i 

### RNEY GENERAL 0~ TEXAS

Honorable JamesW. Swarts CountyAttorney Culberson County Van Horn, Texas OpinionNO. 

### O-6097 Re: Taxation of undeveloped oil and gas leasehold &states, and related questions. Dear Sir: We have receivedyour recent letter requesting our opinion relative to the above captioned subjectmatter, Said letter is self explanatory and reads as follows:

“Iwoul’dlike your opinion on the following propositions.

“This county has a considerableland under lease for oil and gss and othermineral.

“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 atwhat valuation?

“2. Is ,themineral, 011 and gas which has been purohased outright, subject to taxation and if so atwhat value?

“Itwould seem that a straight oil, gas or mlneral leasemight not be consideredproperty and subject to taxationwhile an out-rightpurchase of themineralwould be a title in realestate. The formerbeing only a right to prospect.



### “3

. If either or both classes are subjectHon. JamesW. Swarts, Page 2 (No.O-6097)

to taxation, thenmight the state sel,lthe same for delinquent taxes under the law providing for sale of land for delinquent taxes?

"This is a matter which might lnvolve the collectionof considerablemoney for county and state not only here but in other counties. "Iwould appreciateyour opinion in thismatter and citation of any authoritiesbearing on the question."

The following twoArticles pertain to the questions Involvedherein. Article 7145,V.A.C.S.:

"All property, real, personal or mixed, except such as may be hereinafterexpressly exempt, Is subject to taxation,and the same shall be rendered and listed as herein prescribed."

Article 7146,V.A.C.S.: "Realproperty, for the purpose of taxation, shallbe construed to Include the land itself,whether laid out in town lots or otherwise, and all buildings, structuresand Improvements,or other fixturesof whatsoever kind thereon, and all rights and privilegesbelonging or in anywise 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 PetroleumCo. v. Townsend, 

### 63 Fed. (2dj 293; PrinceBros. Drilling Co. 150,S.W. (2d) 

### 314. v. Fuhrman PetroleumCorp.

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 premiseswith the authority to operate for andHon. JamesW. Swarts, Page 3 (No-O-6097)

procure oil and gas. It follows therefore that since an oil and gas lease Is effective as conferringupon the lessee an interest in the land, the value thereof Is assessable against him for taxation. However, until there has been a severance of themineral estate from the remainder of the land, the tax iB aBBeSSable against the owner of the land, as the rendition of the land carrieswith it the full value of the land.

It is also settledbeyond 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 leaseholdestate, or a mineral estate are to be valued at such price as theywould bring at a fair, voluntary sale for cash.The value defined in the constitntlonand statutes is the reasonable cashmarket 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 providedby our statutes in reference to real estate.

Trusting that the above fully answersyour 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 Committeeby BWB, Chairman WVG:fo"bt