Gerald C. Mann                 Ausrn~   na. TEXAS




    Honorable Stanford Payne
    Chief Deputy supervisor
    Oil & GagsDivision
    Railroad Ccmmission of Texas
    Austin, Texas

    Dear Sirr                           Opinion No. O-2216
                                        Re: Rhether a special permit to drill
                                             an oil well, granted as an exoep-
                                             tion to Rule 37,,continues to be
                                             valid titer the expiration of the
                                             lease in effect at the time the
                                             permit was granted.

              We have your letter of April 11, 1940, in which you askour opinion
    with reference to the present validity of,a special permit.to drill an oil
    well, granted by the Railroad &mission   as an exception to Rule 37, where
    the lease in existence at the time the permit was granted has expired. YOU
    state in your letter that'the special pexmit was grantsd~t&the lessee of B
    two acre tract, but that the lease expired before drilling operations ocm-
    menced. The question you ask iS whether the permit will be valid so as to
    permit the drilling of the well by another person holding IIlease executed
    thereafter, or whether it will be necessary for the Railroad Comission to
    issue a new permit to drill.

                 Ws do not find any rule of the Railroad Commission of Texas or any
    statute which controls this situation. Under the general authority granted
    to it to meke.the necessary regulations of the production of oil and gas in
    orderto conserve such natural resources (see Vernon's Annotated Civil Stat-
    utes, Articles.   6014, 6029, 60490) the Railroad Commission of Texas would
    undoubtedly have the power to make any reasonable regulations governing per-
    mits for the drilling of oil wells. See Brown v. Humble Oil & Refining Com-
    pany, 126 Tex. 296, 63 S.W. (2d) 935,

              The Railroad Conmxission*sspacing rule is Rule 37. This rule pro-
    vides for the granting of permits to drill as exceptions to the rule, but
    contains no provision covering the situation where the working interest in
    an oil and gas lease is transferred either by the act of the parties or by-
    operation of law after the granting of a permit. '% understand that it has
    been the general practice of the Railroad Ccmmission to recogniae the val-
    idity of any permit in the hands of any person who acquires the working
    interest in the lease after the granting of the permit, without the neces-
    sity of obtaining a new permit.
Honorable Stanford Payne, Page 2 (o-2216)



          It is our opinion that the special permit to drill is a
privilege which goes with the wcrking interest when the working in-
terest is transferred either by act of the parties or by operation
of law. Where, es in this case, the lease has expired, the mrking
interest has become vested in the ower or owners of the fee, as a
matter of law, end such fee cwners could thereafter transfer such
wcrking interest to a new lessee.

          There is nothing in Rule 37 which indicates that any special
trust or confidence is placed in the permittee at the time the pennit
is granted, the sole grounds for granting an exception being that the
Commission shall find that the permit is neoessary "in order to prevent
waste or to prevent the confiscation of property." This indioates that
the Canmission, in granting the permit, is concerned solely with the
land involved and that no consideration is given to the financial re-
sponsibility or other qualifications of the pennittee. The Railroad
Conmission having determined that a permit should be granted for a well
on the tract in ,question,the privilege to drill the well in the ab-
sence of any regulation of the Railroad Ccwission to the contrary,
in our opinion, goes with the wcrking interest, whether such interest
is transferred by operation of law or by the act or deed of the parties.

          We are not here undertaking to pass upon the right of the
Railroad &xmnission to make any reasonable regulations requiring new
applicaticn, notice, hearing or pennit where the working 5nterest in
oil end gas property is transferred; our opinion is strictly limited to
the situation where no rule or regulation of the %mnLesion requires
such new application, n&ice, hearing, or permit.

                                             Very truly yours


                                        ATTORNEY GENEUL OF TEXAS

                                        By
                                             s/ Jemes P. Hart
                                                    James P. Hart
                                                       Assistant
JPH&dtd,egw

APPROVED MllY8, 1940
s/ Gerald C. &UUI
ATTORNEYGENERAL OFTEXAS                           Approved Opinion Committee
                                                  By BWB Chairmen
