i RNEY GENERAL
0~ TEXAS
Honorable James W. Swarts
County Attorney
Culberson County
Van Horn, Texas
Opinion NO. O-6097
Re: Taxation of undeveloped
oil and gas leasehold
&states, and related
questions.
Dear Sir:
We have received your recent letter requesting
our opinion relative to the above captioned subject matter,
Said letter is self explanatory and reads as follows:
“I woul’dlike your opinion on the following
propositions.
“This county has a considerable land
under lease for oil and gss and other mineral.
“Some of this presumptlve 011 gas and
mineral has been sold outrlght or at least In
part.
“1. Is the oil and gas lease, undeveloped,
subject to taxation? If 80 at what valuation?
“2. Is ,the mineral, 011 and gas which
has been purohased outright, subject to taxation
and if so at what value?
“It would seem that a straight oil, gas or
mlneral lease might not be considered property and
subject to taxation while an out-right purchase
of the mineral would be a title in realestate. The
former being only a right to prospect.
“3. If either or both classes are subject
Hon. James W. Swarts, Page 2 (No.O-6097)
to taxation, then might the state sel,lthe same
for delinquent taxes under the law providing for
sale of land for delinquent taxes?
"This is a matter which might ln-
volve the collection of considerable money for
county and state not only here but in other
counties.
"I would appreciate your opinion in
this matter and citation of any authorities bear-
ing on the question."
The following two Articles pertain to the ques-
tions Involved herein. Article 7145, V.A.C.S.:
"All property, real, personal or mixed,
except such as may be hereinafter expressly exempt,
Is subject to taxation, and the same shall be
rendered and listed as herein prescribed."
Article 7146, V.A.C.S.:
"Real property, for the purpose of
taxation, shall be construed to Include the
land itself, whether laid out in town lots or
otherwise, and all buildings, structures and
Improvements, or other fixtures of whatsoever kind
thereon, and all rights and privileges belonging
or in any wise appertaining thereto, and all
mines, minerals, quarries and fossils in and under
the same."
It is now firmly established in Texas that oil
and gas leases are realty and subject to taxation as such. See
Texas Company v. Dougherty, 176 S.W. 717~ Stephens County v.
Mid-Kansas Oi1 and Gas Company, 254 S.W. 290; State v. Down-
man 134 S.W. 787; Phllllp~s Petroleum Co. v. Townsend, 63 Fed.
(2dj 293; Prince Bros. Drilling Co. v. Fuhrman Petroleum Corp.
150,S.W. (2d) 314.
The above cases hold that no distinction can be
made as to the form of the lease and that an interest in land is
created, whether the lessor granted, bargained, sold, or con-
veyed the oil and gas to the lessee, or if the lessor let and
leased the premises with the authority to operate for and
Hon. James W. Swarts, Page 3 (No-O-6097)
procure oil and gas. It follows therefore that since an oil
and gas lease Is effective as conferring upon the lessee an
interest in the land, the value thereof Is assessable against
him for taxation. However, until there has been a severance
of the mineral estate from the remainder of the land, the tax
iB aBBeSSable against the owner of the land, as the rendition
of the land carries with it the full value of the land.
It is also settled beyond controversy that a mineral
interest in land, as well as the lessor's estate or Interest,
generally referred to as royalty, Is taxable as real estate.
See Sheffield v. Hogg, 77 S.W. (2d) 1021.
Mineral properties, whether same be a leasehold estate,
royalty Interest, or a mineral estate are to be valued at such
price as they would bring at a fair, voluntary sale for cash. The
value defined in the constitntlon and statutes is the reasonable
cash market value. Such profierty,when rendered, shall be valued
as of January 1st the same as other real property.
It follows, as a matter of course, that inasmuch as
such mineral interests are in fact realty, that the State could
bring a foreclosure suit for delinquent taxes thereon and sell
the same as provided by our statutes in reference to real estate.
Trusting that the above fully answers your questions,
we are
Yours very truly
ATTORNEY GENERAL OF TEXAS
Bys/ W. V. Geppert
W. V. Geppert;
Assistant
APPROVED Jul 13, 1944
W.P. Blackburn
Acting Attorney General of Texas
Approved Opinion Committee by BWB, Chairman
WVG:fo"bt