. ’


                            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

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