Can a Texas county and its school districts jointly develop minerals on county school land?

TX AG Opinion GA-0616: Can a county and its school districts jointly develop minerals on county school land?

Plain-English summary

The State long ago granted certain lands to Texas counties to hold in trust for their public schools. The Webb County Attorney asked a general question: could a county and the school districts within it work together to develop or sell the natural resources and minerals on those county school lands, sharing the expenses and the revenue, and could they set up a local government corporation or other joint association to do it? Because the question was general and not tied to a specific plan, the Attorney General answered in terms of general principles.

The answer was no. Article VII, section 6 of the Texas Constitution vests title to county school lands in the county and provides that the lands and their sale proceeds "shall be held by said counties alone as a trust for the benefit of public schools." The Education Code reinforces this by making the members of the commissioners court the "sole trustees" of the county permanent school fund. The opinion explained that both a county commissioners court and a school district board have only the powers the constitution and statutes grant them or that are necessarily implied. Nothing authorizes a county and its school districts to jointly develop or sell the minerals on county school land.

The core problem is delegation. A joint venture (which the opinion noted has four elements: a community of interest, an agreement to share profits, an agreement to share losses, and a mutual right of control) would force the county to hand a piece of its exclusive constitutional management authority to the school districts. A separate corporation or association would likewise have the commissioners court cede its authority, in whole or in part. The opinion pointed to a long line of cases holding that the commissioners court cannot delegate its article VII, section 6 responsibilities, and to a prior opinion reaching the same conclusion. Any arrangement in which the court shares or cedes its authority as sole trustee would be tantamount to an unconstitutional delegation.

The opinion added two more limits. The county and the school districts could not share the revenue from selling mineral rights, because the sale of a mineral interest is a sale of a real property interest and the proceeds must go into the permanent school fund. And a county cannot recoup its development or sale expenses out of those proceeds. Unlike an ordinary trustee, a county must bear its own expenses to administer the constitutional trust, so even though the Texas Trust Act generally lets a trustee take compensation and reimbursement from the trust, that Act does not let a county recoup its expenses to the extent it would conflict with the county's duties under article VII, section 6. School districts are also limited in how they may use county available fund money (it is restricted to teacher and superintendent salaries).

Currency note

This opinion was issued in 2008. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The county school land provisions (Texas Constitution article VII, section 6; Education Code sections 45.105 and 45.113; Local Government Code section 263.003) may have been amended since 2008. Confirm current law before relying on this analysis.

Who this opinion affected (as of 2008)

County commissioners courts: The opinion told them they are the sole trustees of county school land and the county permanent school fund and cannot delegate or share that authority, including by joint venture or by creating a corporation or association.

School districts in counties holding school land: The opinion concluded they could not partner with the county to develop or sell the minerals or share in that revenue, and reminded that county available fund money is limited to teacher and superintendent salaries.

Mineral developers and counties exploring resource deals: The opinion left counties able to sell or lease mineral interests in county school land on their own (as trustee), but foreclosed joint-development structures that share the county's management authority or its revenue.

Common questions

Can a county sell or lease the minerals on its school land at all?
Yes, on its own as trustee. The opinion recognized that a commissioners court may lease the surface and may sell a mineral interest in county school lands. What it cannot do is share or delegate that trustee authority to others.

Why can't the county just form a corporation with the school districts?
The opinion concluded that creating a corporation or association to develop or sell the minerals would have the commissioners court cede its constitutional authority, which is an unconstitutional delegation. The county must hold the land "alone."

Where does the money from selling mineral rights have to go?
Into the county permanent school fund. The opinion treated a mineral-interest sale as a sale of real property whose proceeds must be placed in that fund, so the county and school districts cannot split the revenue.

Can the county at least cover its costs out of the proceeds?
No. The opinion explained that a county, unlike an ordinary trustee, must bear its own expenses to administer the constitutional trust, and the Texas Trust Act does not let it recoup those expenses where doing so would conflict with article VII, section 6.

Background and statutory framework

Article VII, section 6 of the Texas Constitution vests county school lands in the county and directs that the lands and their proceeds be held by the county "alone as a trust for the benefit of public schools," with proceeds invested and only the interest and other revenue (not principal) becoming the available fund (Tex. Const. art. VII, § 6). The proceeds fund is the county permanent school fund and the income is the county available school fund (Tex. Educ. Code Ann. § 45.113(a)(2), (c)), with the commissioners court members as "sole trustees" (id. § 45.113(b)). The commissioners court must provide for the protection, preservation, and disposition of the land (Tex. Loc. Gov't Code Ann. § 263.003(a)) and may lease the surface (Falls County v. Delaney, 11 S.W. 492, 492 (Tex. 1889)) and sell a mineral interest (Ehlinger v. Clark, 8 S.W.2d 666, 670-72 (Tex. 1928)).

A commissioners court and a school district board have only powers granted or necessarily implied (Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948); Tex. Roofing Co. v. Whiteside, 385 S.W.2d 699, 701 (Tex. Civ. App.-Amarillo 1964, writ ref'd n.r.e.)). A joint venture has four elements including a mutual right of control (Ayco Dev. Corp. v. G.E.T. Serv. Co., 616 S.W.2d 184, 186 (Tex. 1981)). The trustee authority cannot be delegated (Williams v. Pure Oil Co., 78 S.W.2d 929, 931 (Tex. 1935); Potter County v. C.C. Slaughter Cattle Co., 254 S.W. 775, 777-78 (Tex. Comm'n App. 1923, judgm't adopted); Logan v. Stephens County, 83 S.W. 365, 368 (Tex. 1904); Gano v. Palo Pinto County, 8 S.W. 634, 636 (Tex. 1888)). A county must bear its own expenses administering the trust and cannot recoup them from proceeds (Dallas County v. Club Land & Cattle Co., 66 S.W. 294, 296-97 (Tex. 1902)), and the Texas Trust Act's reimbursement provisions do not override that duty (Tex. Prop. Code Ann. §§ 114.061(a), 114.063(a)). County available fund money is limited to teacher and superintendent salaries (Tex. Educ. Code Ann. § 45.105(a)-(b)).

Citations

Statutes:

• Tex. Const. art. VII, § 6
• Tex. Educ. Code Ann. §§ 45.113(a)(2), (b), (c) (Vernon Supp. 2007); 45.105(a)-(b), 11.301 (Vernon 2006)
• Tex. Loc. Gov't Code Ann. § 263.003(a) (Vernon 2005)
• Tex. Prop. Code Ann. §§ 114.061(a), 114.063(a) (Vernon 2007)
• Act of May 27, 1995, 74th Leg., R.S., ch. 260, § 58(a)(1), 1995 Tex. Gen. Laws 2207

Cases:

• Falls County v. Delaney, 11 S.W. 492, 492 (Tex. 1889)
• Ehlinger v. Clark, 8 S.W.2d 666, 670-72 (Tex. 1928)
• Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948)
• Tex. Roofing Co. v. Whiteside, 385 S.W.2d 699, 701 (Tex. Civ. App.-Amarillo 1964, writ ref'd n.r.e.)
• Ayco Dev. Corp. v. G.E.T. Serv. Co., 616 S.W.2d 184, 186 (Tex. 1981)
• Williams v. Pure Oil Co., 78 S.W.2d 929, 931 (Tex. 1935)
• Potter County v. C.C. Slaughter Cattle Co., 254 S.W. 775, 777-78 (Tex. Comm'n App. 1923, judgm't adopted)
• Logan v. Stephens County, 83 S.W. 365, 368 (Tex. 1904)
• Gano v. Palo Pinto County, 8 S.W. 634, 636 (Tex. 1888)
• Dallas County v. Club Land & Cattle Co., 66 S.W. 294, 296-97 (Tex. 1902)

Prior Attorney General opinions referenced: JC-0399 (2001), M-1104 (1972).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0616
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2008/ga0616.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts may remain - the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

April 8, 2008

The Honorable Homero Ramirez
Webb County Attorney
Post Office Box 420268
Laredo, Texas 78042-0268

Opinion No. GA-0616

Re: Whether a county and school districts in the county may jointly develop or sell rights to the natural resources located on county school lands (RQ-0636-GA)

Dear Mr. Ramirez:

You ask whether a county and school districts in the county may jointly develop or sell rights to the natural resources and minerals located on county school lands, sharing expenses incurred and revenue realized.[1] If so, you ask whether they may jointly create a local government corporation or other association for that purpose. Request Letter, supra note 1, at 1. You do not ask about a specific plan and do not elaborate about the joint development and expenses you envision. As your question is general, we will confine our analysis accordingly to general principles concerning county school land.

Your question concerns lands the state has given to counties to hold in trust for the benefit of the counties' public schools. Article VII, section 6 of the Texas Constitution governs a county's management and disposition of its public school land:

All lands heretofore, or hereafter granted to the several counties of this State for educational purposes, are of right the property of said counties respectively, to which they were granted, and title thereto is vested in said counties .... Each county may sell or dispose of its lands in whole or in part, in manner to be provided by the Commissioners Court of the county. Said lands, and the proceeds thereof, when sold, shall be held by said counties alone as a trust for the benefit of public schools therein; said proceeds to be invested in [certain] bonds ..., or in such other securities, and under such restrictions as may be prescribed by law; and the counties shall be responsible for all investments; the interest thereon, and other revenue, except the principal shall be [the] available fund.

TEX. CONST. art. VII, § 6 (emphasis added).

The fund for proceeds held in trust and the "available fund" mentioned in this provision are commonly known respectively as the "county permanent school fund" and the "county available school fund." See TEX. EDUC. CODE ANN. § 45.113(c) (Vernon Supp. 2007). The corpus of the county permanent school fund includes the proceeds from any sale or other disposition of county school lands, held in an irrevocable trust in perpetuity for the benefit of the county's public schools. Id. § 45.113(a)(2), (c). The income from the trust constitutes a portion of the county available school fund that may be distributed according to law. Id. § 45.113(c).[2]

A county's constitutional duty to hold the lands as trustee is reflected in the county commissioners court's statutory responsibility to "provide for the protection, preservation, and disposition of lands granted to the county for educational purposes." TEX. LOC. GOV'T CODE ANN. § 263.003(a) (Vernon 2005). The commissioners court's powers to manage the land under trust allow the court to lease the surface of such lands for the benefit of the county's public schools. See Falls County v. Delaney, 11 S.W. 492, 492 (Tex. 1889). A commissioners court also may sell a mineral interest in county school lands. Ehlinger v. Clark, 8 S.W.2d 666, 670-72 (Tex. 1928) (holding that the county could grant an oil and gas lease for a royalty, in part because "there was no authority in law for the county [itself] to enter upon the costly experiment of exploring for oil on its school lands").

A county commissioners court and a school district board of trustees are limited to the powers expressly granted to them by the constitution or by statute or necessarily implied from such grants. See Canales v. Laughlin, 214 S.W.2d 451, 453 (Tex. 1948) (concerning county authority); Tex. Roofing Co. v. Whiteside, 385 S.W.2d 699, 701 (Tex. Civ. App.-Amarillo 1964, writ ref'd n.r.e.) (concerning school district authority). Neither article VII, section 6 nor any statute of which we are aware expressly or implicitly authorizes a county and its school districts to "jointly develop or sell" rights to natural resources and minerals in county school lands. To the contrary, article VII, section 6 and related statutes prohibit the joint arrangement that your questions seem to suggest. See Request Letter, supra note 1, at 1. The arrangement you first describe, whereby the county and the school districts "share the expenses incurred and revenue realized from such [a] venture," id., indicates that a joint venture is contemplated. See id. A joint venture has "four elements: a community of interest in the venture; an agreement to share profits; an agreement to share losses; and, a mutual right of control or management of the enterprise." Ayco Dev. Corp. v. G.E.T. Serv. Co., 616 S.W.2d 184, 186 (Tex. 1981) (emphasis added). A joint venture to develop county school land resources would necessarily require the county to delegate a portion of its exclusive management authority under article VII, section 6 to the school districts in the county.

The alternative proposal described in your second question also suggests a delegation of authority by the county. The proposal that the county and the school districts establish a separate corporation or association to develop or sell natural resources and minerals from county school land appears to contemplate that the commissioners court would cede its constitutional authority, in whole or in part, to the corporation or association. Request Letter, supra note 1, at 1.

The constitution, however, requires the county "alone" to hold the lands and proceeds in trust. TEX. CONST. art. VII, § 6 (stating that "Said lands, and the proceeds thereof, when sold, shall be held by said counties alone as a trust for the benefit of public schools therein"). Reflecting this constitutional mandate, the Education Code makes the members of the county's commissioners court the "sole trustees" of the trust established for the permanent school fund. TEX. EDUC. CODE ANN. § 45.113(b) (Vernon Supp. 2007). And not only are the members of the commissioners court the sole trustees of the land and the permanent school fund, they may not delegate their authority and responsibility under article VII, section 6, as a long line of cases establishes. See, e.g., Williams v. Pure Oil Co., 78 S.W.2d 929, 931 (Tex. 1935); Potter County v. C.C. Slaughter Cattle Co., 254 S.W. 775, 777-78 (Tex. Comm'n App. 1923, judgm't adopted); Logan v. Stephens County, 83 S.W. 365, 368 (Tex. 1904); Gano v. Palo Pinto County, 8 S.W. 634, 636 (Tex. 1888). Accordingly, this office has previously advised that a county may not delegate its article VII, section 6 responsibilities to the school districts in the county, relying on article VII, section 6 and the reasoning from the above-referenced cases. See Tex. Att'y Gen. Op. No. JC-0399 (2001) at 5. The same principles would apply here, whether the county shares its constitutional authority with the school districts or cedes its authority to a separate corporation or association. Any arrangement to "jointly develop" county school lands in which the commissioners court shares or cedes its authority as sole trustee under article VII, section 6 would be tantamount to an unconstitutional delegation.

Additionally, article VII, section 6 not only prohibits a county from delegating its trustee authority, it also would not allow the county or the schools to "share the expenses incurred and revenue realized." See Request Letter, supra note 1, at 1. The sale of a mineral interest is a sale of a real property interest. Ehlinger, 8 S.W.2d at 670. The proceeds of such a sale must be placed in the permanent school fund. See TEX. CONST. art. VII, § 6. A county may not recoup its expenses incurred in the performance of its duties under that constitutional provision from proceeds intended for the permanent school fund. Dallas County v. Club Land & Cattle Co., 66 S.W. 294, 296-97 (Tex. 1902). And school districts are constrained in the use of funds derived from the county available fund. See TEX. EDUC. CODE ANN. § 45.105(a)-(b) (Vernon 2006) (limiting the use of "state and county available funds" to teacher and superintendent salary purposes).

You observe that under the Texas Trust Act (the "Act"), a trustee may receive compensation and reimbursement from the trust. See Request Letter, supra note 1, at 3-4 (citing TEX. PROP. CODE ANN. §§ 114.061(a), .063(a) (Vernon 2007)). You also note that an attorney general opinion has applied a provision of the Act to a permanent school fund. See id. at 3 (citing Tex. Att'y Gen. Op. No. M-1104 (1972)). This office has subsequently cautioned, however, that the Act does not apply to the county as trustee to the extent such provisions would conflict with the county's duties under article VII, section 6. See Tex. Att'y Gen. Op. No. JC-0399 (2001) at 5. In 1902, the supreme court determined that while a county is a trustee in the contemplation of the law, unlike an ordinary trustee, a county must bear its expenses to administer the constitutional trust under article VII, section 6. See Club Land & Cattle Co., 66 S.W. at 297. Thus, the Act does not authorize a county to recoup its expenses as trustee under article VII, section 6.

In sum, a county and school districts in the county cannot "jointly develop" or sell rights to natural resources and mineral rights in county school land if such an arrangement means that the county would surrender its authority and responsibility as the sole trustee of the lands and the county permanent school fund. A county may not delegate its authority under article VII, section 6 either by sharing its constitutional authority with the school districts or by creating a separate corporation or association to exercise the county's authority. Furthermore, a county or school district may not recoup expenses to develop or sell natural resources and mineral rights from subsequent revenue. Finally, the county and the school districts in the county may not share in the revenue realized from the sale of natural resources and mineral rights in such land.

SUMMARY

Article VII, section 6 of the Texas Constitution does not allow a county to cede or share its authority and responsibilities as sole trustee of county school land and the county permanent school fund. Thus, a county and school districts in the county may not "jointly" develop or sell rights to natural resources and minerals in county school land by forming a joint venture, a local government corporation, or other association to exercise the county's constitutional authority. A county or school district may not recoup expenses to develop or sell natural resources and mineral rights in county school land from subsequent proceeds or income from such land. The county and the school districts in the county may not share in the revenue realized from the sale of natural resources and mineral rights in such land.

KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Homero Ramirez, Webb County Attorney, to Honorable Greg Abbott, Attorney General of Texas, at 1 (Oct. 10, 2007) (on file with the Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] Former chapter 17, subchapter E contains similar provisions governing the county's duties with respect to county school land and the proceeds of sales, rentals, and leases. See TEX. EDUC. CODE ANN. tit. 2 app. at 601-02 (Vernon 2006) (former Education Code §§ 17.81-.83). Chapter 17 was repealed in 1995, but continued in effect for school districts choosing to continue operating under its provisions. See Act of May 27, 1995, 74th Leg., R.S., ch. 260, § 58(a)(1), 1995 Tex. Gen. Laws 2207, 2498; TEX. EDUC. CODE ANN. § 11.301 (Vernon 2006).