because of the lessee's default in filing the bond or prepaying the annual rental.

On August 12, 1955, Ruth B. Lucas Hugley was appointed executrix. of the estate of Roy O. Lucas and on September 9, 1955, she filed a request with the manager for reinstatement of the lease. The manager denied this request. He had previously issued a new lease effective December 1, 1954, in response to an application filed by Olin C. Brooks after the closing of the Lucas case. The executrix appealed to the Director of the Bureau of Land Management. In a decision dated April 9, 1957, the Director held that the Lucas lease was improperly canceled for want of the required 30-days' notice of default in performance of the terms of the lease since the lessee was not in default on March 25, 1954, and the subsequent notice dated June 1, 1954, was not served upon the lessee or his authorized representative, ordered the continuation of the lease in the name of the executrix, and canceled the Brooks lease.

Pursuant to the Director's decision, the manager issued a decision dated June 4, 1957, offering the executrix a 2-year extension of the lease, and so long thereafter as oil or gas is produced in paying quantities,1 subject to acceptance and to payment of rental due for the 10th lease year from July 1, 1956, through June 30, 1957, and for the 11th year which would be due on or before July 1, 1957. The executrix appealed to the Director, contending that she owes rent only for the portion of the 10th lease year from April 9, 1957, through June 30, 1957, because the lessee in effect had been evicted from July 1, 1954, through April 8, 1957, and that payment has been made of the portion of the rent accruing from April 9th through June 30th which is applicable to the month of June by the submission of two checks totalling a year's rental for the portion of the original lease which she still holds and the assigned portion for the period beginning on June 1, 1957. The president of the Zion Oil Company, which was the unit operator (see fn. 1), has demanded a refund of the rent for the 8th and 9th years on the ground that the lessee was denied possession and the use of the premises during the period from July 1, 1954, to April 9, 1957, so that there was an eviction which relieves the lessee of the obligation to pay rent.

In his decision of June 9, 1958, the Director held that the lease had remained in effect throughout, that rentals had accrued each year, and there was no authority to waive such rentals.

The executrix and the president of Zion have renewed these contentions in their joint appeal to the Secretary. The question thus presented is whether a lessee is relieved under an oil and gas lease of his

1 The 2-year extension referred to by the manager is the 2-year extension given a lease upon the termination of a unit agreement to which it has been committed (30 U.S.C., 1952 ed., sec. 226e). The Lucas lease had been committed to the Wyoming Anticline unit agreement which was terminated on October 1, 1956.

February 2, 1959

obligation to pay rent during a period of controversy over the propriety of a purported cancellation of the lease because of the lessee's default in performance of its terms.

The Director's decision of April 9, 1957, holding that the Lucas lease had been improperly canceled, was the result of a petition for reinstatement filed by the executrix. In Thomas F. McKenna et al., 62 I.D. 376 (1955), the Department considered the nature of reinstatement and concluded:

*** the reinstatement of an oil and gas lease is the restoration of the lease to the status it occupied prior to its termination. It is not the issuance of a new lease ***. In reinstating the canceled lease the Secretary, in effect, rescinds his own action and places the lease in the same status that it would have occupied had no cancellation been made. (Pp. 378-379.)

The effect of the Director's decision of April 9, 1957, was therefore to wipe out the erroneous cancellation and leave the lease as though it had never been canceled. It follows that the annual rentals became due and payable on the anniversary dates of the lease.

The appellants themselves recognized this when, in seeking reinstatement, they tendered rent for the 8th and 9th years of the lease. They obviously felt that tender of the rental payments was important to their contention that the lease should be reinstated and was necessary to preserve their rights while the legal controversy was pending. Thus their demands now for refund of the rental payments after the Director's decision reinstating the lease is completely inconsistent with their previous position.

In any event, the Mineral Leasing Act does not grant to the Secretary of the Interior any authority to excuse lessees from the obligation to pay rent in accordance with the terms of their leases. Accordingly, there is no legal basis for such action. Robert E. O'Keefe, 57 I.D. 216 (1940); Stansbury, Inc., A-27396 (November 20, 1956); Clyde B. Neill, A-27650 (September 16, 1958); cf. L. N. Hagood et al., 65 I.D. 405 (1958), reflecting the Comptroller General's decision denying the Secretary's authority to refund rental payments under a lease covering land for which patent was issued to a mining claimant during the term of the lease even though the lease was canceled.

Therefore, pursuant to the authority delegated to the Solicitor by the Secretary of the Interior (sec. 23, Order No. 2509, as revised; 17 F.R. 6794), the decision of the Director of the Bureau of Land Management is affirmed.

EDMUND T. FRITZ,

Acting Solicitor.

A-27669

CHAMPLIN OIL AND REFINING COMPANY

JOE N. CHAMPLIN

Decided February 3, 1959

Oil and Gas Leases: Assignments or Transfers

A partial assignment of an oil and gas lease, when approved, creates two separate leases and the existence of a producing well on one lease will not place the other in the status of a producing lease.

Oil and Gas Leases: Rentals-Oil and Gas Leases: Termination

The assignor of an oil and gas lease may, after the filing of an assignment but prior to its approval, elect to bring the lease under the automatic termination provision of section 7 of the act of July 29, 1954, and the lease remains thereunder whether the assignment is approved prior to or after the anniversary date of the lease. The assignee's concurrence in the election is not essential.

Oil and Gas Leases: Rentals

There is no exemption from the provision of the act of July 29, 1954, automatically terminating leases for failure to pay rental timely of leases which contain valuable deposits of oil and gas but do not have a well capable of producing in paying quantities.

Oil and Gas Leases: Termination

Although a lessee of an oil and gas lease issued prior to July 29, 1954, may elect to bring his lease under the provisions of section 7 of the act of July 29, 1954, whether there is a producing well on it or not, the lease will not automatically terminate for failure to pay the rentals timely, if on the anniversary date of the lease there is on it a producing well.

Oil and Gas Leases: Termination-Oil and Gas Leases: Rentals

The fact that rental payments are offered and accepted on a lease that has terminated cannot continue or reinstate the lease.

Oil and Gas Leases: Termination-Oil and Gas Leases: Cancellation The provisions of section 31 of the Mineral Leasing Act, as amended, relating to the cancellation of leases for lands known to contain valuable deposits of oil and gas do not apply to leases terminated under the provisions of section 7 of the act of July 29, 1954.

APPEAL FROM THE BUREAU OF LAND MANAGEMENT

Champlin Oil & Refining Company (formerly Champlin Refining Company) and Joe N. Champlin have appealed to the Secretary of the Interior from a decision of the Acting Director of the Bureau of Land Management dated January 28, 1958, holding that noncompetitive oil and gas lease New Mexico 06171 had terminated by operation of law on November 1, 1955, and reversing the decision of the manager of the land office at Santa Fe, New Mexico, which held that an election filed by the former subjecting lease New Mexico 06171 to the provisions of section 7 of the act of July 29, 1954 (30 U.S.C., 1952 ed., Supp. V, sec. 188), was not acceptable.

February 3, 1959

The records show that oil and gas lease New Mexico 06171, covering 320 acres in sec. 6, T. 14 S., R. 33 E., N.M.P.M., was issued as of November 1, 1952, to Margaret J. Spoden and transferred to Champlin Refining Company (hereinafter referred to as the Company) by mesne assignments. On February 25, 1955, the Company executed a partial assignment of a 40-acre tract of this lease, identified as the SESE1⁄4 sec. 6, to Joe N. Champlin, hereinafter referred to as Champlin. Evidence of this assignment was filed with the land office on March 16, 1955. Then on May 6, 1955, the company assigned to Champlin an undivided one-half interest in the remaining 280 acres in lease New Mexico 06171 and evidence of this act was filed on June 3, 1955. Finally, on May 6, 1955, Champlin assigned to the company an undivided one-half interest in the SE14SE14 sec. 6, and evidence of this act was filed on June 10, 1955. In a decision dated September 30, 1955, the manager approved (1) the partial assignment of the SESE to Champlin and designated it as New Mexico 06171-A, (2) the assignment of an undivided one-half interest in the remaining 280 acres to Champlin, and (3) the assignment of an undivided onehalf interest in New Mexico 06171-A to the company. The net effect of the three assignments was to give the company and Champlin each an undivided one-half interest in both leases. On July 18, 1955, while the requests for approval of the assignments were pending, the company filed its election to subject lease New Mexico 06171 to section 7 of the act of July 29, 1954 (30 U.S.C., 1952 ed., Supp. V, sec. 188), providing for the automatic termination of leases upon the failure of the lessee to pay rental on or before the anniversary date of the lease. This fact was noted in the serial register on July 21, 1955.

A producing well was completed on the land now covered by the A-lease on May 6, 1955. On August 26, 1955, prior to the approval of the assignments, the rental account of the lease was transferred to the Geological Survey at its request.

On November 1, 1955, the rental for the fourth year of the parent lease became due and payable. It was not paid. On December 6, 1955, the petroleum accountant of the Geological Survey notified the company and Champlin of the overdue rental and requested that a check be mailed to the Geological Survey. On December 13, 1955, the Geological Survey acknowledged payment of the overdue rental on lease New Mexico 06171 and enclosed a receipt on the company's form. On January 27, 1956, the account for the parent lease was returned to the land office as being for a nonproducing lease.

On February 21, 1956, W. M. Mueller filed his offer to lease the land included in lease New Mexico 06171 (excluding the 40 acres in the A-lease).

On April 20, 1956, the manager issued a decision holding that the election filed by the company was ineffective for want of the consent

of all the lessees. He indicated that Champlin might execute and return the election form furnished and, in that event, automatic termination for failure to pay rental would be effective the first lease year following the date of such filing and added:

* * * According to a report of the Geological Survey, rental for the fourth lease year has been paid. Since the provisions of Public Law 555 were not applicable to that period the date the payment was made is immaterial to the status of the lease.

It also appears that on June 8, 1956, the company and Champlin commenced operations upon a test well in the SE1⁄44NW1⁄44 sec. 6 in the parent lease. This well was completed as a producing well on August 1, 1956, and is still producing.

On July 31, 1956, the manager issued a decision in which he rejected Mueller's lease offer on the ground that the land embraced therein was included in oil and gas lease New Mexico 06171 held of record by Champlin and the company.

Mueller appealed to the Director of the Bureau of Land Management, citing the statute which provides for automatic termination of an oil and gas lease for failure to pay rental and concluding that, if the election filed was effective, his offer to lease should have been accepted. The company answered, contending that it had no authority to bind Champlin by the filing of its election.

In his decision of January 28, 1958, the Acting Director held that Champlin had no interest in the lease until the company's assignment to him was approved by the management; that the Company was the sole record titleholder on July 18, 1955; and that its election was binding as to the entire lease without any subsequent action by the manager as to that document. Having thus found that the outstanding lease was terminated for failure to pay rental when due, the Acting Director, nevertheless, found that the rejection of Mueller's offer was proper, because the termination of the previous lease had not been noted on the tract book of the land office and that the land was therefore not available for leasing. (43 CFR, 1957 Supp., 192.161(a).)

From this decision the company and Champlin have taken this appeal. Mueller has neither filed a notice of appeal nor taken any part in the appeal.

Section 7 of the act of July 29, 1954 (supra), amended section 31 of the Mineral Leasing Act, as amended, by adding to it the following sentence: 1

*** Notwithstanding the provisions of this section, however, upon failure of a lessee to pay rental on or before the anniversary date of the lease, for any lease on which there is no well capable of producing oil or gas in paying quantities, the lease shall automatically terminate by operation of law: Provided,

1 Section 31 is concerned with the procedure to be followed by the Secretary in canceling leases for failure of the lessee to comply with the lease provisions. In general, it requires notice to the lessee and 30 days in which to cure the default.