,
Mr. T. E. Allday
Audito+ of Oil
l!heUniversity of Texas" Re: Interpretationand
Austin, Texai Constltutloiiallty
0f'Sectlon 4, 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 dealing with
the payment of rentals
ana royalties on 011
and&as_ leases upon
land appropriatedto
the Unlverslty of
dear Mr. Allday: 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'oundthe following
-questions:
1. "Was It the Intention of the I&Is-
lature,.whenIt passed Cahpter 6 of the',Acts
of 1921, to repeal or nulllf~~.?ltheror both
of the $2 an acre considerationsdue to be
paid by the'permltteesunder 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 permits having.been
Issued on the University lands?"
2. "Is It your opinion that el&erSec-
tlon 14 of Chapter 71, or Section 14 as'ainended
ln Chapter 143 (both Chapters being Acts of
1925), had the effect of repealing or nulli-
fying the same considerationsshown ln ques-
tion 1, due.to be paid by the permittees under
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,you propound
the followingadditional questlofi'!.~-
3. "In the event you hold :hat It was
the Intention of the Legislature to repeal
the $2 considerations,which considerations
are mentioned ln Subdivisions1 and 2,0f
Section 7 of Qlapter 83 of the Acts qf 1917,
with (hapter 6 of the Acts of 1921, or o.lth
Chapter 71 of the Acts of 1925, or wi.$hboth
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 inquiries are directed into two groups,
.thefirst group comprising leases Issued under and by
~vlrtueof the provisions of Chapter 83 of the Acts of 19X-7
.and Chapter 6, Section 4, Acts~of 1921; the SeGOnd grouti.
~comprls%ngleases thatwere Issued under Chapter 83.of the
Acts of 1917 and Chapter 71 of the Acts of 1925 (Section 14)
.asamended by 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
,contalnedlnicha@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'respectto leases falling In
.the first group described In your letter.'.You further
.state that the Commlssldnerhas construed.Sectlon14 of Chap-
ter 71 of the Acts,of 1925, as amended by Chapter 143, of the
Acts of 1921, so as to repeal and abolish .therequirements
of Chapter 83.with respect to the $2.00 pe3'_acrecase pay-
ment and the $2.00 per acre annual payment:on.l.easesfalling
In the second group described ln your letter'.'
A consdleratlonop the questlons~&u have asked
necessarily requires a careful review of the relevant statutes.
On March 16, 1917, Qlapter 83 of the Acts of 1917
was approved. Such Act was a comprehenslxeamendment to the
.1913Act, and provided that all Unlirerslty,public school
and other lands deslgnat~edIn the Act, should be open to the
prospectingfor and developingof~mlnerals,, includingpetro-
leum and natural gas "upon the terms and cgr)clltlons
prdvlded
In this Act."
&. T. E. Allday, page 3 (o-730)
Section 2 of Chapter 83 provided Gnat any person
"desiring to obtain the right to pmaect for and develop
the minerals. . .that may be in any of the.areas included
herein may do so under the provisions of I&Is Act, to.gether
with such rules and regulationsas may be &dopted by the
Commissionerof the General Land Office relative thereto. . ."
Section 3 provided for the filing ielththe Courity
Clerk of applicationsto obtain the rlght,.toprospect for
and develop petroleumand natural gas in surveyed areas
covered by the Act.
Section4 provided for the flllng with the'~'County
Surveyor of applicationsto obtain the right to prospect for
and develop petroleumand natural gas ln WJ$ of. the unsur-
veyed areas Includedln the Act.
Sectloti5 prescribed the duty of th%'~'Commlssloner
of the Genekal Land Office upon receipt by him of an appll-
,catlonafter same had been filed with the$ounty Clerk or the
Surveyor, and such section also provided that such a fll$s-
tlon should be accompaniedby field notes.and plat, s
flllng fee and 10 cents per acre for each acre applled'for,
also a sworn statementby the applicant shpwlng certain facts.
Section 5 then provides as follows:
"And If upon examinationthe ap&catlon
or the applicationand field notes are'found
correct and the area applied for Is wltti.the
provisionsof this Act the Commission shall
Issue to the applicant or his assignee a'permlt
conferringupon him an exclusive right to pro-
spect for and develop petroleum and natural gas
within the designatedarea for a term not to
exceed two years."
Section 6 prescribed the time ln.,Whlch
the owner of
a permit should begin In good faith the ac$ual work necessary
.to the physical developmentof said area;ijSkev@edfor the
filing of an affidavit stating that such work had been begun
and the extent of.such work and the expendituresincurred
therein and a statementof whether or ~not.petroleum or natura
gas had been discovered In commercial quantl~les. The Sri@1
sentence of Section 6 reads as follows:
"The owner of a permit shall not 'take,carry
dwaiyor sell any petroleum or natural gas before
obtaininga lease therefor; provided, puch quantity
as may be necessary for the continued development
Iir.T. E. Allday, page 4 (o-730)
of the area before ;dblM.nlnga lease may,be
used without accountingtherefor.” .
Section 7 of Chapter 83 providesas followsz
“If at any time within the 1lfe;of a permit
one should develop petroleum'ornatural gas In
commercial quantitiesthe owner or manager
shall file ln the Qeneral Land Office a state-
ment of such developmentwithin thirty days
thereafter, and thereupon the owner of~@e per-
mit shall,have the rlght to lease the.abea ln-
eluded ln the permlt upon the’followlngconditions:
'1. An applicationand a flrst,$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,rnaturaLgasZ.3.n
d .~C c;ol;ilitirclal
qr;iult-$@s,
-.
‘2. Upon the payment of two dolJ.arsper
acre for each acre ln the permit a lease shall
be Issued -fora term of ten years or .less,as
may be'desired by the applicant,andalth the
option of a renewal or renewals for ti iiciiial
- _--
or shorter period, and'annually af$#&:thaj.expi-
ration of th,efirst Year after the date.or ~the.
lease.the sum of two dollars per acre .shall
-....- --
Id during the llfe of the lease,;.and In'
Ion thereto the owner of the lease &iiTl
pay a sum of money equal to a royalty~ofone-
meter optput of all gas disposed of MS the
premises. .
‘3. The ro~lties shall be pa2't.o he
State through the Gommlsslonerof the.Qeneral
Land Office. at Austin, monthly durlng.t@e.,,llfe
of the lease. All payments shall bepc~uapanled
by the sworn statementof the owner or m@qer
or other authorized agent showing thq(amount
pqduced since the last report and th,emarket
value of the output and a copy of all plpe.llne
recelptxi>tankreceipts, guage of
which petroleum may have been,run,
checks and memoranda of.amount put out
Mr. T. E. Allday, page 5 (o-730)
g'lpelines or tanks or pools. The books and
accounts, the receipts and dlscharges.ofall
pipe lines, tanks and pools and gas &lnes and
.gas pipes and all other matters pertainingto
the production,transportationand mafketlng
.ofth,eoutput shall be.open to the ex,am+atlon
and lntipectlonat all times by the C+ssloner
of the General Land Office or his rey(re+,enta-
tlve or any other person authorized lw me
Governor or Attorney General to repraaent the
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
produced upon the leases areas and t&e lmpyove-
ments situated thereon to secure the.papen$
of any royalty and any sum due the $t,ate,aris-
-1ng under the operation of any portion qf this
Act
4. The permit or lease shall o&au 'the
terms upon.whlch It Is issued lnclu1In&the
authority of the Commissionerto require the
.drllllngof wells necessary to offset wells
drilled upon adjacent private land, and 'such
other matters as the Commissionermay dee@~
lmportantto the rights of the appllcent,or
the State."
Section 16 of Chapter 83, in pant,;provldesas
'follows:
"The payment per acre required t6 be
made before the Issuance of a permlt.shall
be paid annually thereafterduring tb life
of the permit or lease. A separate urlt$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 embrace a divided area Whole
tracts of surveyed land may be appllad.$oras
a whole or In eighty acre tracts or multiples
thereof without furnishing field noteg-therefor.
A duplicate of every permit and lease++hallbe
kept In the General Land Office. The area In
each permit shall be developed Independentlyof.
other areas."
Chapter 83 of the Acts of 1917, with the amendments
&. T. E. Allday, page 6 (o-730)
hereinafter noted, continued In force as the basic law
governing the Issuanceof permits and leases for 011 and
gas In University lands until the effect1v.e date of Qlapter
71 of the Acts of 1925, approved March 10,..1925. Prior to
the enactment of Chapter71 of the Acts of 1925, several
amentients were made to Chapter 83, but, %n opr.opinion,
only one of such amendementsIs material ljothis opinion.
Such amendment Is Chapter 6, of the Acts of 1.921,approved
..February3, 1921.
By the express terms of Section.l of.Chapter6 of
the Acts of 1921, such amendment purported,tpapply~only to:.
"Permits to prospect for oil ani &here-
tofore Issued on University land, and P&r
School land which Is unsold at the tlmre.thls
Act goes Into effect, river beds, PI!,channels
and fresh water lakes'and Islands theein, and
which have not expired. . .'I
And also tici.
"All permits to prospect for oli%d gas
heretofore Issued on .saldlands and ape&s and
all permits heretofore Issued after the.Mneral
Act of 1917,went into effect... .whlah have
ejcplredat the time this Act goes Into efcect,
but on which the drilling of a Well Qr wekls
has been begun ln good faith, or with ref'er-
ence to which permits and the right of.$he
owner of the same to the possessionqf the
area Included therein bona 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
.permltsas describedabove should be ex'tended"so that they
shall remain In full force and effect for a period of five
.years from.the date of the Issuance OF the.permit, condl-
~tloned-onlyupon the performanceof the terms of this Act."
Section 4 of Chapter 6 provided,&hat:
"If 011 or gas should.be.productW'in Ay-
ing quantities-uponthe area Included 'inany
of the permits included In this Act, -@e owner
of'the permit shall report th developmentto
the Comfnlsslonerof the Gene& Land Office
within thirty days thereafter,and apply for a
Mr. T. E. Allday, page 7 (o-730)
lease, accompanyingthe application With 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;lor
renewals." .
Tne question IS thus presented &'to ihether Section
4 of Chapter 6, properly construed, repea&ed and abolished
.the requirementsspecified In Section 7 oC.Chapter83,
.Acts of '1917,that a permittee, before be- entitled to a
.lease, should pay to the State $2.00 per tire for-each acre
lncludea within his lease. and that In addition $2.00 per
acre should be paid tkeresfter annually dur thenlife
of the lease. Clearly, Section 4 of Chapt,er
3 was not
intended to affect in any manner permits Qsued, subsequent
.to the effective date of Chapter 6, because Its operation
Is expressly limited In Section 1 thereto.to"dermlts here-
tofore Issued". If Section 4 of Chapter 6 IS.construed so
es to repeal and abolish the requlrements,of.the$2.00 per
acre cash payment and the $2.00 per acre &nnual payment
required by Chapter 83, or either of such,&ments, such
.constructlonand effect must, necessarlly,,be,limltedso
as to apply only to leases resulting from.permlts5ssued
prior to the effective date lof=Chapter6. Permits issued
.subseqent to said date would be wholly !.u@fectedby the
.Act un1er any constructlonthereof. We pwtpone any fur-
ther discussionas to the proper constructionto be given
to Chapter 6 to a subsequentplace In this opinion.
No other amendments with which ue are now,con-
cerned were made to Chapter 83 of the Acts of 1917 until the
enactment of Chaptex 71, Acts of 1925, apwoved,March 10,
1925. Chapter 71, Acts of 1925, was a coqrebenslve Act
-dealingwith the sale of 011 aridgas leases on unsold Unlver-
slty land and upon Unlversltiyland which MaQ been sold with
.mlneralreservationprior to the effectlve,datepf Chapter
71. The operation of Chapter 71 was expresslylimited by
the final clause of Section 1 of the Ac%.wkiichreadk as follows:
"Provided,011 and gas permits ax&leases
outstanding shall not be affected,by.thlsAct
except as provided ln Section 14 theceof."
Section 14 of Chapter 71 provld&:
"All oil and gas permits heretokore ls-
sued upon lands Included herein and noirin'
force shall be extended for a term of five
years from date thereof andkknever production
or. T. E. Allday, page 8 (O-730)
Is secured In paying quantitiesand t&e pay-
ment of royalty begins, the owner shaJ& not
pay any further annual money rental.;.Pfter
production Is secured In paying quant#les
the owner shall be entitled to a lease_which
shall run so long as the area covered.byhis
lease produces 211 or gas In paying puan-
titles, subject to the provisions of.thls Act.”
Chapter 143, Acts of 1925, approved March 30, 1925,
by the same Legislature which enacted Chapter 71, amended
Section 14’of Chapter 71, so that Section.14 shall there-
.after read as follows:
“All oil and gas permits heretogore &d
hereafter Issued upon lands IncludedJzereln
and which have not expired shall be -tended
for a term of five years from date t@reof
conditionedonly upon the payment of.the.annual
rental, as provided by law, In advance
and whenever production Is secured ln’.pay$ng
quantitiesand the payment of royalty begins,
the owner shall.not pay any further apnual
rental money. After production Is secured in
paying quantities, the owner shall be entitled
to a lease which shall run so long a&the area
covered by his lease produces oil or.gas In
paying quantities subject to the prav.lsions
of this Act.”
;*y*
r On the same day, March 30, 192~~~Cha$5er140, Acts
of ,LSLj, was approved by 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
Session of the Thirty-fifthLeglslature,ap-
proved 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 desired by the applicant,
and with the option of a renewal or renewals
for an equal or shorter period, 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 life
Mr. 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-eighth of the value
of the gross production of petroleum.- The
owner of a gas well shall pay a royalty of
one-tenth of the value of the metre output of
allygas disposed of off the premises;;provided, i
however, that the provisions hereof as to the
payment of two ($2.00) doll.arsper acre dur-
ing 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
acres but not In excess of five hundred t5001
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 expenditurebf>sald amount tUntitled Texas Attorney General Opinion
Combined Opinion