Court Opinion

ID: 4140612
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:01:16.304866+00
Date Added: 2024-06-11T13:28:50.494169
License: Public Domain

B:Y        GENERAL

                                           AS

Honorable Bascom Giles
Commissioner
General Land Office
Austin, Texas

Dear Sir:                               Opinion No. O-5700
                                        Re: Power of Commissioner      of General
                                             Land Office to accept for filing or
                                             to approve mineral lease with pool-
                                             ing clause.

            Reference  ts made to your letter of recent date to which you attached
a copy   of an oil and gas lease relating thereto.  Your letter is as follows:

           “There has been tendered to this department for filing the en-
   closed mineral lease.    This lease was executed by the land owner on
   a small tract of scrap land sold under Chapter 271, Acts of the 42nd
   Legislature,   Regular Session,  1931. This law and the application   to
   purchase provide for a reservation    to the State of a free royalty of
   l/8 of the sulphur and l/l6 of the other minerals.

         “The lease in paragraph five (5) thereof provides for pooling
   or combining this tract with other tracts whether owned by the les-
   see or not for the purpose of creating drilling units, and as to the
   payment of royalty the lease provides as follows:

          “‘In the event production  of oil, gas, or other minerals   is ob-
   tained upon any unit or units created hereunder Lessor       shall receive
   and will accept on account of any such production,     regardless   of whe-
   ther or not such pro,duction is on any part of the land herein above
   described,   a royalty equal to such portion of a l/8 royalty as the
   number of acres out of this lease and included in any such operating
   unit bears to the total number of acres included in the respective       op-
   erating unit. ’

          “If the above provision in the   lease is binding on the State, the
   State would share in the production     from the unit on the basis of l/8
   of the sulphur and l/16 of all other    minerals figured in the proportion
   that the acreage in this tract bears    to the total acreage in the unit.
Honorable               Bascom               Giles,   Page          2 - O-5700

           With the above facts in mind, I would like to have%           %enef&I:~f~~!:‘~~
                                                        ” ;; ,..IY’
                                                                  .x,,i ,;<:I :.: ,‘,’
                                                                                     ~,,,.I.I ,’; /
     your opinion on the following question:

            “(1) Does the Commissioner        of the General Land Office have
     the legal authority to file in this office or to:gijli~o’i~‘a~‘~in2~al.‘l.~g~~
     such as the above providing for a combination        of a tra&“m’whYch-‘the
     State has a mineral interest fixed by law with othe&racts,,          ‘in’whtch~’
     the State has no interest, in order to form a drilling unit,?’             ,’
                                                                                                    Case (1o2 s w ZQ7),
                                                                                          Sales Act of 1931) as fixing the
                                                                                           and l/16 of all &her minerals,
                                                                                          of the Bonus and rental for a
     lease         executed                 l$‘thelan$’        owner,                     We have also followed this con-

       ‘It    i;.,~~hl:ib~ttck~‘~$rt.bi                   ise’c’t’,dn.i~,~f’~iiusi’Bil~                       qbrd~idCs          bls   ,fol-

    lows :
.~i ~;                                                                                                                    .,/.
       ,,;t; ~i::jiii, ‘,::,,; ‘,iI/,i            ~:,~, “:        : :’               :       ;‘):: :
    ,““i’,‘i ;“ProvibedT ‘however, that’nothing ‘in this Act shali be construed
““a’s,i%m’dvingfrom        oi’~ntcrfering,wtth    tlie”rtghts and ‘powers of the
” sur’fac’e ‘own& ofian,di:sold ‘or to ‘be hereafter’ s’old ~by the State, with
  “a ‘min&ap ~re’servation,, to act. as’ agent of’the State in making’ and exe-
    cuting mineral leases covering and ‘a’ffecting ,such lands, but the auth-
    ority of such surface owner shaDremain              the same as provided by law,
    a~nd’117 Tex. 516,                 8 S. W. (2d) 655; Empire Gas & Fuel Co. v. State,
     121 Tex. 138,                 47 S. W. (2d) 265, 274; Lamar v. Garner, 121 Tex.
     502, 50 S. W.                 (2d) 769, 773.

            $$@@9:8%the    Legislature    passed the Repurchase      Act (Chap-
   ter 94, and amended by the Acts of the 39th Leg. in 1926, 1st C. S..,
   p. 43, c. 23, article 5326a, of Vernon’s Annotated Civil Statutes).
   Section 3 of the act (Vernon’s       Ann. Civ. St., art. 5326a, 4 3) con-
   tains, the following ‘lapguage:      ‘One-sixteenth    of the oil and gas,
   and all of other minerals       in the lands included herein, whether
   known or unknown, are expressly           reserved   to the public free
   school fund in the event the forfeited        sale was with mineral reserva-
   tion ,. ’ The act was construed by this court in the case of Magnolia
   Petroleum      Co. v. Walker, 125 Tex. 430, 83 S.W. (2d) 929, and it
   was held that the land had previously          borne a mineral classifica-
   tion, and that when the land was repurchased            under that act it was
   repurchased      under the same classification,       and that all minerals
   were reserved      to the State. It was also held in that case that the
   Act of 1925 should be @oustrued in connection with other laws re-
   lating to this subject,    including article 5310 and the Relinquishment
   Act.

           “In 1931 the 42nd Legislature     enacted Senate Bill 310, chap-
   ter 23, article 5368a of Vernon’s     Annotated Texas Civil Statutes,
   which provided that title to fifteen-sixteenths     of all minerals    in
   all lands described    in said act is vested in the owner of the soil,
   and one-sixteenth    of the minerals   as a free royalty was reserved
   to the State, in case of production,    and the owner was authorized
   to develop said minerals,     and might make such leases or sales
   of same as he might deem proper, subject only to the reservation
   of the State’s one-sixteenth    free royalty interest.    The act further
   authorized   the owner of the land, on his behalf and as agent for the
   State, as to the royalty reserved     by the State, to develop said miner-
   als, or to sell or lease said land for oil and gas and other mineral
   development    and production,    and shall deliver to the State a one-
   sixteenth part of said oil or gas or other minerals        free of cost.
   Because this act violated several provisions       of the Constitution,
   it was declared   void in toto in the case of Empire Gas & Fuel CO.
   v. State, 121 Tex. 138, 47 S. W. (2d) 265.
Honorable   ‘Bascom     Giles,   page 6’-   O-5700

             “House Bill 358, the act under consideration     (now article
     542lc, Vernon’s Annotated Texas ‘Civil Statutes), was enacted by
     the 42nd Legislature   in 1931, c. 271,‘shortly after the enactment
     of SenateBill   310. Both laws were passed by the same Legisla-
     ture, and Senate Bill 310 was on the books, and had not been de-
     clared ,invalid, when Hous,e Bill 358 was passed.     It clearly ap-
     pears that House Bill 358 was enacted under the belief that Sen-
     ate Bill 310 was a valid law, the owners of school land previously
     purchased would have the right to execute leases, for themselves
     and as the agents of the State, on the land for development      of any
     mineral, which would include oil, gas, and sulphur.

             Before the passage ,of the Relinquishment     Act in 1919, the owner
of public free, school and asylum land, sold with minerals       reserved   to the
State, could not validly execute     an oil and gas lease on this land. Wtth the
passage of this Act, all public free school and asylum land sold, or there-
after sold, became     subject to its terms except that land on which there was
a then outstanding oil and gas lease; this became subject to its terms at the
expiration   of the lease, or in the case of production,   at the cessation   of pro-
duction.   While all lands once subject to the provisions     of the Relinquishment
Act remain so, this Act was replaced by the Sales Act of 1931, House Bill 358
as passed by the 42nd Legislature       in 1931. This original Act and the amend-
ment to it are now known as Article        542lc, Vernon’s Annotated Civil Statutes.
Thus, we find that all public lands in Texas in which the State has a mineral
reservation,    sold or to be sold, are subject to the terms of one or the other
of these Acts.

            Under the provisions   of Article 5368, of the Relinquishment       Act,
and the Act of 1931, Article 5421~ and the amendments         thereto, the owner of
the land is authorized as agent of the State to lease the land for oil and gas on
such terms as he deems best, however, the authority of the owner as agent
of the State and the terms of the lease are subject to the provisions       of law
under which the land was sold and to the cumulative       effect of all mineral laws
of Texas not repugnant to the particular     Act. Regardless      of which Act may
govern in a particular   case, we find that in each there is a definite reserva-
tion to the State of a minimum of one-sixteenth     (l/16) free royalty.

            Article    5368 provides    in part:

            u. . . .   No oil or gas rights shall be sold or leased hereunder
     for less than     ten cents per acre per year plus royalty, and the lessee,,,,
     or purchaser       shall in every case pay the State ten cents per acre per
     year of sales     and rentals; and in case of production   shall pay the State
Honorable   Bascom               Gile~,   page 3 - O-5700

     the undivided one-sixteenth of the value of the oil and gas reserved
     herein, and like amounts to the owner of the soil.”

            Article              5421~ provides   in part’:

             “Sec. 1. All lands heretofore  set apart in the public free
     school funds under the Constitution and laws of Texas, and all of
     the unappropriated    and unsold public domain remaining in this
     State of whatever character,    except river beds, and channels, and
     islands, lakes and bays, and other areas within tide water limits,
     are subject to control and sa,le under the provisions    of this Act.

            ,I. . . .

            “Sec. 4. All land shall be sold without condition of settle-
     ment and with a reservation    of one-sixteenth (l/16)  of all minerals,
     as a free royalty to the State, . . .

            44
                 .   .   *   .

             “Sec. 8. All islands, salt water lakes, bays, inlets, marshes,
     and reefs owned by the State within tidewater limits, and that portion
     of the Gulf of Mexico within the jurisdiction     of Texas, and all unsold
     public free school iand, both surveyed and unsurveyed,        shall be sub-
     ject to lease by the Commissioner      to any person, firm, or corpora-
     tion for the production of minerals,    except gold, silver., platinum,
     cinnabar, and other metals, that may be therein or thereunder,         in ac-
     cordance with the provisions     of Chapter 271, Acts of the Forty-second
     Legislature,    as amended, and Subdivision    2, Chapter 4, Title 66, Re-
     vised Civil Statutes of Texas of 1925, relating to leasing public areas,
     in so far as same is not in conflict herewith.      Provided,  however,
     that nothing in this Act shall bk construed as removing from or in-
     terfering with the rights and powers of the surface owner of land
     sold or to be hereafter    sold by the State, with a mineral reservation,
     to act as agent of the State in making and executing mineral leases
     covering    and affecting such lands, but the authority of such surface
     owner shall remai’n the same as provided by law, and is no wise
     abridged,    modified or removed by this Act. As amended Acts 1939,
     46th Leg., p. 465, 5 2.”
Honorable   Bascom           Giles,   page   @ -0-5’700   ’

            The term “free royalty’: was de,fined by Mr.      Justice Greenwood
of the Supreme Court in the case of Sheffield vs. Hogg,       124 Texas 290, 77
S. W. (2d) 1021, as:

             “The.,ter,m ‘free ,royalty’ introdu,ced into this Act must
     mean that the interest reser~ved to fhe State and the mineral,6
     produced on sc,hoo,l lands sold under the terms of the Act,
     must no,t bear any expense of the produQ,tion,, sale, or delivery
     thereof.“,

             Following    the rule announced in the case of Magnolia Petroleum
Company vs. Walker, supra, we find that public land leased for,oil and gas
is subject either to the terms of Article 5369 of the Relinquishment     Act or
to the terms   gf Arttcle    5359, Vernon’s Annotated @vi1 Statute.s. Since they
are similar in language,and effect, we cite Article     5359, which is as follows:

             “If oil or gas should be produced in commercial      quanti-
     ties in a well on an area privately owned when such well is
     within one thousand feet of an area leased hereunder,       the
     owner of the lease on such State area shall, within sixty days
     after the initial p.roductipn on such.priv$tely   owned area, be-
     g,in in good faith and prosecute   diligently the drilling of an
     offset well or wells on the area so leased from the State. . . .”

            In addition to that part of paragraph five of the attached lease,
which you quote in your letter, there is the following provisionf$that   is im-
portant here:

            ,I
                 . The commencement
                     .   .                of a well or the completion    of
     a well to produi;tion, and ~the production    of oil or gas therefrom,
     on any portion of ,an operating,unit    in which a,11 or any portions
     of the land described   herein is embraced      shall have the same ef-
     fect, under the terms of t,h,is,lease ,as if a well were commenced
     or completed   on the land embraced      by this~lease. , . .”

            Summarizing    the cumulative effect of these laws, we deem it
sufficient to say that the term:s pf.a lease containing a pooling clause, such
as is in the attached lease, are not in accord with the mineral laws of this
State as they relate to public lands.   Under the terms of this lease, the State
would not receive the minimum one-sixteenth       “free royalty” as is reserved
by law, nor would the lessee be required to offset and develop p’+&c lands
as required by law. It is the opinion of this department that the land owner,
as agent of the State, does not have the authority to execute such an oil and
Honorable   Bascom   Giles,   page $: -0-5700

gas lease, nor does the Commissioner      of the Genera’1 Land Office      have the
legal right to accept for filing or to approve such a lease.

            This offic,e has previously  held in Opinion No. O-853, written to
the Railroad Commission      of Texas on May 30, 1939, that the Railroad Com-
mission does not have authority to ma’ke.a regulatory     order repuiring the
owner or owners of small tr.acts of land to pool or combine them with other
tracts as a prerequisite   to granting a drilling permit for oil or gas.

            With reference,~to,the second part of yo.ur letter, this is to advise.
that the constiuction  your office has given the Sales Act of 1931 is in accord
with,that given by the Attorney General in Opinion No. O-458, written to you
on July 18, 1939, copy of which is attached.

             We +I   consider your sec,ond and third questions together since
 House Bill 9, Acts of 1939, amending House’Bill     358, Acts of 1931, did not
 change the effect of the original acts as it relates to your ~questions.  The
‘ortginal act and the amendment to it, ar’e now ,codifted as Article  5421~ in
 Vern,on’s Annotated Civil Statutes.

              Then Supreme Cou.rt in the case of Wintermann vs. McDonald,
supra,   interpreted   Article 5421~ Ln this respect, as follows:

             “House Bill 358 and the Relinqu,ishment    Act should be con-
     strued together.    It 1S plain that the 1931 Act is not intended to
     repeal the Relinquishment      Act; nor does the Relinquishment   Act
     occupy the field cover,ed by this law. Th,is law covers a wider
     field than the Relinquishment      Act. The land sold under the pro-
     ,visions of this Act will be governed by the terms thereof, and not
     by the terms of the Relinquishment      Act.  (E,mphasis ours)

           It follows that your second and third questions are answered in the
negative, which. is in accordance  with the holding in our Opinion No. O-458,, ad-
dressed to you under date of July 18, 1939.

                                                 Yours   very truly

FIRST ASSISTANT                                                Assistant
ATTORNEY   GENERAL
                                Chairman
JWR :mb