Gerald C. Mann 

IPrnRD 

Aun- H. TEXAS 

*-RN- a-- 

Honorable Rascom (&!.es, 

Commissioner 

General Land Office 

Austin, Texas 

OpFnion No. O-1185 

,. 

Re: Authority surfaae owner 

of land under Rellnqulshment Act to amend lease. 

Dsai- Sir: 

This department aaknowledgea reoelpt of your letter of July 25, 1939, ln whloh you state that underscrap 

File No. 12,924, the State awarded anarea of land In Cameron county under the Aot of April 3, 1919; that on July 7, 

1938; Oatewood Newberry; the surfaoe owner~~~lndlvldually and 

as agentof the State, executed sn 011 and gaslease nith~a 

drilling agreement ooverlng a portion of the above me&toned 

land. Other facts are stated by you ln your letter, as 

follows2 

"This lease and drilling contract 

provide for thedrllllng of three wella to a 

depth often thousand feet, unless oil or gas 

should bs discovered .ln paying quantities at a 

;;;;ir depth, or unless salt, granite'heav~lng 

, uncontrollable flow of salt water, or other 

formation be encountered at a lesser depth which 

oould render further drilling lmpraotlcable. 

"Under the terms of the lease and within the 

time-provided therein, the first ten-thousand-foot 

test has been projeated thereon, and at a depth of 

approximately 7,500 feet there was encountered an 

uncontrollable flow of salt water whloh rendered 

it necessary to abandon thewell. A log of tids 

well, sworn to by the operators and showing same 

carried to a depth of 7,584 feet, wasfiled In 

this offioe July 15, 1939, and on the same date 

there was reoeived from the Pure Oil Company, as 

assooiate contraotora, letter stating that said 

well, being the Gatewood Newberry No. l,.was 

abandoned and plugged on June 28, 1939., 

Y!he information as to the uncontrollable 

flow of salt water reaahed at approximately 7.500 

feet was given to this office in a letter from. 

Vinaon, Elkins, Weema & Franois dated July 22,.1939, 
Hon. Bascom Gilea, page 2, O-1185 

said firm being attorneys for the owner and lessor, 

Gatewood Newberry. 

"Under the lease contraat the operators have 

six months from the date of abandonment of the 

first well in whioh to begin another ten-thousandfoot teat, but since an uncontrollable flow of salt 

water was enoountered in the first well at a lesser 

depth, it is represented that the parties at interest 

feel that to project another ten-thousand-foot test, 

whioh would oost approximately twide as much as the 

projection of a 7,500-foot test, would be impracticable andfooliab. This difference in cost is, of 

course, occasioned by the difference in required dlametar of the two classes of wells. On this account 

they desire to have the lease amended so as to 

provide for the drilling of a series of 7,500-foot 

wells in lieu of the second of the ten-thousand-foot 

wells provided'for in the contract." 

Based on the facts .above set out, you propound four 

questions. In view of the answer we have given to the 

first question, we do not deem it neoessary to write on 

the other three questions. The first question is as 

follows2 

"Does.Gatewood Newberry, aa agent for the 

State-of Texas, under the provisions of the ~&inqulshment Aot, have the power to execute an amendi 

ment to suoh lease whloh would be binding on the 

State of Texas, the owner of the mineralsPn 

This question involves a oonstruotion of Articles 

5367 and 5368, Revised Civil Statutes of Texas, 1925, which 

oonstitute a part of the Relinquishment Act of 1919. The 

effeot of this Act has been thoroughly discussed by the 

Supreme Court in the cases of Greene vs. Rob!son. 117 Tex. 

516, 8 S.W. (2d) 655, and Rmplm & Fuel Company vs. 

State, 121 Tex. 138, 47 S.W. (2d) 265, uherein the court 

h-eTFthat the effeot of the Aat is that the surfaoe owner 

Is authorized to lease land for the development of oil 

and gas, and the State is entitled to reoeive one-ha!f of 

the bonus, royalties, and rentals (with a minimum of l/lGth 

royalty and ten cents per acre rental) received by virtue 

of a lease executed by the surface owner. 

There oan be no question as to the authority of 

the surface owner to determine in the first instance the 

terms and conditions under whioh he may execute an oil end 

gas lease of the land involved, .subject to the limitations 

hereinbefore and hereinafter note'd. ~Artiole 5368~~specifltally provides that the owner is authorized to lease the 

land for oil end gas "upon suoh terms and conditions as 
Hbn. Baaoom (liles, page 3, O-1185 

suoh owner may deem best, 

hereof". 

subject only to the provisions 

In other words, the State requires the surfaoe 

owner to lease the land for oil and gas under terms which 

he deems best, subjeot only to the other provisions of the 

statute with reference to paying the State Its proper share 

of the bonus, royalty, and rental, and other provisions of 

the statute such as those~pertainlng to the drilling of 

off-set wells and forfeiture of rights under the lease. rn 

other words, the surface owner cannot enter into any lease 

or contra& whioh in any manner ahanges the provisions of 

the law with reference to the execution of leases. We also 

believe that in entering into a contract which he may "deem 

best", the surface owner is required to exeraise good faith 

with the State and also not be negligent in securing a fair 

bonus and rental. 

The statutes do not require the surfaoe owrmr to 

enter into any speolflc oontract forthe drilling of wells 

to any particular depth, and apparently oontemplates that a 

lease executed by the surface owner will be the ordinary 

oil and gas lease, subject, of course, to the provisions, 

of the statute already pointed out. In view of this' sit- ,~ 

uation, it is our opinion that since the s urfaoe owner has 

authority to lease,the land upon such terms and conditions 

as he deems best, and adme he is not required to enter into any specific oontract Pertaining to the depth to wblch 

wells may be drilled, but has done so, he also has aqthority, if he deems It best, to amend the lease so as to change 

the terms with referenoe.to tlrs depth to whichwells may beg 

drilled. In other words~.we believe that it is the duty oft 

the surface owner, in aoting as agent of the State, to act in 

good faith, and not enter into any agreement which will 

prejudice the rights of the State in securing the poper 

development of the minerals owned by the State. 

Under the 1931 Sales Act'(Vernonts Article 54210), 

land is~ sold with the reservation of l/l6 of all minerals, 

exoept sulphur, as a free royalty. The State is not entitled to receive any part of the bonusor rental. Se~e Wintermann vs. McDonald, 129 Tex. 275, 102 S.W. (2d)l67.- 

While the State owns all the minerals in the lands 

sold under the Act of 1919, yet the only practical difference 

between the Acts of 1919 and 1931 is that under the 1919 Act 

the State receives one-half of all the royalty, bonus,:and 

rentals with a minimum of 1/16th royalty and tent osnts per 

acre rental, while under the 1931 Act the State~reoeives a 

free royalty of 1/16th of the minerals, dxoept 1/8th of~the 

sulphur, and does not reoeive any pcft of the bonus and 

rentals. Under the 1931 Aot. the State owns an interest in 

the minerals, and in the case of~Wlntermann vs. McDonald, 

supra, the question arose as to what procedure should be 
Hon. Basoom Giles, page 4, O-1185 

followed in making a mineral lease under the 1931 dot; 

that is, whether the aurfaoe owner alone muld make the 

lease, or whether it was necessary for the State to join in 

same. The aourt construed the Aat so as to authorize the 

surface owner to make the lease without the joinder of the 

State, and In the opinionstated: 

"The owner of the land acts as the 

agent.of the State ln making the mineral leases. 

This calls for the exercise of a duty by the 

land owner to the State. The land owner owes 

to the State good faith in the performance of 

the duty whloh he has assumed, and he should 

disollarge that duty with prudenoe and good 

faith, and with ordinary oare and dlligenoe.~w 

We see noreason why the same rule should not 

apply to the owner'of the surfaoe under a lease exeouted 

under the Relinquishment' Aot, and s~%nce the State does not 

require that leases executed under said Aot shall provide 

for the depth to tiich wells shall be drilled, we believe 

that this is a question to be determined by the owner of 

the land, and if he concludes that, it is to the best interest 

of hlmselP and the State to amend the lease, and he amends 

it in such form as to show good faith whRhiahe owes to the 

State, and it is done with prudence and with ordinary care 

and dillgenae, the amendment of the lease is authorized. 

.Of course, if there is any oonsideration paid for the 

amendment to the lease, the State will be entitled to onehalf of such oonslderation. 

Yours very truly 

ATTORNEY GRRRRAL OF TIEXAS 

s/ H. Grady Chandler 

BY 

Ii. Grady Chandler 

HGC:FG-cg Assistant 

Approved Aug. 22, 1939 

First Assistant Attorney General 

s/W. F. Moore 

Approved Opinion aommlttee 

by BWB, Chairman