      I’~E    J~TTORNEY           GENERAL
                  .: ,OF.mXAS’                .:




                        January 28, 1948

Hon. Baaoom Glles          ODlnlon
                           ~.      No. v-486
Comissiqu3r   ',
General Land Office        Re : Whether the primary
Austin, Texas ,',               term lP Mineral Lekise
                                Ro. 22624 1s suspended
                                 by.wratien        of Art.
                                 5341C) v .c .a.
Dear Mr. Glles:
          By letter dated lPovemb& 3, 1947, supple-
mentea by letter dated J&nuary lo; 1948, you requested
theeopInIonof.,this ~officewhether the ppimary term of
Mineral Lease No./22624 expired on Septembe? 20, 1947,
or whether,the same has been; or.should be, extended
by~reasoh of the provlhions~of Article 5341c, Vernon's
Civil Statutes. The facts'are as follows:
          On September 20, 1937, the Commissionerof
the General Lend Office isiiued'tothe Superior @I1
Cola)sngMineral Lease No. 22624 oalerlng Tract No.
45, containing 320 acres, more or less, out lf Lsguna
Maare, lVueces'and,ICleberg
                          Counties, Texas. This lease
was for a primary term of five years.
          Approximatelysix months prior to the expl-
ration of the primary term, on March 24, 1942, Superl-
or, by letter to the Commissioner, pointed out that
the War Department had by letter dated March 21, 1942,
refused to grant a drilling permit on this lease and
requested that the Commissionerrecognize the primary
term of such lease as extended under the provisions of
Artlole 5366a, Vernon'8 Civil Statutes, reading as
follows:
          "Se&Ion 1. In eaah case in which an
     011 aua gas mineral lease haa heretofore
     been granted or may hereafter be granted
     by the State of Texas on an area covered by
     the coastal waters of the State or within
     the Gulf of Mexioo and In whloh the War De-
     partment of the united States refuses to
     grant a permit to the lessee or owner of
Hon. Basaom Glles   -   Page 2                    v-486


     such lease to drill a well thereon for oil,
     gas or other minerals (the are& lncludea~in
     such lease being within the navigable wa-
     terseof the United Statea) and in the event
     the prim&g term of such lease should expire
     during !he period of tl&a in which the War
     Dopartmqnt of the United States may oon-
     tin+%0 refuse to Issue auoh,*relt, then
     and in auoh eveht the primarg to- of such
     lease is hereby extended for auccoaaivepe-
     rioda ,ofone (l),Jear,from and aftor the
     end of~the orlginal primary term of such
     leaad while and so long aa the War Depart-
     ment may oontinue auch'refuaalto Issue to
     the leadee ,orto the'owner of auah lease a
     permit t6 drill for oil, gas or other mln-
     erala, on the area eovored thereby; provid-
   ,,ed, that in order to make such exte~alo~a~
     effectual .thelosses or tb6 owner of auah
     lease ahaIL, during eaeh,of the annual pe-
     rLods~durl.hg whlcnhthe primary term of the
     loaae is so oxtonaea; applp to ana seek to
     obtain fiym the War Department a permit to
     drill a wall for oil, gas 07 other miner-
     ala on tho aroa ooverea by such leas8 and
     be unatio&aafulIn fta attempts   to obtain
     a pemlt, or, if a~cesaful~in obtain1ng.a
     permlt,~bomaonoeope,ratioaa  'forarillfng a
     well upon ths'lease premlaea within sixty
     (60) dqa afterKobta.iai.rugsuch pemlt; and
     provfaea further ,thatthe less00 or the own-
     er of auoh lease continues to pay the annual
     renewal rentila at the rate provided for in
     amh leaae.for the.psriod of time lnvolvqd
     in auoh extonalona, ShouPd such lease be ao
     oxtendod and bhould the War Department,at
     any tire whlle,~sueh,l~aaa is still in force
     and offeot issue 8 perraftto the loaaee or
     to the owner of stih lease to drill a well
     thereon for ofl, ‘gas or other minerals, such
     lease-ahaii eohtinue in foroe'ana effect If
     the l~aaee eommencea'drflling'OpOratiOnS   UP-
     on the leaaeq prenl?ta within afx,tJ(60)
     daya,after obtsinQkg such permit, and so
     long aSr the lessee or the owner of suah lease
     shall continue to eonduct arflling or mining
      operatfohsthereon, dr if oil, gas or other
     mineral be dlaeovered,thereon by the lessee
     or the owner of suck lease, so long aa 011,
Bon, Baseom Gilss   -   ?age 3                     v -406


    gas or other mineral is produced from such
    leased premises, 8h0da    the production of
    oil, g.4sor other mlsrerelon sa.ialeased
    premlaea after once seaurea, oease from any
    cause, svusti
                lease aball not terminate,lf
    tRe lessee or owner of such lease commences
    aaaitfona'ldrilling, reworking or mining
    operationswi'thfnShlrty (30) days there-
    after or ff 1% be within the orialnal prl-
    marg term of auoh leaze, eomnrencesor re-
    sumes the payment or tender of rental on
    or before the rental paying date, if any,
    next ensuing; but If there be no rental pay-
    ing date next ensuing, the lease shall In
    'noeven% %ermXQ,a%e ,prior,%othe expiration
    of the primary term.
         ‘See. 2, TRe Commissionerof the Gen-
    oral Lana Office is hereby authorized to Is-
    au0 'to %Re lessee or owner of said lease
    auoh iws.%rumeat in wrftlag i;nthe nature of
    an extension of said Pease as may be neces-
    sarg'or proper to omarryinto effect the
    foregofng provisfons of this Act."
          Thereafter, ~urau~d% to the provisions of
said Article 5366s, the Commissioneron March 27, 1942,
executed an instrumentcxtmd~kag the primary tern of
said Lease No. 22624 inn%he language of the statute,
as followz:                               I
         "‘,0 Y do hereby grae% %o the Superior
    Oil Compmy the preset% owner of such lease
    as showa by the records of the General Land
    Office, an exten3fon ttmwof Fa accordance
    wfth,%he provislolzaof E'hapter287 of the
    Acts of %Re Forfg-mven%h Legislature ana
    do hereby extend sa.fdleaas for successive
    periods of one year from and after the end
    of the orfgfria$primary term of such lease
    whllo,.and so bag as, the War Department
    may eqtime swti refmal %o fasw to the
    leaoes or %o the owner of said lease a per-
    mft tb drill for 011, gas or other mfner-
    ala, on the area covered thereby; provided,
    that'fn order to make su6h extbns10ns ef-
    fee%ual,tRslssae~sor the OWBLQPof such
    loose,shall, aurirJgaa.ahof the a~ual pe-
    riods duping wM@R the primaq term of %he
                                                     .      L




I-Ion,
     Bascom Gfles   -   Page 4                      v-486


    lease IS so extended, apply to and seek to
    obtain from the War Department a permit to
    drill ,a well for oil, gas or other minerals
    on the area covered br ,auchlease and be
    unsuoceasfulIn ita attempts to obtain a
    permit; or, If successful In obtaining a
    permit, commenoe~operationafor drilling
    a well upon the leased premises within alx-
    tg (60) days after obtaining,such permit;
    and provided further that the lessee or the
    owner of such lease continues to pa;rthe
    annual renewal rentals at the rate provided
    for in such lease for the period of time
    involved in such extensions."
          As stated In your letter of November 3, 1947,
Superior repeated Its request to the War Department In
compliancewith the statute and the extension inatru-
ment dated March.27, 1942 each year during the yeara
1943, 1944, 1945, and 1946. Each of thoso yearly re-
quests was refused by the War Department. During this
period Superior pala its annual rental as requirea.
          No request was made by Superior to the War
Department for   nnlaalon to 61-111Lease Ho. 22624 dur-
ing the year 19r7, and the primary term of said lease
as extonaoa under the provisions of Artlole 5366a and
the extension instrumentdated March 27, 1942, came to
an end, without drilling operations thereon, on Septem-
ber 20, 1947, unless said primary term has been M-
pended as contended by Superior under the provisions
of Artielo 53410, Vernon's Civil Statutes, reading as
follows:
          "Sectfon 1, If the owner of any valid
     oil and gas lease granted by the State is
     denied access to or is denied a permit to
     drill upon or produce from the leased prem-
     ises by any duly constitutedauthority of
     the United States of America, after a bona
     fide attempt has been made by such owner %o
     obtain access or permit to drill upon or
     produce from the leased premises, such owner
     may file with the School Land Board an ap-
     plication deser+bfngand glvfng %he date of
     the action which deprfves hfm of the right
     of access or the right to drill upon or pro-
     duce from the premises, and if said Board is
     satisfied that the facts se% forth in the
Ron, Bascom Gilas   -   Page 5                   v-486


     applicationare true, tha Board may enter an
     order upon its mi~nutessuspendingthe run-
     ning of both the primary and the principal
     term of surshlease, or suspendingany con-
     dition, obligation or duty thereunderas of
     the aate’of the origin of the cause of sua-
     pension and during the existence of the cause
     of suspensfon,so lomg as the lessee con-
     tinuea to make on eaah ,anniversarg date of
     such lease t'heannual rea%al paymen%s atipu-
     latea in the lease du1a2.g the period of sua-
     pension. Such oil and ga3 lease shall re-
     main in s%a%us quo, and all obligationsand
     conditions existing under such lease or suoh
     of .%hemas may be suspended by said Board,
     shall be Inoperativeana of no force and ef-
     fes%, except the obliga%ion to pay delay rent-
     als as provide& for herein, untfl ninety (90)
     days af%er the School Land Boara shall enter
     an order upon its minu%es reciting that the
     cause for suspension haa oeasea to exist, at
     whieh,time such of1 ana gas.lease shall, pro-
     vi$ea the rental payments have been made aur-
     lng %he period of suspension,again become
     operatfve and all of the suspended obligations
                     fnelucTingt.m payment of rent-
     ana eonaCll%ions,
     ala under same, shall again attach a5a be in
     force, ama in th@ C&S5 of the suapens10n of
     the primary and/or principal berms of the
     lease9 the lsatseshall %hereaf%ercontinue
     fa form for aperiod equivalen% to the un-      *
     expired %erm oi"%he lease on the date of orl-
     gin of %b aawe for suspension, The Commis-
     sioner of %-he&52eral Lar0.dOffice shall give
     notfe6 immedfa%alyto the lesse8.or the entry
     of the ordor %ha.t%he muS8 .forsaspeusiom
     'hasoeasea %o exls%; provided9 however, that
     tb3 anmual,rsa%~.lpape5t3 kmva beam me%;,

         "See. 2, Bothl~g eor&sfned herein shall
    be construed as abrfdgfng any rfgh%s or prlv-
    flegos comveyesdLlgChap%er 287, Acts of the
    Forty-seventhLegislature,Regular Qesslon,"
          I% wfll be noted tha% while Article 5366a pro-
vides for the ex%ensfon of the primary term of a lease
when the War Department refuses to gran% a permit to a
State lessee %o drill a well %hereon, Article 53410,
Hon. Dascom Giles   -   Page 6                  v-486


enacted two years later by'the 48th Legislature,pro-
vides that the School Land Board may suseend the run-
ning of both the p+mry and principal terms of such
lease         condition, duty or obligation thereunder"
      or ,"an~.
as of the date of the origin of the cause of suspension.
          Article 5366a is self-operativeas to exten-
sions.the statute providing that when the War Depart-
ment refuses to permit drllllng, and in the event the
primary term should expire while the War Department
continues to refuse, "the primary term of the lease g
hereby extended," for successiveperiods of one year.
It is provided, however, that such lessees must con-
tlnue to make request of the War Department from year
to year.and must continue to be refused permission in
order for the automatic extensions under the statute to
be operative.
          Article 5341~ is quite different. In order
to be entitled to the benefits of Article 5341c, it is
required:
          1) That the lessee have a valid lease;
          2) That the lessee be denied access to, or
denied permit to drill upon or produce from the leased
premises by a duly constitutedauthority of the United
States of America after a bona fide attemut is made to
obtain access or permit to drill;
          3) That an application be filed with the
School Land Board reciting such facts;
          4) That the School Land Board satisfy it-
self that the facts set forth In the applfcationare
true;
          5). That the School Land Board enter an or-
der on its minutes suspending the running of the pri-
mary or princ.ipalterm of the lease or a condition,
obligation,or duty thereunder.
          It Is to be observed that the School Land
Board is vested with discretion In the matter. The
statute requires that the Board be satisfied that the
matters recited in the applicationare true. It then
provides that the Board w9   not shall, enter an order
suspending the running of the primary term or princi-
pa.1term or other condltlon, obligation,or duty under
HOQ. Baacom Mles     -   Page 7                   v-486



the lease. It is only after such an order has been
entered that the lease and all obligatlonsthereunder
rem,in In status quo (except the payment o? rentals).
This status quo; the status moated by the entry O?
such an order, remains until 90 days after the School
Land Board shall enter a further order upon its min-
utesrealtlag~that the aause for suspensionhas ceased
to exist. Thereupon'tbslease aontlnues In effeat for
a period equivalent to the unexpired term of the lease
as of the date of the,origlaof the cause for suapen-
slon.
            It is clear'that Superior has ,notbrought it-
 self within the terms of Article 5341~.   On August 15,
 1947, a month and five days ,prlorto the expiration of
 the primary term, aa extended by the provisions of Ar-
 ticle 5366a, Superior requested a further "extension"
,of,said lease beyond September 20, 1947, "until the
United States of America, by Congress, paeses a proper
Aot, signed by the,Presidentof the United States dls-
.clalmlng, unto the respective states all submerged area
 under Inland waters and seas, or in the absenoe of ex-
 isting legislation,this applfcant asserts its equl-
 table.rightthat the term of said lease shall extend
 beyond September 20, 1947, and for a reasonable peri-
 od, and thereafter until the cloud on title fs removed,
,tobe recognizedeither in Court of Equity or by leg-
 lslatfve act of the State of Texas affirming and con-
 firming existfng leases In such cases, and thereafter
 during a reasonable tfme withFn ,whioh%he Lessee may
 begin its operatfons.'PIt was sot claimed by this let-
ter %ha% Superior was eetl%led I-orights under Article
 5341~~ nor was t&e letter an applicationwithin the
 terms of tbai?article, Indeed, in this letter Superl-
 or stated, "we are unable to refer you to 5ny specific
 sta%utory provision under which fur%ber extension9are
permftted under~safd lease,"
          We have also examined oopies of subsequent
letters of Superior to your office dated August lgth,
August 2lst, and August 27't.h.By nozieof these let-
ters did Superior make applicationto the School Land
Board for the entry of an order on its minutes sus-
pending the'runaingof the primary term of Lease No.
226240  On the contrary-,by each of t&se letters Su-
perior requested to be informed of 'thedate the School
Land Board bad entered an order on Its minutes reciting
that the cause for suspe~slo~ of the lease had ceased
to exist. In its letter of August 27th Superior ten-
dered Its Check in the amou.ntof $80.00 "as rental to
Hon. Bascom Giles   -   Page   a                v-486


August 19, 1948, when the equivalent of the suspended
period of the primary term of said lease will expire
after said ninety days from entry of order In the min-
utes of the School Land Board that the source of the
cause of suspension ceased to exist.”
          Apparently, the contention asberted by Supe-
rior is that Artlale 5341~ is self-operativeand inures
to the benefit,of8 lessee whose primary term has been
extended pursuant to the provisions of Artlale 5366a
even though no application for susuenslon of the prl-
mary term of the lease has been filed with the School
Land Board under ths provisions of said Article 534l,c,
and even though the School Land Board has not entered
an order, pursuant to proper application,Gpendlng
such primary term.
          We Cannot subscribe to this view. Superior
applied for and obtained an e&ension of t&e primary
term of Lease No. 22624 under Artiole 5366a. As long
as Superior kept within its terms this statute provided
for automatic yearly extensions of the primary term of
the lease, conditioned that Superior apply.yearlyto
the War Department for permit to drill the lease, and
make yearly payment of the rentalsO Superior chose not
to come within the terms of this statute during the year
1947. Superior did not apply during that year to the
War Department for permission to drill the lease. Su-
perlor’s rights under Article 5366~1and the extension
instrumentdated March 27, 1942 therefore terminated
and expired on Sep~tember20, 1947.
         Superior is entitled to none of the benefits
of Article 5341~ for the plain reason that It has made
no application under that Article to the School Land
Board resulting in the entry of an order by the Board
.suspendlngthe primary term of its lease,
          It is conceivablethat Superior may now con-
tend, although their plain Import does not so reflect,
that its letters to the Commissionerdated August 19th,
August 21st, and August 27th should be construed and
considered as an application to the School Land Board
for the entry of an order suspendingthe primary term
of Lease Ho. 22624. In this event we hold that Artl-
cles 5366a and 5341~ should be construed together, and
that in order'-fora lessee whose lease has been extend-
ed under the provisions of Article 5366a to be entitled
G an order of suspension from the School Land Board
-   .




        Ron. Bascom Giles   -   Page 9                     v-486


        based upon reruaal of ,theWar Department to permit
        drilling, the.lesseemust have currently made a bona
        fide attempt to secure a permit to',drFllfr~omthmr
        Department,,and.havebeen refused,.~Artlcle5341~
        clearly requfresthat~the lessee 'makessuch a
        fide attemet. Weare not 'preparedto say tha  'Ere-
        quest last made'of the"War Department In 1946 Is such
        a’ "bona Fidelattempt" within the,meanlng of Article
        534%~ ,asto ~entltlean applicantin Augtist’ 1947 $a
        secure.an o,rderfrom the Sohool~~I&ndBoard suspending
        the primaryterm of:lts le'ase.
                  Uoreover,,,.
                            we have been~ln,formally'
                                                    advised '..~
        by you that the War..Departmsntlifted all drilling 're-
        strictions~,onthe'.,area
                               In,question on or.about March
        10, 1947:LWe have ~a180ascertai,ned ,fromthe records
        of the Railroad.~Commlsslonthatthe lessee In ques-
        tion hasnotflled'.its Notice of Intention to Drill
        wfth,tbat~%omm~ssion.as~required by Its rules,and regu-
        lations,,and that no drill~ng~'activlteshave in fact
        been commenced,o,nthe leaaed premises.
                  Under the clrcumstanoeswe are of the arln-
        ion that:~DeaseRo.'22624 has terminatedundo]: the pro-
        visions Of paragraph 1 thereof as of September 20,-
        19470                             ,,




                 (I). i 'State'
                              lessee not having applied
            for and'obtained suspensfonof the primary
            term of Its lease under Art.,5341c, V.C.S.,
            Is not entitled to the bec.efltsof such
            statute,~the statute requlriag an appllca-
            tlon for, and order ~of,,suspenslonby the
            ,gchoolIand Board.
                   (2) A State lessee whose 'leasehas
             been extended from year to year until Sep-
             tember,20;1947, by compliancewith Art.
             536Sr, voc.s., is not entitled to the bene-
             fits of Art..,,534lc, V'.C.S.,without show-
          ~, ing a,~curretit bona fide attempt to seoure
Hon. Bascom Giles       -   Page 10                    v-466


         a drilling permit from the War Depart-
         ment.                                    ‘.



                                 Yours very truly
                            ATTORNEY GENEZ?ALOF TEU3




JDs:jt




                            ATTORNEY GENERAL
