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A BILL TO BE ENTITLED
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AN ACT
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relating to the duty of a lessee or other agent in control of |
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certain state land to drill an offset well, pay compensatory |
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royalty, or otherwise protect the land from drainage of oil or gas |
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by a horizontal drainhole well located on certain land. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 52.034, Natural Resources Code, is |
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amended by amending Subsections (a) and (d) and adding Subsections |
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(a-1) and (a-2) to read as follows: |
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(a) In this section: |
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(1) "Horizontal drainhole well" means a well with a |
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horizontal drainhole that may produce oil or gas along at least 100 |
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feet of the drainhole. |
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(2) "Take point" means any point in a horizontal |
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drainhole well where oil and gas can be produced from the reservoir |
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or field interval recognized by the Railroad Commission of Texas. |
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(3) "Unconventional fracture treated field" means an |
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oil or gas field in which horizontal well development and hydraulic |
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fracture treatment must be used to recover resources from all or |
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part of the field. |
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(a-1) Except as provided by Subsection (a-2), if [If] oil or |
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gas is produced in commercial quantities from a well located on a |
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privately owned area or areas of state land leased at a lesser |
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royalty and the well is located within 1,000 feet of an area leased |
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under this subchapter[,] or [in any case where such an area] is |
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draining an area leased under this subchapter [being drained by |
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such a well or wells], the lessee of the state area shall begin in |
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good faith and prosecute diligently the drilling of an offset well |
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or wells on the area leased from the state within 60 days after the |
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initial production from the draining well or the well located |
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within 1,000 feet of the leased state area. |
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(a-2) If the well producing oil or gas in commercial |
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quantities under Subsection (a-1) is a horizontal drainhole well |
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located in an unconventional fracture treated field, a lessee of a |
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state area is not required to drill an offset well as provided by |
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Subsection (a-1) unless any take point in the horizontal drainhole |
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well is located closer to the leased state area than the greater of: |
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(1) the minimum distance established by the applicable |
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lease-line spacing requirement of the Railroad Commission of Texas; |
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or |
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(2) a perpendicular distance of 330 feet. |
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(d) At the determination of the commissioner and with the |
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commissioner's [his] written approval, the payment of a |
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compensatory royalty shall satisfy the obligation to drill an |
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offset well or wells required by Subsection (a-1) [Subsection (a) |
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of this section]. Such compensatory royalty shall be paid at the |
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royalty rate provided by the state lease issued under this |
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subchapter and shall be paid on the market value at the well of |
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production from the [draining] well producing oil or gas in |
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commercial quantities described by Subsection (a-1) [or the well |
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located within 1,000 feet of the leased state area]. |
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SECTION 2. Section 52.173, Natural Resources Code, is |
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amended by amending Subsections (a) and (d) and adding Subsections |
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(a-1) and (a-2) to read as follows: |
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|
(a) In this section: |
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(1) "Horizontal drainhole well" means a well with a |
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|
horizontal drainhole that may produce oil or gas along at least 100 |
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|
feet of the drainhole. |
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(2) "Take point" means any point in a horizontal |
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drainhole well where oil or gas can be produced from the reservoir |
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or field interval recognized by the Railroad Commission of Texas. |
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|
(3) "Unconventional fracture treated field" means an |
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oil or gas field in which horizontal well development and hydraulic |
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fracture treatment must be used to recover resources from all or |
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part of the field. |
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(a-1) Except as provided by Subsection (a-2), if [If] oil or |
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[and/or] gas is [should be] produced in commercial quantities |
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within 1,000 feet of land subject to this subchapter[,] or if |
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production of oil or gas is draining [in any case where] land |
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subject to this subchapter, [is being drained by production of oil |
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or gas] the owner, lessee, sublessee, receiver, or other agent in |
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control of land subject to this subchapter shall in good faith begin |
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the drilling of a well or wells upon such state land within 100 days |
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after the draining well or wells or the well or wells completed |
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within 1,000 feet of the state land commence to produce in |
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commercial quantities[,] and shall prosecute such drilling with |
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diligence to reasonably develop the state land and to protect such |
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state land against drainage. |
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(a-2) If the well producing oil or gas in commercial |
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quantities under Subsection (a-1) is a horizontal drainhole well |
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located in an unconventional fracture treated field, the owner, |
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lessee, sublessee, receiver, or other agent in control of land |
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subject to this subchapter is not required to drill an offset well |
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as provided by Subsection (a-1) unless any take point in the |
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horizontal drainhole well is located closer to the state land than |
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the greater of: |
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(1) the minimum distance established by the applicable |
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lease-line spacing requirement of the Railroad Commission of Texas; |
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or |
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(2) a perpendicular distance of 330 feet. |
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(d) At the determination of the commissioner and with the |
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commissioner's [his] written approval, the payment of a |
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compensatory royalty shall satisfy the obligation to drill an |
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offset well or wells required by Subsection (a-1). Such |
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compensatory royalty shall be paid at a royalty rate established by |
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the commissioner if the land is unleased, or at the royalty rate |
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provided by the state lease, if the land is leased. Such |
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compensatory royalty shall be paid on the market value at the well |
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of production from the [draining] well producing oil or gas in |
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commercial quantities described by Subsection (a-1) [or the well |
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located within 1,000 feet of the state land]. |
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SECTION 3. Notwithstanding Section 4 of this Act, the |
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changes in law made by this Act apply only to a lease or other |
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agreement or an amendment to a lease or other agreement entered into |
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on or after the effective date of this Act. A lease or other |
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agreement or an amendment to a lease or other agreement entered into |
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before the effective date of this Act is governed by the law in |
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effect on the date the lease or other agreement or amendment to the |
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lease or other agreement is entered into, and that law is continued |
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in effect for that purpose. |
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SECTION 4. The parties to a lease or other agreement entered |
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into before the effective date of this Act pertaining to land |
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subject to Subchapter B or F, Chapter 52, Natural Resources Code, |
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may: |
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(1) contractually agree to amend the lease or other |
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agreement to bring the lease or other agreement into conformity |
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with the changes in law made by this Act; or |
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(2) after reviewing pertinent data, contractually |
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agree that a horizontal drainhole well in an unconventional |
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fracture treated field is incapable of draining the land subject to |
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the lease or other agreement. |
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SECTION 5. This Act takes effect September 1, 2021. |