### . ’

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 casingheadgas produced and vented to atmosphere is within the royalty reservationof “7/48thsof the gros~s

prOdUCtiOnOf 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 designated88 Mner&l File Ro. 20001 Is being vented to atmosphere. Cur oorreepondenae with Rumble Oil & Reflning Coa~any lndlcatasthat all gas so vented Is aaslnghe8dgar. 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 easingheadgas only, we l 8& your opinion of the following questions:
"1. Should bplnionHo. v-$75, dated January :13,1948, be coustruedto mean that gross productionon which romlty Is due the state Include aaslngheadgas 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 attaohlnghereto 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 atmospherefrom Lease lo. 20001 has been casingheadgas.* The lease designatedas Mineral File lo. 20001 in your letterwas the subject of Attorney ffenera118 Opinions

X0. v-475.
In that 

### opinion.lt was stated: "The mlneral lease you subs&t embodies mineral reservationsidenticalIn terms (except 

### for the aunaat) to those ainlmuaminera1 reservations

requiredby 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, parallelingthose mlnlmum mineral reservationsof the Statute, should be governedby the Statute.n
It will be noted that In Opinion 130. V-475, supra, the mlneral reservationsIn the lease are considered identicalIn terms (exceptfor the amount of royalty)with those ainlmm reservationsset out in the statute (Section10, Article 54210, V.C.S.). Although the result reached in that opinion is correct, since the opinion erroneouslytreats 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 applloableto 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., executedpurR.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 producedand saved, and 7/48ths. of the gross productionof 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 producedA\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.dthat "casinghead gas* isincluded @thin the term "oilyLanda conatituent 0r "01'1~~'

In questionssuch as you present it had been. de$ermined~(wlth

respect,toprivate leases), that ."casinghe~+d

ga's" reserved Is governedby 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. LIvingstonOil Corporationv..Wau273 S.W. 903, 906 (Tex. Civ. App. 1925, error

terminativeof the questionsInvolved,to be drawn between private and State leases. Utider the~rule announced in the above case&, "casinghead g+&* la undoubtedlywithin the 011 royalty 'clpus,e:of~,tb$ lease. For a critical analysis of these decisltins, see Hardwicke,Evolution of CasingheadGas 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 reservationof "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 rOYaltYHon. C. 8. Cavneso,page 4 (V-1000)

on that caslnghead~gas that 1s lawfullyvented 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,wasteor gas In ILCcordancewith the resent deo slons in Rumble 011 & RefInI= Co. v. RailroadComslssion,223 S.W.2d 785 (S

.

226500 [Tex. Clv. App. X949* error ref.).

With reference to your secrond question,however, since we have coneladedthat the State 18 entitled under Mineral Lease lo. i3X3Ck to "7d48thsof 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 furtherrequested 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"productionof grs, regardlesso? what 1s sold "ofr the area," and 'withoutany deductions"for gas used on the premises or in the developmentof the lease.

"Casinghead gaIIg being w&thin the reservation of "oil* in State le8ses,under State Wineral Lerse Ho. 20001, reserving "7/48thsof the gross produotlonof 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 Commlsslonhas theHon. 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 casingheadgas produoedand used "on the lease for any lease purpose." Under the lease, the State Is entitled to "7/48ths*of the '&tire" production of gas (otherthan casinghead) without deductionof the quantityus:d "0" the lease for any lease purpose.
Yours very truly,
PRICE DAMIBL Attorney General

APPROVEDI Charles D. Mathtrs ExecutiveAssistant BY: Everett Hutchinson Assistant

Price Daniel Attorney Qeneral

RR:db