i RNEY GENERAL 

0~ TEXAS 

Honorable James W. Swarts 

County Attorney 

Culberson County 

Van Horn, Texas 

Opinion NO. O-6097 

Re: Taxation of undeveloped 

oil and gas leasehold 

&states, and related 

questions. 

Dear Sir: 

We have received your recent letter requesting 

our opinion relative to the above captioned subject matter, 

Said letter is self explanatory and reads as follows: 

“I woul’d like your opinion on the following 

propositions. 

“This county has a considerable land 

under lease for oil and gss and other mineral. 

“Some of this presumptlve 011 gas and 

mineral has been sold outrlght or at least In 

part. 

“1 . Is the oil and gas lease, undeveloped, 

subject to taxation? If 80 at what valuation? 

“2. Is ,the mineral, 011 and gas which 

has been purohased outright, subject to taxation 

and if so at what value? 

“It would seem that a straight oil, gas or 

mlneral lease might not be considered property and 

subject to taxation while an out-right purchase 

of the mineral would be a title in realestate. The 

former being only a right to prospect. 

“3 . If either or both classes are subject 
Hon. James W. Swarts, Page 2 (No.O-6097) 

to taxation, then might the state sel,l the same 

for delinquent taxes under the law providing for 

sale of land for delinquent taxes? 

"This is a matter which might lnvolve the collection of considerable money for 

county and state not only here but in other 

counties. 

"I would appreciate your opinion in 

this matter and citation of any authorities bearing on the question." 

The following two Articles pertain to the questions Involved herein. Article 7145, V.A.C.S.: 

"All property, real, personal or mixed, 

except such as may be hereinafter expressly exempt, 

Is subject to taxation, and the same shall be 

rendered and listed as herein prescribed." 

Article 7146, V.A.C.S.: 

"Real property, for the purpose of 

taxation, shall be construed to Include the 

land itself, whether laid out in town lots or 

otherwise, and all buildings, structures and 

Improvements, or other fixtures of whatsoever kind 

thereon, and all rights and privileges belonging 

or in any wise appertaining thereto, and all 

mines, minerals, quarries and fossils in and under 

the same." 

It is now firmly established in Texas that oil 

and gas leases are realty and subject to taxation as such. See 

Texas Company v. Dougherty, 176 S.W. 717~ Stephens County v. 

Mid-Kansas Oi1 and Gas Company, 254 S.W. 290; State v. Downman 134 S.W. 787; Phllllp~s Petroleum Co. v. Townsend, 63 Fed. 

(2dj 293; Prince Bros. Drilling Co. 

150,S.W. (2d) 314. 

v. Fuhrman Petroleum Corp. 

The above cases hold that no distinction can be 

made as to the form of the lease and that an interest in land is 

created, whether the lessor granted, bargained, sold, or conveyed the oil and gas to the lessee, or if the lessor let and 

leased the premises with the authority to operate for and 
Hon. James W. Swarts, Page 3 (No-O-6097) 

procure oil and gas. It follows therefore that since an oil 

and gas lease Is effective as conferring upon the lessee an 

interest in the land, the value thereof Is assessable against 

him for taxation. However, until there has been a severance 

of the mineral estate from the remainder of the land, the tax 

iB aBBeSSable against the owner of the land, as the rendition 

of the land carries with it the full value of the land. 

It is also settled beyond controversy that a mineral 

interest in land, as well as the lessor's estate or Interest, 

generally referred to as royalty, Is taxable as real estate. 

See Sheffield v. Hogg, 77 S.W. (2d) 1021. 

Mineral properties, 

royalty Interest, 

whether same be a leasehold estate, 

or a mineral estate are to be valued at such 

price as they would bring at a fair, voluntary sale for cash. The 

value defined in the constitntlon and statutes is the reasonable 

cash market value. Such profierty, when rendered, shall be valued 

as of January 1st the same as other real property. 

It follows, as a matter of course, that inasmuch as 

such mineral interests are in fact realty, that the State could 

bring a foreclosure suit for delinquent taxes thereon and sell 

the same as provided by our statutes in reference to real estate. 

Trusting that the above fully answers your questions, 

we are 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

Bys/ W. V. Geppert 

W. V. Geppert; 

Assistant 

APPROVED Jul 13, 1944 

W.P. Blackburn 

Acting Attorney General of Texas 

Approved Opinion Committee by BWB, Chairman 

WVG:fo"bt