ("Current Law"). All of the above are subject to change with either
prospective or retroactive effect, and our opinion and advice may be adversely
affected or rendered obsolete by any such change. We do not undertake to advise
you as to any such future changes or interpretations unless we are specifically
retained to do so.
Due to the inherently factual nature of certain issues, the absence of
certainty concerning future facts with respect to such issues, or the inadequacy
of controlling authority, we are unable to render any opinion with respect to
the following specific federal income tax issues: (a) the validity of any
special allocation of an item that is dependent on a Partner's basis in an oil
or gas property; (b) the amount, if any, of the Organization and Offering
Expenses that will be deductible or amortizable; (c) the amount, if any, of the
Management Fee and the initial Administrative Costs
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that will be deductible or amortizable; (d) the deductibility in a given year of
any intangible drilling and development costs incurred in a year prior to the
drilling of the wells to which such costs relate; (e) the availability or extent
of percentage depletion deductions to the Partners; (f) compliance of the
allocations under the Partnership Agreement and the Drilling Program Agreement
with Section 704(c) of the Code in the event property is contributed or deemed
contributed to a Partnership or a Program; (g) the deductibility of any interest
expense by a Partner; and (h) whether Interests will be considered "publicly
offered securities" for purposes of ERISA.
Although we are unable to render an opinion with respect to the issues
described in the preceding paragraph, we have reviewed the discussion of the
federal income tax consequences set forth in the Prospectus under the headings
"Risk Factors -- Tax Risks" and "Tax Aspects," and to the extent such discussion
involves matters of law, we are of the opinion that such discussion is accurate
in all material respects under the Code, the Treasury Regulations promulgated
thereunder, and existing interpretations thereof, all as of the date hereof, and
addresses fairly the principal aspects of each material federal income tax issue
relating to an investment in Interests by an Eligible Citizen of the United
States.
In light of the various opinions and assumptions described above, but
subject to the qualifications and limitations placed thereon, we are of the
opinion that, under Current Law, the material federal income tax benefits of an
investment in Interests, in the aggregate, more likely than not will be realized
in substantial part by an investor Partner who acquires his interest for profit,
provided that an investor Partner who acquires Limited Partner Interests either
is not subject to the passive activity loss limitations of Section 469 of the
Code or has sufficient passive income against which he can deduct his share of
any Partnership deductions and losses. For a discussion of the timing of the
realization of such tax benefits, see the discussion in the Prospectus under
"Tax Aspects -- Special Features of Oil and Gas Taxation -- Basis and At Risk
Limitations."
The conclusions set forth above are conditioned on our understanding that
there are no agreements, arrangements, undertakings or the like other than those
expressly reflected in the Partnership Agreement, the Drilling Program Agreement
and the other documents appended to the Prospectus.
We hereby consent to the filing of this opinion letter as an exhibit to the
Prospectus and to the references to Vinson & Elkins L.L.P. under the headings
"Certain Federal Income Tax Consequences" and "Legal Opinions" in the
Prospectus. In giving this consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the 1933 Act
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
Vinson & Elkins L.L.P.