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Commissioner of the Land Office
COMMISSIONERS OF LAND OFFICE — FURNISHING NATURAL GAS The Commissioners of the Land Office may legally agree to furnish natural gas to their agricultural lessees to be used as fuel to produce water for irrigation purposes from wells owned by the Commissioners of the Land Office, provided full market value is paid in money for the use thereof, and provided the oil and gas lessee will agree to furnish the oil and gas partially in kind.
The Attorney General has considered your request for an official opinion wherein you state: "In several locations within the State the Commissioners of the Land Office have drilled and cased water wells which are capable of producing sufficient water to permit irrigation. The cost of the drilling and casing these wells has been paid by the Commissioners of the Land Office.
These lands have been leased for agricultural purposes to lessees who, in order to avail themselves of this irrigation water, have installed pumps and pipes, at their own expense, the title to which remains in the lessee. The rental charged for lands having an irrigation well upon them is substantially higher than the rental charged for lands not having wells capable of producing sufficient water to permit irrigation. These pumps are normally fueled by natural gas or liquified petroleum gas (butane or propane).
"In each of the sections upon which an irrigation well has been drilled there is now a gas well, producing or capable of producing natural gas in commercial quantities. Under the provisions of the oil and gas lease the Commissioners may elect to (1) take their royalty in kind, delivered to the pipeline, free of cost, or (2) take the monetary value of their share of the production.
"I have been directed by the Commissioners to request an opinion from the Attorney General upon the following question: "May the Commissioners of the Land Office legally agree to furnish natural gas to their agricultural lessees to be used as fuel to produce water for irrigation purposes from wells owned by the Commissioners of the Land Office?" Title 64 O.S. 281 [64-281] (1969), grants the power to the Commissioners of the Land Office to lease for oil and gas purposes any of the school or other land owned by the State of Oklahoma, subject to the terms and conditions stated therein.
Each such lease shall provide for the delivery to the State of any royalty of not less than one-eighth (1/8) part of the oil and gas produced from the leased premises or in lieu thereof the payment to the State of the market value of said royalty interest, as the Commissioners may elect. The disposition of bonuses, royalties and other considerations for such lease is governed by 64 O.S. 289 [64-289] (1961).
In School District No. 23 v. Commissioners of the Land Office, 166 Okl. 226, 27 P.2d 149, the Court at page 153 stated: "We think it clear that it was the intention of Congress in passing the enabling act, and the framers of the Constitution of the State of Oklahoma, and the people in adopting the same, that all funds arising from bonuses, royalties, and rentals for oil and gas leases contemplated a diminution of the corpus of the school land and that the same shall be carried into and credited to the permanent fund for the uses and purposes designated in the grant of such lands by Congress to the State of Oklahoma . ." In Wright et al v. Carter Oil Company, et al. 97 Okl. 46,223 P. 835, the Supreme Court held in the third paragraph of the syllabus: "Bonus, rentals, and royalty are income from the use of the mineral resources of the land." It appears that the furnishing of natural gas to agricultural lessees would constitute a diminution of the gas, and unless money was received in full value therefore, the same would not be authorized.
It is therefore the opinion of the Attorney General that the Commissioners of the Land Office may legally agree to furnish natural gas to their agricultural lessees to be used as fuel to produce water for irrigation purposes from wells owned by the Commissioners of the Land Office, provided full market value is paid in money for the use thereof, and provided the oil and gas lessee will agree to furnish the gas partially in kind. (W. Howard O'Bryan Jr.)