,

Mr. T. E. Allday Audito+ of Oil l!he University Austin, Texai of Texas"

dear Mr. Allday: Re: Interpretation and Constltutloiiallty 0f'Sectlon4, **Chapter** 6, A&s of 1921, and Section 14 of Chapter 1, **Acts** of 1925, as amended by Chabter 145, Acts of 1925, said Acts dealingwith the payment of rentals
ana royaltieson 011 and&as_ leases upon land appropriatedto the Unlversltyof Texas.

This opinion Is glven.ln reply to the written request contained In your letter of Aprll.29, 1939, and the additional request contained In **your** letter of June 15, 1939. In your letter of April 29, 1939, you prop'ound the following -questions:

1. "Was It the Intentionof the I&Islature,.whenIt passed Cahpter 6 of the',Acts of 1921, to repeal or nulllf~~.?lther or both of the $2 an acre considerations due to be paid by the'permlttees under subdivisions1 and 2 of Section 7 of Chapter 83 of the Acts of 1917, for, and on, the leases that were executed as a result of permitshaving. been Issued on the University lands?"

2. "Is It your opinion that el&erSectlon 14 of Chapter 71, or Section 14 as'ainended ln Chapter 143 (both Chaptersbeing Acts of 1925), had the effect of repealingor nullifying the same considerationsshown ln question 1, due.to be paid **by** the permitteesunder the same s~bdlvlslon,section,and Chapter mentioned in the preGediIIg paragraph,for, and on, the leases that were executed resulting- .

Mr. T. E. Allday, page 2 (o-730)

from permits Issued on the Unlversltx lands?"

In your letter of June 15, 193gc,youpropound the followingadditionalquestlofi'!.~-

3. "In the event you hold :hat It was the Intentionof the Legislature to repeal the $2 considerations, which considerations
are mentioned ln Subdivisions1 and 2,0f Section 7 of Qlapter 83 of the Acts qf 1917, with (hapter 6 of the Acts of 1921, or o.lth Chapter71 of the Acts of 1925, or wi.$h both of these Acts, would such ACt or Acts, ln your opinion,be unconstitutional?"

In your letter you divide the leases of University lands to which your inquiriesare directed into two groups, .thefirst group comprising leases Issued under and by ~vlrtue

of the provisionsof Chapter 83 of the Acts of 19X-7 .andChapter 6, Section 4, Acts~of 1921; the SeGOnd grouti. ~comprls%ng

leases thatwere Issued under Chapter83.of the Acts of 1917 and Chapter 71 of the Acts of 1925 (Section14)
.asamendedby Chapter 143, Acts of 1925.

You state that the Commlssloner,p~ the General Land Oiflce has construed Section 4 of Chaptkr .6of the Acts of 1921 as rqeallng and abolishing .the"r@qulrements ,contalned

lnicha@er‘83, Section 7, of the Acts of 1917, for the payment df $2.00 per acre at the t$me the lease Is Issued and $2.00 per aore annually thereafterduring the life of the lease wlth'respect to leases falling In .thefirst group described In your letter.'. You further .state that the Commlssldner has construed.Sectlon 14 of Chapter 71 of the Acts,of 1925, as amended by Chapter 143, of the Acts of 1921, so as to repeal and abolish .the requirements of Chapter 83.with respect to the $2.00 pe3'_acre case payment and the $2.00 per acre annual payment: on.l.eases

falling In the second group described ln your letter'.'

A consdleratlon

op the questlons~&u have asked necessarily requires a careful review of the relevant statutes.

On March 16, 1917, Qlapter 83 

### of the Acts of 1917
was approved. Such Act was a comprehenslxe amendmentto the .1913 Act, and provided that all Unlirerslty, public school and other lands deslgnat~ed In the Act, should be open to the prospectingfor and developingof~mlnerals,, includingpetroleum and natural gas "upon the terms and cgr)clltlons prdvlded In this Act."&. T. E. Allday,page 3 (o-730)

Section2 of Chapter 83 provided Gnat any person "desiring to obtain the right to pmaect for and develop the minerals.

. .thatmay be in any of the. areas included herein may do so under the provisionsof I&Is Act, to.gether with such rules and regulationsas may be &dopted by the Commissionerof the General Land Office relativethereto.

. ."

Section3 provided for the filing ielth the Courity Clerk of applications to obtain the rlght,.to prospectfor and develop petroleum and natural gas in surveyedareas coveredby the Act.

Section4 provided for the flllng with the'~'County Surveyor of applications to obtain the right to prospect for and develop petroleumand natural gas ln WJ$ of. the unsurveyed areas Includedln the Act.

Sectloti

5 prescribedthe duty of th%'~'Commlssloner of the GenekalLand Office upon receipt by him of an appll- ,catlon after same had been filed with the$ounty Clerk or the Surveyor,and such section also provided that such a fll$stlon should be accompanied by field notes.andplat, s flllng fee and 10 cents per acre for each acre applled'for, also a sworn statement by the applicant shpwlng certain facts. Section 5 then providesas follows:

"And If upon examinationthe ap&catlon
or the application and field notes are' found correct and the area applied for Is wltti.the provisionsof this Act the Commission shall Issue to the applicantor his assignee a'permlt conferring

upon him an exclusive right to prospect for and develop petroleum and natural gas within the designatedarea for a term not to exceed two years."

Section6 prescribedthe time ln.,Whlch the owner of

a permit shouldbegin In good faith the ac$ual work necessary .tothe physicaldevelopmentof said area;ijSkev@ed for the filing of an affidavit stating that such work had been begun and the extent of.such work and the expendituresincurred therein and a statementof whether or ~not.petroleum or natura gas had been discoveredIn commercial quantl~les. The Sri@1 sentence of Section6 reads as follows:

"The owner of a permit shall not 'take, carry dwaiy or sell any petroleumor natural gas before obtaininga lease therefor;provided, puch quantity

as may be necessary for the continued developmentIir.

T. E. Allday, page 4 (o-730)

of the area before ;dblM.nlng a leasemay,

be used without accountingtherefor.”

. Section 7 of Chapter 83 providesas followsz

“If at any time within the 1lfe;ofa permit

one should develop petroleum'or natural gas In commercial quantitiesthe owner 

### or manager shall file ln the Qeneral Land Officea statement of such development within thirty days thereafter,and thereuponthe 

### ownerof~@e permit shall,have the rlght to lease the.abea lneluded ln the permlt upon the’followlng conditions:

'1. An application and a flrst,$a&nt of two dollars per acre for a lease of the-area ticluded ln the permit shall be made &o th Commissionerof th a 1LadO iTFce til:hln tKlrty days’

after ~he’%%M?r~ of .gatrol&m o,r naturaLgasZ.3.n

c;ol;ilitirclal

qr;iult-$@s, d .~C -. ‘2. Upon the payment of two dolJ.ars per acre 

### for each acre ln the permit a lease shall be Issued

### -for

a term of ten years or .less, as may be' desired by the applicant,andalth the option of a renewal 

### or renewals for ti iiciiial

or shorter period, and' annuallyaf$#&: - _--thaj.expiration of th,e

first Year after the date. or ~the. lease.the sum of two dollars per acre shall Id during the llf -.. . ..- -- e of the lease,;.and In' Ion thereto the owner of the lease &iiTl pay a sum of money equal to a royalty~ofonemeter optput 

### of all gas disposedof MS the premises. .

‘3. The ro~lties shall be pa2't.o he State through the Gommlssloner of the.Qeneral Land Office. at Austin,monthly durlng.t@e.,,llfe 

### of the lease. All payments shallbepc~uapanled by the sworn statementof the owner or m@qer
or other authorizedagent showingthq(amount pqduced since the last report and th,e market value of the output and a copy of all plpe.llne recelptxi>

tankreceipts, guage of which petroleummay have been,run, checks and memoranda of.amountput outMr. T. E. Allday,page 5 (o-730)

g'lpe lines or tanks or pools. The books and accounts,the receipts and dlscharges.of all pipe lines, tanks and pools and gas &lnes and .gas pipes and all other matters pertainingto the production,transportation and mafketlng .ofth,e output shall be.

open to the ex,am+atlon and lntipectlon

at all times by the C+ssloner of the GeneralLand Office or his rey(re+,entatlve or any other person authorizedlw me Governor or AttorneyGeneral to repraaentthe State. The value of any unpaid rp3lty and any sum due the State under this Act upon.any lease &all become as prior lien upon all production producedupon the leases areas and t&e lmpyovements situatedthereon to secure the.papen$ of any royaltyand any sum due the $t,ate,aris- -1ng under the operationof any portion qf this Act

4. The permit or lease shall o&au 'the 1 terms upon.whlchIt Is issued lnclu In&the authority of the Commissioner to require the .drllllngof wells necessary to offset wells drilled upon adjacentprivate land, and 'such other matters as the Commissioner may dee@~ lmportantto the rights of the appllcent,or the State."

'follows: Section 16 of Chapter 83, in pant,;provldes as

"The payment per acre required t6 be made before the Issuanceof a permlt.shall be paid annually thereafterduring tb life of the permit or lease. A separateurlt$F applicationshall be made for the area de-, sired ln a permit. No permit, lease&r.,, patent shall embrace the area ln two ,ormore applications. No applications, permit, lease
or patent shall embracea divided area Whole tracts of surveyed land may be appllad.$oras a whole or In eighty acre tracts or multiples thereofwithout furnishingfield noteg- therefor. A duplicateof every permit and lease++hallbe kept In the General Land Office. The area In each permit shall be developed Independently of. other areas."
Chapter83 of the Acts of 1917, with the amendments&. T. E. Allday, page 6 (o-730)

hereinafternoted, continuedIn force as the basic law governing the Issuanceof permits and leases for 011 and gas In University lands until the effect1v.e date of Qlapter 71 of the Acts of 1925, approvedMarch 10,..1925.Prior to the enactment of Chapter71 of the Acts of 1925, several amentientswere made to Chapter 83, but, %n opr.opinion, only one of such amendementsIs material ljo this opinion. Such amendment Is Chapter 6, of the Acts of 1.921, approved ..February

3, 1921.

By the expressterms of Section .lof.Chapter6 of the Acts of 1921, such amendmentpurported,tp apply~ only to:.

"Permits to prospect for oil ani &heretofore Issued on Universityland, and P&r School land which Is unsold at the tlmre .thls Act goes Into effect, river beds, PI! ,channels and fresh water lakes'and Islandstheein, and which have not expired.

. .'I

And also tici.

"All permits to prospect for oli%d gas heretofore Issuedon .sald lands and ape&s and all permits heretofore Issued after the.Mneral Act of 1917,wentinto effect..

. .whlahhave ejcplred

at the time this Act goes Into efcect, but on which the drilling of a Well Qr wekls has been begun ln good faith, or with ref'erence to which permits and the right of.$he

owner of the same to the possessionqf the
area Includedthereinbona fide lltlgatlon has existed during the whole or a pant' of the term of the permit.

. ."

Section 1 of Chapter 6 provided that.ill of such .permlts

as describedabove shouldbe ex'tended "so that they shall remain In full force and effect for a period of five .yearsfrom.the date of the IssuanceOF the. permit, condl- ~tloned-only

upon the performanceof the terms of this Act."

Section 4 of Chapter 6 provided,&hat:

"If 011 or gas should.be.productW'inAying quantities-upon the area Included 'in any of the permits included In this Act, -@e owner of'the permit shall report th developmentto the Comfnlssloner

of the Gene& Land Office within thirty days thereafter, and apply for aMr. T. E. Allday, page 7 (o-730)

lease, accompanyingthe applicationWith a correct log of the well or wells, and thereupon

a lease shall be Issued without the payment of any additional sum of money and for 8 period not to exceed ten years, subject to cgnewa;l or renewals."

.
Tne question IS thus presented &'to ihether Section 4 of Chapter 6, properly construed,repea&edand abolished .the requirementsspecified In Section 7 oC.Chapter83, .Acts of '1917,

that a permittee, .lease, before be- entitled to a

shouldpay to the State $2.00 per tire for-each acre lncludea withinhis lease. and that In addition $2.00 per acre shouldbe paid tkeresfterannually dur 3 then

life of the lease. Clearly, Section 4 of Chapt,er was not intended to affect in any mannerpermits Qsued, subsequent .to the effectivedate of Chapter 6, because Its operation Is expresslylimited In Section 1 thereto.to"dermlts heretofore Issued". If Section 4 of Chapter 6 IS. construed so es to repeal and abolish the requlrements,of.the $2.00

acre cash payment and the $2.00 per acre &nnual payment per requiredby Chapter 83, or either of such,&ments, such .constructlon

and effectmust, necessarlly,,be,limlted so as to apply only to leases resulting from.permlts 5ssued prior to the effectivedate lof=Chapter 6. Permits issued .subseqent to said date would be wholly !.u@fectedby the 1 .Actun er any constructlonthereof. We pwtpone any further discussionas to the proper construction to be given to Chapter 6 to a subsequentplace In this opinion.

No other amendmentswith which ue are now,concerned were made to Chapter 83 of the Acts of 1917 until the enactmentof Chaptex 71, Acts of 1925, apwoved,March 10, 1925. Chapter 71, Acts of 1925, was a coqrebenslve Act -dealingwith the sale of 011 arid gas leases on unsold Unlverslty land and upon Unlversltiy land which MaQ been sold with .mlneralreservationprior to the effectlve,date pf Chapter 71. The operationof Chapter 71 was expresslylimited by the final clause of Section 1 of the Ac%.wkiich readk as follows:
"Provided,011 and gas permits ax&leases outstandingshall not be affected,by.thls Act except as provided ln Section 14 theceof."

Section 14 of Chapter 71 provld&:

"All oil and gas permits heretokore lssued upon lands Includedherein and noir in' force shall be extended for a term of five years from date thereof andkknever productionor. T. E. Allday,page 8 (O-730)

Is secured In paying quantitiesand t&e payment of royaltybegins, the owner shaJ& not pay any furtherannual money rental.;.Pfter productionIs secured In paying quant#les the owner shall be entitledto a lease_ which shall run so long as the area covered.byhis lease produces 211 or gas In paying puantitles, subjectto the provisionsof.thls Act.”
Chapter 143, Acts of 1925, approvedMarch 30, 1925, by the same Legislature which enacted Chapter71, amended Section 14’of Chapter 71, so that Section.14shall there- .afterread as follows:

“All oil and gas permitsheretogore

### &d hereafter Issued upon lands IncludedJzereln and which have not expired shall be -tended for a term of five years from date t@reof conditioned

only upon the payment of.the.annual rental, as providedby law, In advance and wheneverproduction Is secured ln’.pay$ng quantitiesand the payment of royalty begins, the owner shall.notpay any further apnual rental money. After productionIs secured in paying quantities, the owner shall be entitled to a lease which shall run so long a&the area coveredby his lease producesoil or.gas In paying quantitiessubject to the prav.lsions of this Act.”

;*y* r On the same day, March 30, 192~~~Cha$5er 140, Acts of ,LSLj,was approvedby the Legislature. Chapter 140 reads
as foil,.icC

.~
“Sec. 1. That subdivision2 of:: Section 7 of Chapter 83 of the Acts of the Regu)ar Sessionof the Thirty-fifthLeglslature,approved March 16, 1917, be amended so.88 to hereafter read as follows:
“Upon the payment of $2.00 (two.dollars)

. per acre for each acre In the permit&lease shall be Issued for a term of ten (10) years, or less, as may be desiredby the applicant, and with the option of a renewal or renewals for an equal or shorterperiod, and $mmedlately after the expirationof the first year after the date of the lease the sum of; two -($2.00) dollars per acre shall be paid during the lifeMr. T. E. Allday, page 9 1'. ~730)

of the lease, and in addition there& the
owner of the lease shall pay a sum of money equal to a royalty of one-eighthof the value of the gross productionof petroleum. - The

owner of a gas well shall pay a royalty of one-tenthof the value of the metre output of ally gas disposed of off the premises;; provided, however, that the provisionshereof as to the i

payment of two ($2.00) doll.ars per acre during the lease period and the life of.sald lease shall not apply to leases of bays, marshes, reefs, salt-waterlakes or other submerged lands containingas much as one hundreds. 100 t 1 acres but not In excess of five hundred 500
acres upon which as many as five wells,have been drilled,and upon which an expetidlture of as much as one hundred thousand ($100,000.00), dollars has been made. The drllllng,ofsaid wells and the expenditure bf>sald amount t<be established to the satisfactionof the Commiss~l'bner of the Land Office.

"Sec. 2. The fact that leases ex1s.t upon. some of the bays, marshes, reefs, salt-water lakes and other submerged lands of the.eei herein Indicatedupon which many wells have been drilled and large amounts of money expended,and the fact that another wrlodical payment of two ($2.00) dollars per acre will

soon be due and the fact that the patient of said amount Is unfair and unjust to the owners of these leases, create an emergency,and an imperative

public necessity, that the constltutlonal rule which requires bills ta be read
on three consecutivedaya,be suspendedand
same Is hereby suspended;and this Act ta,k& effect from and after lts~passageand It Is so enacted."

Cha ter 140, Acts of 1925, (cop%.ed above) appears as Article 53

t.4 of the 1925 Revised CivilStatutes of Texas.
By virtue of the enactment.ofSection 14 of Chapter ‘71, Acts of 1925, as amended by Chapter l&3, Acts of 1925, the question Is presentedas to whether such Act, properly construed,.

has the effect of repealingan~.abollshing,
as to permits and leases previously Issued, the-requirements of Section 7, Chapter 83, of a $2.00 per acre cash payment at the time the,lease Is Issued and a $2.00 per-Mr. T. E. Allday,page 10 (o-730) -

acre annual payment thereafterduring the'ilfeof the lease.

If it were necessary In this opinionto make a con- :.structlon

of Chapter 6, Section 4, Acts qf 1921, and Section 14 of Chapter71, Acts of 1925, we would,feel no hesitancy, In the l?.ght

of the legislative history precedingand following the Acts In question, ln holding that such Acts, properly conshued, do not purport or Intend to release permlttees and lessees from making the $2.0qper acre cash payment and also the $2.00 per acre annual p $ment during the ,llfe of the lease, asqequlred by Chapter,3.

_. However,'.l!n

view of your alter&iv& question as to the constltutlonallty of Section 4 of .Chaptir 6, and Section 14 of Chapter 71, it Is riot necessar;y'

that we at this time make an independentconstruction of &uqh Act. For the purpose only of testing the constltutlonaJ.lty of such Act,
we assiuae

that the construction whlah has.beepgiven to said Ac.t b* former Commlssloners of the General d Offlos Is .the proper construatlon. You atate In your IT etter that former Conunlssloners of the Qsneral Land Officehave oonstrued Section4 of Chapter 6 of the Aots.of 1921, as repealing and abolishingthe requirementsoi. Cha .of1917, with respect to the requirementof a 'i tar 83,er,~:$ 2.00 per acre cash payment at the time the lease is Issuedapd a $2.00 ,per acre annual payment thereafterdurlng._the l$fe of the lease as to leases fallingwithin group ape above described. You further stat8 that former Land Commls % oners have construed Section 14 of Chapter 71, Acts of 25,,.as amended by Chapter 143, Acts of 1925, as repealingand abolishing the prov?:."*~z of Chapter 83, insofar as aap'ter 83 requires the payment-ofthe stated $2.00 per aare F\eryments with respect to leases falling in group two above described. So construed,are.,the Acts referred to constL$ut$onal?

Section 12 of Article 7, of the.Oo~stltutlon of Texas, providesas follows:

"The land herein set apart to t 2tiUnlverslty fund shall be sold under such r ula$,lons, at such times and on such terms as may ?e provided by law; and the Legislature shsJ1provide for the prompt collection, at maturity,of all debts dtie

on account of University lqds, heretofore sold, or that may-hereaftert&sold, and shall in neither event hatie the power to grant relief to the purchasers."

Section 15 of Article 7 of the Constitution of Texas providesas follows:Hr. T. E. Allday,page 11 (o-730)

"In addition to the lands heretofore granted to the University of Texas,there Is hereby set apart, and appropriated,Soti the endowmentmaintenance,and supportof said Universityand Its branches, one mIllJon acres of the unappropriated public domain o.f

the St&te, to be designated,and surveyed;as may be providedby law; and said lands shall be sold under the same regulations,and.the,proceeds invested In the same manner, as Is provided for the sale and Investmentof .thepermenent UniversityFund; and the Legislature shall not have power to grant any relief to the purchasersof, said lands."

Section 53 of Article 3, of the Constitution, .provldesas fgllows:

"The Legislature shall,haveIJO power to grant, or to authorize any county qr municipal authority to grant, any extra compensation, fee or allowanceto a public offloer,. agent, servant or contractor,after servlceJlas been rendered,or a contract has been entered Into, and performed In whole or ln part.

. :I'

Section 55 of Article 3, of the Cgnstltutlon, provides as follows:

"The Legislature shall have no wwei' to release or extlngultih, or to authorize the releasingor extinguishing,In whole or In part, the indebtedness, llabllltyor ,obllgatlon of anys;lncorporatlon or Individual,to this, State, or to any county or other municipal corporationtherein."

Section 51 of Article 3, of the Tonstltutlon, provides as follows:

"The Legislature shall have no power to make any grant or authorize the maklng.of-any grant of publicmoney to any lndlvldu~l,association of Individuals, municipal or.other corporations

whatsoever.

. ."
Indulgingall presumptions, as we must, In favor of the constitutionality of the Acts in question, can it reasonablybe concludedthat said Acts do riot violate anyMr. T. E. Allday, page 12 (o-730)

,ofthe constitutional provisionsabove quoted?"- Stated otherwise,the-question to be determinedis whether or not Section 4 of Chapter 6, Acte of 1921, or Section 14 of Chapter 71, Acts of 1925, construedas they have been construedby' the former commissioners of the GeneralLand Office, constitute a grant of relief to purchasersof.Un$versltylands,
or a grant of publicmoney or extra compensation to the .lessees

of such land, or the release dr extinguishment, in whole or In part, of an~indebtedness, llabllltyor obllgatlon owed by such lessees to the State of Xexas?

Inorder to decide the foregolng.que&ons, It.18 necessary that.we first consider and detegpine',the.nature and effect of the rights, estates and obl%gatlonswhich were createdby the applicationfor and the Issuance of permits under Chapter 83, Acts of 1917. We belleue'.the decisions of the Supreme Court oflTi$ae In State v.&oblson; 30 S. W. (26) 292, and Thelsenv. Robaeon, 8 S. W."(2d) 646, have clarifiedand settled such questions.

State v. Roblson, supra, involveda comtructlon of Chapter 71, Acts of 1925, with respect.totpe power of the Legislatureto withdraw Universitylands from lease and under said Act after bids &ad been submltQd to the Land Commissioner

by persons desiring to purchase leases, In accordancewith said Act. The courtheld $hat ,Chapter 71 was In effect an offer by the Legislatureto ae&l.oll and gas leases to the highestbidder In accordancewith the provlslons of such Act, and that after the person desiring to purchase such lease had complied with the.provlsons of the Act and had accepted such offer, by submittinga high bid,

a contractwith the State thereupon resulted,which contract was beyond the power of the Leglslat+reto impair by subsequentlegislation. followinglanguage: The court In so~l-@ldlng ,used the

"In the case of Jumbo Cattle.-$0. .v. Bacon, 79 Tex. 5, 14 S. W. 840, &rr3, .$hls court, speakingthrough Mr. JusticeGaines, says: 'Whenthere Is an offer made hy an act of the Legislaturewhich is acceptedby
an individual,

'thereIs a contractwhlch.ls not within the power of the state to Smpalr. ASte? an acceptanoe,a repeal of thedaw cannot affect the contract;but, until an acceptance, a repeal of the act withdrawsthe offer, and no contractcan be made."

"This correct announcementof the law appliesMr. T. E. Allday,page 13 (o-730)

with full force to the case under cos$lderatlon In regard to the land includeda schedule B. An act of the Legislature made the offer, and Interveners

have accepted It as wovlded and conditionedIn the Act. A contractbetween the state and the-hi

v. bkrtinj66 Tex. &"est.,bldder was made. White 3 0, 17 S; W.~'727; Jumbo Cattle Co. v. Bacon, 79 Tex.\5, 1.4 S..W. 840: Standiferv. Wilson, !pyn ~i3Klncannon,523 Te?F232,,'54 .S, W.~ 898; Tex. Clv. -A$$.. 633, II?9 Nothing remainedto be done to eSfe;?t the making of the contract. The.act apeclSlcally

provides the means of producing the evidence of the Contract, I.e. lt.makes It the mandatory duty of the commlss%onerto examine the bid or bids, ascertainwith whom the state has contractedunder Its oSSer and the acceptancethereof, and accordinglyto, execute the lease. The doing of the mlnlsterlal acts of opening the bids, ascertaining .who 1s the highest bidder, and lssulngthe lease according to the terms of the law, 1s'
no part of the contract Itself. It ls only making effectual the contractalreadsmade. The acceptor of the state's offer canno more withdrawhis money deposit and back out than can the, commissionerrefuse to carry out the.contract as the.

law requires of him. The contracts-hereare not within the power&S the state to impair. The RepealingAct of 1929 (Acts 1929, c2) cannot affect these contracts, but does withdraw the offer of further sales.

We believe the same statementC&I be made with respect to the effect of Chapter83, Acts 6S 19.l.7; that is, Chapter 83 was an-offer-bythe State tr, persons desiring to prospect upon. and to secure lea*8 for 011 and gas on University lands, such offer beIng_.condltloned only upon compliancewith the terms a1-85 provisions of Chapter 83. Upon acceptanceof such offer,by persons desiring to
secure permits or leases upon Universityl'ands, ~a contract resulted which was beyond the power of the State to impair.

The question then arises: "Was it beyond the power of the Legislature,after such contract was .made, to release, extinguishor forego a complianceby the permittee

or lessee with the obligationsundertakenby the lessee under the provisionsof Section 7 of Chapter 831" We believe a determinationof the nature of the contract soMr. T. E. Allday,page i4 (o-730)

entered Into between the State and Its permitteesand lessees under Chapter 83' furnishedthe answer.tothis question. The decision In Thelsenv. Robison,' supra, clearly defines and establishesthe nature of such,contracts.

.

. In Thelsenv. Court of Texas construed Roblson, 8 S. W. (2) 646, the Supreme Chapter 83 of the.Actsof 1917 and also Chapter 71 6S the Acts of 1925, exclusive of Section 14 of the latter Act. In that case the two 0ct.s were attacked
as being unconstitutional on the grounds P at they conferred
on a permitteeor lessee no greater rlght.thana mere license, exercisableat the perm;ttee'sor lessee's option; to prospect for oil and gas, whereas the Constltutlon.mandatorlly requires the Legislatureto disposeof Universitylands by

ii&@-E , and forbids the grant of'a merq,optlonallicense.
our after making an.e~austlve reviewof the history '. preceding the.Acts In question held that such.actsauthorized a sale of University lands. The Count said:

II undtr,tht thoroughlysettled law of this state; the act8 of 1917 and of I.925 operate not to grant mere licenses to explore for mlnerals, but Instead they,authorlze conveyances

by the state of minerals In place, and unce the Leglslature In passing the acts obeyed the,commandof the constitution

to sell the Un1versLt.y lands.

'In order to arrive at a correct understanding of the rights of a permitteeor Lessee, under the first Instrument Issued under these acts, we must considerhis rights under the succeeding Instrument,since the right to the succeedinglnstrument,vests In him under the veryfirst .lnstrument as completelyas the privilegeof exploration, though, of course, subjectto t&e conditions lmposedby the statutes. The right to.explore, to produce,and to appropriaterelat.es:back to, and is derived from, the Initialperv&t or lease.

"Thus viewing the rights of the permittee

or lessee,we find that each act authorizesthe sale, at stipulatedprices, of a permit In the
one case and of a lease In the other,.-,wh$ohlnvested the permittee or lessee and hiis: assigns,
on performance

of stated obligations, with the exclusiveright to explore certain lands for oil and gas, for a fixed term of years, and, upon the discoveryof 011 or gas In commercialor paying quantities,to produceand appropriateMr. T. E. AIlday, Page 15 (O-730)

. same, so long as ~profltable productlqn

may continue. While the act of 1917 does not in terms provide that the right of production and of appropriationshall continueas long as 011 or gas Is produced In paying quantltles,.as does the 1925 act, yet the provisionof ths,act of 1917 for successlve.lease.renewals, at the option of the lessee or his assign, necessanlly has the
same effect as an express provision &bat the lease shall remain In force as long as oil&r gas may be profitablyproduced."

After referring to and quoting fsom the oplnlon In Stephens Co. v. Mid-KansasOil & Gas Co., 254 s. w. 290, the court stated:

'In legal effect, the grants authorizedby the acts are not essentiallydifferent Srpip the grant In the ordinary oil and gas lease, such as was before the court In the Stephens County Case. .The ordinary lease confers first an option to exp&ore for oil or gas, but, after discovery of 011 or aa ln paying quantities,It confers the right to produce and appropriate the 011 or gas. It 1s lmmattnlalthat the right to appropriatethe 011 or gas under the 1917 and.1925 acts follows and does not pnecede the final leavecause, as already pointed out, the permitteeor.lesseemay compel the executionof the final lease on performingthe obligations which the act imposes on him. Under the ordinarylease, the right to continue to produce and appropriate011 or gas is contingenton-performance of similar obllgations. It Is unthinkableto treat tk&,ordlnary lease as conveyingminerals in placeand to refuse to give that effect to the grants aut&orl,zed by these acts."

The Supreme Court of the UnitedStates In Group No. 1 Oil C:rf?oration v. Bass, 283 U. S. p9, 75 L. ed. -. 1032, has occasion to pass upon the naturspf the.interest createdby the Issuanceof permits and leases..ur-+der Chapter 83 of the 1917 Acts. The lessee In such case was claiming immunity from taxation with respect to income derived from the.sale of 011 and gas, produced under l-sea issued under Chapter 83. The claim of tax immunitywas based upon the contentionthat the asserted tax was one upon an instrumentality of the State. visions of Chapter 83, The court~heldthat under the pro- "a completelyexecuted sale, without restrictions"

occurred. The followinglanguagewas used byor. T. E. Allday, page 16 (o-730)

the court:

"But no case has extendedsuch &unity to property,real or personal,or lncpme derived from its sale, where It has passed to the buyer by a completelyexecutedact of..sale,wlthout restriction,and no InterestIn It has been retained for the benefit of the Indians'; Whatever may be the appropriatelimits of the &mnunity, as applied in this class of cases, those limits are clearly exceededby that assertedhene."

In State v. Ratcher, 281 S. W. 1;92, and in Sawyer

v. Roblson, 268 S. W. 151, It was held by,the Supreme Court of Teds that the transactions authorlzed.by

chapter 83 of the Acts of 1917, constituted a sale o~Unlverslty~and.

The above cited authorities, we believe, conclusively establishthe followingproposition:

1. That Chapter 83 of the Acts:of 1917 constitutedan offer by the state to personsdesiring to purchasemineral rights ln the University lands, and that a contractbinding uRon both the State and the premltteeresulted.when such

8ersons complied with the provlsions.oS Chapter 3 and secured a permit to prospect for oil and gas under the terms and conditionsset forth in the Act.

2. That the Issuanceof a permit under Chapter 83, Acts of 1917, constitutedsale by the State to such permitteeof Universityland within the meaning of Sections12 and15, Artlcle 7 of the Constitution of Texas.

3. The considerations and obll$atlonsprovided for in said contractand sale,agreed~and undertakenby the permitteeto' be pati and performed, are prescribeddefinitelyin Sections 6 and 7 of Chapter 83, Acts of 1917. .Cne of. the obligations.as

prescribedin Sectlon.6,is that the permittee shall perform certain avelopment work within a prescribedperiod. In.Section7, it Is prescribedand requiredthat an application for lease shall be made within 30 days after discovery of oil, accompanied by "a first payment of $2.00 per acre for a lease of the area included In the permit. t .", and that "annuallyafter theMr. T. E. Allday, page 17 (o-730)

expirationof the first year after the .date of the lease, the sum of $2.00 per acre shaW be paid during the life of the lease, and that In addition thereto the owner of the lease ahal pay a sum of money equal to a royaltyof 1/8th of the value of gross productionof petroleum. The owner of a gas well shall pay a royaltyof l/lOth of-the value of the meter output of all gas disposedof off the premises."

If subsequentacts of the IeglsIatureare construed to release and extinguishthe'obllgatlon and llablllty of permittees,whose permitswere Issuedwlor to the amendatory acts, to pay the $2.00 per acre cash price upon the issuance of a lease and the $2.00 per acrewual payment required during the life of the lease, or dither of them, do such acts violate any of the constltutlonal provisions quoted above? We have concludedthat suoh acts, when so ..construed,

do.clearlyviolate such constl&utlonal~provlslons unless the State receives an adequate..oonslderatlon In return for the purportedreleaseof such obligation and llablllty.

In our opinion, the plain effect of Section 4, or Chapter 6, Acts of 1921, and of Section111, Cha,pter

71, Acts of 1925, when so construed,la to attempt&o release and dischargepermittees from the obligationto make the 42.00 per acre aash and annual paymentswhich such permittees agreed and bound themselvesto make at the,tlme of their applicationsfor permit under Chapter 83, Acts of 1917. The permittee'sobligationsas well as his r#Qts were fixed and secured upon the granting to him of a pe&$ as prescribed by Chapter 83. We hold that the Leglslatlrre, as held ln State.v. Robison, supra, was prohibitedfrom thereafter Impairingthe permittee'srightil and Srom,lnzreasing the permIttee% obligationsto the State beyord,theprovisions of Chapter 83, and this becauseof constitutionalprovisions which prohibit the impairment of previously existing contract rights. We as firmlybelieve, and we here hold, that the Legislature,by reason of the constltutlonal provislor\g hereinabovequoted, Is likewiseprohlblte&.from releasing

or extinguishingany of the permittee's obligationsor llabllltles as prescribedby Chapter83, unless an adequate considerationis received by the State ln payment for such discharge. We further hold that the. Legislature Is without .power to grant relief to such permitteesor lessees.

We have searched ln vain Chapter 6 and Chapter 71 for any provision or conditionwhich can reasonablybe deemedMr. T. E. AIlday, page 1.8 (o-730)

a consideration

required to be paid by the,permitteein return for a release of the $2.00 payments...ln question. The plain result of such statutes, In our opinion, If construed
as aforesaid, Is to grant to the permittee. the Identical property, Interestsand rights which are provided for In Chapter 83 of the Acts of 1917, without requiringfrom him in return therefor any promise,payment ox other conslderatlon moving to the State. In support of this conclusion,
we refer to the followingcases: Delta Countyv. Blackburn, 100 Tex. 51, 93 S. W. 419; Judklns v. Robison, 109 Tex. p. 6, 160 S. W. 955; Greene v. Roblson, 117 Tex. 515, 8 s. W. (26) 655; Empire Gas & Fe1 Co. v. State, J,21 Tex, 138, 47
s. W. (26) 265.

In Delta Countyv. Blackburn,93.S. W. 419, the Supreme Court of Texas decided that an order entered by the Commissioners

Court of Delta County attemptingto reduce the rate of Interestupon notes given In payment 

### for the balance of the purchaseprice owing upon a sale of county school land from 7 per cent , as provided In the notes, to 3 per cent, violated Section 55 of Artlole3 .oSthe Constitution,In that such order was an attempt, to release and extinguishthe llabllltyand obllgatlqp::of the purchaser of such land. In so holding the court said:

"But while tht Commissioners Courtmay be conceded, for present,purposes, to possess such
an authority as was there exercised, as Incidental to Its control as vendor over the title to the land, It does not follow that It has all of the power which an Individual would have to chs.nge.at will the rights arising out of a contract already made In selling. It cannot lawfully lnve&.the proceeds. of sales otherwisethan as the law directs; nor can It release or extinguishllabllltlesor obligations which have accrue'd to the county or State further than may be essentialto the proper exercise of the power of sale or dispositionglvenjto It."-

With regard to the Commlssloners~&!ourtls attempt .toreduce the lnterest called for-in the pu;rchaser's notes, the Supreme Court said:

"They simply attempted to releaw him from his alternativebbligatlonto pay the.wholedebt at one or to continueto pay Interestat the rate of seven per cent, which, under the Const'ltutlon, they had not the power to do. It Is Idle to say that they exerted the power given themMr. T. E. Allday, page 19 (o-730)

to sell or dispose of'the land. and neither party Intendedthat
_. . _ . . It haa been sold the sale should
- ._ -. be disturbed. Such an extensionor aat power 1s not at all essentialto Its full and S+ee exercise, but would.

make It lmplngeupon the other positive conetltutlonal

provisionswhich restact the authority of the countiesIn dealing with such subjects and would open the door for many eva.qoiBthereof.

. .I'
"Differently

vlcwed, as the comm$ssloners viewed It, their attempt, instead of wttlng at naught the contractof sale, reassertingthe title of the county and resellingthe.land,was - to keep the sale In force, and, by releasing-the vendee from a part of his unquestionableobllgatlon to the county,to Induce him to perform th'e remainder ln a somewhatdifferentwagcI ,yhichlnfringed the other provisionof the Cws$ltutlon forbiddingthe release. or extlngulshu&?rjt

.QS llabllltlesand obligationsto the acult)ty."

In Judklnsv. Roblson, 160 S. W.,955, the Supreme Court had under consideration the constltuttidnallty of the repurchaseAct of Zgl;, Article 5423, R. C.. S. of 1911. The court laid down the following rules foz.determlnln& the constltutlonallty oS.euch an Act:

"The test to be applied to it, thtyefore, Is whether Its necessaryoperation Is to enable the previous owner to reacquire the Land at a less price than he was obligatedto mx under his former purchase. Is its terms wex~ to. that effect or such were Its necessary opexatlon,we think it should be held Invalid, though It purported to deal with the previousowner as a **alpnger** ‘

. to the title, as such an act would bu.$$rovean easy method.to alrcumventthe constitutional provision."

In Greene v. Rnbison, 8.~. **W.** (&;‘.655, at page 658, the Supreme **Court** said:

"We cannot agree with responden&.the land commissioner

and his attorney that tti Legislature has authority to relinquishto the owner **OS** the soil, without payment of consideration therefor, minerals reserved to the state prior to the sale of the land and withheld In his purchasethereof,
or that the cases of Cox v. Roblson, 105 Tex. 426,Mr. T. E. Allday, page 20 (9-730)

150 S. W. 1149, and Greene v. Robisop..:' 09 Tex. 367, 210 S. **W.** 498, can be so construe.: $#,

In Empire Gas & ~Buel Co. v. Stati,'@ S. W. (2d) 265, the Supreme Courtwas 'called upon to,determlne

whether
or not Chapter 23 of the Acts of 1931 was.constltutlonal. Said act attempted to relieve the purchaserof school land sold with mineral reservationfrom the pawent of any amount
over and above a l/16 royalty and 10 centg_peracre rental, notwithstanding

the fact that the Supreme&qurt in the case ~of Qreene v. Roblson,8 S. **W.** (26) 655, had that Chapter 81 of the Acts of 1919 limited such purchaser'sright to one-half of the royaltyand onerh+f of.t& Fental as com- .pensatlonfor damagesto the s&face, the.remalnlng one-half of the royalty and rentals to be paid to the State. In striking down such act as In violation of Section 51, Article 3, Section 53, Article 3, and section 4 of Article :a~$~~~Constltution, the Supreme Court wed the following

whloh languagewe .balleve to be decisive of the questionJathand:

'"Asconstrued

by the Supreme Court,,thls. law +$horlzes the 011 and gas to be sol&,~.retalnlng to the state as a minimum l/l6 of all-gas and minerals as roylatyand 10 cents per acre per annum and one-half of all amounts receivedhy the.owner
over and above the foregoingamounts.. The law fixed the rights of the state, as well as the rights of the purchaser. Since the lnceptla of this act, all purchasersof lands from the stat,e,..under the provisionsthereof,agreed to pay the state, over and above l/16 royaltyand 10 cents per acce, one-half of all other sums received for the gag'and.011. Besides, the provisionsof the act made the pu.chaserof land the agent of the state to secure %w;;;;sybat and fixed his compensation definitely,. does the Legislature undertaketo do under.cerCaln provisionsof SenateBill 310? It expbesslyundertakes to relieve the purchaser from the pawent of any sum over and above the l/16 royalty and the,.10 cents per acre. This Is a plain violation of action 51, Article 3, of the.Constltutlon quoted abo.ve. The PelinqulshmentAct constituted the buyer Ue agent of the State In makingmineral leases and fixed his compensationand under the provisionsof that act he was to receive for his servicesone-half of all
sums over and above the royalty and 10 cents per acre rental. The provls?onsof Senate Bill.310 undertake

.Mr. T. E. Allday, page 21 (o-730)

to take from the state all of the bonps and give It to the agent whose right&were fixed In the Relinquishment Act enact&d ln 1919 * This Is in clear violationof45ectlon 53, article 3, of the Constitution above quoted,
"Again, the Legislatureln Sena$i$lll 310 undertakes to grant relief to purchasersof oil and gas sold by the state under the pxo~lslons of the Relinquishment Act, and this I@ plainly contrary to the provisionsof Section 4, Article 7 of the Constitution of this state..;

.a. "As shown by this record, the s-ices of Tlppett as an agent for the state had-been rendered,his compensation fixed, anb.t~e..Empire ', Gas eC-1 Companyand Tippett owe the #ate one-halt'

of all sums receivedabove Ue,roylaty arid 10 cents per acre rental. These,slghtsand obligationsof the partieswere definitelyfixed by law. For the Legislatureto undentaketo change the oondltlons firedby law by releaalng

### or extlnZulshlng the debt owing by Tlppett @ the Empire Gas.& Fuel Company to the stat&by relieving them or either of them of thar. obllgations, or any part thereof,to the sta& or granting them or eitherof them any relief as purchasers of the mineral rights, In so' far as Se@e Bill 310 undertakes to do this, it Is clearly.Eepugnant to the provisionsof the Constitution, qd Is therefore void."

The above quoted languageof the'isupreme Court Is directly applicable to-the questionwe are, now .conslderlng. As the Acts of 1918 ftxed the obllgations,pf purchasers from the State with respect to the payment&S royalty and rentals, so did Chapter83 of the Acts ofLJ.917 fix such obligationswith Respect to permitsand leases Issued to purchasersunder chapter83. What does t&&eglslature undertake to do by enactmentof Chapter 6.&.the Acts of 1921 and Chapter 71 of the Acts of 1925, I& such acts are construedas they have been mormer Land Commissioners? It undertakes to relievepurchasersunder Chapter 83 from the payment of the $2.00 per acre ca& payment at the time of the issuanceof the lease and the‘-$2'.00cper acre annual payments during the life of the le'lse. The obllgations as well as the rights of the permitteeand the State were definitelyfixed by Cha ter 83. The attempted release and extinguishment of the f2.00 per acre obligationsMr. T. E. Allday,page 2i (o-730)

owed to the State,and the attemptedgrantpf such lease .bythe State to the permitteewithout the,aaymentof the amounts prescribed by Chapter‘83,In our *ion, constltutes a plain vlolatlon.ofSection 51, Artjcle 3, Section 53, Article 3, and S ctlon 12 and 15 of Ar$l&Le 7 of the State Constitution. Accord "$ ly, It Is ouc'oplnlon, and you are advised that Section of Chapter& Act:zcf 1921, and Section 14, Chapter71, of the Acts of.'1925, and ,Chapter

143, Acts 1925, Insofar as said Acts m&y be construed to repeal and abolish the requirements of the $2.00 per acre cash paymentupon the Issuanceol,the lease and the $2.00 per acre annual payment thereaf-r during the life of the lease, are invalidand unconstltutlongl. !
If said **Acts** are construedotherkie than as releasing and abolishingthe requlrmentsfo&$he two $2.00 per acre payments,lt,&f course, follows .th$t the requlrements made by Section7; Chapter 83, of t ~tzf 2% for such paymentshave remainedand are w, and effect, unaffectedand unrepealedby &y.'subsequent ~.leglslatlon.

In such event, said smounts,.lf. they have not heretoforebeen paid, are now exlstln&and unpaid obligationsdue to the State by all lessees whose permits and leases were Issued under Chapter83. .Webelieve this statement,when consideredIn the light of.&he remainder .of this opinion, constitutesa sufficient.&swer to all of the questionspropoundedln your letter+.

In conclusion,

we will state that.wehave given careful consideration to the case of Rhoads.Drlll1n.g Co.
vs. Allred, 70 S. W. (26) 576, as well as&o the other decisions cited In that opinion. We bell.*e-'that he facts and holding In Rhoads Drilling Companyv,-Allred,and the other cases therein cited, are clearly-,dlstingulshable from the facts and conclusionsexpressed'ti this opinion. In ?he?hoadscase the decision as to the cona$l$utlonallty of the statutethere attacked was expressl&based upon a Pinding that an adequate consideration pa&by the lessee there Involved supportedand renderedvallQ.the reduction In the royalty obligationgranted to t&e Leigee. The consideration

for the reduction of such romJ.ty obligation IS set forth on pages 584, 585, and 586 of.tfie opinion.

This distinction1s clearlypoded out in the opinion of the Rhoads Drilling Co. case on.pag'$ 583 where the Court says:

"The act would be within the constitutional pro~lbltlon~lf

It undertookto authorizethe'Mr. T. E. Allday, page 23 (o-730)

gratuitous releasingIn whole or in par&~ of an existing,r.,lndebtedness, liability,or obligation to the State. Delta County v. Blackburn, 100 Tex. 51, 93 S. W. 419, 420; Judklns v.,Robison, 109 Tex. 6, 160 S. **W.** 955; Greene v. ,Roblson, 117 Tex. 516, 8 S. W. (26) 655; Empire-Gas& Fuel Co, v. State, 121 Tex. 138, 47 S. W. (2d) 265."

In the Statutesnow under consideration, we find nothing which we can construeas a consideration requiredto be paid by the permitteesor lessees in return for the attempted release and extinguishment of the. permittee's

and lessee'sobligationto pay the $2.00 per s.cre case and annual payments requiredby Chapter 83. any consideration

actuallypaid to

Nor are wellnformedof the State,,for

such attempted release. In brief, the State has not receivedany consideration

for the attempted release an& ext-$ngulshment,

nor do the statutescondition such release and extingulshment upon a receiptby the State of a conalderatlon.

In opposingthe conclusion of ttxls opinion,It will possiblybe contendedby lessees who are affectedby this opinion, that they for several years have held their leases In relianceupon the construction which has heretofore been given by commissioners to the Acts in.,questlon. .In reply to any such possible contentton,we tiu now state
some of,the factualhistory in connectionWith oil and gas leases covering tens of thousands of acres-of University land which leases were issued by virtue of.Chapter83. We are informed that such lesseesIn many instanceshave for many years retainedtheir leases by the drillingof
a single well on an isolated section of a lease, and in many Instancesthe particular section upon which a well
was drilled is situatedIn a county far removed from the locationof other sectionsof land coverebgy such lease. Furthermore,these leases have been secured.and held without the paymentby the lessees of the algina $2.00 per acre cash at the time of the issuance&the lease as provided in Chapter83 and without the payme@ of a single $2.00 per acre annual payment. The mere swtement of the actual conditions

which exist with regard to University lands upon which permitsand leases have been issuedunder Chapter 83 serves,we believe, as an effe
a contentionthat the position we take in Ye. answe~r

to t is opinion is lacking in equity.

This opinionhas been extended to some length because of the importance of the questions involved. We**Mr.** T. E. Allday,page 24 (o-730)

t,;::ct that a full ar.;rcti has-been given to your questions.

Yours very truly

.., ATTORNEYGXNERALOF TMAS
By /s/ RoBert E. Kepke

Robert E. Kepke Assistant

REK:BT:br

APPROVED AUG 31, 1939
/a/ Gerald C. Harm

ATTORIiEYGEI?ERAL

OFTMAS