Untitled Texas Attorney General Opinion ( 1942 )

.
THEATTORNEYGENERAI.
OF TEXAS
GERALDC. MANN
Mr. C. D. Simmons
Comptroller
University of Texas
Austin, Texas
Dear Sir : Opinion No. O-4970
Re: Authority of Board of Regents
or Board for Lease to make
agreement8 waiving right to
Inaiat upon development under
University 011 and Gas Permit
Leaeee, and related queation.
This will acknowledge receipt of your letter of recent
date wherein you reqwmted the oplnlon of this department upon
the above etated matter. We quote from your letter as follows:
“The facts In conneotion wlth the nondevelop-
ment of the acreage covered by the oil ana gae
leases Involved in the oeee of State v. Tide Water
Associated oil co., 159 9.w. (28) 192 (w~%t of
error refused,), is a typiaal example of the oonal-
tlons in respect to the nondevelopment of 8 lasge
amount of acreage held under other end similar
leases on Unlvareity lands, You will reoell that
ln thla oaee the lease covered a total ao~eage of
6,940aoree of University lande, and, exoept for a
amall traot of 80 ROFBBupon which alone oil had
been discovered end produced in paying quantities,
no other part of thbe aoreage k&d ever been de-
veloped for 013 OF gas. This soreage wen not oon-
tiguous, but warJ scattered wMely over four dif-
ferent counties in West Texee. Ths auLt reaufted
in the cancellation of the leaae,as to the non-
developed acreage involved.
“dpproximetely 110,000 eorea of University
lancbare affeoted by thle eituetlon.
“A oontroversy has existed between the Board
of Regents of The Univeraitg of Texan and the
Board for Lease of University Lands and the various
lessees or asaigneetl under these leases as to
whether due diligence han been exeralsed for the
,~ .
Mr. C. D. Simmons, page 2 O-4970
exploration and development under these leases
for a great number of years.
"It has been suggested that these leases,
in so far as they may affect the nondeveloped
areas, be cancelled by suit or that the con-
troversy be settled by a supplemental agreement
between either the Board of Regents or the
Board for Lease, or both, whichever has the au-
thority to enter into such agreements with the
present owners of said lenses. It is proposed
that such supplemental agreement provide and
fix a definite term in which the lessees shall
be required to either drill or pay rental, and
that the leases, in so far as they affect such
undeveloped areas, shall terminate at the end of
said period unless oil or gas in paying quanti-
ties shall have been discovered and is being
produced before the end of such term. That such
agreements shall be 80 drawn as to provide that
each separate trac,tof land covered thereby shall
be considered a separate and Independent unit
for developmen,tpurposes. Mr. Scott Gaines has
prepared a tentative draft of such proposed a-
greement, a copy of which is enclosed to 'you
herewith for your information.
"Accordingly, we would respectfully request
your advice as to whether the Board of Regents
or the Board for Lease has the authority to make
the proposed agreement with .thevarious owners
of these leases in respect to the development of
these undeveloped areas covered by their leases."
We gather from your inquiry that the leases'in question
like those involved in the case of State of Texas v. Tidewater
Associated Oil Co,, et al, supra, 'wareall exechted by the Land
Commissioner under authority of the 1917 Permit Lease Act and its
amendments, and this opinion is based upon that assumption.
While broad authority to sell or lease minerals in pub-
lic lands dedicated to the Univer,3i,ty
of Texas permanent fund
was placed in the Board of Regen,tsby the.27th Legislature, it is
the prevailing opinion that such authority was limited to the so-
called hard or solid minerals. See Acts, 1901, 27th Leg.;,Reg.
Sess., p- 266,now Art. 2597, R.C.S., 1925; 31Tex. Jur. 664,note
12. This belief finds support in *he fac.tthat.the oil and gas
industry was then in its infancy a?d that ,theLegislature at that
Mr. C. D. Simmons, page 3 O-4970
time was preoccupied with the development of other and then more
common minerals. See 31 Tex. Jur. 664, Sec. 87.
However, this question need not be debated here because
such authority as might have existed in the Board of Regents was
superceded in 1913 by the 33rd Legislature which in that year
placed exclusive jurisdiction and authority over oil and gas
leases on University lands in the Commissioner of the General
Land Office. See Acts, 1913, 33rd Leg., 1st C-S., p0 26. Sec-
tion 33 of the 1913 Act repealed all laws or parts of laws re-
lating to the sale of mineral lands.", This provision, we be-
lieve effectively terminated any authority to lease University
lands which the 1901 Act might have placed in the Board of
Regents. Since it lacked authority to execute the leases origi-
nally, we can conceive of no rule of law which would make possi-
ble a holding that the Board of Regents, nevertheless, now has
authority to either forfeit or modify such leases. Certainly no
statute so provides.
At the outset, therefore, we can eliminate the possi-
bility that the Board of Regents has the power or authority to
either forfeit or modify the leases in question and turn to a
consideration of the question of the existence of such authority
in the Board for Lease of University lands.
In 1917 the Act of 1913 was redrawn by the 35th Legis-
lature and the Permit Lease Act is now generally known as the
Act of 1917; it will be so referred to hereaftar in this oplnion.
While many changes in phraseology 'G&remade by the 35th Legisla-
ture, the Act of 1917 was, in substance and for all purposes
necessary to this inquiry, identical with t.he1913 Act. The
later act retained in the Land Commissioner the exclusive author-
ity to execute and supervise leases on University lands conferred
on him by the Act of 1913. See Acts lgS7, 35th Leg., Reg. Sess.,
State v. Bradford, 50 S.W. f2j 1065, 1074, modifying
&i ,'?!! (2) 706.
The Act of 1917 remained in effect, insofar as it applied
to University lands, until 1925 when the Legislature abandoned
the Permit plan of leasing these lands and adopted a new method.
See Acts, 1925, 39th Leg., Reg. Sess., Ch, 71, p. 225. Section
1 of the 1925 Act, as found in Vernon's Annotated Statutes under
the~heading "Additional Legislation", following Article 5343,
provides that oil and gas leases upon University lands, as well
as leases on other lands therein named, should thereafter be
controlled by its provisions, Sole authority to lease University
lands for oil and gas is retained in the Land Commissioner, and,
as was the case in the Acts of 1913 and 1917, exclusive power to
forfeit was continued in that official.
Mr. C. D. Simmons, page 4 o-4970
Although the 1925 Act sets up an entirely new method
of executing leases on University lands, it continued in force
for3 a limited period ail permits issued under the Act of 1917.
No express repeal of the Act of 1917 is contained in the 1925
Act, and, as a matter of fact, no repeal provision of any nature
is included. However, since under the provisions of both acts,
exclusive jurisdiction over the execution and forfeiture of oil
and gas leases on University lands was vested in the Land Com-
missioner, no question of conflict of authority between officials
was possible under the two acts. The 1925 Act merely provided
for a different procedure by ,whichthe same official was there-
after to perform the same official function. Unquestionably, the
Act of 1917, after the passage of the 1925 Act, continued to
control leases theretofore issued under its provisions.
In 1929, the Legislature for the first time took from
the Commissioner of the General Land Office the authority to
lease University lands for oil and gas, The 41st Legislature in
that year created the Board fo:rLease of University Lands and
vested in it the sole and exclusive authorrty to execute oil and
gas leases on UrIversity lands, See Acts, 1929, 41st Le
Ses3 *, p0 616 (codified as Art. 2603a, Ver-non'sAnn. St.7 "TEzg'
creation of this new bosrd and ,thevesting in i-tof authority
which formerly rested in the Commissioner of the General Land
Office to execute leases on University lands gives rise to the
question of whether the Board or the Commissioner thereafter had
jurisdiction over oil and gas leases issued under the prior acts.
The 1929 Ac'i is, in scope and by its express terms, con-
cerned with the execut,Ionof leases and in the future supervision
of such leases. Thus Section 9 of the 1929 Act deals only with
obligations undertaken "during the term of any lease issued under
the provisions of ',iisA&", while Section 13 p?ovides authority
in the Board for Lease to forfeft rights acquired by lessees
"under this Act". The 1929 Act does not expressly concern it-
self with cont,rolof leases in existence at ,thetime of its en-
actment.
The express limitation on 'theauthority of the Board for
Lease to supervision of leases and to obligations and rights under-
taken or acquired by lessees under the Act, indicates a legisla-
tive intent that leases executed under prior laws were to be con-
trolled by the laws under srhichthey were execu.ted.
Section 18 of the 1929 Act provides:
"Any and ali or parts of laws in conflict
with this Act are hereby repealed.'
This is 'what is known as a general repealing provision,
one that does not expressly name the stayutes which it repeals.
Mr. C. D. Simmons, page 5 o-4970
A general repeal is effective to repeal prior enactments only to
the extent of inconsistency or repugnancy with the terms of the
later statute. Gaddes v. Terrell, 101 Tex. 574, 110 S.W. (2)
429; Johnson v, Ferguson, (Civ. App,, Austin, 1932) 55 S.W. (2)
153, error dismissed. Insofar a3 the Act of 1917 and its amend-
ments do not conflict with the 1929 Act, the prior act remains
in full force and effect.
In 1931, the Legislature adopted certain amendments to
the 1929 Act. Specifically, it amended Sections 4, 5, 6, 7, 8, 9,
10 and 18, retaining in Section 18 the general repeal provision
quoted above. Again in 1937, the Legislature amended Sections
4, 5, 6, 7, 8 and 18 and in addition amended Section 14. The
identical general repeal provision was again retained in Section
18.
It will not be necessary for the purpose of this opinion
to go into the nature of the 1931 and 1937 amendments generally.
We will mention only those which we feel have some bearing on your
questions.
Section 8 as amended by the Legislature in 1931 author-
ized the Board to execut.eleases with primary terms not exceed-
ing five years instead of three years as provided in the 1929 Act
and authorized the Board to extend the primary ,termsfor an add-
itional five years under certain conditions. It also placed
within the Board's discretion the authority "to pro-rate, reduce
or discontinue production on any of the University oil and gas
leases, by agreement with lessees for a iimited period." The
1937 amendment continued only this latter authority. The author-
ity to modify leases in that limited respect is broad enough to
include pe:rmitleases. We believe it to be the only provision
in the Act broad enough to encompass leases executed under prior
laws.
Another provision contained in the 1931 amendment to
Section 8 of the 1929 Act is the following subsection:
"(c) Whenever in the discretion of said
Board,it isfor the interest of the University
and its permanent fund to extend a lease issued
by said Board or the Land Commissioner, said
Board for Lease of University Lands is hereby
granted and given full authority to extend said
lease for a period not to exceed five (5) years,
upon condition that the lease (1essee)shall
continue to pay yearly rental as provided in
the lease, and such additional terms as the
Board for Lease may see fit to demand. Said
Board is hereby given full authority to extend
such leases and execute an extension therefor."
Mr. C. D. Simmons, page 6 O-4970
The 1937 am0ndmen.tto Section 8 eliminated from the Act
the quoted provision, and all other authority which the 1931 a-
mendment had placed in the Board, to extend the primary terms of
leases on University lands.
Now, what is ,thesignificance of these amendments to
the 1929 Act?
It Is obvious that the Legislature has been very sparing
in its grants of authorit:yto the Board for Lease to modify any
of the leases on University lands. The authority which it gave
to the Board in 1931 to extend the primary term of leases, it
took away in 1937. The only modifying power it has left In the
Board is that 'of prorating or discontinuing production in %he
interest of the University permanent fund. We do not believe
that this power is sufficiently broad to authorize the board to
excuse non-development, even for a valid consideration.
In the absence of 3perifi.I::
aut,horS?y,'~o
modi"y, changes
in the terms of a lease executed by the Board for Lease could be
brought about only by er,t::yinto a new lease contract. The
Board's authority to execl&e a lease, however, u,nderthe provi-
sions of Sections 5, 7 an:d 8 of Article 2633a is restrlcted by
the requirement .thatleases be awarded to the highest bidder.
Where, as here, the Legislature has provided a particular method
for the exercise of an official function by a boa,rd,*It is gener-
ally held that,t;hemethod prescribed is exclusive, Bryan v 0
Sundberg, 5 Tex. 418; 34 Tex. Jur. 453, See, 74.
Lacking authority to modify lsases which i,t,Itself, ha3
executed, the Boa:rdfor Lease must, of necessity, be held power-
less to modlfy leases entered jr.?0'by the Commissioner of the
General Land Office prior to the @Pea&ion of the Board. The
authority to modify mst be speclfi.callyg:?a:i'red by the LegFsla-
,ture. It cannot be implied from scthority to er,t.er into the
original contract. Marn v , iXlbli:;gCo,ttoc
Oil 20 1,"92 Tex a 377,
48 F .w. 567; G,ovier..,S;:a:"r-,Fa:.lrln
Co., v0 N. Nigro & Co., (Civ,
App. Dailas, 192ZZ:),240 S,W, 578; 2 Tex. J>dr.469, Sec. 73.
Neither t'he1.929Act no? the amendments of 1931 and
1937 give to the Board for Lease, in express tier*ms
or by neces-
sary lmpllcationr any authority over leases already in effect or
permits then extant except .tothe limit,edertent~stated.
If it had been the intention of the Legislature to vest
in the Board for Lease jurlsdic.tionover all leases on University
lands, including those execu%ed by the Land Commissioner prior
to 1929 under the Act of 1917 or the Act of 1925, it seems certain
that it Qould have expressly repealed the Act: of 1917 and the Act
of 1925 and would have vested the a``thonity.thenexlstlng in the
Land Commissioner In the Boar6 fc:rLease.
Mr. C. D. Simmons, page 7 O-4970
In the
- _ absence of express repeal of the Act of 1917,
we mLI3't
conclude that Its provision3 still control leases ex-
ecuted under it by the Commissioner of the General Land Office.
State of Texas v. Tidewater Associated Oil Co., 159 S.W, (2)
192, error refused. See also 31 Tex Jur. 664, Sec. 86. The
further conclusion is inevitable that the Board for Lease does
not have any authority to either forfeit or modify leases ex-
ecuted under the Act of 1917. Such authority, if any> is in
the Land Commissioner,
This answers the specific inquiry you have propounded;
however, in anticipation of a further inquiry as to the authority
of the Land Commissloner to forfeit or modify, we deem it ad-
visable to examine the question of the Commissioner's authority
and advise you also in this regard.
A brief resume of the provisions of the Act of 1917 at
this point may be of some help in explaining our conclusions.
The Act of 1917 contemplated the Issuance of leases on
University, an:1o,therlands included within its provisions, by
the Commissioner of the General Land Office, Under that Act,
anyone desirirg the right ,toexplore a particular tract of land
for oil and gas was required to apply to the Commissioner for an
exclusive permit to explore the land, accompanying the applica-
tion with certain payments. If the exploration resulted in the
discovery of 011 or gas? the Commissioner was authorized and re-
quired, upon the request of a permittee who had ccmpiied with the
other requirements of the Act, to Issue a lease to him upon the
area covered by his permit.
The 36th Legislature liberalized the requirements of the
1917 Act by providing for a combination of permits and the issuance
of a lease upon the completion of a well on any one of the
several permit areas included in the combination. See Sections
12, 13, 14 and 17 of Relinquishment Act, Chap,ter81, Acts 1919,
36th Leg. 2nd C.S., p0 249-254.
The sections of this Act which relate to combinations of
permits have been codified as Articles 5374, 5375, 5376 and 5343,
R.C.S., 1925, respectively,
Section 19 of the Act of'l919, generally known as the
"Relinquishment Act", provides that,except insofar as they were
changed by this Act, the provisions of the 1917 Act should re-
main in full force and effect.
Among the provisions of the 1917 Act which were not
affected by``'the
1919 Act Is Art,icle5350, R.C.3, 1925, which
provides that, "Should the owner of a permit~fail or refuse to
begin In food faith the work necessary to the development of the
. . ,,
Mr. C. D. Simmons, page 8 0 -4970
area within the time required, or to proceed in good faith and
with reasonable diligence in a bona fide effort to develop an
area included in his permit after ‘havingbegun the development
the permit or lease shall be subject to forfeiture.
Whin’the Commissioner ( of the Seneral Land Office) is suffi-
ciently informed of such facts he may declare the permit or
lease forfeited by proper entry upon the du.plicatethereof in
his office . . .” (Parenthetical matter added)
The printed forms of the leases issued by the Land Com-
missioner under this Act provide as follows:
"3 . The owner of the rights herein con-
veyed shall proceed with reason,ablediligence
in a bona fide effort to develop and operate
the area leased,and to prosecute such drill-
ing operations with due and reasonable diligence
to the usual depths at which oil is found in
other weil,sin tie same vicin,i~+,y,
0 Q 0 ~ D .‘I
We are advised t~hateach of the leases executed under
the provisions of the Act of 1917 contains this particular pro-
vision.
It is apparent t,hatneither Ar-title5350, R.C.S. 1925,
nor the quoted provision ir the lease make an.yprovision for
payment of indemnity in lieu of boca fide a:-ddiligent develop-
ment . The Land Commissioner’s authority is limited to that
granted e If he finds that bona fide and diligen~tdevelopment is
lacking, he has the power to forfeit the l~ease. No discretion
is given ,tohim to raqu,ireanything mope than, nor to accept
anything less than, that required ‘ky the stat,ute. The statute
and the lease :-equirebon.afide and tiligen,tdeveiopment under
penalty of forfeifzre.
We have stated a,tseveral points in this opin.ionthat.
the land Commissione:.?
and the Board for Lease are powerl,essto
mod,i .fy contracts :--ed
e:5ti,,,into or,t,ehaifof the S.?&e. I,tshould
c,.Aa-,
be borne in.mi:-6+,‘p, we are not’hers c0n.c
arr,ed,;itha question,
of the power of the State ,kocor?ra::t0.rto modify an.existing
contract. The sole questir:m:n
in.volvsd,
in this opinion is whether
or not the LegisX!ure has author3ze.d these particular offi.cials
to modify the ccntracts in ques’tfon..
the Stat+ of Texas has power to contract
Un ~quv,estioc.ably,
equivalent to that of a corporaticc or an. individu,aland it has
been aptly stat.ed,thatthis is one of the attributes of soverigntg,
Conleg v. Daughters of the Republic, lC6 Tex. 80, 156 S;W. 197,
157 S.W. 937; Jumbo Cattle co. v. Bacon.,79 Texas 5, 14 S.W. 840;
Charle,sScribner’s Sons v e Marrs, Ilk Tex e 11, 262 S .W. 722; Dikes
v. Miller, 25 Tex. Supp. 28;.
Mro C. D. Simmons, page 9 O-4970
The State of necessity contracts only through its
agents and it may be bound by a contract only if its agent is
authorized to enter into the particular contract. The State is
not bound by contracts made in its behalf by its agents or
officers without previous authority conferred by law. Terre11
v. Sparks, 104 Tex, 191, 135 S.W. 519; State v. Perlatein (~ivi.1
App. ) 9 S.W. (2) 143, Error DismiSSed.
In the absence of a clear expression in the State Con-
stitution forbidding it, the Legislature may authorize modifica-
tion of its contracts by its agents, Rhoads Drilling Co. v,
Allred, (Comm. App.) 70 S,W. (2) 576.
"The State cannot enjoy and exercise fully
the important right to contract unless it is per-
mitted through officers or representatives au-
thorized by ,theLegislature to modify its execu-
tory contracts when a proper occasion arises."
Rhoads Drilling Co. v. Allred, sup:ra.
The case from ,whichthe above quotation is taken, Rhoada
Drilling Co. v. Allred, involved a construction of Subsection 6b
of Section 8-A of Art. 5421`` Vernon's Annota'tedCivil Statutes,
expressly COn.fepri~g upon the Board fur Mineral Developmentthe
authority to revise oil or gas leases on river-beds upon request
of the lessee. The authority granted by the Statute is broad and
places extensive discretion in t'na?,Board.
No such t:?oadauthority has been coLfe:wzd upon either
the Board for Lease or the Land Commissioner over oil and gas
leases on University lands.
It is therefore the opinion of this Department and you
are so respectfully advised ,tha t,.:,~eLtk.er
th,eBoard of Regents
nor the Board for Lease has any au'YhoritytG forfeit leassa ex-
ecuted under the Act of 191'70:~,tomodify tihemby er3ering into
the proposed ag:raemert, Itiia .';tie fvlrtl-
‘zer*
opinion of this de-
partmen.tthat ,theland ``OlIUEiSBiOn~2 h&S 'kkl:ie
aG.t;kGrity t0 forfeit
such leases for failure of the 'le:ssees to :Zevelopin a bona fide
and diligent manner an.dtha.tthe Lan.dCommissLon,eris without
authority to modify the '?:erms of such leases by entering into the
suggested agreemer,? O
Mr. C. D. Simmons, page 10 o,-4970
Trusting that we have fully answered your inquiry,
we are
YOUI' very truly
ATTORNEY GENERAL OF TEXA?
By s/Peter Mtiniacalco
Peter Manixalco
Assistant
PM:ff:wc
APPROVED MAR 6, 1943
a/Gerald C. Manrr
A'ITORNEXGENERAL OF TEXAS
Approved Opinfcrls'ommi,:t:,e
By s/WB Chairmar