. ’ 

ATTORNEY 

OFTEXAS 

AUEITIN 11. TEXAS PRlCE DANIEE 

Hon. C. Ii. Cavness 

State Auditor 

Austin, Texas 

Dear Slrr 

Febrorzy 17, 1950 

OQinlon Iwo. v-1000 

Rer Whether casinghead gas produced and vented to atmosphere is within the royalty 

reservation of “7/48ths of 

the gros~s prOdUCtiOn Of gas, 

or the value of same* in a 

State lease. 

Your request for an opinion reads in part as 

follorsr 

"From the lnforuation which we have received frou the Rumble oil b Refining Cow 

pany and records filed in the general Land 

Office, we have noted that gas produced 

from the le8se designated 88 Mner&l File 

Ro. 20001 Is being vented to atmosphere. 

Cur oorreepondenae with Rumble Oil & Reflning Coa~any lndlcatas that all gas so vented Is aaslnghe8d gar. l%& Rumble Oil & 

Refining Company fmther states that no 

gas produced from 688 wells has been vented. If a detailed examination proves that 

all of the g88 so vented is easinghead gas 

o nly, we l 8& your opinion of the following questions: 

"1. Should bplnion Ho. v-$75, dated 

January :13, 1948, be coustrued to mean that 

gross production on which romlty Is due 

the state Include aaslnghead gas that is 

vented td atmosphere? 

*2. If Rumble 011 & Reilnlng Company 

uses either casinghead gas or any other 

gas on the lease for any lease purposes, 

should royalty be due the State of Texas 

on,the value thereof? 
Eon, C. H. Cavness, page,2 (V-1000) 

"We are attaohlng hereto photostatic 

COPY of a letter dated December 16, 1947 

fl?OlS the Rumble 011 h Refining Corpany in 

whfch they explain that all gas vented to 

atmosphere from Lease lo. 20001 has been 

casinghead gas.* 

The lease designated as Mineral File lo. 

20001 in your letter was the subject of Attorney ffenera118 Opinions X0. v-475. 

In that opinion.lt was stated: 

"The mlneral lease you subs&t embodies 

mineral reservations identical In terms (except for the aunaat) to those ainlmua minera1 reservations required by the Statute, 

aupra . He Shall~oOnBtNe,the aineral reservations of this leaee, therefore, by construing those minimum nlrieral reservations 

in the Statute. lhwln thla caee the provislons of the lease, paralleling those 

mlnlmum mineral reservations of the Statute, should be governed by the Statute.n 

It will be noted that In Opinion 130. V-475, 

supra, the mlneral reservations In the lease are considered identical In terms (except for the amount of 

royalty) with those ainlmm reservations set out in the 

statute (Section 10, Article 54210, V.C.S.). Although 

the result reached in that opinion is correct, since 

the opinion erroneously treats the royalty clauses in 

the lease as tracking the minimum reservations required 

by the statute, the language of that opinion is modlfled so as to m&e the same applloable to the terms of 

the lease rather than the alnimm terms of the statute. 

Nlneral Lease lo. 20001, whibh is the subject of your request for an opinion, was 

suant to House Bill 358, A&s 42nd Leg., 

executed purR.S., 1931, 

and provides for royalty reservations aa follows! 

0 

. . . 7/48ths. of the gross production 

of oil, or the value of same, that luay be 

produced and saved, and 7/48ths. of the 

gross production of gas, or the value of 

same, and 1/8th. of the gross produotion 

of sulphur or the v8lue of same, that may 

be produced and sold off the area, aad 
. - 

Hon. C. A. Cavness,, page 3 (V-1000) 

one-slxteenth.,of the,, ,value of~all other 

minerals, that.wy be, 

addltldiial ,pa &of 

ST&h. of 41Bh&;'or 

duced and sa*ved+,& a+ tract." 

Therq Is "(;'&iX ~'defi&&distincti~n in law 

betwe,en gas produced A\o&I &'gds :rell and casinghead 

~~~~m.~~~~~~~~do~O19, 

House Bill 358 and prlof. to th‘e'execution of the lease, 

the courts had defi#+ely con&ude.d that "casinghead 

gas* isincluded @thin the term "oilyLand a conatituent 0r "01'1~~' In questions such as you present it had 

been. de$ermined~(wlth respect,to private leases), that 

."casinghe~+d ga's" reserved Is governed by the '611" (as 

dlstiiguishtid from the '"&as")~'royaity're&ervatlon in 

the abs,ence of"-s~ecir,ic r,eservation provision for 

"casinghtad g&s. LIvingston Oil Corporation v..Wau273 S.W. 903, 906 (Tex. Civ. App. 1925, error 

terminative of the questions Involved, to be drawn between private and State leases. Utider the~rule announced 

in the above case&, "casinghead g+&* la undoubtedly within the 011 royalty 'clpus,e:of~,tb$ lease. For a critical 

analysis of these decisltins, see Hardwicke, Evolution 

of Casinghead Gas Law 

3 Summers 011 and Q 

as,4$;929)j8 Tex. Law. Rev. 1, 16; 

. 

gas" 

Having concluded, therefore, that "casln#head 

fall8 within the mlneral reservation of "oil, 

under the terms of Mineral Leas& lo. 20001 the State 

is to rectiqe as royalty'on,tNs lea~~,"7/~8ths of the 

gross produ&lon" of "cas$nghe&d~gasy or~'%he, value of 

same, that may be ptioduced and s@ved." The words produced arid saved are clear and beyond dispute. "Save" 

Is defined ln"Webster'& Hew Inte~~tlonal~Dlctlonary, 

Second Edition, Unabridged ~(1938)#,,@ %atch~,' *to keep 

from,beMg $pect, tiasted, dr lobt,: "to retain or keep 

Qas vented or lost 

to atmosphere $6 not (+a6 ueed "ofi the 'lease 

for any leati~e purpose*~ls ";a*edin 

$X answer.%% your first question, therefore, 

it IS bur opinion that the State may'not claim rOYaltY 
Hon. C. 8. Cavneso, page 4 (V-1000) 

on that caslnghead~gas that 1s lawfully vented to atmosphere. However, we cal~l your attenltlon to the fact 

that In such cases the Railroad C-salon has the 

power to prevent suoh w&l 

*f~ 

and,waste or gas In ILCcordance with the resent deo slons in Rumble 011 & RefInI= Co. v. Railroad Comslssion, 223 S.W.2d 785 (S . 

226 500 [Tex. Clv. App. X949* error ref.). 

With reference to your secrond question, however, since we have coneladed that the State 18 entitled 

under Mineral Lease lo. i3X3Ck to "7d48ths of the gross 

production" of %aslnghead gas" or the value of same, 

that say be produoed and saved," ';lt follows in auf; 

opinion that the State is entitled to royalty on casfnghead #as that 18 used 'on the lease for any 1SaSh pvrpose. 

In your second question ou have further requested our opinion as to whether f he State is due 

royalty for the use o? 'any other gas on the lease for 

lease purposes." We believe this was' answered in our 

Opinion Ro. V-475 in which we held that under Mineral 

Lease no. 20001 the state 1s to receive *7/48ths* of. 

the "entire" production of grs, regardless o? what 1s 

sold "ofr the area," and 'without any deductions" for 

gas used on the premises or in the development of the 

lease. 

"Casinghead gaIIg being w&thin the 

reservation of "oil* in State le8ses, under 

State Wineral Lerse Ho. 20001, reserving 

"7/48ths of the gross produotlon of oil, 

or the value of same, that may be produced 

and srved,' the State may not claim royalty 

on "casingherd gas v-ted to atmosphere." 

However, the R8llroad Commlsslon has the 
Hon. C. H. Camera, page 5 (V-1000) 

Railroad Co~Isrlon v. Flour Bluff 011 

w, 219 s.u.2d 5UQ (T8X. Clv. AQP. 

error Fe?*). 

The State 18 entitled to "7/48ths* 

royalty on casinghead gas produoed and 

used "on the lease for any lease purpose." 

Under the lease, the State Is entitled to "7/48ths* of the '&tire" production of gas (other than casinghead) 

without deduction of the quantity us:d 

"0" the lease for any lease purpose. 

Yours very truly, 

PRICE DAMIBL 

Attorney General 

APPROVEDI 

Charles D. Mathtrs 

Executive Assistant 

BY: 

Everett Hutchinson 

Assistant 

Price Daniel 

Attorney Qeneral 

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