BRIAN HOYLE, Justice.
San Augustine Central Appraisal District filed a motion for rehearing of our January 18, 2017 opinion. We overrule the motion for rehearing, withdraw our opinion and judgment of January 18, 2017, and substitute the following opinion and corresponding judgment in their place.
This case concerns the effect of mineral interest pooling on the lessor's tax liability. Oliver Lane Chambers, Donna Kay Chambers-Jones, Rhonda Thompson, Clinton L. Chambers, and Brandi N. Chambers appeal from an adverse summary judgment rendered in favor of San Augustine Central Appraisal District (SCAD)
Appellants own 652 acres of land in Shelby County, Texas. In 2007, they entered into oil and gas leases with Hunt Petroleum Corporation, which was later acquired by XTO Energy, Inc. In 2010, their interest under the leases was included in two production units which also contained interests in land located in San Augustine County, Texas. In 2013, SCAD sent Appellants a notice of appraised value for that year. The notice referenced their fractional royalty interests in the two units and stated the "Owner's Proposed Tax Estimate." Because their land is located in Shelby County, Appellants filed a notice of protest with the Appraisal Review Board for San Augustine County asserting that the property should not be taxed in San Augustine County. The review board declined to change the appraisal records concerning the property.
Appellants sought judicial review of the appraisal review board's determination. They contended that the mineral interest they own is located in Shelby County and properly appraised and taxed in Shelby County. They requested the trial court to order SCAD to remove their mineral interest from its appraisal roll.
SCAD moved for summary judgment claiming entitlement to judgment as a matter of law based on the fact that Appellants had pooled their mineral interest with other mineral owners and a portion of the unit is in San Augustine County. It argued that Appellants have "cross-conveyed their mineral interests with other mineral owners, and [are] appropriately taxed in both San Augustine and Shelby counties in proportion to the percentage of the unit lying within each county." In support of the motion, SCAD relied on the well location plat and the "Unit Designation." SCAD argued that, because Appellants unitized their mineral interest with other mineral interests lying within the boundaries of San Augustine County, Appellants must pay taxes on mineral interests within the unit to the extent they lie within the boundaries of San Augustine County.
The trial court granted SCAD's motion, and this appeal ensued.
In their first issue, Appellants assert that the trial court erred in granting summary judgment in favor of SCAD. While they admit that their mineral interest was pooled and unitized into two units that contain interests in San Augustine County, they assert that their leases expressly prevented cross-conveyance of any interest. In their second issue, they contend that a royalty interest, an interest in real property, is taxable by a taxing unit if it is located in its jurisdictional limits. Because their mineral interest is located exclusively in Shelby County, their argument continues, SCAD has no authority to tax their interest.
Standard of Review
We review the trial court's decision to grant summary judgment de novo.
The Texas Constitution provides that all property shall be assessed for taxation and the taxes paid in the county where the property is situated. TEX. CONST. art. VIII, § 11. Real property is taxable by a taxing unit if located in the unit on January 1. TEX. TAX CODE ANN. § 21.01 (West 2015). To collect taxes, an appraisal district must show that the property it seeks to assess has a taxable situs within the limits of its boundaries.
An oil and gas lease is a conveyance of an interest in real property.
Oil and gas leases in general, and pooling clauses in particular, are a matter of contract.
There is no dispute that Appellants' land lies in Shelby County. At issue is the legal effect of the inclusion of their land, together with property lying in San Augustine County, in pooled units. Appellants assert that pooling must comply with the express conditions found in the leases. They argue that the contract language in their leases authorized pooling, but limited the effect. Specifically, they assert that their leases prevent cross-conveyance. They rely on the following sentence in their lease agreements:
Furthermore, both unit designations provide that the lessee pools the leases "under and by virtue of the power and authority conferred and granted by the provisions of Said Leases. . . ."
In the absence of express agreements to the contrary, participants to a pooling agreement cross-convey to one another an interest in minerals subject to the agreement.
It is undisputed that the units include land not covered by Appellants' leases. Appellants' leases specified that such units "shall not have the effect of exchanging or transferring any interest under" the leases. Therefore, we look to the meaning of those terms. "Exchange" is the act of transferring interests, each in consideration for the other. Exchange, BLACK'S LAW DICTIONARY (10th ed. 2014). A "transfer" is any mode of disposing of an interest in an asset, or a conveyance of property or title from one person to another. Transfer, BLACK'S LAW DICTIONARY (10th ed. 2014). We compare the "exchanging or transferring" language of the leases with the ordinary meaning attributed to cross-convey. "Convey" means to transfer or deliver to another or to perform an act intended to create a property interest. Convey, BLACK'S LAW DICTIONARY (10th ed. 2014). Through cross-conveyance, parties to a pooling agreement own an undivided interest in the pooled mineral interests, and they are taxed on that interest. See
Giving effect to all language of Appellants' leases, we conclude, as a matter of law, that the leases authorize pooling but prohibit cross-conveyance of interests. See
THIS CAUSE came to be heard on the appellate record and briefs filed herein, and the same being considered, it is the opinion of this court that there was error in the judgment of the trial court below.
It is therefore ORDERED, ADJUDGED and DECREED that the trial court's judgment be
It is FURTHER ORDERED that all costs of this appeal are hereby adjudged against Appellee