B:Y GENERAL 

AS 

Honorable Bascom Giles 

Commissioner 

General Land Office 

Austin, Texas 

Dear Sir: Opinion No. O-5700 

Re: Power of Commissioner of General 

Land Office to accept for filing or 

to approve mineral lease with pooling clause. 

Reference ts made to your letter of recent date to which you attached 

a copy of an oil and gas lease relating thereto. Your letter is as follows: 

“There has been tendered to this department for filing the enclosed mineral lease. This lease was executed by the land owner on 

a small tract of scrap land sold under Chapter 271, Acts of the 42nd 

Legislature, Regular Session, 1931. This law and the application to 

purchase provide for a reservation to the State of a free royalty of 

l/8 of the sulphur and l/l6 of the other minerals. 

“The lease in paragraph five (5) thereof provides for pooling 

or combining this tract with other tracts whether owned by the lessee or not for the purpose of creating drilling units, and as to the 

payment of royalty the lease provides as follows: 

“‘In the event production of oil, gas, or other minerals is obtained upon any unit or units created hereunder Lessor shall receive 

and will accept on account of any such production, regardless of whether or not such pro,duction is on any part of the land herein above 

described, a royalty equal to such portion of a l/8 royalty as the 

number of acres out of this lease and included in any such operating 

unit bears to the total number of acres included in the respective operating unit. ’ 

“If the above provision in the lease is binding on the State, the 

State would share in the production from the unit on the basis of l/8 

of the sulphur and l/16 of all other minerals figured in the proportion 

that the acreage in this tract bears to the total acreage in the unit. 
Honorable Bascom Giles, Page 2 - O-5700 

With the above facts in mind, I would like to have% %enef&I:~f~~!:‘~~ 

your opinion on the following question: 

” ;; ,..I Y’ .x,i ,;< :I :.: ,‘,’ ~,, ,.I .I ,’ ; / 

“(1) Does the Commissioner of the General Land Office have 

the legal authority to file in this office or to:gijli~o’i~‘a~‘~in2~al.‘l.~g~~ 

such as the above providing for a combination of a tra&“m’whYch-‘the 

State has a mineral interest fixed by law with othe&racts,, ‘in’whtch~’ 

the State has no interest, in order to form a drilling unit,?’ ,’ 

Case (1o2 s w ZQ7), 

Sales Act of 1931) as fixing the 

and l/16 of all &her minerals, 

of the Bonus and rental for a 

lease executed l$‘thelan$’ owner, We have also followed this con- 

‘It i;.,~~hl:ib~ttck~‘~$rt.bi ise’c’t’,dn.i~,~f’~iiusi’Bil~ qbrd~idCs bls ,follows : 

.~ i~; ,,;t; ~i::jiii, ‘,::,,; ‘,iI/,i ~:,~, “: : :’ : ;‘):: : .,/. 

,““i’,‘i ;“ProvibedT ‘however, that’nothing ‘in this Act shali be construed 

““a’s,i%m’dvingfrom oi’~ntcrfering,wtth tlie”rtghts and ‘powers of the 

” sur’fac’e ‘own& ofian,di:sold ‘or to ‘be hereafter’ s’old ~by the State, with 

“a ‘min&ap ~re’servation,, to act. as’ agent of’the State in making’ and executing mineral leases covering and ‘a’ffecting ,such lands, but the authority of such surface owner shaDremain the same as provided by law, 

a~nd’<s in’rib;wise’ab~~idged, modiffedor removed‘by this’Act.’ 

,. ., 

“Section 4-a offHouse:BIll 9 re’ads as follows: 

!~~~edP:~hal.l.~~~::bi~aing yonYho ‘state unl&s&,,!it re&ites’the actllal 

a’nd true’ c’o%siderati$r p’af,d”K pr’omi,sed the~refbr.’ 

:~~ .:uIt’j 2.g &i;;& & ,th&3 above ednclusi&, f Shall appreciate 

your opinion on the following questions in addition to Question No. 
. . 

Honorable Bascom Giles, Page 3 - O-5700 

“(3) Do leases issued by the land owner on Public School 

Lands, sold under the Sales Act of 1931, as amended by House 

Bill 9, Acts of 1939, come within the provisions of the Relinquishment Act? 

“The Relinquishment Act, as I understand it, is embraced 

in Articles 5367 to 5379, inclusive, Revised Civil Statutes of 1925.” 

The validity of an agreement by owners of private lands to pool 

their respective interests, thus forming a drilling unit for the exploration 

and development of oil and gas, and to share the royalties from production 

on an acreage or other equitable basis, has been upheld by our appellate 

courts. However, the right of any statutory agent of this State, authorized 

to execute oil and gas leases on public land, either owned by the State in 

fee or on land sold with minerals reserved to the State, to include this 

land in such a pooling agreement has never been presented to the courts 

for determination. 

In reviewing the statutes of this State, we are unable to find any 

Act of the Legislature whiqh specifically deals with this subject. We do 

find, however, that the Congress of the United States amended the Leasing 

Act in 1931, to permit the unit development of a field or pool by lessees or 

permittee%,,,; of the U,nited States. (30 USCA Section 225) A number of the 

several States have either by amendatory Acts o,r special Acts authorized 

.:,the:,incl&ion of State owned land with that of private owners, in co~m%V?~.~% 

&on~& ~o~~~~~~~Ui~g,,lus?it.s tocrl,~~~~.axplo.ration of oil and gas, where the 

royalties are tobe distributed on an acreage or other equitable basis. 

In the absence of specific statutory authority in Texas in this 

respect, we think it necessary to review some of the more important Acts 

of the Legislature which deal w?th the mineral laws as they relate to public lands. The courts of this State have held that the mineral laws of Texas 

dealing with public land are to a large extent patchwork, each law being 

cumulative of the other, and no new law repealing a prior law, unless clearly 

repugnant as to the prior law. (Magnolia Petrole,um Company vs. Walker, 

83 S. W. (2d) 929) For the purpose of this review, we adopt that given by 

the Supreme Court in the case of Wintermann ‘9. McDonald, 102 S.W. (2d) 

167, which is as follows: 

“The burden is placed on the Legislature to sell the public 

free school lands ‘on such terms as may be prescribed by law.’ 

Article 7, section 4, of the Constitution. In response to this command, many laws, including this act, have been passed. The extent 
Honorable Bascom Giles, page.4 -.~EO~57~0. ,.,, ,,. ,;: 

of the vast’ public domain. of ‘T&&placed a stupendous task 

upon the Legislature to sa’feguardithe’ rights of all :c,oncerned 

by the’enactment of ‘Rio&r laws; To accomRlish this purpose 

the Legislature has from time to time enacted many land laws. 

We shall review only a pa,rt of, them. 

._ ,i ,, 

“Chapter’3, title 86,‘artic’le 5306 et seq:, R.S. 1925, 

is generally known as the General Sales Law. This law furnishes 

certain fundamental rules for the sale of public lands. As early 

as’ 1883 the Legislature made provision to classify public lands 

and sell the agricultural land to settlers; and the minerals thereunder were ‘reserved by the State for the use of the fund to which 

the land now belongs.’ See Act of April 12, 1883, 9 Gammel’s 

&aws; 394; 31 Tex. Jur. p. 659. “, 

“In 1919 the Relinquishment Act was passed. Article 5367 

reads: ‘The State hereby constitutes the owner of the soil its 

agent for the purposes herein named, and in consideration therefor, relinqu,ishes and vests in the owner o,f the soil an undivided 

fifteen-sixteenths of all oil and gas which has been undeveloped 

and the value of the same that may be upon and within the surveyed and &surveyed public free school land and asylum lands 

and portions of such surveys sold with a mineral classification 

or mineral reservation, subject to the terms of this law. The 

remaining undivided portion of said oil and gas and its value is 

hereby reserved for the use of and benefit of the public school 

%‘knrl-,~and the several asylum funds. (Acts 2nd C.S. 1919, p. 249; 

Acts 1st C.S. 1921, p. 112.)’ 

“Article 5368 describes the terms upon which the owner may 

lease said land as the agent of the State. 

‘By the provisions of the Relinquishment Act the State canstitutes the owner of the soil its agent to sell or lease the oil and 

gas that may be thereon or therein, upon such terms and conditions 

as such owner may deem best, subject to the condition, among other 

things, that one-sixteenth of the gas and oil, in case of production, 

as a royalty shall be paid the State by the lessee. By its provisions 

the State is to receive as a minimum for the sale of the gas and oil 

one-sixteenth of all gas and oil as royalty, and 10 cents per acre 

per annum as rental, and certain sums are to be received by the 

owner of the land for his services in making the lease as the agent 

of the State, during the term of the lease. This act was construed 

to mean that the oil and gas in place shall not vest in the owner of 

the soil as his property, but that he shall receive certain interests 
Honorable Bascom Giles, page :5 - O-5700 

~n~~~mi~e~t~s’~h,e~,~~3al~~‘~~i~~!y~h:~e~s~h~~i;~~~~~jce~~.~~d~by~~~~e:,owner :,:: 

,.r..I i?+I’ .,,. 

,:I,/ ’ of the surface estate as the agent of the State, in compliance 

with the terms of this act. The Relinquishment Act has been construed by this court in the following cases: Greene v. Robison, 

117 Tex. 516, 8 S. W. (2d) 655; Empire Gas & Fuel Co. v. State, 

121 Tex. 138, 47 S. W. (2d) 265, 274; Lamar v. Garner, 121 Tex. 

502, 50 S. W. (2d) 769, 773. 

$$@@9:8%the Legislature passed the Repurchase Act (Chapter 94, and amended by the Acts of the 39th Leg. in 1926, 1st C. S.., 

p. 43, c. 23, article 5326a, of Vernon’s Annotated Civil Statutes). 

Section 3 of the act (Vernon’s Ann. Civ. St., art. 5326a, 4 3) contains, the following ‘lapguage: ‘One-sixteenth of the oil and gas, 

and all of other minerals in the lands included herein, whether 

known or unknown, are expressly reserved to the public free 

school fund in the event the forfeited sale was with mineral reservation ,. ’ The act was construed by this court in the case of Magnolia 

Petroleum Co. v. Walker, 125 Tex. 430, 83 S.W. (2d) 929, and it 

was held that the land had previously borne a mineral classification, and that when the land was repurchased under that act it was 

repurchased under the same classification, and that all minerals 

were reserved to the State. It was also held in that case that the 

Act of 1925 should be @oustrued in connection with other laws relating to this subject, including article 5310 and the Relinquishment 

Act. 

“In 1931 the 42nd Legislature enacted Senate Bill 310, chapter 23, article 5368a of Vernon’s Annotated Texas Civil Statutes, 

which provided that title to fifteen-sixteenths of all minerals in 

all lands described in said act is vested in the owner of the soil, 

and one-sixteenth of the minerals as a free royalty was reserved 

to the State, in case of production, and the owner was authorized 

to develop said minerals, and might make such leases or sales 

of same as he might deem proper, subject only to the reservation 

of the State’s one-sixteenth free royalty interest. The act further 

authorized the owner of the land, on his behalf and as agent for the 

State, as to the royalty reserved by the State, to develop said minerals, or to sell or lease said land for oil and gas and other mineral 

development and production, and shall deliver to the State a onesixteenth part of said oil or gas or other minerals free of cost. 

Because this act violated several provisions of the Constitution, 

it was declared void in toto in the case of Empire Gas & Fuel CO. 

v. State, 121 Tex. 138, 47 S. W. (2d) 265. 
Honorable ‘Bascom Giles, page 6’- O-5700 

“House Bill 358, the act under consideration (now article 

542lc, Vernon’s Annotated Texas ‘Civil Statutes), was enacted by 

the 42nd Legislature in 1931, c. 271,‘shortly after the enactment 

of SenateBill 310. Both laws were passed by the same Legislature, and Senate Bill 310 was on the books, and had not been declared ,invalid, when Hous,e Bill 358 was passed. It clearly appears that House Bill 358 was enacted under the belief that Senate Bill 310 was a valid law, the owners of school land previously 

purchased would have the right to execute leases, for themselves 

and as the agents of the State, on the land for development of any 

mineral, which would include oil, gas, and sulphur. 

Before the passage ,of the Relinquishment Act in 1919, the owner 

of public free, school and asylum land, sold with minerals reserved to the 

State, could not validly execute an oil and gas lease on this land. Wtth the 

passage of this Act, all public free school and asylum land sold, or thereafter sold, became subject to its terms except that land on which there was 

a then outstanding oil and gas lease; this became subject to its terms at the 

expiration of the lease, or in the case of production, at the cessation of production. While all lands once subject to the provisions of the Relinquishment 

Act remain so, this Act was replaced by the Sales Act of 1931, House Bill 358 

as passed by the 42nd Legislature in 1931. This original Act and the amendment to it are now known as Article 542lc, Vernon’s Annotated Civil Statutes. 

Thus, we find that all public lands in Texas in which the State has a mineral 

reservation, sold or to be sold, are subject to the terms of one or the other 

of these Acts. 

Under the provisions of Article 5368, of the Relinquishment Act, 

and the Act of 1931, Article 5421~ and the amendments thereto, the owner of 

the land is authorized as agent of the State to lease the land for oil and gas on 

such terms as he deems best, however, the authority of the owner as agent 

of the State and the terms of the lease are subject to the provisions of law 

under which the land was sold and to the cumulative effect of all mineral laws 

of Texas not repugnant to the particular Act. Regardless of which Act may 

govern in a particular case, we find that in each there is a definite reservation to the State of a minimum of one-sixteenth (l/16) free royalty. 

Article 5368 provides in part: 

u 

. . . . No oil or gas rights shall be sold or leased hereunder 

for less than ten cents per acre per year plus royalty, and the lessee,,,, 

or purchaser shall in every case pay the State ten cents per acre per 

year of sales and rentals; and in case of production shall pay the State 
Honorable Bascom Gile~, page 3 - O-5700 

the undivided one-sixteenth of the value of the oil and gas reserved 

herein, and like amounts to the owner of the soil.” 

Article 5421~ provides in part’: 

“Sec. 1. All lands heretofore set apart in the public free 

school funds under the Constitution and laws of Texas, and all of 

the unappropriated and unsold public domain remaining in this 

State of whatever character, except river beds, and channels, and 

islands, lakes and bays, and other areas within tide water limits, 

are subject to control and sa,le under the provisions of this Act. 

,I 

. . . . 

“Sec. 4. All land shall be sold without condition of settlement and with a reservation of one-sixteenth (l/16) of all minerals, 

as a free royalty to the State, . . . 

44 

. . * . 

“Sec. 8. All islands, salt water lakes, bays, inlets, marshes, 

and reefs owned by the State within tidewater limits, and that portion 

of the Gulf of Mexico within the jurisdiction of Texas, and all unsold 

public free school iand, both surveyed and unsurveyed, shall be subject to lease by the Commissioner to any person, firm, or corporation for the production of minerals, except gold, silver., platinum, 

cinnabar, and other metals, that may be therein or thereunder, in accordance with the provisions of Chapter 271, Acts of the Forty-second 

Legislature, as amended, and Subdivision 2, Chapter 4, Title 66, Revised Civil Statutes of Texas of 1925, relating to leasing public areas, 

in so far as same is not in conflict herewith. Provided, however, 

that nothing in this Act shall bk construed as removing from or interfering with the rights and powers of the surface owner of land 

sold or to be hereafter sold by the State, with a mineral reservation, 

to act as agent of the State in making and executing mineral leases 

covering and affecting such lands, but the authority of such surface 

owner shall remai’n the same as provided by law, and is no wise 

abridged, modified or removed by this Act. As amended Acts 1939, 

46th Leg., p. 465, 5 2.” 
Honorable Bascom Giles, page @ -0-5’700 ’ 

The term “free royalty’: was de,fined by Mr. Justice Greenwood 

of the Supreme Court in the case of Sheffield vs. Hogg, 124 Texas 290, 77 

S. W. (2d) 1021, as: 

“The.,ter,m ‘free ,royalty’ introdu,ced into this Act must 

mean that the interest reser~ved to fhe State and the mineral,6 

produced on sc,hoo,l lands sold under the terms of the Act, 

must no,t bear any expense of the produQ,tion,, sale, or delivery 

thereof.“, 

Following the rule announced in the case of Magnolia Petroleum 

Company vs. Walker, supra, we find that public land leased for,oil and gas 

is subject either to the terms of Article 5369 of the Relinquishment Act or 

to the terms gf Arttcle 5359, Vernon’s Annotated @vi1 Statute.s. Since they 

are similar in language,and effect, we cite Article 5359, which is as follows: 

“If oil or gas should be produced in commercial quantities in a well on an area privately owned when such well is 

within one thousand feet of an area leased hereunder, the 

owner of the lease on such State area shall, within sixty days 

after the initial p.roductipn on such.priv$tely owned area, beg,in in good faith and prosecute diligently the drilling of an 

offset well or wells on the area so leased from the State. . . .” 

In addition to that part of paragraph five of the attached lease, 

which you quote in your letter, there is the following provisionf$that is important here: 

,I 

. . . The commencement of a well or the completion of 

a well to produi;tion, and ~the production of oil or gas therefrom, 

on any portion of ,an operating,unit in which a,11 or any portions 

of the land described herein is embraced shall have the same effect, under the terms of t,h,is, lease ,as if a well were commenced 

or completed on the land embraced by this~lease. , . .” 

Summarizing the cumulative effect of these laws, we deem it 

sufficient to say that the term:s pf.a lease containing a pooling clause, such 

as is in the attached lease, are not in accord with the mineral laws of this 

State as they relate to public lands. Under the terms of this lease, the State 

would not receive the minimum one-sixteenth “free royalty” as is reserved 

by law, nor would the lessee be required to offset and develop p’+&c lands 

as required by law. It is the opinion of this department that the land owner, 

as agent of the State, does not have the authority to execute such an oil and 
Honorable Bascom Giles, page $: -0-5700 

gas lease, nor does the Commissioner of the Genera’1 Land Office have the 

legal right to accept for filing or to approve such a lease. 

This offic,e has previously held in Opinion No. O-853, written to 

the Railroad Commission of Texas on May 30, 1939, that the Railroad Commission does not have authority to ma’ke.a regulatory order repuiring the 

owner or owners of small tr.acts of land to pool or combine them with other 

tracts as a prerequisite to granting a drilling permit for oil or gas. 

With reference,~to,the second part of yo.ur letter, this is to advise. 

that the constiuction your office has given the Sales Act of 1931 is in accord 

with,that given by the Attorney General in Opinion No. O-458, written to you 

on July 18, 1939, copy of which is attached. 

We +I consider your sec,ond and third questions together since 

House Bill 9, Acts of 1939, amending House’Bill 358, Acts of 1931, did not 

change the effect of the original acts as it relates to your ~questions. The 

‘ortginal act and the amendment to it, ar’e now ,codifted as Article 5421~ in 

Vern,on’s Annotated Civil Statutes. 

Then Supreme Cou.rt in the case of Wintermann vs. McDonald, 

supra, interpreted Article 5421~ Ln this respect, as follows: 

“House Bill 358 and the Relinqu,ishment Act should be construed together. It 1S plain that the 1931 Act is not intended to 

repeal the Relinquishment Act; nor does the Relinquishment Act 

occupy the field cover,ed by this law. Th,is law covers a wider 

field than the Relinquishment Act. The land sold under the pro- 

,visions of this Act will be governed by the terms thereof, and not 

by the terms of the Relinquishment Act. (E,mphasis ours) 

It follows that your second and third questions are answered in the 

negative, which. is in accordance with the holding in our Opinion No. O-458,, addressed to you under date of July 18, 1939. 

Yours very truly 

FIRST ASSISTANT 

ATTORNEY GENERAL 

JWR :mb 

Chairman 

Assistant