c I . 

TXZEA-ETORNEYGENEWL 

OWTEXAS 

AUSTIN. TEXAS 

PRICE DANIICL 

*-- o-mn. 

Decembef 16, 1948 

Hon. Geo. H. Sheppard opinion No. VA739 

Comptrollar of Public Accounts 

Aus~tfn, Tcrae R”,;. The ,,nec@xiily for purface 

owacrs ef State classifi’ed 

mineral lands to pay’stata 

ad valorem tanem on the 

value bf ,th~ sp*fac* plus 

Dear Sir: the minerals. 

You request our opinion as to whether surface owners of 

State mineral claraified lands must pay a State ad valorem tax on 

the value of the surface plush the minerala or on the surface value 

only. 

Par the purpose of, this. opinionyour question nil! be 

considered as to the liability of aa surface owner ~for the payment 

of the State ad valorem tax (a) :prior to the lease of the mineral interest, and (b) at the ,time of and subsequent to the lease of said 

interest. 

Tae Supreme C,ourt of Texas in the case of Sh&+d~v. 

Hogg, 124.T.e~. 29.0. 77 S.W.(td) ~1021. has stated the’~rule of law 

as follows: 

:‘!Wo-will ‘add’s few words as toths royalty interest involved under the lease of the unpatented 

school land survey, which:is, as staid in plaintiffs 

in error’s arpmint, ‘executed by the lessor in- 

‘dividually and as agent for the State of Texas.’ 

“After upholding the validity of the Relinquishment Act in Greene v. ~Robison, 117 Tax. 533, 8 S.W. 

(td) 655, the Supreme Court, in an adopted opinion 

by Judg,e Sharp, for the fir’st time definftely determined the nature of the interests of the agent lessor 

and of his assigns in words concise, clear, and unambiguous, viz.: 

‘In the case of Greene v. Robison, 117 Tex. 533, 

8 SiW! (2d) 655, it was held that, by the terms of the 

Relinquishment Act it is meant that the oil and ‘gas 

in place shall not vest in the owner of the soil as 

his property, but that it means that 15/16 of the 
. - 

H,on. Geo. H. Sheppard, Page 2 (V-739) 

1,” 

,~. 

minerals and f of any and all amounts received 

above 10 cents per acre per annum as rental 

shall be allowed the owner of the land for his 

services as agent 0X the state in making the 

mineral leases. In-our opinion, the act, when 

sairly and reasonably. construed, aleo means 

that ail minerals not disposed of 80 with the 

title of the land, subject to the provisions of 

the act., That .yben a’.valld and binding lease 

or conveyance of the minerals,,is .made .by *the. 

owqer of~t&$,*qLd; a+he agent of the state, 

then in that,,eye?g he receives the foregoing 

amount& .ks cqmpensation for ,,his servfces. 

aisls~Lr.e.,~,She,,rentals, royalties. and bonuseq 4er&r& from- the leases ex4cuted by him 

b,econyyprop~erty rights during the period of time 

Ior whi&h the lease runs:. Prior to the.making of 

.+E .x+wW lea.se:,. the. ovmor:,:‘,of ~tlie. .lan$&as .no 

rig&i4 ko assi@ QP coxvmy.*qy :kpiger+,l;&hts in 

thqwqmrty. ;It.is .tbs int4ntJon.of~Ur+,laa th;at 

the owner of the land shall be the agent of the 

state to, execute mineral leases. :.Whepev?r a 

minbral.lease ox&M& .by ,a. p+r.Joq owryr;.tsr: - 

~minst,&s~.ihe,~then ow# of:the land.bec~oxnes ” 

-the a&t, sf. *e state with ,authqri* to: sell or 

.le4se the eil and gas mfneral rights, as pro? 

vided for in tbc Relinquiahmeqt Act. 

“‘The rulq is wall established that it is 

:noktite.-policy #f the laws of thie st&to favor 

rastraiatsapon alioaation”of prqqrtqy. The 

cuurtwofthis~state frave @abiishi+d tbexe 

that ente ur royalties payatiI8uim4rtM~anZ . . 

gas rfineral ~lea,ses are severa~bl4.an$t S4pard; 

he tram :~a qwnerynip ,ox me surzaci, ds.tate ,+qd 

are prop.4xty rights, and, having astablishod tpss 

,-lo wftlr r4,s;pect to .su,ch property, we think, un: 

S*r the policy.0: the, law of this state, that they 

arp a$srgnahl,e by the owner t@erepf,‘;, LWX+r v. 

.%,a(24 !69, 

4 ,*;* * ~‘! 

“keading the Constitution and &ah&es to.-, ,’ ~. 

gather, there is no escape from the coxiclusion ‘~ ~~ 

that ,tbc intcrpsts, he-r.4 involved Fro meant to be 

taxed 46~ real.:4statc.!~~~,Clasrify them ‘8,: you may, 

they prq at Ipast rights or pr~v@gea.belonging~ 
. 

-.. - 

Hon. Geo. H, Sheppard, Page 3 (V-739) 

or in some wise appertaining to real property, 

and the Legislature has provided that they be 

taxed as such. Bracken v. Van Zandt County 

(Tex.Civ.App.) 74 S.W.(2d) 540.” 

On motion for rehaariag (124 Tex. 290, 80 S.W.(2d) 74l)i 

the Supreme Court held that the surfac’e ,owner’s royalty interest acquired by biro as agent for the State was taxable 4s an interest in land, irraspective 4s to whether, or not the mineral classified land was patented or unpatented. 

Prior to the execution of the mineral lease, all of the mineral interest in the mineral classified land is the prope,rty of the 

State of Texas, and the surface owner has no title to the minerals 

whatsoever&~, Hence, he is not. required to r,ender such~mineral interest for taxation or to pay an ad valorem tax thereon. 

However, upon the execution, of a mineral lease by the sur? 

face owner 6s agent for ~the State of Tex4s, he is required to make 

rendition of and pay an ad valorem tax’upon the value of the royalty 

. interest acquired by him as agent by the’exccutloa of the lease, as 

well as the surface value, during the lffe, of the lease. ,. 

SUMMARY 

Prior to,the rxecution of a mineral lease by,tbe 

‘surface owner of State mineral classified land& the. 

surface owner is liable for the payment of State ad 

valoremtaxas. upem tke surfaoe va,lue only. After a 

7@~1~&~tsrrr~*s ~+en~~~ecnrerl :by .the -mdaci own- 

,.er 4s agent for the State of Texas, he is requir.Ld to 

-~~~‘C)acqu~r.e~ 0 

: :~, pay a State ad valOr4m tax uponthc royalty interest 

y him by reasodof the, execution of such 

I lease; in addition to the surface valuc.~ Sheffield v. 

1. Hogg, 124 Tex. 290, 77 S;W.(td) 1021, 80 S.W.(td) 741. 

Yours very truly 

ATTGRNEYGENERALOFTEXAS 

C. K. Richards 

Assistant 

CKR/JCP