                 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
