Untitled Texas Attorney General Opinion

. ’ ATTORNEY OFTEXAS AUEITIN 11. TEXAS PRlCE DANIEE Febrorzy 17, 1950 Hon. C. Ii.Cavness OQinlon Iwo.v-1000 State Auditor Austin, Texas Rer Whether casinghead gas pro- duced and vented to atmos- phere is within the royalty reservation of “7/48ths of the gros~sprOdUCtiOn Of gas, or the value of same* in a Dear Slrr State lease. Your request for an opinion reads in part as follorsr "From the lnforuationwhich we have re- ceived frou the Rumble oil b Refining Cow pany and records filed in the general Land Office, we have noted that gas produced from the le8se designated 88 Mner&l File Ro. 20001 Is being vented to atmosphere. Cur oorreepondenaewith Rumble Oil & Refln- ing Coa~any lndlcatas that all gas so vent- ed Is aaslnghe8d gar. l%& Rumble Oil & Refining Company fmther states that no gas produced from 688 wells has been vent- ed. If a detailed examinationproves that all of the g88 so vented is easinghead gas o nly,we l8& your opinion of the follow- ing questions: "1. Should bplnion Ho. v-$75, dated January :13,1948, be coustrued to mean that gross production on which romlty Is due the state Include aaslngheadgas that is vented td atmosphere? *2. If Rumble 011 & Reilnlng Company uses either casingheadgas or any other gas on the lease for any lease purposes, should royalty be due the State of Texas on,the value thereof? Eon, C. H. Cavness, page,2 (V-1000) "We are attaohlng hereto photostatic COPY of a letter dated December 16, 1947 fl?OlS the Rumble 011 h Refining Corpany in whfch they explain that all gas vented to atmosphere from Lease lo. 20001 has been casingheadgas.* The lease designated as Mineral File lo. 20001 in your letter was the subject of Attorney ffen- era118 OpinionsX0. v-475. In that opinion.ltwas stated: "The mlneral lease you subs&t embodies mineral reservationsidentical In terms (ex- cept for the aunaat) to those ainlmua min- era1 reservationsrequired by the Statute, aupra. He Shall~oOnBtNe,the aineral reser- vations of this leaee, therefore, by con- struing those minimum nlrieralreservations in the Statute. lhwln thla caee the pro- vislons of the lease, parallelingthose mlnlmum mineral reservationsof the Stat- ute, should be governed by the Statute.n It will be noted that In Opinion 130.V-475, supra, the mlneral reservationsIn the lease are con- sidered identical In terms (except for the amount of royalty) with those ainlmm reservationsset out in the statute (Section 10, Article 54210, V.C.S.). Although the result reached in that opinion is correct, since the opinion erroneouslytreats the royalty clauses in the lease as tracking the minimum reservationsrequired by the statute, the language of that opinion is modl- fled so as to m&e the same applloable to the terms of the lease rather than the alnimm terms of the statute. Nlneral Lease lo. 20001, whibh is the sub- ject of your request for an opinion, was executed pur- suant to House Bill 358, A&s 42nd Leg., R.S., 1931, and provides for royalty reservations aa follows! 0... 7/48ths. of the gross production of oil, or the value of same, that luaybe produced and saved, and 7/48ths. of the gross production of gas, or the value of same, and 1/8th. of the gross produotion of sulphur or the v8lue of same, that may be produced and sold off the area, aad . - Hon. C. A. Cavness,,page 3 (V-1000) one-slxteenth.,of the,, ,valueof~all other minerals, that.wy be, addltldiial,pa &of ST&h. of 41Bh&;'or duced and sa*ved+,& a+ tract." Therq Is "(;'&iX~'defi&&distincti~nin law betwe,engas produced A\o&I&'gds :relland casinghead ~~~~m.~~~~~~~~do~O19, House Bill 358 and prlof.to th‘e'executionof the lease, the courts had defi#+ely con&ude.d that "casinghead gas* isincluded @thin the term "oilyLanda conatitu- ent 0r "01'1~~'In questions such as you present it had been.de$ermined~(wlthrespect,to private leases), that ."casinghe~+d ga's"reserved Is governed by the '611" (as dlstiiguishtidfrom the '"&as")~'royaity're&ervatlon in the abs,enceof"-s~ecir,ic r,eservationprovision for "casinghtadg&s. LIvingston Oil Corporationv..Wau- 273 S.W. 903, 906 (Tex. Civ. App. 1925, error terminativeof the questions Involved, to be drawn be- tween private and State leases. Utiderthe~rule announced in the above case&, "casingheadg+&* la undoubtedlywith- in the 011 royalty 'clpus,e:of~,tb$ lease. For a critical analysis of these decisltins,see Hardwicke, Evolution of Casinghead Gas Law as,4$;929)j8Tex. Law. Rev. 1, 16; 3 Summers 011 and Q . Having concluded,therefore, that "casln#head gas" fall8 within the mlneral reservation of "oil, under the terms of Mineral Leas& lo. 20001 the State is to rectiqe as royalty'on,tNs lea~~,"7/~8thsof the gross produ&lon" of "cas$nghe&d~gasyor~'%he,value of same, that may be ptioducedand s@ved." The words pro- duced aridsaved are clear and beyond dispute. "Save" Is defined ln"Webster'&Hew Inte~~tlonal~Dlctlonary, Second Edition, Unabridged~(1938)#,,@%atch~,' *to keep from,beMg $pect, tiasted,dr lobt,: "to retain or keep Qas vented or lost to atmosphere $6 not (+a6ueed "ofithe 'lease for any leati~e purpose*~ls ";a*edin $X answer.%% your first question, therefore, it IS bur opinion that the State may'not claim rOYaltY Hon. C. 8. Cavneso, page 4 (V-1000) on that caslnghead~gasthat 1s lawfully vented to at- mosphere. However, we cal~lyour attenltlonto the fact that In such cases the Railroad C-salon has the power to prevent suoh w&l and,waste or gas In ILC- cordance with the resent deo slons in Rumble 011 & Re- *f~ fInI= Co. v. Railroad Comslssion, 223 S.W.2d 785 (S . 226 500 [Tex. Clv. App. X949* error ref.). With reference to your secrondquestion, how- ever, since we have coneladed that the State 18 entitled under Mineral Lease lo. i3X3Ckto "7d48ths of the gross production" of %aslnghead gas" or the value of same, that say be produoed and saved,"';ltfollows in auf; opinion that the State is entitled to royalty on casfng- head #as that 18 used 'on the lease for any 1SaSh pvr- pose. In your second question ou have further re- quested our opinion as to whether fhe State is due royalty for the use o? 'any other gas on the lease for lease purposes." We believe this was'answered in our Opinion Ro. V-475 in which we held that under Mineral Lease no. 20001 the state 1s to receive *7/48ths*of. the "entire" production of grs, regardlesso? what 1s sold "ofr the area," and 'without any deductions"for gas used on the premises or in the developmentof the lease. "CasingheadgaIIg being w&thin the reservation of "oil* in State le8ses, under State Wineral Lerse Ho. 20001, reserving "7/48ths of the gross produotlon of oil, or the value of same, that may be produced and srved,' the State may not claim royalty on "casingherdgas v-ted to atmosphere." However, the R8llroad Commlsslonhas the Hon. C. H. Camera, page 5 (V-1000) Railroad Co~Isrlon v. Flour Bluff 011 w, 219 s.u.2d 5UQ (T8X. Clv. AQP. error Fe?*). The State 18 entitled to "7/48ths* royalty on casingheadgas produoed and used "on the lease for any lease purpose." Under the lease, the State Is en- titled to "7/48ths* of the '&tire" pro- duction of gas (other than casinghead) without deduction of the quantity us:d "0" the lease for any lease purpose. Yours very truly, PRICE DAMIBL Attorney General APPROVEDI BY: Everett Hutchinson Charles D. Mathtrs Assistant Executive Assistant Price Daniel Attorney Qeneral RR:db