I’~E J~TTORNEY GENERAL

.: ,OF.mXAS ’ .:

January 28, 1948

Hon. Baaoom Glles Comissiqu3r ', General Land Office Austin, Texas ,', ODlnlon No. v-486
~.
Re : Whether the primary term l

P Mineral Lekise Ro. 22624 1s suspended by.wratien of Art. 5341C) v .c .a.

Dear Mr. Glles:

By letter dated lPovemb& 3, 1947, supplementea by letter dated J&nuarylo; 1948, you requested theeopInIonof.,this ~office whether the ppimary term of Mineral Lease No./22624expired on Septembe?20, 1947,
or whether,

the same has been; or. should be, extended by~reasohof the provlhions~ of Article 5341c, Vernon's Civil Statutes. The facts'areas follows:

On September 20, 1937, the Commissionerof the General Lend Office isiiued'to the Superior@I1 Cola)sng

Mineral Lease No. 22624 oalerlngTract No. 45, containing 320 acres, more or less, out lf Lsguna Maare, lVueces'and,ICleberg Counties,Texas. This lease
was for a primary term of five years.

Approximatelysix months prior to the explration of the primary term, on March 24, 1942, Superlor, by letter to the Commissioner, pointed out that the War Departmenthad by letterdated March 21, 1942, refused to grant a drilling permit on this lease and requestedthat the Commissionerrecognizethe primary term of such lease as extendedunder the provisionsof Artlole 5366a, Vernon'8 Civil Statutes,readingas follows:

"Se&Ion 1. In eaah case in which an 011 aua gas mineral lease haa heretofore been granted or may hereafterbe granted by the State of Texas on an area covered by the coastalwaters of the State or within the Gulf of Mexioo and In whloh the War Department of the united States refuses to grant a permit to the lessee or owner ofHon. Basaom Glles - Page 2 v-486

such lease to drill a well thereon for oil, gas or other minerals (the are& lncludea~in such lease being within the navigablewaterse of the United Statea) and in the event the prim&g term of such lease should expire during !he period of tl&a in which the War Dopartmqnt of the United States may oontin+%0 refuse to Issue auoh,*relt, then and in auoh eveht the primarg to- of such lease is hereby extended for auccoaaiveperioda ,ofone (l),

Jear,fromand aftor the end of~the orlginalprimary term of such leaad while and so long aa the War Department may oontinue auch'refuaalto Issue to the leadee ,or

to the'ownerof auah lease a permit t6 drill for oil, gas or other mlnerala, on the area eovored thereby;provid-

,, ed, that in order to make such exte~alo~a~ effectual .thelosses or tb6 owner of auah lease ahaIL, during eaeh,of the annual perLods~durl.hg

whlcnh the primary term of the loaae is so oxtonaea;applp to ana seek to obtain fiym the War Departmenta permit to drill a wall for oil, gas 07 other minerala on tho aroa ooverea by such leas8 and be unatio&aafulIn fta attempts to obtain
a pemlt, or, if a~cesaful~in obtain1ng.a permlt,~bomaonoe

ope,ratioaa

'for arillfng a well upon ths'leasepremlaeawithin sixty (60) dqa afterKobta.iai.rug such pemlt; and provfaea further ,that the less00 or the owner of auoh lease continuesto pay the annual renewal rentila at the rate provided for in amh leaae.forthe.psriodof time lnvolvqd in auoh extonalona, ShouPd such lease be ao oxtendodand bhould the War Department, at any tire whlle,~sueh,l~aaa is still in force and offeot issue 8 perraft to the loaaee or to the owner of stih lease to drill a well thereon for ofl, ‘gas or other minerals, such lease-ahaiieohtinue in foroe'anaeffect If the l~aaee eommencea' drflling'

OpOratiOnS UPon the leaaeqprenl?tawithin afx,tJ (60) daya,afterobtsinQkgsuch permit, and so long aSr the lessee or the owner of suah lease shall continue to eonduct arflling or mining operatfohsthereon,dr if oil, gas or other mineral be dlaeovered, thereonby the lessee
or the owner of suck lease, so long aa 011,Bon, Baseom Gilss - ?age 3 v -406

gas or other mineral is produced from such leased premises, 8h0da the productionof oil, g.4s

or other mlsrerel

on sa.ia

leased premlaeaafter once seaurea,oease from any cause, svusti

lease aball not terminate,lf tRe lessee or owner of such lease commences aaaitfona'l

drilling, reworkingor mining operationswi'thfn

Shlrty (30) days thereafter or ff 1% be within the orialnalprlmarg term of auoh leaze, eomnrences or resumes the payment or tender of rental on or before the rental paying date, if any, next ensuing;but If there be no rental paying date next ensuing, the lease shall In 'noeven% %ermXQ,a%e ,prior,%o

the expiration of the primary term.

‘See. 2, TRe Commissionerof the Genoral Lana Office is hereby authorizedto Isau0 'to%Re lessee or owner of said lease auoh iws.%rumeat

in wrftlag i;n

the nature of
an extensionof said Pease as may be necessarg'orproper to omarry into effect the foregofngprovisfonsof this Act."
Thereafter,~urau~d% to the provisionsof said Article 5366s, the Commissioneron March 27, 1942, executedan instrumentcxtmd~kag the primary tern of said Lease No. 22624 inn %he languageof the statute,
as followz: I

" 0 Y ‘, do hereby grae% %o the Superior Oil Compmy the preset% owner of such lease

as showa by the records of the General Land Office, an exten3fonttmwof Fa accordance wfth,%he provislolza of E'hapter

287 of the Acts of %Re Forfg-mven%h Legislatureana do hereby extend sa.fd leaas for successive periods of one year from and after the end of the orfgfria$

primary term of such lease whllo,.and so bag as, the War Department may eqtime swti refmal %o fasw to the leaoes or %o the owner of said lease a permft tb drill for 011, gas or other mfnerala, on the area covered thereby;provided, that'fn order to make su6h extbns10nseffee%ual,tRslssae~s or the OWBLQP

of such loose, shall, aurirJg

aa.ah of the a~ual **pe** riods duping wM@R the primaq term of %heI-Ion, Bascom Gfles - Page 4 . L

v-486

lease IS so extended,apply to and seek to obtain from the War Departmenta permit to
drill ,awell for oil, gas or other minerals
on the area covered br ,auch lease and be unsuoceasfulIn ita attempts to obtain a permit; or, If successfulIn obtaininga permit, commenoe~operationa for drilling
a well upon the leased premiseswithin alxtg (60) days after obtaining, such permit; and provided further that the lessee or the
owner of such lease continuesto pa;r the annual renewal rentalsat the rate provided for in such lease for the period of time involved in such extensions."

As stated In your letter of November 3, 1947, Superior repeated Its request to the War Department In compliancewith the statuteand the extension inatrument dated March.27, 1942 each year during the yeara 1943, 1944, 1945, and 1946. Each of thoso yearly requests was refused by the War Department. During this period Superiorpala its annual rental as requirea.

No requestwas made by Superiorto the War Department for
r nnlaalonto 61-111 Lease Ho. 22624 during the year 19 7, and the primary term of said lease
as extonaoa under the provisionsof Artlole 5366a and the extension instrumentdated March 27, 1942, came to
an end, without drilling operationsthereon,on September 20, 1947, unless said primary term has been Mpended as contendedby Superior under the provisions of Artielo 53410, Vernon's Civil Statutes,reading as follows:

"Sectfon1, If the owner of any valid oil and gas lease granted by the State is denied access to or is denied a permit to drill upon or produce from the leased premises by any duly constitutedauthorityof the United States of America,after a bona fide attempt has been made by such owner %o obtain access or permit to drill upon or produce from the leased premises, such owner may file with the School Land Board an applicationdeser+bfngand glvfng %he date of the action which deprfveshfm of the right of access or the right to drill upon or produce from the premises,and if said Board is satisfiedthat the facts se% forth in theRon, Bascom Gilas - Page 5 v-486

applicationare true, tha Board may enter an order upon its mi~nutes suspendingthe running of both the primary and the principal term of sursh

lease, or suspendingany condition, obligation or duty thereunderas of the aate’of the origin of the cause of suapension and during the existenceof the cause of suspensfon,so lomg as the lessee continuea to make on eaah ,anniversarg date of such lease t'he

annual rea%al paymen%s atipulatea in the lease du1a2.g the period of suapension. Such oil and ga3 lease shall remain in s%a%us quo, and all obligations and conditionsexistingunder such lease or suoh of .%hem

as may be suspendedby said Board, shall be Inoperative ana of no force and effes%, except the obliga%ionto pay delay rentals as provide& for herein, untfl ninety (90) days af%er the School Land Boara shall enter
an order upon its minu%es reciting that the

cause for suspensionhaa oeasea to exist, at whieh,time such of1 ana gas.lease shall, provi$ea the rental paymentshave been made aurlng %he period of suspension, again become operatfveand all of the suspendedobligations
ana eonaCll%ions,

fnelucTing



### t.m payment of rentala under same, shall again attach a5a be in force, ama in th@ C&S5 of the suapens10nof the primary and/or principalberms of the lease 9 the lsatse

shall %hereaf%ercontinue fa form for aperiod equivalen%to the un- * expired %erm oi"

%he lease on the date of orlgin of %b aawe for suspension, The Commissioner of %-he

&52eralLar0.d

Office shall give notfe6 immedfa%alyto the lesse8. or the entry of the ordor %ha.t

%he muS8 .for

saspeusiom 'has oeasea %o exls%; provided9however,that tb3 anmual,rsa%~.l

pape5t3 kmva beam me%;,

"See. 2, Bothl~g eor&sfnedherein shall be construedas abrfdgfngany rfgh%s or prlvflegos comveyesd

Llg Chap%er 287, Acts of the Forty-seventh

Legislature,

Regular Qesslon,"

I% wfll be noted tha% while Article 5366a provides for the ex%ensfon of the primary term of a lease when the War Department refuses to gran% a permit to a State lessee %o drill a well %hereon,Article 53410,Hon. Dascom Giles - Page 6 v-486

enacted two years later by'the 48th Legislature,provides that the School Land Board may suseend the running of both the p+mry and principalterms of such lease or ,"an~.

condition,duty or obligationthereunder"
as of the date of the origin of the cause of suspension.

Article 5366a is self-operative as to extensions.thestatuteprovidingthat when the War Department refuses to permit drllllng,and in the event the primary term should expirewhile the War Department continues to refuse, hereby extended," "the primary term of the leaseg

for successiveperiods of one year. It is provided,however, that such lesseesmust contlnue to make request of the War Department from year to year.andmust continue to be refusedpermissionin order for the automaticextensionsunder the statute to be operative.

Article 5341~ is quite different. In order to be entitled to the benefitsof Article 5341c, it is required:

1) That the lessee have a valid lease;

2) That the lessee be denied access to, or denied permit to drill upon or produce from the leased premisesby a duly constitutedauthority of the United States of America after a bona fide attemut is made to obtain access or permit to drill;

3) That an applicationbe filed with the School Land Board reciting such facts;

4) That the School Land Board satisfy itself that the facts set forth In the applfcationare true;
5). That the School Land Board enter an order on its minutes suspendingthe running of the primary or princ.ipal term of the lease or a condition, obligation,or duty thereunder.

It Is to be observedthat the School Land Board is vested with discretion In the matter. The statute requiresthat the Board be satisfiedthat the matters recited in the applicationare true. It then provides that the Board w9 not shall, enter an order suspendingthe running of the primary term or principa.1 term or other condltlon,obligation,or duty underHOQ. Baacom Mles - Page 7 v-486

the lease. It is only after such an order has been entered that the lease and all obligatlonsthereunder rem,in In status quo (exceptthe payment o? rentals). This status quo; the status moated by the entry O? such an order, remains until 90 days after the School Land Board shall enter a further order upon its minutesrealtlag~that the aause for suspensionhas ceased to exist. Thereupon'tbslease aontlnues In effeat for
a period equivalentto the unexpiredterm of the lease
as of the date of the,origlaof the cause for suapenslon.

It is clear'thatSuperiorhas ,not brought itself within the terms of Article 5341~. On August 15, 1947, a month and five days ,prlor to the expirationof the primary term, aa extendedby the provisionsof Article 5366a, Superior requesteda further "extension" ,of, said lease beyond September20, 1947, "untilthe United States of America, by Congress,paeses a proper Aot, signed by the,President of the United States dls- .clalmlng,

unto the respectivestates all submergedarea under Inlandwaters and seas, or in the absenoe of existing legislation, this applfcantasserts its equltable.rightthat the term of said lease shall extend beyond September 20, 1947, and for a reasonableperiod, and thereafteruntil the cloud on title fs removed, ,to be recognizedeither in Court of Equity or by leglslatfveact of the State of Texas affirmingand confirming existfng leases In such cases, and thereafter during a reasonabletfme withFn ,whioh %he Lessee may begin its operatfons.'PIt was sot claimedby this letter %ha% Superiorwas eetl%led I-o rights under Article 5341~~ nor was t&e letter an application within the terms of tbai?

article, Indeed, in this letter Superlor stated, "we are unable to refer you to 5ny specific sta%utory provisionunder which fur%ber extension9are permfttedunder~safdlease,"

We have also examined oopies of subsequent letters of Superior to your office dated August lgth, August 2lst, and August 27't.h. By nozie

of these letters did Superiormake applicationto the School Land Board for the entry of an order on its minutes suspending the'runaingof the primary term of Lease No. 226240 On the contrary-, by each of t&se letters Superior requested to be informedof 'the date the School Land Board bad entered an order on Its minutes reciting that the cause for suspe~slo~of the lease had ceased to exist. In its letter of August 27th Superior tendered Its Check in the amou.nt of $80.00 "as rental toHon. Bascom Giles - Page 

### a v-486

August 19, 1948, when the equivalentof the suspended period of the primary term of said lease will expire after said ninety days from entry of order In the minutes of the School Land Board that the source of the
cause of suspensionceased to exist.”

Apparently,the contentionasberted by Superior is that Artlale 5341~ is self-operative and inures to the benefit ,of8 lessee whose primary term has been extendedpursuant to the provisionsof Artlale 5366a
even though no applicationfor susuenslonof the prlmary term of the lease has been filedwith the School Land Board under ths provisionsof said Article 534l,c, and even though the School Land Board has not entered
an order, pursuant to proper application, Gpendlng such primary term.

We Cannot subscribeto this view. Superior applied for and obtainedan e&ension of t&e primary term of Lease No. 22624 under Artiole 5366a. As long
as Superior kept within its terms this statuteprovided for automaticyearly extensionsof the primary term of the lease, conditionedthat Superiorapply.yearlyto the War Departmentfor permit to drill the lease, and make yearly payment of the rentals O Superior chose not to come within the terms of this statuteduring the year 1947. Superior did not apply during that year to the War Department for permissionto drill the lease. Superlor’s rights under Article 5366~1 and the extension instrument

dated March 27, 1942 thereforeterminated and expired on Sep~tember 20, 1947. Superior is entitled to none of the benefits of Article 5341~ for the plain reason that It has made
no applicationunder that Article to the School Land Board resultingin the entry of an order by the Board .suspendlng

the primary term of its lease,

It is conceivablethat Superiormay now contend, although their plain Import does not so reflect, that its letters to the Commissioner dated August 19th, August 21st, and August 27th should be construedand consideredas an applicationto the School Land Board for the entry of an order suspendingthe primary term of Lease Ho. 22624. In this event we hold that Artlcles 5366a and 5341~ should be construedtogether,and that in order'-for

a lesseewhose lease has been extended under the provisionsof Article 5366a to be entitled G an order of suspensionfrom the School Land Board- .

Ron. Bascom Giles - Page 9 v-486

to permit made a bona fr~om thmr based upon reruaal of ,the War Department drilling, the.lessee must have currently fide attempt to secure a permit to',drFll Department,,and.have been refused,.

~Artlcle5341~ clearly requfresthat~ the lessee 'makes

such a fide attemet. 'EreWeare not 'prepared to say tha quest last made'of the"WarDepartment In 1946 Is such
a’ "bona Fidel

attempt"within the,meanlngof Article 534%~ ,asto ~entltle an applicantin Augtist’ 1947 $a
secure. an o,rder

from the Sohool~~I&nd Board suspending the primaryterm of:lts le'ase.

Uoreover,,,.

we have been~ln,formally' advised '..~ by you that the War..Departmsnt lifted all drilling 'restrictions

~,onthe'.,area

In, question on or.aboutMarch 10, 1947:LWe have ~a180 ascertai,ned

,fromthe records of the Railroad.~Commlsslon thatthe lessee In question hasnotflled'.its Notice of Intentionto Drill wfth,tbat~%omm~ssion.as~required by Its rules,

and regulations,,

and that no drill~ng~'activltes have in fact been commenced,o,n

the leaaedpremises.

: the proUnder the clrcumstanoes we are of the arlnion that:~Dease

Ro.' 22624 has terminatedundo] visions Of paragraph 1 thereofas of September 20,- 19470

,,

(I). i 'State'

lessee not having applied for and'

obtained suspensfonof the primary term of Its lease under Art., 5341c,V.C.S., Is not entitled to the bec.eflts of such statute,~

the statute requlriagan appllcatlon for, and order ~of,,suspenslon by the ,gchool Iand Board.
(2) A State lesseewhose 'lease has been extended from year to year until September,20;1947, by compliancewith Art. 536Sr,voc.s., is not entitled to the benefits of Art..,,

534lc,V'.C.S.,

without show-

~, ing a,~curretit bona fide attempt to seoureHon. Bascom Giles - Page 10 v-466

a drillingpermit from the War Department.

‘

. Yours very truly

ATTORNEYGENEZ?AL

OF TEU3

JDs:jt

ATTORNEY GENERAL