Untitled Texas Attorney General Opinion ( 1973 )

June 5, 1973
Honorable Eyron Tunnell, Chairman Opinion No. H-46
Railroad Commission of Texas
P. 0. Drawer 12967, Capitol Station Re: Questions relating to the
Austin, Texas 78711 applicability of Article
6005, Vernon’s Texas
Civil Statutes, (the well-
plugging statute) to
“landowners” as that
term is defined in the
Dear Chairman Tunnell: statute.
You have requested our opinion as to the applicability and effect
of Article 6005, V. T. C. S. (as amended, Acts 1965, 59th Leg., p. 762,
ch. 355) in seven hypothetical situations, relating to the definition of
“landowner” and to the extent of his responsibility for plugging aban-
doned wells. The most pertinent sections of the statute are as follows:
“Section 1. In this Article, unless the context
requires a different definition, . . . .
“(4) ’ landowner ’ means the owner of the land
upon which the well is situated at the time the
well is abandoned and one who holds a mineral
interest therein;
“Section 4. If the operator fails to comply with
Section 2 of this Article and the nonoperator fails to
comply with Section 3 of this Article, then, in that event,
each landowner is responsible for his proportionate
share of the cost of proper plugging of the well within
a reasonable time, according to the rules and regula-
tions of the Commission in effect at the time the re-
sponsibility attaches. ”
p. 185
Honorable Byron Tunnell, page 2 (H-46)
“Section 5. If a landowner plugs or replugs a
well under Section 4 of this Article, then the landowner
shall have a cause of action against the operator and
nonoperator or either of them, as the case may be,
in any court of competent jurisdiction for all reason-
able costs and expenses incurred in the plugging or
replugging of the wetl, to be secured by a lien upon
the interest of the operator and the nonoperator, or
either of them as the case may be, in the oil and gas
underlying the lease upon which the well is located
and upon the interest of the operator and the nonoper-
ator, or either of them, as the case may be, in all
fixtures, machinery and equipment found or used on
said lease; provided, however, that if the landowner
is responsible for the well not being properly plugged,
then the said landowner shall not have a cause of action
under this Article.
“Section 8. (a) Upon the determination by the
Commission under Section 7 (a) of this Article that
such a well has not been properly plugged, or needs
replugging, the Commission, through its employees
or through a person acting as agent Sor the Commis-
sion, may plug or replug such a well, if
“(1) the well was properly plugged according
to regulations in effect at the time the
well was abandoned or ceased to be
operated; or
“(2) neither the operator, nonoperator nor
the landowner properly plugged the
well, and
“(A) neither the operator, nonoperator
nor the landonwer can be found; or
“(B) neither the operator, nonoperator
nor the landowner has assets with
. which to properly plug the well.
p. 186
Honorable Byron Tunnell, page ‘3 (H-46)
“Section 9. If the Commission plugs a well
under Section 8 of this Article, the State has a cause
of action for all reasonable expenses incurred in
plugging or replugging the well acording to the rules
and regulations of the Commission in effect at the
time the well is plugged or replugged. The cause
of action is first against the operator, to be secured
by a lien upon his interest in the oil and gas in the
land and all his fixtures. machinery and equipment,
found or used on the land where the well is situated,
and second. against the nonoperator at the time the
well should have been plugged, to be secured by a
lien upon his interest in the oil or gas in the land,
and third, against the landowner, to be secured by
a lien upon his interest in the land.”
We have found no cases in which the courts have directly considered
the character and extent of the obligations of landowners to plug abandoned
wells under Article 6005, V. T. C. S. Therefore, the following discussion
represents what we consider to be the proper construction of the statute
in the light of court decisions which have construed some of the language
of this article.
The first question posed by the Railroad Commission is as follows:
“1. ‘A’ owns the mineral rights, hut none of
the surface rights of the tract on which a well is located.
“QUESTION: Is ‘A’, the landowner, within the statutory
definition? If not, is there a landowner?”
We assume that “A” has executed an oil and gas lease covering his
mineral estate; otherwise, he would probably be an operator. Under
these facts, we are of the opinion that “A” would be a “landowner” although
not owning any of the surface estate. If “A” owns a real property interest
in land upon which the we.11 is situated (other than a non-participating royalty
interest), he is an “owner of the land upon which the well is situated. ” For
the Legislature to have excluded a mineral lessor from responsibility for
p. 187
Honorable Byron Tunnell, page 4 (H-46)
plugging merely because he owned no surface estate is moat improbable,
in view of the fact that such lessor probably received a bonus, delay
rentals, and certainly the benefits of the exploration of hir mineral estate.
Your second quertion is:
“2. ‘A’ owns all of the property rights at the
time the well is drilled but sells the surface and a
fraction of the minerals before the well ceases to
produce.
“QUESTION: Is ‘A’ the landowner? If so, what is
the extent of his liability? ”
We understand this question to refer to a mineral lessor who owned
the entire fee simple estate in surface and minerals prior to execution of
an oil, gas, and mineral lease, and who, during the term of said lease
and while minerals were being produced, sold his surface estate and a
portion of his mineral estate. For the same reasons given above, “xSt
would be a landowner within the meaning of the statute by virtue of his
retained ownership of an interest in the mineral estate,
Section 4 of Article 6005, V. T. C. S., states if the operator and
nonoperator fail to comply with the Article, each landowner is responsible
for his proportionate share of the cost of the proper plugging of the well.
“A” would be responsible for that proportion of the cost of plugging as
his mineral ownership bears to the entire mineral fee estate.
The Legislature, in Article 6005, V. T. C. S., has created a three-
tiered scheme of responsibility. Under Section 2, the operator bears
100% of the responsibility for the plugging. The statute does not consider
the percentage of his ownership of the working interest, but simply says
“the operator of a well shall properly plug the well when required, I’
Presumably, he can look to hi,s nonoperators for reimbursement under
the operating agreement.
The second tier consists of the nonoperators or owners of the
working interest who are not responsible for the physical operation and
control of the well. Each nonoperator is responsible “for his proportionate
p. 188
Honorable Byron Tunnell, page 5 (H-46)
share of the cost of proper plugging. ” We are of the opinion that the
Legislature intended to make the nonoperators collectively responsible
for the plugging of the well in the event of the operator‘s failure.
Therefore, as between the nonoperators, each would be responsible
for a portion of the entire cost of plugging not paid by the operator in the
same ratio that his interest bears to the total nonoperating interest.
Between the nonoperators and the landowners, the nonoperators are
severally liable for the entire cost.
The “landowners” form the third tier of responsibility and are
responsible for the entire cost of plugging upon default by operator and
nonoperators. This responsibility is divided between the landowners
according to their proportionate ownership of the mineral estate and
not the ownership of the surface estate. Only the mineral estate stands
to receive the benefits of exploration and production. The “landowners”
are, therefore, responsible for that proportion of the entire cost of
plugging which their respective ownerships bear to the entire mineral
fee estate. They, of course, have claims for reimbursement under
Section 5.
The next question is:
“3. ‘A’ purchases a royalty interest under
a drilling or producing well (no surface rights).
The well ceases to produce.
“QUESTION: Is ‘A’ a landowner? If so, what is
the extent of his liability? ”
The ownership of a non-participating royalty interest with no
rights to bonus, delay rentals, or executive rights does not constitute
its owner a “landowner. ” The statute, in Subsection 3 of Section 1,
specifically excludes royalty and overriding royalty owners from the
status of operators or nonoperators: “It is understood that the terms
‘operator’ and ‘nonoperator’ as defined in this Article do not mean a
royalty interest owner or an overriding royalty interest owner.”
p. 189
Honorable Byron Tunnell, page 6 (H-46)
The definition of “landowner” requires that he hold a “mineral
interest therein. ” The terms “mineral interest, ” “mineral rights, ”
and “minerals” have repeatedly been distinguished from the terms
“royalty, ” “royalty interest” by the Texas courts. As stated by the
Commission of Appeals in Schlittler v. Smith, 128 Tex. 628, 101 S.W.
2d 543 (1937):
“The words ‘royalty, ’ ‘bonus, ’ and ‘rentals’ have a ’
well-understood meaning in the oil and gas business.
Likewise, ‘minerals’ and ‘mineral rights’ have a well-
recognized meaning. Broadly speaking, a reservation
of mineral rights without limitation’would include roy-
alties, bonuses, and rentals, a conveyance of land
without reservation would include all minerals and
mineral rights. However, it is well settled that a
grantor may reserve minerals or mineral rights and
he may also reserve royalties, bonuses, and rentals,
either one, more or all. Here we have a reservation
of only ‘royalty rights. ’ It is obvious, it seems to us,
that this does not include a reservation of bonuses, or
rentals, but only of an interest in oil, gas, or minerals
paid, received, or realized as royalty. . . . I(
The distinction between “minerals” and “royalty” is exhaustively
treated in Vol. I, Williams and Meyers, Oil and Gas Law, Section 302,
et seq.
We conclude, therefore, that a royalty owner does not own a “mineral
interest” as that term has been defined by the courts, and is not a “land-
owner” within Article 6005, V. T. C. S. Accordingly, we answer Question
No. 3. “No. I’
The fourth question is:
“4. ‘A’ owns the surface and mineral rights of
a property at the time production ceases. Thereafter,
he sells all or a portion of his interest. Thereafter,
the well is found to be a pollution source.
“QUESTION: Is ‘A’ still the landowner? If so, what
is the extent of his liability? ”
p. I90
.
Honorable Byron Tunnell, page 7 (H-46)
We assume that by “at the time production ceases” ir meant the
time the well is abandoned. Cessation of production does not necessarily
correspond to abandonment. A well may be “worked over” or various
means may be used to restore production subsequent to the cessation of
production, and while these operations are going on, the well would not
be deemed to be abandoned.
“A” would fall under the statutory definition of a “landowner” and
would be responsible for plugging the well on default by the operators and
nonoperators. His liability would be measured by his mineral ownership
at the time of abandonment. Therefore, he would be responsible for that
proportion of the cost of plugging as his mineral ownership at the time of
abandonment bore to the entire mineral fee estate.
The fifth question posed by the Railroad Commission is as follows:
“5 . ‘A’ owns the surface and minerals at the
time of last production. Thereafter, ‘A’ assigns
his interest to ‘B’. After the assignment, the well
is determined to be a polluting well.
“QUESTION: Is ‘B’ a landowner? If so, what ia the
extent of his liability? ”
In considering this question, we assume that by “the time of last
production ” is meant at the time of abandonment, and that “B” owned no
interest in the property prior to the assignment from “A” to “B”. Under
these circumstances, “B” would not be a “landowner” became he did not
own any interest in the land until subsequent to abandonment. Therefore,
he would not be responsible for plugging.
Section 9 of prticle 6005, V. T. C. S., provides that, in the event
the operators, nonoperators, and landowners fail to plug the well and
the Railroad Commission does so, the Commission shall have a cause
of action against each of the foregoing secured by a lien upon their respec-
tive interests in the fixtures, equipment, and machinery found or used
upon the land and a lien upon the landowner’s interest in the land. Pre-
sumably, this lien would not apply to “B”‘s interest in the land since he
is not a landowner within the meaning of the statute. “A” would, of
course, still be personally responsible.
p. 191
Honorable Byron Tunnell, page 8 (H-46)
The sixth question is:
“6. ‘Al owns surface and minerals at the time
production ceases. ‘A’ dies, leaving ‘Bt and ‘C’ as
heirs. The well is found to be a polluting well.
“QUESTION: Are ‘B’ and ‘C’ landowners? If so,
what is the extent of the liability of each? Ia the
estate liable before distribution? ”
If the words “at the time production ceases’trefer to the time of
abandonment. then “A” was the landowner. In the absence of any mention
of heirs, personal representatives, executors, administrators, devisees.
or the like, we are of the opinion that the statute does not.provide for
succession. The obligations imposed on “landowners” by Article 6005,
V. T. C. S., are highly ccntingent, unliquidated, and would not appear to
be debts recognized at Common Law. Their scope must be measured by
the explicit terms of the statute. By limiting the obligations to “landowners”
without mention of heirs or personal representatives and by defining land-
owner as the person owning the land at a particular time, namely, at the
time of abandonment, the Legislature left no room to infer the succession
of these obligations.
The seventh and last question posed by the Railroad Commission is
as follows:
“7. ‘A’ purchases a tract of land on which, known
or unknown to him, there are one or more non-producing
wells. Thereafter, such wells are determined to be polluting
wells.
“QUESTION” Is ‘A’ a ‘landowner. t If so, what is the
extent of his liability?”
The above question, as does Question 5, involves the liability of a
grantee or successor in title to land upon which there are unplugged or
improperly plugged wells. In such cases, responsibility depends on the
time of acquisition. “The time of abandonment” is fixed by the statute
as the determinative time. If, therefore, “A” purchased the land after
p. 192
Honorable Byron Turntell, page 9 (H-46)
abandonment, he ia not a “landowner”. If he purchased before abandon-
ment, he is a “landowner” and his liability ie determined by the percentage
of his mineral fee ownership.
SUMMARY
In determining who are “landowners” in the
context of Article 6005, V. T. C. S., the time of
acquisition is of importance since he who owns
the land at the time the well is abandoned is the
“landowner”, made liable for the cost of plugging
if the operator and nonoperators do not fulfill
their obiigations.
Very’ truly yours,
DAVID M. KENDALL, Chairman
Opinion Committee
p. 192A