                                                                                121
                              OFFICE             OF




Bonorable BB8ocm Oil88
o~~i881~8i8r, 08n0ni wit3 ofri00
Austin, Tsxas
Dsar Slrr                              opinion    no.    0-6233
                                       80:   AuthorItr and duty or
                                             CcanI88Ioner of 0oneral
                                             Land ostiaa uadsr fwo. 4a
                                             Of mu80 Bill lo. 9* Act8
                                             of   46th    ~~gls~turs,   1939,
                                             to sxulne       and approve,
                                             kfors fIlla!& loam. on
                                             land8 rubjoot to pcorI8Ions
                                             of RolInquI8bmemt Aot, and
                                             rslatsd qu88tIoIl8.

          He hn   pur letter of recent drte In vhloh
you rsquest this dspartwot to rdoi8e rou on the to11wlng
qu88tIon8r
            '1.   The ltent
                          of th8 authorIt
     oonferrqd 01).
                  thm C~I8mionmr   of obaoral Land
     OfrIo by tlrtus OS the lcrsataentOS Bee. k
     of H. 1).9, Aots of 46th k~ld.aturo, .1939.

          ‘2.  Do88 88otIam 3 of the Ollurd
     pm luiom~muhIttod to puu        nqulrod~
     aat. k of RI.B, 9 (Art. !34210-2)confliot
     With thm prO+f8fO5B 6i th0 8O~ingUiBbD~t Act?'
          In oooruatl~ with -Tourfirst que8tloJlw
bsn studlod the uoastmatleo    our doparka& lam g.tvon
this Aot and the pnotlor you w iollo~84 In admfalrtsrlsg
                              L
It...That part of your letter sotting out your dopr~matal
Oon8tru0tim    and pnatioa     I8 a8 followrt
            "seation 4-m Of Eoumo bill lo. 9, pmmmmd
     br   the 46th Isgirlatm., 1939, prorid.
               *lo Unoml       lea80 uoautid by m 011ur     .
     or wmro               la@ or 8laenls under u&t is a~-
                          of
     8-4           k 8OUB lI tbs hliliqUf8bWlt &Ot Sbu11’ k
            pOtti 0 ssrtiflod OOpJ Of ruoh 1.&Sa 18
     lff*OtiW
     fiid in th@ L&Id offlOB. HO SUah 1USO UOotlkd                                         '
     -r               lffOOtiW tit8
                   th 8                    h8rVOf Sb8l1 k ba
     UpOm the 8kk                 -1.88 it nOit. th.   lOtu& ud
                                                             l
     $m       oonr;fdorrtion
                          mid or prmlsod thorofor.
          '?dOS' t0 tb. -84&O     Of t&i8 bt, tb,
     O.neml Usad Offi rplo sd %&WOSti@Ol's to in-
     Spat thb hunts Rsoords I o dekmlw         vlnt vdr dw th.
     8t8t8 OB Oil U&p8     lU808 UOOutOd on bndr subject
     to the Relsaqul8lmentA8t. a8       pnotIa* ua8 no-
.-   UO88Ur, b.OWS., bOfaD#TfthOUt q         lSQ*l UW88it~
     or rillag m8h lw8.8 iaths 0rr100, tb landom.rs
     and 10880.8 ia l mt           b8tUaOOS did not bother
     thrrr1VOS Utth SHb(# “y th    th8 8tRtS   8Wb  got   it8
     Shari Of th@ bOIIU8, Mdi~lr,   md I?OpittiS.      In
     many fnst~oe~, *ho lu8r8 prior to ths pusage 0r
     Howe Bill Ro. 9 In. 1939 had tams in them In eon-
     ilid          Vith    tb8    JWWfSi~          Of th8 ~8lirrqlPi8h888&
     Ad,  and frI1.d to Sat0 the 80-l sad trru bonus
     ~Oll8i&I8t~O%   hbU8. Of thf8 Sort -8 W88~Uld
     l'88tikd iad@priVizy: th8 PO-nt8ohoolRmd      of
     much rovonuo.
              ‘Th8        VOX% Of the abwo montfdi8tjinWSti-
                                                      inrtUW.S~thO
                                                           doprlvod   of funda
     md     SUOh -8.8 WFO                   Ul1.d t0 tb lttOa ti=
                                                                Of &




     of mllm~le8~k8~dedlaatod                         to that Ipad.
          '~fIhC0th.mSm     Of8O~tiO@l4-Q      thf8
     &partuot’hu    rrrriad all 011 end @r lea8e8 tsndowd for
     flllng In this offiw ud uwutsd       oa lsab ,robjoot to tha
     pro+ir$oolof tlm Rellaquhhont A&. yhul 8UOh a 10~0
     18 tOmdUd              iOr    filing     it   18 .XUiWd    Wfld4.                ft   i8
     w.d              to dot.mIno            ths   mount   ot boaw ti            Iwrtrh
     to k paid the 8-t..  mm l.uqth or tbs prlmry tern
     Or th8 1~80 18 Ooluidrm.   w  otherbwm8iw~
     vfsi~ an aomldwodrlth8pooir1~~b.~           t&w
                          .
                                                                   -123

HO&   h8Oa    ffi1.8,-60      3

                                                                      .
      vhethsr ths loa8*8 hare a~   prorlrianr oatmry
      t0 th8 ~8linqUi8~Cllt  &t.   ti8111 US. the km
      "8OlinquiS~W&t   Act", I not only rsrer to m.ACt
      ftSslf, bnt al80 t0 tb OOUrt d80i81~,     cm-
      struing the Act. mxb     tOOI the COpf Of th0 10888
      tendsr8d for riling 18 8&uInsd a8 to rhothor or not
      it 18 a oCrtifi8d copy as rsqulnd br 8ootloa 441,
      All thf8 18 dOnw vlth a 8.~80 of dut7 00 af psrt
      t0 84if@gW!brdth0 f.htWBSt Of th0 St&C ad to BOO
      tbt th8 hlWM8lit Who01 ?UUd get8 SUCh fund8 to which
      It I8 CatIt1.d.                                      .
           'Ifa after UIlX&inatiOiI Of SUCh leaBe, I
      find that thobOnu8 and rentals tobe paid the Stats
      a- ratlsfaatorf and In 1InC uith ubat other leases
      are bringlUg In the ame looallty, that the loam
      ha8 no provirioU8 contrary to the &tlln@Ir~ont'
      Act, rpd that 8 oertlfled recorded 00p of the 1CtSSC
      18 tsndersd for ,filing,then, 1 Silo tI;
                                             l 1OiS89, apply
      tha State'8 0m-hair  0s the bow8 paymnt and aotirl
      thy party tSZi&rfIig th0 1~t80 Of th8 fllf?ig Of Baa!@,
      aad the St8k 1mS@ ~UhSC 888i~6d t0 ft. 1 al80 gfV8
      a rscsipt for th. bono8 rooslvod by the Stati, Ew-
      ever, in no f~bno~   do 1 rile a 1ea8r until I havb
      n~8iV8d the 8tiktO'S ShoX'COf the bonw consideration.
             %hCnCver   1 find        that   1W88   should   not
      .MBflbd bOCWl80 it dO.8 not oOniOlW t0 the ri-
      qUlr888nt8 Bet out abow, I hold the 10880 and borpar
      gky8at  In 8u8pm8C ad notirr~th8 party toaderlng
      ths 1CaSC for file 0s y obj.ctiOas. I ask the
      ~rt~tO~-OXMUtOthO1OB8O         in S~~irutulO~S   ULd
      hU8  th8 AW lU80 0~~81~1~  Vith th8 X'BqU.fmWntS Of
      th8 ~linQl%ShO~t   Act.   NhemvorIdoomthobanua
      Cm8lderatIon lou, 16dri88 tho~pbrt     to t&t offeat
      and a8k fo rUIlpUmtIon      VQ ruoh I0~0 rhorrldnot
      bs worth opn 80~~~     COOpBF8tiOII18 USWL~~J SWUWd~
      and, after 1 U 88tiSfi.d that thC abow FCQUfX'O8Odi8
      hfLV8b88n 88t, x ~pprOY8 urd fib   thr lC88e. '
           "It ,I8 the COti8tFUCtiOZl
                                    Of thf8 dspartmant
      thtttthe ~CME#iSSfoUCr Of the mWU1    bnd OffiCe ha8
      the authority as well as the duty under Section 4-4
      of Hoaue Bill lo. 9 to rxerlne lra888 uwutad    on
      land8 subject to tb0 &3~inq\tiStmC!ltAct Uld tCnd&wd
      for film   In this 0ffle.j snd that he mU8t sPPrO'fe
             , .

                                  2



                          .
                                                                                  124

        8uOh 18.808    88 to the-bsnU8 Slid rOXlt81 OOD-
        SidC~StiOa    to b8   Bid thC =BtO,  DC tC the
        other   prWi8iOM    P n the 108CSC  Snd CD to tho ,
        length of tho primary tom of iha 108808.         In
        other UO~dS, th8 bOBIlRi88iO~Or mU6t OpprOrO tho
        lease SC 8 nholo befOr      ha Silea it in tho
        Ganaral L8ud Offloo, and priac   tc euoh approval
        snd filing the loeaao18 lnaffectlvo   Insorer as
        the State 18 aonoornad.
             'l!hIodepartmental oon6truotlon  i8
        plaoed upon SrctIon 4-a not with 8 doairo to
        ooeree the landowner end lessee into a lease
        that is dotriruantalto their interests,  but
        with un earnest desire tc prctaat the Publio
        free school fund. The grext neJority of loaees
        tendered for iii*   In this orriOt are 43tls-                                   .
        fectory and 8C0~ro my fmnedfrrtsapproval, uhoro-
        UpOn t&y      BrO prOXUptly     fihd.        zWt     1andOW~U3~8
       -and lessees ara amra of the proolsious of tho
        ~eUnquIshmsnt Aot end the polioy cr this offloo,
        snd oooperata with ma in thesr metters. Aird
        most landowMir8 end les8abs    aamply with my
        reqUW3t8 $Or ally ChOll@S III 14WMl    86 t0 th0
        bonus end rental oonblderation, and pWffiiOn8
        that erb Fo-oonflIot with the Ralinqulehaant
        Act. Only In-a rslatlvaly few insttmase      hero
        I failed to seouro ooopsratlon    from the lcrd-
        owner and les-seewhich rcbulted     in 8 do&lock
        end where I ~(18 wublo to prooeed iurther.w
             The Supr8qio     Oollrt’   or      Toxs8   in   W   rooont
0980    or l3lrroughs1. Lylee, 181 9. H. (2) 570, ruled                    thst
1oOg    8ddIli8tX8tiVO     CirnetZ%iOti~          Of 8 CtrtUtC
                                               18 Ultitbd
to groat weight ia'dskrdaing th8 8ff8Ct to be gilon
It.. %liis rulr of lsar should br prrtIOul8rlflppUoebl@
hon 88 th8 Aot Padsr diSOU881OU W88 onsotsd b t&
Legblattwo rollovdng you rromwodatlon to ds t Wr
that SUCh a law WCS aboded in order that th0 St&O’8       .int8rOSt
might be batter protootad.,

            TO hold that the Act 88d8 It YOW duty to file
011  ahd gss kmses Without first oX+nining end apprcving
thorn would  defeat Its lerg purpose. It 18 the opinion of
this doportmant that,your oo88tNotlon    aS tho Act 18 oorroot,
and -yaw paotioo    ln ax80lnlng aad approving loa63oebeforo
rim18     18 prOper.

          Pollowlng your dopartmentsl oonstruatian  of
Seotlon b-8 cf Ii.B. 9, you hgva rcSu6tyl to approve and
rile oavereloil end g8a loasee submittad to you for the
rsason that it 18 your oplnlon SootIon 3 0r tho loam0 Is
oontrary to tkm p~oiisions cd thb RelinquIShnf?mtAoti
              .%DJtiOII3 Of bh0 108608 fS 66 rO~OW8l
                            .-
                                                    :

                              I
                                  *   .




      Hon. maoom              Gile8,      Pa66 5
               .

                   “3   Royaltiaa to be paid by leema
      m     -A;$ (.I Cna-elxtaanth of the value ab all oil
             and gas produoad aad Saved from Said lalUlt0
           . be    Id to the Ommlssloner of the GenarelLand
             Ofir oe ror the State of Texas, at Austin, lkanrj
             (b) ona-rlxtronth of the value af all 011 and gel
              rodiioadand saved frcuaraid land to ba paid to
             !a aaor IndlvlduaUy.   where gae rr0m a wall oap-
             able of praduoIn@ go8 only la not sold or used,
             Imaaa may pay aa royalty FIit Dollar8 ($50.00)
             par wall per year to said 0alntisaIowr or the
             Caners1 Lend Cfiloa ior tho State OS Taxaa and
             a’like amount to Laseor lndlvldually, and upon
             suah payments it will ba oonaldered thet gas la’
             being produoad wIthIn the manlug ab Paragraph 2
                   hereof.”

                           Section 2 or the leasa Ir as rollower
                        *Subject to other prootlslonshara-
                   in oontalmd, thla lease shall mmainln    ioroa
                   ior a term of tan year6 rrom this data, oallad
                   primary term, and aa long theraerter aa oil
                   or gas Is produoad iron said land, or es long
                   theraarter 88 Lessee shall oonduot drllllng or
                   rewo~klng operationa            thereon   with no oaasation
                   of m&e than sixty oonsaoutlva daya until pro-
                   duotion results, and If produotlon results, 80
                   long BEI 011 or gae 4s produoad.”
                         The Relinquiahmant &t 1s oodlfiad in.
      Ve   nonis         AnnotatedOItIl Stetutae, a8 Artlolar 5367 and
      5388.           Artlola 5368 ir lnvolvad hare and is an.follow:
           .         .  *The owner of aald land 1s haroby
p..                authorized to roll or leaso to any per8on, ilrm
                   or oorporatlonthe oil'and gee that my bo thrraon
8.         f or tharalnupon suoh terms and ooldition~ aa                     suoh
!~                 owner may daem beat,  6ubJeot only to tha provl~lol~
i.                 hereof, and ha ma9 hnW a eeoond lien thereon to                     1
                   aaoura the payment of any 6um due him. All lsesoa
                   and ralaa so awda ahall bo assignable. MO oil ok
                   gas rights ahall ‘be rold = leered heraunder ior
                   leas than tan oanta per aora per yaar plus royalty
                   and the laasaa or puroha8er 8hsl.lIn every oaea
                   pay the State tan oantn per aora par year or aala~
                   and rentalsi and in aasa of production ahall pay tha
                   State the undIrldad ona-rirtaanth or the viluo of
                   the 011 end gar raearrad herein, and 3Ike amour&m
                   to the owner or the rbdLw
                           The Supraw        Court or Taxes In tha oaaa ot
      Greene v. Roblson, 8 S. W. (2) 655, end other oases,                       upheld ~tha
       aoonetltutlone.lIty
                         oi the RalInquIshmentrAot, -and interpreted
 .
I’                                                                          126   .

       Eon. Baaoom Oiler, Pa@    6

       it to man    that tbo landounar wia mda the Agent or tba State
        rm tha purpone ot rraoutIPlgoil and &as laaaaa on lands Sold
        aubjaot to the Aot, the agaat curdthe Stste to shara squally
        tha bonus, rantala and~royaltlaa,  oxoapt the State reserved to
        itaa~ a si        l/l6 free royalty and tan oanta par aore
      1.~4I~Imumrental. ThS agent oould oontraot ,ror a royalty, OIU-
        half oi whloh oould be more than l/l6 1
        toatgaiate,    but ha ooy>d not oontrrrot for a lasau amount to
                  .
                  The authority of &a agent umber this Aot IS
        broad, and the term n.‘. . ‘upon auoh oondltlonrias auoh
        owner may deem baet, aubjoot.on1 to the prorlalona hazoof,”
        has never bean and oennot be daf1ned ulth oertalnty eimxo aaoh
        lease oontreot muat stand upon Its oun terms. However, with
        raapaot.to the authority of the agent and tma of lease ho Is
        authorized to axeouta,  the San ,AntonIo Court speaking thr
        Judge Murray, In the ass8 of St&a V. Mwnolia, 173 s.’w. T  (2 ,
       .186 (writ refused), sold!
                 “We feel that whan the antlra RelInqulah- .
            mant Aot la aonsidarad and lspaolally in the Ught
             in whloh It has heratofora be&n oonstruad, it w8a
             never lntemhd   that the mrfaoq owner should axaeuti
             a deed absolute to the oil and gas in end under tha
             lpnd, but only an ordinaryomaroial     lease, which
             protide,  far dalay rentals unlees and until oil Ia
             produoad In prying quantItIaa. . . .O
                  We inter&rat the option as ll.mltw ‘tha auth-ty
        of the agent to the laldng of 91 ordinary acnmaera1618Il.ati &ra
        laaae, providing ror a term.0r yaare not In 8x0088 or the ~8~1
        and ruatasry tel;n aa praatload In the oIl’Indu~t.ry,?Q
        dolay rontala, and $n oaaa af praduotlon, as lang thoreafta
        as 011 or gas 1s .prOauoad inr the m.
                  Thi tam * mduoad~‘aa used In the ordln~ry
‘*.     laSsa, Snd as la tuai ln Seotlon2 ot tha laaaea b~rora US,
:       has bsan darlnsd by thr Supram Oourt in the Mea of Ouola
        t. King, l641,S. W. (2) 509, to wan She lotual prodtistim
        oi 011 and g~a In p    ng qoantltIaa. Paying quaatltieewas
      ' dailmd   to be sufrlo r ent prOdaOtIOn for the leasea or operator
        to make a prodit from ‘the oparatIon of the 18qSO. Tha amount
        oonslderad to ba In payImg qW¶titIaS is laft to the jud~ant           .
        qr the operator, when auoh fudmant Is axarola+d in good felt&
I,
                   l!hti
                       oourt In the. a~80 of Oerole v. KII$, apmeait
        the holding or a 0880 arlalsg In Tannaseaa in w oh
        of the word *proMoed* as uaad in an ordinary oo@uaroial lease.
;.      We quot. from the opinion as f ollows~

                  “in the Benadum-Traaa oil ti. tr Davis, 107
             F. 2nd 981,.985, a ease arid    In TeanoaSaa, tha
L            leaeae oomplated i Gall produo
                                          %    gas but no oili
i
Hon.   Baaoa      Oilor, Pam      7

                       It 20s want of a Derkat.   Interpret&M
                       the sixth OIrauIt’Oourt  of Appaala aaldr

                  leaaoa hero In- quafltion ware rap
       rlva and one years raepsotlvaly and “aa long thara-
       after as oil or gaa OT althsr of them Is produoad
       tron the laardby the laaaaa.W lhere Is abarnt rroa
       them the sxaot.lsnguega that gas or 011 must ba
       produoed In npayi& quentltlaa*. Howwar, In arcs
       riving at the Intent of the partlas, this Is im-
       plied baozuse they oontraoted .&th the and In view
       thst the bueineaa would be profitable td both leseor
       and lessee. The lattff  mey have rael1Sed.a gain
       by retal.n.iwtha leases fq speoulatlon. The former.
       could    reoalva     no banarlt      from them axoapt by msr-
       ketlng     gaa from the        premlaas.     .   .   .

                  term Qeylng quentItIas~~Involves
            iP*!l%e
       not cnly the anount 0r I;lroduotioll,
                                          but also tha
       ability to market the produot st s profit.**
          The lease involved in the ‘Leruiasaeeosse did
not oontsln the terns round IA Seotion 3 or the leesea berora
us IA this OpiAion. We reoognlzethat private parties mey
enter Info a lease oontraot thet does oontaln these terms,
and which would make the oases &ted a’bova ~opplloebla.
Ye have u~od these oesoo In on effort to determine the ariaat
0r the usual and ordlnsry oommerolal oil and gas lease thet’
did AOt hove :A them Such provIsIons OS is found In Scotion
3 of these leases. The terms found in Sootlon 3 Or the80
leases are a$ relatively   reoent origin, mfS ware not egmmonly
used at the tlma the .Ralinqriiahmant Aot wss maoted.
          ¶‘%atinurel laws OS ‘l’axaa as ‘they rolata to pub-
$10 lands have oonalatentlyfollowed    the polloy of aoauhig
the ilavolopnantoi,the’Stct8'8mlnarals. By davrl6prwnt wo
meon the aottialproduotlon and Sal8 of the m.lMrOl,SIn order
that the anda to nhloh’thelrrnda.are dmdloatadaright  hero
the usa~ ot the        revenue   ra8ultIn.g       therefrom.      The prInaIpa1
p&pose     o?    the   BalinqulShmant Aot inas to aaoW               the ooopara-
tlon or the suria&a owner la promoting                      the darslepawnt or thaao
reaouroea.
                As stated    In the oaao at State               vi Magnolia,
aupri, In leases exsoutad aubjeot   to the ptiovlalona oi the
RalInquIahment Aot, It Is oontmplsted that they be tha mutual
ati orbinary oommeroiel laeaaa, providing ror e derlnlte term
of pars,   amleas end until oil. or gas is.produoad in eying
quontitiaa, then as leng tharaatter es,sctuel prod+ Pon
oontlnuas. The right to aubstltutii   the payment of $50.00 per
wall per year on a gas Wall, where the gas ‘Is not used or       j                     ’
sold, ior aotuel produotlon, an8 auoh payment to ha celled
produotion, thua oontInuIng the lsOS8 in for68 end affect by
reason  of produotlon over an indetermlnabla -psrlod, is one not
BOA. BerooD Oilon, Pago 8.

eontmplsted by tbo RolinquitioAt Aat. The Aot oontompletor
the loams to k ooatlnuod in otfoct br roaaon oiaotual pro-
daotlon and the pa ent 0r r/l6 rroo royalty to the trullt                   *
rd.    Su o h l p r o vr r lo n oould o p er a te to retard th e develo p -
ment of the State's minor81 ?MOQ?Oom.

            m0      SIQT&   cow in th0 ~80 0r hg1ir0 fa
& PUO~ 00. V.       St&o, M S. W. (4) 265-272, rtated a rule or                 I
lau uhloh wo aonsldor qqtlloahlo hour01
              The    rule ia also will *ottldd that
      logiil$t:v8grids         or propertyrl             ts   iill6
                                                                 prlll-
      1sg.e must be oorretrued~rtriatlyf!ir.aroraa the
      State OA &WI&   or pub110 pollof, end whafowr
      i8'Aot rinoquivooallygroAWd iA olear and orplioit
      terma is withheld.            Any mablgulty or obsourity
      IA t&o tarAs 05 tho ltatuto                must   operato IA rev*
      of the State.*
          ~srta1~l.y tho RoliAqti~At     Aat 1s obaoum
end ~bi@UOUlr iA BUgl rV6~Ct8.     Aod iA 6pite Of tho Mw
oourt d~oiaio~s ooastruing the hot    66 it applies to gito~
olrourmtaLLoe8,
             it will,              no   doubt,
                                     oontlnue to be rubjooted
to rurthor  0oAatruotion 8s dimsrent    quei3tiaruarlso ;A
the ruttar.. fA the lastant ea60 tho rule rtatod abovo
mm1113prtloulerly   crpplldablo ah00 the rlgbtrgrentod in
the loesee are oaloul8tod to operate in revor of the 106600,
rnd 0ortainZg thoro ia the possib%Ut7 0r it opuathg         to
the detriment or,tho Stat&.
    :
           Aooord.l~,3l7,JOU are advised that it ir
the opinion or this doperbent    that Sootlon 3 lf tho loasoa
in:qUOStiOA iS OOAtZarr t0 th0 LbrOViriOM    Or th0 iwi.n-
aulshment Aotendmmara       oorreotiar&m rofumltoap-




JWR:BTt.jrb

APPRm      am.      31, 1944   .
 a/ Oarlor 0. Aahlo7
LR ST ASSISTART
ATl!tXMEY oBR&IL                          APPRavRD OPIRIOR cl.MaTl%E
                                                 BY BWB,Ohrir~
and 0gt-(pp.l-4)        .
