Mr. William G. Burnett, P.E. Executive Director Texas Department of Transportation 125 East 11th Street Austin, Texas 78701-2483
Re: Whether article
Dear Mr. Burnett:
We have been informed that the State owns, in fee simple, highway rights-of-way in several tracts located within the boundaries of two unitized oil fields. Recently, a citizen discovered the State's ownership and believes the state lands are inside the boundaries of producing oil fields, although the State never has leased the oil and gas rights to the land. If the State pursues a claim for lost royalties, you assert, it may recover a share of the oil and gas royalties earned from wells located in the two fields.
The citizen contracted with the State to provide information about the State's land in return for a finder's fee of five percent of the amount of any revenue the State recovers as a result of the citizen's information. You suggest, however, that any proceeds the State recovers may be subject to disposition in accordance with article
Article VIII, section 7-a of the constitution provides in pertinent part as follows:
Subject to legislative appropriation, allocation and direction, all net revenues remaining after payment of all refunds allowed by law and expenses of collection derived from motor vehicle registration fees, and all taxes, except gross production and ad valorem taxes, on motor fuels and lubricants used to propel motor vehicles over public roadways, shall be used for the sole purpose of acquiring rights-of-way, constructing, maintaining, and policing such public roadways, and for the administration of such laws as may be prescribed by the Legislature pertaining to the supervision of traffic and safety on such roads; and for the payment of the principal and interest on [certain] county and road district bonds or warrants . . .; provided, however, that one-fourth (¼) of such net revenue from the motor fuel tax shall be allocated to the Available School Fund; and, provided, [that counties will derive certain minimum net revenue from motor vehicle fees]. [Footnotes added.]
Your question assumes that the state acquired the highway rights-of-way about which you ask using funds dedicated by article VIII, section 7-a. We have been informed, however, that the state acquired the highway rights-of-way about which you ask in the 1920s and the 1930s. The electorate did not amend the constitution to add article VIII, section 7-a until 1946. Generally, a constitutional provision must be construed to operate prospectively, not retroactively. See Grigsby v. Peak,
We will assume for purposes of this opinion, however, that the highway rights-of-way were purchased with that portion of the receipts from motor vehicle registration fees and motor fuel tax revenues that are constitutionally dedicated to "acquiring rights-of-way, constructing, maintaining, and policing such roadways, and for the administration of such laws as may be prescribed by the Legislature pertaining to the supervision of traffic and safety on such roads . . . ." See Tex. Const. art.
A court of civil appeals, as well as this office, has determined that interest accruing on a special fund dedicated by the constitution becomes part of the special fund. Lawson v. Baker,
We believe, however, that Lawson v. Baker provides, by comparison to the issue before us here, some guidance. In Lawson the court of civil appeals considered whether the legislature may separate interest accrued on a constitutionally created special fund from the fund itself and divert the interest to another fund or another purpose. Lawson,
The court analyzed the enactment under article
Interest, according to all the authorities, is an accretion to the principal fund earning it, and, unless lawfully separated therefrom, becomes a part thereof. We think it is clear that the interest earned by deposit of special funds is an increment that accrues to such special fund, and any attempt of the Legislature to make such interest a part of the general revenue is futile, in the face of the constitutional provisions creating or dedicating these funds to special purposes.
Id. at 272; see also Oregon ex rel. Sprague v. Straub,
The Lawson court defined the term "interest" as "an accretion to the principal fund earning it." See id. at 272. In its usual sense, "accretion" describes the "slow gradual building up of land by the gradual deposit by the river of a solid material." See Barakis v. American Cyanamid Co.,
In our opinion, royalties the State receives from the depletion of oil and gas under property the State acquired with constitutionally dedicated funds differ from interest accrued on those funds. First, royalties do not accrue on the special, "principal" fund itself; rather, they are received for the depletion of real property, which in this case was purchased with money from the special fund. Second, royalties do not naturally adhere to real property.
Significantly, the legislature has determined by statute that proceeds from the sale of highway right-of-way need not be disposed in accordance with article
Furthermore, on its face, article VIII, section 7-a dedicates only motor vehicle registration fees and revenues from gasoline taxes; it does not refer to proceeds on land the state has purchased with the registration fees and gasoline taxes. We note, by contrast, article
Similarly, article
If the legislature had wished to propose to the electorate a constitutional amendment that dedicated proceeds received for the use of land purchased with motor vehicle registration fees and revenues from the gasoline tax, it clearly could have done so. In the absence of such a provision, we conclude that article VIII, section 7-a does not require the department to credit to the special fund created in article VIII, section 7-a oil and gas royalties received for the depletion of highway rights-of-way acquired with money from the special fund. Instead, such royalties must be distributed in accordance with applicable statutes.
You do not ask which statute governs the disposition of the oil and gas royalties in this case, although your letter suggests that you desire to know how the proceeds must be disposed. Section
We have located three statutes that may apply in this situation: Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 1, 1995 Tex. Sess. Law Serv. 1025, 1127, 1486 (to be codified at Transp. Code §§
Yours very truly,
DAN MORALES Attorney General of Texas
JORGE VEGA First Assistant Attorney General
SARAH J. SHIRLEY Chair, Opinion Committee
Prepared by Kymberly K. Oltrogge Assistant Attorney General
[1] Chapter 101 of the Natural Resources Code authorizes, subject to the approval of the Railroad Commission, see Nat. Res. Code §
(1) that the agreement is necessary to accomplish [the two purposes listed above];
(2) that it is in the interest of the public welfare as being reasonably necessary to prevent waste and to promote the conservation of oil or gas or both;
(3) that the rights of the owners of all the interests in the field, whether signers of the unit agreement or not, would be protected under its operation;
(4) that the estimated additional cost, if any, of conducting the operation will not exceed the value of additional oil and gas so recovered, by or on behalf of the several persons affected, including royalty owners, owners of overriding royalties, oil and gas payments, carried interests, lien claimants, and others as well as the lessees;
(5) that other available or existing methods or facilities for secondary recovery operations or for the conservation and utilization of gas in the particular area or field concerned or for both are inadequate for the purposes; and
(6) that the area covered by the unit agreement contains only that part of the field that has reasonably been defined by development, and that the owners of interests in the oil and gas under each tract of land in the area reasonably defined by development are given an opportunity to enter into the unit on the same yardstick basis as the owners of interests in the oil and gas under the other tracts in the unit.
Id. § 101.013(a). The Railroad Commission's decision whether to approve an application to establish a pooled unit is based upon the application and a hearing. Id.
[2] Pursuant to section 101.013(a)(6), see supra note 1, each owner of an interest within the area to be unitized must receive an offer to join the unit. We understand the Department of Transportation never was notified that an application to unitize the land on which the highway rights-of-way at issue here had been filed and that a hearing on the matter was imminent. See Nat. Res. Code §
[3] Section
[i]f the state recovers property in connection with a contract executed under this section and payment of the contractual consideration is not [otherwise] prohibited . . ., an amount not to exceed five percent of the amount of revenue or proceeds from the sale of property recovered shall be deposited to the credit of the comptroller's operating fund for payment of the consideration. The balance of the revenue or proceeds from the sale of property recovered shall be deposited to the credit of the general revenue fund or to any special fund as required by law.
Cf. Attorney General Opinion
[4] See Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 1, 1995 Tex. Sess. Law Serv. 1025, 1494-98 (to be codified at Transp. Code §§ 502.160-.173); Act of May 19, 1995, 74th Leg., R.S., ch. 350, § 1, 1995 Tex. Sess. Law Serv. 2880, 2880 (amending V.T.C.S. art. 6675a-6c, repealed by Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 24(a), 1995 Tex. Sess. Law Serv. 1025, 1871); Act of May 24, 1995, 74th Leg., R.S., ch. 705, § 1, 1995 Tex. Sess. Law Serv. 3719, 3720 (to be codified at V.T.C.S. art. 6675c, § 3).
[5] See Tax Code ch. 153.
[6] Article VIII, section 7-a does not indicate on its face that it was intended to operate retroactively. Moreover, upon an examination of statutes predating article VIII, section 7-a, we doubt the electorate so intended. We base our belief on the existence, before the addition of article VIII, section 7-a to the constitution, of detailed instructions for the distribution of the motor vehicle registration fees and gasoline taxes.
Immediately prior to the 1946 amendment to the constitution, the law required the county tax collector to deposit in the county depository, to the credit of the county road and bridge fund, all of the motor vehicle registration funds collected until the amount of funds for the calendar year equaled $50,000. See Act of July 1, 1929, 41st Leg., 2d C.S., ch. 88, § 10, 1929 Tex. Gen. Laws 172, 177-78. Then, and until the county had collected an amount equal to $175,000, the county tax collector was to deposit in the county depository 50% of the amount received. Id. § 10, at 178. The county tax collector was to remit the remaining 50%, and all amounts over $175,000, to the State Highway Department for the benefit of the State Highway Fund. See id. §§ 10-10a, at 177-78. The 1929 statute was not amended prior to the 1946 constitutional amendment.
Also prior to the 1946 constitutional amendment, the law required the state treasurer to deposit into a special fund, called the Highway Gasoline Tax Fund, revenues generated by the gasoline, or motor fuel, tax. Any money in that fund that was not needed to refund overpayments was divided between the Available School Fund and the Highway Fund. One-fourth of the money in the Highway Gasoline Tax Fund was to be deposited in the Available School Fund, and the remaining three-fourths was to be deposited in the Highway Fund.
[7] This office considered a similar question in Attorney General Opinion
Then, relying on the court's decision in Lawson, the opinion stated, "[T]he legislature lacks power to enact a statute diverting interest on constitutionally dedicated funds to general revenue." Id. at 3-4. Consequently, the opinion concluded, the legislature is unauthorized to enact a statute diverting to the general revenue fund interest on the motor vehicle fees and motor fuel taxes article VIII, section 7-a of the constitution dedicates to highway purposes. Id. at 4.
[8] The legislature enacted the original statutory predecessor to Transportation Code section
[9] Section
[10] The court reasoned that oil and gas, while in situ, are part of the real property. State ex rel. Attorney Gen. v. Hatcher,
[11] You state that generally the School Land Board, see Nat. Res. Code §
[12] While we are not aware of any other statutes that may apply, cf. Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 1, 1995 Tex. Sess. Law Serv. 1025, 1125, 1138 (to be codified at Transp. Code §§
Consequently, we do not wish to imply that the three statutes we have listed in the text, Act of May 1, 1995, 74th Leg., R.S., ch. 165, § 1, 1995 Tex. Sess. Law Serv. 1025, 1127, 1486 (to be codified at Transp. Code §§