Untitled Texas Attorney General Opinion ( 1949 )

AUSTIN a~.TE;nas
PRICE DANIEL
ATTORNEY GENERAL
February 16, 1949
Hon. Baacom Glles, Commlssloner
General Land Office
Austin, Texas
Opinion No. V-m
Re: Statur of non-extendedpro-
ducing leases on State land
a8 affected by Article 53&k,
V. C. 9, (Acts 1947, 50th Leg.,
Ch. 82, p* 139) and related
questions.
Dear Sir:
We have your request for an opinion, composed
of three questions, concerning the above-mentionedaub-
Ject.
Your question Wo, 1 reads aa follows:
"What will be the status of non-extend-
ed leases which may be found productive dur-
ing the primary term and subsequent to Octo-
ber 1, 1948? Shall the 25 year term be con-
sidered binding, or shall the School Land
Board have within fts authority the a,bflQty
to grant lease extensions at any latterdater
on the basis of value establishedafter pro-
duction has been encountered?"
You are advised that non-extendedleases will
terminate'aftertwenty-five (25) years from the date of
the lease. The School Land Board fs without authority
to grant lease extensions on ap lfcationdtfiled after
September 30, 1948, Article 53$4c, V. C. S,
Your queetion lo. 2 reads as follows:
"What methods of dispositionwill be
available to the present or future School
Hon. Bascom Giles - Page 2 - V-777
Land Boards with regard to the title of
non-extendedproducing leases which may
be found to have appreciablereserves up-
on terminationof the 25 year period?
Even with the best geological and engi-
neering estimates certain producing leases
may indicate insufficientreserves to have
producing lives greater than 25 years.
With possible discoveriesof new produc-
ing formations the application of more ef-
ficient methods of recovery, or with changes
in crude prices and demand, these leases may
have reserves greater than those presently
anticipated,and also extended operating
lives."
The method of dispos,itionavailable to pre-
sent or future School Land Boards with reference to
State lands formerly leased under terminatednon-extend-
ed leases will depend upon the pertinent leasing sta-
tutes in effect at the time of the expirationof the
twenty-five (25) year term. The present leasing Act
Is Article 5421c, V. C. S.,(Acts 1931, 42nd Leg., p-452;
as amended, Acts 1939, 46th Leg. p# 465; as amended,
1941, 47th Leg., p. 596; as amended, Acts 1943, 48th
Leg. P. 453).
Your question No. 3 reads as follows:
"It is anticipated that certaln,non-
extended producing leases will be capable
of additionalproduction after the 25 year
term, provided that large capital expendi-
tures are not required to produce or to re-
,developthe property, It is possible that
the present law can be interpretedto mean
that upon terminationof the 25 year period
the lease reverts to the State and the opera-
tor Is entitled to salvage all surface and sub-
surface equipment. If the operator plugs and
abandons any or all wells upon said lease,
it Is quite possible that the remaining re-
serve would be unprofitableshould ~redrilling
be required. Since we are interested in maln-
taking a profitable reserve, It will be nec-
essary to establish the right of the State to
assume title to the hole and its salvagable
Hon. Rascom Glles - Page 3 - V-777
casing. Without this right an appre-
ciable reserve'couldbe lost by the aban-
donment of a nonextendedproducing lease,"
Mr, Dennis Wallace of the General Land Of-
fice and this writer made a survey for a twenty year
period of several of the leases now on file, and it
Is our conclusion that the leases are silent as ito
the dlspositlonof casing in the ground.
You are advised that the view of the Texas
Courts is that casing placed in a well can be removed
by the les,see. These cases are based on the reason-
ing that it IS personal property or a'trade fixture of
the lessee. SouthwesternOil &-Gas Co, v. Kimball 011
and Develovment C0.. D D 11 ICIV. DD. :
Oil co.. 269 S.'W.
n-E ReclamationDistrict
V.DD.
The view of Texas is the view of other states.
39 A. L, R. 1225. Practicallyall the cases involved
standard 011 and gas leases with a clause giving the
lessee the right to remove machinery and casing on aban-
donment or terminationof lease. However, the rule is
that a lessee can, within a reasonable time after aban-
donment or termination,remove machinery and casing even
though the lease contract does not specificallygive him
this privilege, SouthwesternOil & Gas Co, v, Kimball
Law of Oil & Gas, 3rd Ed., Vo
The courts, unhesitatingly,apply the rule that
the-lessee can-remove casing from a dry hole. They have,
however, in the few cases on the subgect, issued lnjunc-
tlons restrainfng the lessee from removing casing from a
producer. Orfic Gasoline Case, aupra; SouthwesternOil
Hon. Bascom Giles - Page 4 - V-777
& Gas Co. case, supra; and Wisconsin-TexasOil Co. v.
Clutter 258 S, W. 265 (Rev. on other grounds by Comm.
App.268 s. w. 921).
Restraining the removal of casing from a pro-
ducing well is consistentwith Railroad commission
rules for prevention of waste. Art. 6005, V. C. S.,
Railroad Comm. 011 & Gas Rule #gb and 10, and Art.
6014(c), v. c. 9, See also 31-A Texas Jurisprudence,
See, 216, which says:
"The right to remove casing from an un-
productive hole does not, of course, give the
lessee any right to destroy a productivewell
by taking away the casing, for such action
would involve a violation of the 011 and gas
conservationlaws."
It should be noted that the question of removing
casing from a producer~is applicable only as between lessor-
lessee. The rights of mortgagees of casing may involve a
different conclusion. Crabb v. Keystone Pipe & Supply Co.,
177 S. W. (2d) 989 (Clv, App,, 1944, W. E, ref.),
As a safeguard In future leases which might term-
inate for other reasons while wells are still productive,
you might wish to consider insertion of a clause which
would provide that casing and other equipment necessary to
maintain production shall not be removed.
Under the provisions of Art. 344c
,(Acts1947, 50th Leg., Ch. 82, p. 139 the
School Land Board is without authority'to
extend leases on State land on applications
filed after September 30, 1948,
School Land Board will dispose of
State lands which revert to State upon terml-
nation of non-extendedleases according to
terms of leasing statute in effect at time of
expiration of the lease.
-
Hon. Bascom Giles - Page 5 - V-777
Unless otherwise provided by con-
tract, casing in a well ia personal prop-
erty or a trade fixture of the lessee,
and can be removed by him; however, the
courts will not permit the removal of
casing from a producing well In viola-
tion of the 011 and gas conservationlaws.
Yours very truly
ATTORNEY G
JJIW:bt
BY
Assistant 7 Cc.