By Earley                                             H.B. No. 2625
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the sale and development of state-owned oil, gas, and
    1-3  other minerals.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Section 32.002, Natural Resources Code, is
    1-6  amended to read as follows:
    1-7        Sec. 32.002.  Application of Chapter.  (a)  This chapter does
    1-8  not apply to:
    1-9              (1)  land dedicated by the constitution or a law of
   1-10  this state to The University of Texas System, land donated by a
   1-11  will or instrument in writing or otherwise to The University of
   1-12  Texas System, as trustee, for a scientific, educational, or other
   1-13  charitable or public purpose, or any other land under the control
   1-14  of the Board of Regents of The University of Texas System;
   1-15              (2)  land whose title is vested in the state for the
   1-16  use and benefit of any part of The Texas A&M University System or
   1-17  land under the control of the Board of Regents of The Texas A&M
   1-18  University System;
   1-19              (3)  <land> minerals subject to lease under Subchapter
   1-20  F, Chapter 52 of this code, commonly known as the Relinquishment
   1-21  Act, and Subchapter B and C, Chapter 53 of this code;
   1-22              (4)  oil and gas underlying land owned by the state
   1-23  that was acquired to construct or maintain a highway, road, street,
    2-1  or alley, which is located in a producing area, unless the oil or
    2-2  gas is leased for the specific purpose of drilling a horizontal
    2-3  well;
    2-4              (5)  oil and gas underlying land owned by the state
    2-5  that was acquired to construct or maintain a highway, road, street,
    2-6  or alley if the State Highway and Public Transportation Commission
    2-7  has determined that such right-of-way is no longer needed for use
    2-8  by citizens as a road pursuant to Chapter 99, General Laws, Acts of
    2-9  the 42nd Legislature, Regular Session, 1931 (Article 6673a,
   2-10  Vernon's Texas Civil Statutes);
   2-11              (6)  land owned by the Texas Parks and Wildlife
   2-12  Department; or
   2-13              (7)  land owned by the Texas Department of Corrections.
   2-14        (b)  For purposes of Subsection (a)(4) of this section, land
   2-15  is located in a producing area if the closest boundary line of the
   2-16  surface of such land is within 2,500 feet of a well capable of
   2-17  producing oil or gas in paying quantities as of January 1, 1985.
   2-18        (c)  Oil and gas underlying land not located within a
   2-19  producing area or that is leased for the specific purpose of
   2-20  drilling a horizontal well may be leased under the provisions of
   2-21  Section 32.201 of this code.
   2-22        (d)  If title to land subject to Subchapter F, Chapter 52 of
   2-23  this code, commonly known as the Relinquishment Act, is acquired by
   2-24  a department, board, or agency of the state, the land shall be
   2-25  leased as provided by Chapter 52 of this code for the leasing of
    3-1  unsold public school land.
    3-2        (e)  If title to land subject to Subchapter C, Chapter 53 of
    3-3  this code is acquired by a department, board, or agency of the
    3-4  state, the land shall be leased as provided by Chapter 53 of this
    3-5  code for the leasing of unsold surveyed public school land.
    3-6        SECTION 2.  Section 32.061, Natural Resources Code, is
    3-7  amended to read as follows:
    3-8        Sec. 32.061.  Board's General Duties.  Except as provided by
    3-9  Subchapter G, Chapter 51 of this code, the board shall:
   3-10              (1)  set the dates to open bids received for the sale
   3-11  of surveyed land dedicated to the permanent school fund <and>;  for
   3-12  the lease of land for prospecting or exploring for, mining,
   3-13  producing, storing, caring for, transporting, preserving, selling,
   3-14  or disposing of oil, gas, or other mineral leased under this
   3-15  chapter; and for the commitment of land to the terms of a contract
   3-16  for development;
   3-17              (2)  determine the prices and set the terms of the
   3-18  contract for which land shall be sold <and leased>, leased, or
   3-19  committed to the terms of a contract for development;
   3-20              (3)  consult with the president, chairman, or other
   3-21  head of the department, board, or agency, applicable, or with the
   3-22  representative of the head, on each matter before the board that
   3-23  affects land owned or held in trust for the use and benefit of a
   3-24  department, board, or agency of the state; and
   3-25              (4)  perform any other duties which may be required by
    4-1  law.
    4-2        SECTION 3.  Section 32.062, Natural Resources Code, is
    4-3  amended to read as follows:
    4-4        Sec. 32.062.  Adoption of Rules and Collection of Fees.
    4-5  (a)  The board shall adopt rules of procedure and rules for the
    4-6  sale <and lease> of land, the leasing of land and the commitment of
    4-7  land to the terms of a contract for development  as provided by
    4-8  this chapter.
    4-9        (b)  The board by rule shall adopt and shall collect
   4-10  reasonable fees necessary to carry out this chapter.
   4-11        SECTION 4.  Section 32.064, Natural Resources Code, is
   4-12  amended to read as follows:
   4-13        Sec. 32.064.  Survey or Subdivision of Land.  The board may
   4-14  have land surveyed or subdivided into tracts, lots, or blocks based
   4-15  on its determination of which method will be most conducive and
   4-16  convenient to facilitate the advantageous sale of land <or oil,
   4-17  gas, or mineral leases>, the lease of land for oil, gas or other
   4-18  minerals, or the commitment of land to the terms of a contract for
   4-19  development.
   4-20        SECTION 5.  Section 32.065, Natural Resources Code, is
   4-21  amended to read as follows:
   4-22        Sec. 32.065.  Permits for Surveys or Investigations.  If land
   4-23  other than public school land is not under a valid lease or
   4-24  committed to the terms of a contract for development, the board may
   4-25  issue a permit for a geological, geophysical, or other survey or
    5-1  investigation of that land that will encourage the development of
    5-2  the land for oil, gas, or other minerals.  The permit may be issued
    5-3  for the consideration and under the terms and conditions the board
    5-4  considers to be in the best interest of the state.
    5-5        SECTION 6.  Section 32.101, Natural Resources Code, is
    5-6  amended to read as follows:
    5-7        Sec. 32.101.  Applicable Law.  Land shall be <sold and
    5-8  leased> offered for sale, for lease or for commitment to the terms
    5-9  of a contract for development subject to the terms and conditions
   5-10  provided by law.
   5-11        SECTION 7.  Section 32.105, Natural Resources Code, is
   5-12  amended to read as follows:
   5-13        Sec. 32.105.  Date <of Sale and Lease> for Opening Bids.  The
   5-14  <sale> date for opening bids for the sale <or>, lease or
   5-15  development of land shall be the first Tuesday of the month.
   5-16        SECTION 8.  Section 32.106, Natural Resources Code, is
   5-17  amended to read as follows:
   5-18        Sec. 32.106.  Description of Land.  The description of public
   5-19  school land offered for sale <or>, lease or development shall be in
   5-20  accord with the description which may be found in the School Land
   5-21  Registry of the land office.
   5-22        SECTION 9.  Section 32.107, Natural Resources Code, is
   5-23  amended to read as follows:
   5-24        Sec. 32.107.  Notice of Sale <and Lease.  (a)  The board
   5-25  shall publish notice of the sale or lease of land>, Lease and
    6-1  Contract.  (a)  Notice that the board will receive bids to
    6-2  purchase, lease or develop land shall be published in at least
    6-3  three issues of at least four daily newspapers.
    6-4        (b)  The notice shall be published at least 30 days before
    6-5  the date <of sale or lease> the bids are advertised to be opened.
    6-6        (c)  The notice shall state that land is to be offered for
    6-7  sale <or lease>, lease or commitment to the terms of a contract for
    6-8  development on a certain date and at a certain time and the method
    6-9  <of the sale> thereof, and shall give notice that <lists describing
   6-10  the land may be obtained at the land office> interested parties may
   6-11  obtain publications from the Land office that contain descriptions
   6-12  of the land offered for sale, lease or development.
   6-13        (d)  The Land office may solicit and include advertising in
   6-14  its publications that contain descriptions of the land offered for
   6-15  sale, lease or development.  Fees paid to include advertising in
   6-16  Land office publications giving descriptions of the land offered
   6-17  for sale, lease or development shall be deposited by the
   6-18  commissioner in the State Treasury as a special fund.
   6-19        SECTION 10.  Section 32.1071, Natural Resources Code, is
   6-20  amended to read as follows:
   6-21        Sec. 32.1071.  Lease Sales.  (a)  The sale of oil, gas, or
   6-22  other mineral leases shall be by sealed bid or at public auction or
   6-23  through a combination of public auction and sealed bid, as the
   6-24  board elects.
   6-25        (b)  Sections 52.015 through 52.020 of this code apply to the
    7-1  sale of leases by sealed bid.
    7-2        (c)  The leases shall be made on terms and conditions that
    7-3  may be prescribed by the board.
    7-4        SECTION 11.  Section 32.1072, Natural Resources Code, is
    7-5  amended to read as follows:
    7-6        Sec. 32.1072.  Minimum Royalty, Bonus, and Rental.  The board
    7-7  may not accept a bid on an oil and gas lease that offers:
    7-8              (1)  a royalty of less than one-eighth of the gross
    7-9  production of oil<, gas, or other minerals> or gas; or
   7-10              (2)  a cash bonus of less than $10 an acre.
   7-11        SECTION 12.  Section 32.109, Natural Resources Code, is
   7-12  amended to read as follows:
   7-13        Sec. 32.109.  Acceptance and Rejection of Bids.  (a)  <The
   7-14  board may reject any and all bids, but if the board elects not to
   7-15  reject any and all bids, it is required to> For each tract offered
   7-16  for sale, lease, or for commitment to the terms of a contract for
   7-17  development, the board must either accept the best bid submitted
   7-18  that meets the minimum requirements set by the board or by law, or
   7-19  reject all bids.
   7-20        (b)  The minutes of the board shall reflect the acceptance or
   7-21  rejection of a bid<, and the approval of the minutes constitutes
   7-22  approval of the act of acceptance or rejection>.
   7-23        SECTION 13.  Section 32.110, Natural Resources Code, is
   7-24  amended to read as follows:
   7-25        Sec. 32.110.  Special Sale Fee.  (a)  On land sales and
    8-1  mineral leases made by the board, the bidder is required to pay by
    8-2  separate check an amount equal to one and one-half percent of the
    8-3  bid payable to the commissioner as a special fee.
    8-4        (b)  Only the special fees paid on the <high> bids accepted
    8-5  by the board shall be deposited by the commissioner in the State
    8-6  Treasury as a special fund.
    8-7        (c)  Failure to pay the special fee <does> shall not <render>
    8-8  void a bid <void>, but the commissioner shall demand payment of the
    8-9  fee before <he issues> a lease is issued to the <successful> best
   8-10  bidder.  If the <successful> best bidder fails or refuses to make
   8-11  the payment within 30 days after demand by the commissioner, the
   8-12  bidder is not entitled to a <lease or> sale of or a lease on the
   8-13  tract covered by <his> that bid and the cash bonus shall be
   8-14  automatically forfeited to be deposited by the commissioner in the
   8-15  State Treasury to the credit of the permanent school fund <or the
   8-16  appropriate special mineral fund>.  The board, at its option, may
   8-17  offer the tract for sale or lease to the next best bidder under the
   8-18  same terms as submitted by, and as would have been granted to, the
   8-19  best bidder.
   8-20        (d)  Checks submitted by unsuccessful bidders shall be
   8-21  returned to the bidders <with their bid checks>.
   8-22        SECTION 14.  Section 32.151, Natural Resources Code, is
   8-23  amended to read as follows:
   8-24        Sec. 32.151.  Term of Lease.  Each oil and gas lease shall be
   8-25  for a primary term <of> not to exceed <five> ten years and for as
    9-1  long thereafter as oil<,> or gas<, or other minerals> covered by
    9-2  the lease <are> is produced in paying quantities.
    9-3        SECTION 15.  Subchapter F, Chapter 32, Natural Resources
    9-4  Code, is amended by adding Section 32.206 to read as follows:
    9-5        Sec. 32.206.  Ratifications and Other Agreements.  (a)  The
    9-6  board is authorized to approve, by board action or by rule, in a
    9-7  manner deemed by the board to be in the best interest of the state,
    9-8  ratifications, or other contracts or agreements, to include in the
    9-9  benefits of production any mineral or royalty interest in land
   9-10  owned by the state that was acquired to construct or maintain
   9-11  highway, road, street, or alley.
   9-12        (b)  Any agreement approved by the board under this section
   9-13  must be executed by the commissioner to be effective.
   9-14        (c)  This section shall not apply to those interests subject
   9-15  to pooling or unitization by lessee under leases issued under this
   9-16  subchapter.
   9-17        SECTION 16.  Section 52.014, Natural Resources Code, is
   9-18  amended to read as follows:
   9-19        Sec. 52.014.  Date for Lease and Notice.  <(a)>  The date for
   9-20  opening bids to lease <of> areas covered by this subchapter shall
   9-21  be set and notice of the date shall be given in the manner provided
   9-22  in Sections 32.105 and 32.107 of this code.
   9-23        <(b)  Notice of areas being offered for lease shall be
   9-24  advertised for a period of 30 days before the lease date.>
   9-25        SECTION 17.  Section 52.015, Natural Resources Code, is
   10-1  amended to read as follows:
   10-2        Sec. 52.015.  <Application for Lease.  (a)  Each application
   10-3  for a separate area and the first payment shall be delivered to the
   10-4  land office on or before the day and hour on which the area is
   10-5  subject to lease.> Bids to Lease.  (a)  To apply to lease a tract,
   10-6  a bidder must submit a separate bid for each separate tract to be
   10-7  leased.
   10-8        <(b)  The application and payment shall be delivered in a
   10-9  sealed envelope endorsed with "application to lease oil and gas"
  10-10  and the date on which the area is subject to lease.>  (b)  Bids
  10-11  must include a completed application to lease form, a payment to
  10-12  the commissioner in the amount of the actual bonus bid or set, and
  10-13  a separate payment to the commissioner in the amount of the special
  10-14  fee provided in Section 52.016 of this code.
  10-15        <(c)  Any application received up to the hour in which the
  10-16  applications are to be opened shall be considered to be properly
  10-17  delivered regardless of whether it is opened or sealed or endorsed
  10-18  or unendorsed.>  (c)  Bids must be delivered to the Land office on
  10-19  or before the date and time the bids are advertised to be opened.
  10-20        SECTION 18.  Section 52.017, Natural Resources Code, is
  10-21  amended to read as follows:
  10-22        Sec. 52.017.  Keeping and Opening Bids.  <The envelopes> Bids
  10-23  shall be kept <securely> secure and unopened by the commissioner
  10-24  <or his chief clerk until the day on which the applications are to
  10-25  be opened, and at that time, the board shall open the envelopes in
   11-1  the presence of any persons who desire to be present>, or the
   11-2  commissioner's designee, until opened on the date and at the time
   11-3  set as provided in Section 52.014 of this code.
   11-4        SECTION 19.  Section 52.021, Natural Resources Code, is
   11-5  amended to read as follows:
   11-6        Sec. 52.021.  Term of Lease.  A lease granted under this
   11-7  subchapter shall be for a primary term not to exceed <five> ten
   11-8  years and for as long after that time as oil or gas is produced
   11-9  from the leased area.
  11-10        SECTION 20.  Section 52.022, Natural Resources Code, is
  11-11  amended to read as follows:
  11-12        Sec. 52.022.  Royalty Rate.  The board shall set the royalty
  11-13  rate on production of oil and gas from land leased under this
  11-14  subchapter.  The royalty rate set must be at least one-eighth of
  11-15  gross production, or the market value thereof, of the oil and gas
  11-16  produced.  <and Delay Rentals.  (a)  In addition to the cash amount
  11-17  bid for a lease, the area included in the lease shall be leased for
  11-18  not less than one-eighth of the gross production of oil produced
  11-19  and saved, or its value, and not less than one-eighth of the gross
  11-20  production of gas produced and sold off the area or its value, plus
  11-21  an amount determined by the board, until production is secured.>
  11-22        <(b)  If production is secured in commercial quantities and
  11-23  the payment of royalty begins and continues to be paid, the lessee
  11-24  is exempt from further delay rental payments on the acreage.>
  11-25        <(c)  If production ceases and royalty is not paid, the
   12-1  lessee shall pay at the end of the lease year in which the royalty
   12-2  ceased to be paid and annually after that time in advance, an
   12-3  amount determined by the board for as long as the lessee desires to
   12-4  maintain the rights acquired under the lease, but not for more than
   12-5  five years from the date of the lease.>
   12-6        SECTION 21.  Section 52.023, Natural Resources Code, is
   12-7  amended to read as follows:
   12-8        Sec. 52.023.  Lease Provisions for Drilling and Reworking.
   12-9  Each lease shall provide that:
  12-10              (1)  if the production of oil or gas on premises leased
  12-11  under this subchapter ceases for any reason <at or> after the
  12-12  expiration of the primary term, the lease will not terminate if the
  12-13  lessee commences additional drilling or reworking operations within
  12-14  60 days after the cessation of production;
  12-15              (2)  the lease shall remain in effect as long as <the>
  12-16  drilling <and> or reworking operations continue in good faith and
  12-17  in a workmanlike manner<,> without interruptions<,> totaling more
  12-18  than 60 days <during any one such operation; and>;
  12-19              (3)  if the drilling or reworking operations result in
  12-20  the production of oil or gas, the lease shall remain in effect <as>
  12-21  so long as oil or gas is produced from the leased premises in
  12-22  paying quantities or payment of shut-in <gas> royalties or payment
  12-23  of compensatory royalties is made as provided by law; and
  12-24              (4)  if the drilling or reworking operations result in
  12-25  the completion of a well as a dry hole the lease will not terminate
   13-1  if the lessee commences additional drilling or reworking operations
   13-2  within 60 days after the completion of the well as a dry hole and
   13-3  the lease shall remain in effect so long as the lessee continues
   13-4  drilling or reworking operations in good faith and in a workmanlike
   13-5  manner without interruptions totaling more than 60 days.
   13-6        SECTION 22.  Section 52.024, Natural Resources Code, is
   13-7  amended to read as follows:
   13-8        Sec. 52.024.  Lease Provisions for Shut-in Oil or Gas Royalty
   13-9  and Compensatory Royalty.  Each lease shall provide that:
  13-10              (1)  For purposes of this section, a well shall be
  13-11  defined as any well that has been assigned a well number by the
  13-12  state agency having jurisdiction over the production of oil and
  13-13  gas;
  13-14              <(1)> (2)  if, at any time after the expiration of the
  13-15  primary term <or at any time after the expiration> of <the primary
  13-16  term> a lease that is being maintained in force and effect, a well
  13-17  <or wells> capable of producing oil or gas in paying quantities
  13-18  <are> is located on the leased premises, but oil or gas is not
  13-19  being produced for lack of suitable production facilities or lack
  13-20  of a suitable market <and the lease is not being maintained in
  13-21  force and effect>, then the lessee may pay as a shut-in oil or gas
  13-22  royalty an amount equal to double the annual rental provided in the
  13-23  lease, but not less than $1,200 a year for each well capable of
  13-24  producing oil or gas in paying quantities.  <Any shut->To be
  13-25  effective, each initial shut-in oil or gas royalty must be paid on
   14-1  or before:  (A) the expiration of the primary term, (B) 60 days
   14-2  after the lessee ceases to produce oil or gas from the leased
   14-3  premises, or (C) 60 days after the lessee completes a drilling
   14-4  <and> or reworking operation in accordance with the lease
   14-5  provisions, whichever date is <later> latest;
   14-6              <(2)> (3)  if the shut-in oil or gas royalty is paid,
   14-7  the lease shall be considered to be a producing lease and the
   14-8  payment shall extend the term of the lease for a period of one year
   14-9  from the end of the primary term or from the first day of the month
  14-10  <next succeeding> following the month in which production ceased,
  14-11  and, after that, if no suitable production facilities or suitable
  14-12  market for the oil or gas exists, the lessee may extend the lease
  14-13  for four <additional and> more successive periods of one year by
  14-14  paying the same amount each year on or before the expiration of
  14-15  <the extended term> each shut-in year;
  14-16              <(3)> (4)  if, during the period the lease is kept in
  14-17  effect by payment of the shut-in oil or gas royalty, oil or gas is
  14-18  sold and delivered in paying quantities from a well located within
  14-19  1,000 feet of the leased premises and completed in the same
  14-20  producing reservoir, or in any case in which drainage is occurring,
  14-21  the right to continue to <extend> maintain the lease by paying the
  14-22  shut-in oil or gas royalty shall cease, but the lease shall remain
  14-23  effective for the remainder of the year for which the royalty has
  14-24  been paid <and>.  The lessee may maintain the lease for four
  14-25  <additional and> more successive <periods of one year each> years
   15-1  by the lessee paying compensatory royalty at the royalty rate
   15-2  provided in the lease of the market value <at the well> of
   15-3  production from the well <which is> causing the drainage, or which
   15-4  is completed in the same producing reservoir and within 1,000 feet
   15-5  of the leased premises;
   15-6              <(4)> (5)  the compensatory royalty is to be paid
   15-7  monthly to the commissioner beginning on or before the last day of
   15-8  the month <next succeeding> following the month in which the oil or
   15-9  gas is <sold and delivered from the well> produced from the well
  15-10  causing the drainage, or which is completed in the same producing
  15-11  reservoir and located within 1,000 feet of <or draining> the leased
  15-12  premises <and completed in the same reservoir>;
  15-13              <(5)> (6)  if the compensatory royalty paid in any
  15-14  12-month period is in an amount less than the annual shut-in oil or
  15-15  gas royalty, the lessee shall pay an amount equal to the difference
  15-16  within 30 days from the end of the 12-month period; and
  15-17              <(6)> (7)  none of these provisions will relieve the
  15-18  lessee of the obligation of reasonable development nor the
  15-19  obligation to drill offset wells as provided in Section 52.034 of
  15-20  this code; however, at the determination of the commissioner, and
  15-21  with <his> the commissioner's written approval, the payment of
  15-22  compensatory royalties shall satisfy the obligation to drill offset
  15-23  wells.
  15-24        SECTION 23.  Section 52.028, Natural Resources Code, is
  15-25  amended to read as follows:
   16-1        Sec. 52.028.  Suspension of <Oil and Gas Leases> Lease for
   16-2  Litigation.  (a)  If an oil and gas lease that has been for
   16-3  Litigation.  (a)  If an oil and gas lease that has been issued by
   16-4  the commissioner is involved in litigation relating to <its> the
   16-5  validity of the lease or to the authority of the commissioner to
   16-6  <lease the land, the primary term of the lease> issue the lease,
   16-7  the lease, and all the conditions and covenants contained in the
   16-8  lease, shall be suspended <and all obligations imposed by the lease
   16-9  set aside> during the period of the litigation, except as otherwise
  16-10  provided in this section.
  16-11        (b)  If the litigation is instituted <at least six months
  16-12  before the expiration of the primary term, after final judgment is
  16-13  rendered> during the primary term of the lease, then, after a
  16-14  final, non-appealable judgment is entered in the litigation, the
  16-15  primary term provided in the lease shall begin <to run> again and
  16-16  the lease shall continue to run for the remainder of the period
  16-17  specified in the lease, and all conditions and covenants contained
  16-18  in the lease <and all obligations and duties imposed by the lease>
  16-19  shall be operative.
  16-20        (c)  <The lessee shall pay all annual delay rentals and any
  16-21  royalties> If the litigation is instituted during the secondary
  16-22  term of the lease, then, after a final, non-appealable judgment is
  16-23  entered in the litigation, the lease, and all the conditions and
  16-24  covenants contained in the lease, shall be operative, and the
  16-25  lessee shall have 60 days from the date a final, non-appealable
   17-1  judgment is entered in the litigation to commence drilling or
   17-2  reworking operations on the lease as if production had ceased on
   17-3  that date under the provisions of Section 52.023 of this code.
   17-4        (d)  Lessee shall pay all royalties, if any, that accrue
   17-5  during the period of <litigation> suspension of the lease in the
   17-6  same manner as they are to be paid under the <lease during the
   17-7  primary term.  If such delay rentals are not paid as the lease
   17-8  requires, the lease shall not automatically terminate; however, the
   17-9  delay rentals continue to be an obligation and debt owed by the
  17-10  lessee.  The delay rentals paid during the period of litigation
  17-11  shall be held and returned to the lessee if the state is
  17-12  unsuccessful in the litigation> terms of the lease.
  17-13        SECTION 24.  Section 52.0301, Natural Resources Code, is
  17-14  amended to read as follows:
  17-15        Sec. 52.0301.  Suspension of Terms of Lease in Certain
  17-16  Situations.  (a)  If the <owner> lessee of a valid oil and gas
  17-17  lease granted by the state is <denied access to or is denied>
  17-18  unable to obtain access to the leased premises, or is unable to
  17-19  obtain in a timely manner a permit to drill on or produce from the
  17-20  leased premises by any duly constituted authority of the United
  17-21  States <after a bona fide> or of the State of Texas after a
  17-22  diligent, good faith attempt has been made by the <owner> lessee to
  17-23  obtain access to, or a permit to drill on or produce from, the
  17-24  <lease> leased premises, the <owner> lessee may file with the board
  17-25  an application describing and giving the date of the action that
   18-1  deprives <him> the lessee of access to or <the right> a permit to
   18-2  drill on or produce from the leased premises.
   18-3        (b)  If the board is satisfied that the facts included in the
   18-4  application are true, <the board may enter an order in its minutes
   18-5  suspending the running of both the primary and the principal term
   18-6  of the lease or suspending any condition, obligation, or duty
   18-7  under> and that the lessee acted diligently and in good faith in an
   18-8  attempt to gain access to, or the right to drill on or produce from
   18-9  the leased premises, the board may order the suspension of the
  18-10  lease, or of any condition or covenant contained in the lease, from
  18-11  the date <of> the board finds to be the date the cause for the
  18-12  suspension <through the continued existence of the cause for the
  18-13  suspension, so long as the lessee continues to make the annual
  18-14  rental payments that are> began, except as otherwise provided in
  18-15  this section.
  18-16        (c)  The board may set as a condition to approving the
  18-17  application for a suspension of the lease any term or requirement
  18-18  it deems to be in the best interest of the state.
  18-19        (d)  If the lease is suspended during its primary term,
  18-20  lessee shall make payments in the amount of the annual delay rental
  18-21  stipulated in the lease <on> by each anniversary date of the lease
  18-22  during the period of suspension.  <(c)  After the board enters an
  18-23  order in its minutes stating that the cause for suspension has
  18-24  ceased to exist, the oil and gas lease shall again become operative
  18-25  if the rental payments have been made> If the payments in the
   19-1  amount of the annual delay rental are not paid by each anniversary
   19-2  date of the lease, the lease shall not automatically terminate;
   19-3  however, the amount of the annual delay rental stipulated in the
   19-4  lease due by each anniversary of the lease during the period of
   19-5  suspension<, and all suspended obligations and conditions shall
   19-6  again attach and be in force for a period equivalent to the
   19-7  unexpired term of the lease.>
   19-8  <(d)  Deleted.>
   19-9  <(e)  The commissioner shall give notice immediately to the lessee
  19-10  of the entry of an order stating that the cause of suspension has
  19-11  ceased to exist, provided annual rental payments have been made.>
  19-12  continues to be an obligation and debt owed by the lessee.  Lessee
  19-13  shall pay all royalties, if any, that accrue during the period of
  19-14  suspension of the lease in the same manner as they are to be paid
  19-15  under the terms of the lease.
  19-16        (e)  If the lease is suspended during its primary term, then,
  19-17  when the suspension ends, the primary term provided in the lease
  19-18  shall begin again and continue to run for the remainder of the
  19-19  period specified in the lease, and all conditions and covenants
  19-20  contained in the lease, shall be operative.
  19-21        (f)  If the lease is suspended during its secondary term,
  19-22  then, when the suspension ends, the lease, and all conditions and
  19-23  covenants contained in the lease, shall be operative, and the
  19-24  lessee shall have 60 days from the date the suspension ended to
  19-25  commence drilling or reworking operations on the lease as if
   20-1  production had ceased on that date under the provisions of Section
   20-2  52.023 of this code.
   20-3        <(f)> (g)  This section may not be construed as abridging any
   20-4  rights or privileges conveyed under Chapter 287, Acts of the 47th
   20-5  Legislature, Regular Session, 1941 (Article 5366a, Vernon's Texas
   20-6  Civil Statutes).
   20-7        SECTION 25.  Section 52.035, Natural Resources Code, is
   20-8  amended to read as follows:
   20-9        Sec. 52.035.  Agreements With U.S. Government.  (a)  The
  20-10  governor may execute agreements on behalf of the state to obtain
  20-11  access to confidential and proprietary information from the
  20-12  secretary of the United States Department of the Interior regarding
  20-13  exploration, development, or production of oil or gas or any other
  20-14  mineral on the outer continental shelf.  The governor may agree to
  20-15  waive sovereign immunity and other defenses as prescribed by this
  20-16  section, and may agree to indemnify the United States government
  20-17  from unauthorized disclosure of the information obtained.
  20-18        (b)  The information obtained from the Department of the
  20-19  Interior under an agreement executed under Subsection (a) of this
  20-20  section is confidential and may not be used publicly, opened to
  20-21  public inspection, or disclosed, except that the information may be
  20-22  examined and used by the governor and the commissioner of the
  20-23  General Land Office, or their designees, for the administration of
  20-24  their official duties and to assure a fair and equitable division
  20-25  of federal revenues derived from leasing lands adjacent to the
   21-1  boundaries of this state.
   21-2        (c)  The state waives its right to claim sovereign immunity
   21-3  in any action commenced against the state for unauthorized
   21-4  disclosure of the confidential information obtained from the
   21-5  Department of the Interior under an agreement executed by the
   21-6  governor under Subsection (a) of this section, and waives its right
   21-7  to claim that an employee who revealed privileged information was
   21-8  acting outside the scope of employment by disclosing the
   21-9  information.
  21-10        (d)  The state agrees to hold the United States government
  21-11  harmless from any actions or damages brought as a result of the
  21-12  acts or omissions of the state or its employees in releasing
  21-13  proprietary information obtained under an agreement executed under
  21-14  Subsection (a) of this section.
  21-15        SECTION 26.  Section 52.076, Natural Resources Code, is
  21-16  amended to read as follows:
  21-17        Sec. 52.076.  Duty to Advertise.  (a)  The board <shall> may:
  21-18              (1)  advertise for bids <proposals:>
  21-19  <(1)>  to lease riverbeds and channels for oil and gas development;
  21-20              (2)  <to drill> advertise for bids to contract to
  21-21  develop the oil or gas under or recoverable from riverbeds and
  21-22  channels on consideration involving compensation with oil and gas
  21-23  or money so that the state will receive a portion of the oil and
  21-24  gas as it is produced or advanced royalties paid in money; <and>
  21-25              (3)  advertise for bids to purchase oil and gas in
   22-1  place under or recoverable from riverbeds and channels without
   22-2  requiring mineral development; and
   22-3              (4)  pool or bring an action to force pool unleased
   22-4  riverbeds and channels.
   22-5        (b)  The board shall advertise <the proposals and conduct the
   22-6  sales> notice that the board will receive bids and conduct the
   22-7  award of the right to lease, develop, or purchase hereunder in the
   22-8  same procedural manner as provided in Subchapter D, Chapter 32<,>
   22-9  and Subchapter B, Chapter 52 of this code.
  22-10        SECTION 27.  Subchapter C, Chapter 52, Natural Resources
  22-11  Code, is amended by adding Section 52.078 to read as follows:
  22-12        Section 52.078.  Special Fee.  Each bidder on a lease under
  22-13  this subchapter shall remit, with each bid by separate payment, a
  22-14  special sale fee in the amount and in the manner provided in
  22-15  Section 32.110 of this code.
  22-16        SECTION 28.  REPEALER.  Section 52.079, Natural Resources
  22-17  Code, is repealed.
  22-18        SECTION 29.  REPEALER.  Section 52.081, Natural Resources
  22-19  Code, is repealed.
  22-20        SECTION 30.  Section 52.082, Natural Resources Code, is
  22-21  amended to read as follows:
  22-22        Sec. 52.082.  Term of Lease.  A lease granted under this
  22-23  subchapter shall be for a primary term <of five> not to exceed ten
  22-24  years and for as long after that time as oil or gas is produced
  22-25  from the leased area.
   23-1        SECTION 31.  REPEALER.  Section 52.086, Natural Resources
   23-2  Code, is repealed.
   23-3        SECTION 32.  Section 52.088, Natural Resources Code, is
   23-4  amended to read as follows:
   23-5        Sec. 52.088.  Royalty Rate.  The board shall set the royalty
   23-6  rate on production of oil and gas from riverbeds and channels
   23-7  leased under this subchapter.  The royalty rate set must be at
   23-8  least one-eighth of gross production, or the market value thereof,
   23-9  of the oil and gas produced <and Delay Rentals.  (a)  In addition
  23-10  to the cash amount bid for a lease, the board shall lease the area
  23-11  for not less than one-eighth of the gross production of oil
  23-12  produced and saved or its value and not less than one-eighth of the
  23-13  gross production of gas produced and sold off the area or its value
  23-14  plus an amount determined by the board until production is secured.>
  23-15  <(b)  If production is secured in commercial quantities and the
  23-16  payment of royalty begins and continues to be paid, the lessee is
  23-17  exempt from further delay rental payments on the acreage.>
  23-18  <(c)  If production ceases and royalty is not paid, the lessee shall
  23-19  pay at the end of the lease year in which the royalty ceased to be
  23-20  paid and annually after that time in advance, in an amount
  23-21  determined by the board as long as the lessee desires to maintain
  23-22  the rights acquired under the lease, but not for more than five
  23-23  years from the date of the lease>.
  23-24        SECTION 33.  REPEALER.  Section 52.089, Natural Resources
  23-25  Code, is repealed.
   24-1        SECTION 34.  Section 52.131, Natural Resources Code, is
   24-2  amended to read as follows:
   24-3        Sec. 52.131.  Payment of Royalty Generally.  (a)  Royalties
   24-4  due under a lease of state land or minerals that are required to be
   24-5  paid to the land office, including leases on land on which a free
   24-6  royalty is reserved pursuant to Section 51.201 or 51.054 of this
   24-7  title, shall be due and shall be paid as provided in this section.
   24-8        (b)  The commissioner shall by rule set the date for making
   24-9  royalty payments and for filing any reports, documents, or other
  24-10  records required to be filed by the commissioner.  However, the
  24-11  commissioner may not set the due date for royalty on oil before the
  24-12  5th day of the second month succeeding the month of production and
  24-13  may not set the due date for royalty on gas before the 15th day of
  24-14  the second month succeeding the month of production.
  24-15        (c)  Royalty payments shall be accompanied by:
  24-16              (1)  an affidavit of the owner, manager, or other
  24-17  authorized agent, completed in the form and manner required by the
  24-18  land office and showing the gross amount and disposition of all oil
  24-19  and gas produced and the market value of the oil and gas;
  24-20              (2)  a copy of all documents, records, or reports
  24-21  required by the land office, confirming the gross production,
  24-22  disposition, and market value, including gas meter readings,
  24-23  pipeline receipts, gas line receipts, and other checks or memoranda
  24-24  of amount produced and put into pipelines, tanks, pools, and gas
  24-25  lines or gas storage;
   25-1              (3)  a check stub, schedule, summary, or other
   25-2  remittance advice showing by the assigned land office lease number
   25-3  the amount of royalty being paid on each lease; and
   25-4              (4)  other reports or records that the land office may
   25-5  require to verify the gross production, disposition, and market
   25-6  value.
   25-7        (d)  The lessee has the responsibility for paying royalties
   25-8  or having royalties paid by the date provided for payment in this
   25-9  section.
  25-10        (e)  If any royalty is not paid when due but is paid before
  25-11  the 31st day after the date on which it is due, a penalty of five
  25-12  percent of the royalty due shall be added to the unpaid amount due.
  25-13  If the royalty is not paid before the 31st day after the date on
  25-14  which it is due, a penalty of an additional five percent of the
  25-15  royalty due shall be imposed.  The minimum penalty under this
  25-16  section is $25.  The penalty may not be imposed in cases of title
  25-17  dispute as to the state's portion of the royalty or to that portion
  25-18  of the royalty in dispute as to <fair> the market value of the
  25-19  production.
  25-20        (f)  The commissioner shall add a penalty of 25 percent to
  25-21  any delinquent royalty if a part of the delinquency is due to fraud
  25-22  or an intent to evade the provisions of this chapter.
  25-23        (g)  The annual interest rate on delinquent royalties is 12
  25-24  percent.  Interest accrues on delinquent royalties beginning 60
  25-25  days after the date on which the royalty is due.
   26-1        (h)  If any report, affidavit, supporting document, or any
   26-2  other instrument required to be filed under this chapter is not
   26-3  filed when due, the commissioner shall charge a reasonable penalty
   26-4  in an amount established by rule adopted by the commissioner.
   26-5        (i)  Interest charged under Subsection (g) of this section or
   26-6  penalties under Subsection (e), (f), or (h) of this section are in
   26-7  addition to any other right, including forfeiture, that the
   26-8  commissioner may exercise for failure to submit a report or other
   26-9  instrument.
  26-10        (j)  By rule, the board may provide procedures and standards
  26-11  for reduction of interest charged pursuant to this section or
  26-12  penalties assessed under this section or any other interest or
  26-13  penalties assessed by the commissioner related to unpaid or
  26-14  delinquent royalties.
  26-15        SECTION 35.  Section 52.133, Natural Resources Code, is
  26-16  amended to read as follows:
  26-17        Sec. 52.133.  Payment of Royalty in Kind<.  (a)  In this
  26-18  section, "royalty" means royalty payable in a sum of money equal to
  26-19  the market value for the general area where produced and when run
  26-20  or royalty that may be collected in kind.>
  26-21        <(b)> (a)  Each oil or gas lease covering land leased by the
  26-22  board, by a board for lease other than the Board for Lease of
  26-23  University Lands, or by the surface owner of land under which the
  26-24  state owns the minerals, commonly referred to as Relinquishment Act
  26-25  land, which shall be subject to approval by the commissioner before
   27-1  it is effective, shall include a provision granting the board
   27-2  authorized to lease the land or the owner of the soil of
   27-3  Relinquishment Act land and the commissioner authority to take
   27-4  their royalty in kind, and the commissioner and the boards for
   27-5  lease may include any other reasonable provisions that are not
   27-6  inconsistent with this section.
   27-7        <(c)> (b)  The option to take the royalty in kind may be
   27-8  exercised at any time or from time to time on not less than 60
   27-9  days' notice to the holder of the lease.
  27-10        <(d)> (c)  The <board, the> commissioner, each <board for
  27-11  lease other than the Board for Lease of University Lands, or the>
  27-12  owner of the soil under Subchapter F of this chapter, or the
  27-13  commissioner, acting on the behalf of and at the direction of an
  27-14  owner of the soil under Subchapter F of this chapter, the board, or
  27-15  a board for lease may negotiate and execute <sales> contracts or
  27-16  any other instruments or agreements necessary to dispose of their
  27-17  portion of the royalty taken in kind, including, but not limited
  27-18  to, contracts for sale, transportation, or storage.
  27-19        <(e)> (d)  This section does not apply to or have any effect
  27-20  on the Board for Lease of University Lands or any lease executed on
  27-21  university land.
  27-22        <(f)> (e)  This section shall not be construed to surrender
  27-23  or in any way affect the right of the state or the owner of the
  27-24  soil under existing or future leases to receive royalty from its
  27-25  lessee on the basis of the <fair> market value <produced> of the
   28-1  production from state public land or land under the provisions of
   28-2  Subchapter F of this chapter.
   28-3        SECTION 36.  Section 52.151, Natural Resources Code, is
   28-4  amended to read as follows:
   28-5        Sec. 52.151.  Authorization to Operate Areas as Units.
   28-6  (a)  The commissioner, on behalf of the state or any fund that
   28-7  belongs to the state, may execute agreements that provide for
   28-8  operating areas as a unit for the exploration, development, and
   28-9  production of oil or gas or both and to commit to the agreements
  28-10  (1) the royalty interests in oil or gas, or both, reserved to the
  28-11  state, or any fund of the state, by law, in a patent, in a contract
  28-12  of sale, or under the terms of an oil and gas lease legally
  28-13  executed by an official, board, agent, agency, or authority of the
  28-14  state, or (2) the free royalty interests, whether leased or
  28-15  unleased, reserved to the state pursuant to Section 51.201 or
  28-16  51.054 of this code.
  28-17        (b)  <The> For an agreement authorized by Subsection (a) of
  28-18  this section to be effective, the commissioner must find that the
  28-19  agreement is in the best interest of the state.
  28-20        SECTION 37.  Section 52.152, Natural Resources Code, is
  28-21  amended to read as follows:
  28-22        Sec. 52.152.  Approval of <Unit> Agreements.  (a)  An
  28-23  agreement that <(1)> commits <the> (1) a royalty interest in land
  28-24  belonging to the permanent school fund or the asylum funds, in
  28-25  riverbeds, inland lakes, and channels, or in an area within
   29-1  tidewater limits, including islands, lakes, bays, inlets, marshes,
   29-2  reefs, and the bed of the sea, or (2) the free royalty interests,
   29-3  whether leased or unleased, reserved to the state pursuant to
   29-4  Section 51.201 or 51.054 of this code, must be approved by the
   29-5  board and executed by the commissioner to be effective.
   29-6        (b)  An owner of the soil <if the agreement covers land
   29-7  leased for oil and gas under> who is subject to the provisions of
   29-8  Subchapter F of this chapter may grant to a lessee prior authority
   29-9  to pool or unitize the interest of such owner in a lease executed
  29-10  under the provisions of such subchapter.  In order for the
  29-11  provisions of an agreement to bind the interest of an owner of the
  29-12  soil who is subject to the provisions of Subchapter F of this
  29-13  chapter and who has not granted the lessee prior authorization to
  29-14  pool or unitize such interest in an oil and gas lease executed
  29-15  under the provisions of that subchapter, the agreement must be
  29-16  executed by the owner of the soil.
  29-17        <(b)> (c)  An agreement that commits <the royalty> any
  29-18  interest in any land <or an area> not listed in Subsection (a) of
  29-19  this section must be approved by the board, official, agent,
  29-20  agency, or authority of the state which has the authority to lease
  29-21  or to approve the lease of the land for oil and gas and must be
  29-22  executed by the commissioner to be effective.
  29-23        SECTION 38.  Section 52.153, Natural Resources Code, is
  29-24  amended to read as follows:
  29-25        Sec. 52.153.  <Agreement Provisions.  (a)  The agreement to
   30-1  operate areas as units may provide> Provisions of Agreement.
   30-2  (a)  An agreement executed under this subchapter may include the
   30-3  following provisions:
   30-4              (1)  that operations incident to drilling a well on any
   30-5  portion of a unit shall be considered for all purposes to be
   30-6  conduct of the operations on each <separately owned> tract in the
   30-7  unit <by the several owners>;
   30-8              (2)  that production allocated by the agreement to each
   30-9  tract included in the unit shall be considered for all purposes to
  30-10  have been <produced> production from the tract;
  30-11              (3)  that the <agreement and lease, with respect to the
  30-12  interest of the state, shall be effective as long as oil or gas or
  30-13  both are produced from the unit in paying quantities and royalties
  30-14  are paid to the state> interest reserved to or provided for the
  30-15  state, or any of its funds, on production from any tract included
  30-16  in the unit shall be paid only on that portion of the production
  30-17  from the unit which is allocated to the tract under the agreement;
  30-18  and
  30-19              (4)  that <royalties reserved to the state or any fund
  30-20  of the state on production from any tract or portion of a tract>
  30-21  each lease included in the unit shall <be paid only on the portion
  30-22  of the production allocated to the tract by the agreement> remain
  30-23  in effect so long as the agreement remains in effect and that on
  30-24  termination of the agreement each lease shall continue in effect
  30-25  under the terms and conditions of the lease.
   31-1        (b)  The agreement may include any other <provision which
   31-2  the> terms and conditions the commissioner or any board, official,
   31-3  agent, agency, or authority of the state <which> that has the
   31-4  authority to lease or to approve <the leasing> a lease of the land
   31-5  for oil and gas may consider <necessary for the protection of the
   31-6  interests> to be in the best interest of the state.
   31-7        SECTION 39.  Subchapter E, Chapter 52, Natural Resources
   31-8  Code, is amended by adding Section 52.154 to read as follows:
   31-9        Section 52.154.  Ratifications and Other Agreements.  (a)
  31-10  The board is authorized to approve, by board action or by rule, in
  31-11  a manner deemed by the board to be in the best interest of the
  31-12  state, ratifications, or other contracts or agreements, to include
  31-13  in the benefits of production any mineral or royalty interest in
  31-14  land belonging to the permanent school fund or the asylum funds.
  31-15        (b)  Any agreement approved by the board under this section
  31-16  must be executed by the commissioner to be effective.
  31-17        (c)  A ratification, or other contract or agreement, that
  31-18  commits any of the interests listed in Subsection (a) of this
  31-19  section in land not belonging to the permanent school fund or the
  31-20  asylum funds must be approved by the board, official, agent,
  31-21  agency, or authority of the state which has the authority to lease
  31-22  or to approve the lease of the land for oil and gas and must be
  31-23  executed by the commissioner to be effective.
  31-24        SECTION 40.  Section 52.175, Natural Resources Code, is
  31-25  amended to read as follows:
   32-1        Sec. 52.175.  Lease of Oil and Gas After Forfeiture.  When
   32-2  the relinquishment or agency right herein granted has been
   32-3  forfeited, the land shall be subject to lease for oil and gas under
   32-4  the procedure provided by law for the leasing of unsold surveyed
   32-5  public school lands.  The substantive provisions of Subchapter B of
   32-6  this Chapter and Subchapters D and E of Chapter 32 of this code
   32-7  shall apply to such an oil and gas lease.  No oil and gas lease
   32-8  shall be executed which provides for a royalty of less than
   32-9  one-eighth, payable to the state for the benefit of the permanent
  32-10  free school fund.  The owner of the soil shall not be entitled to
  32-11  any revenue generated by a lease executed pursuant to this section.
  32-12  Upon the termination or expiration of a lease so executed by the
  32-13  Commissioner of the General Land Office, the rights of the surface
  32-14  owner to act under this law shall be ipso facto reinstated.
  32-15        SECTION 41.  Section 52.186, Natural Resources Code, is
  32-16  amended to read as follows:
  32-17        Sec. 52.186.  Lease of Certain Minerals When Owner of the
  32-18  Soil Unavailable.  (a)  If an owner of the soil or of any undivided
  32-19  interest therein of any land subject to the terms of this
  32-20  subchapter, or Subchapter C, Chapter 53, of this code, is found to
  32-21  be unavailable under Subsection (b) of this section to act as the
  32-22  state's agent for leasing oil and gas or any mineral leased under
  32-23  Subchapter C, Chapter 53, of this code, such land or undivided
  32-24  interest therein shall be subject to lease for the applicable
  32-25  minerals under the procedure provided by Subchapter B of this
   33-1  Chapter 52  for the leasing of unsold surveyed public school lands.
   33-2  The substantive provisions of Subchapter B of this Chapter and
   33-3  Subchapters D and E of Chapter 32 of this code shall apply to such
   33-4  a lease of land subject to lease under this subchapter.  The
   33-5  substantive provisions of Subchapter E of Chapter 53 and
   33-6  Subchapters D and E of Chapter 32 of this code shall apply to such
   33-7  a lease of land subject to lease under Subchapter C of Chapter 53
   33-8  of this code.  Subject to the provisions of Subsection (b)(4) of
   33-9  this section, the owner of the soil shall not be entitled to any
  33-10  revenue generated by a lease executed pursuant to this section.
  33-11        (b)  An owner of the soil or of an undivided interest therein
  33-12  may be found to be unavailable to act as the state's agent for
  33-13  leasing oil and gas or any mineral leased under Subchapter C,
  33-14  Chapter 53, of this code, if the following conditions have been
  33-15  satisfied:
  33-16              (1)  Any party who has been unable to locate an owner
  33-17  of any interest, including an undivided interest, in the surface of
  33-18  land subject to this subchapter or Subchapter C, Chapter 53, of
  33-19  this code must submit a written affidavit to the commissioner
  33-20  stating that the party (hereafter called affiant) has been unable
  33-21  to locate said owner.  This affidavit must specify the legal
  33-22  description of the land which the affiant has been unable to lease
  33-23  and the extent of the interest and type of mineral which the
  33-24  affiant has been unable to lease.  In the affidavit, the affiant
  33-25  must also attest to the fact that he diligently searched the county
   34-1  clerk's records and the tax assessor's records to determine the
   34-2  name, identity, and last known place of residence of the owner of
   34-3  the soil who could lease the interest that the affiant has been
   34-4  unable to lease.  The affiant must further attest to the results of
   34-5  his search of such records and to any other steps taken to locate
   34-6  the owner of the soil.
   34-7              (2)  The commissioner shall provide notice to any owner
   34-8  of the soil identified by the affiant in Subdivision (1) of this
   34-9  subsection of the consequences of a finding that such owner of the
  34-10  soil is unavailable to act as the state's leasing agent.  Such
  34-11  notice shall be in writing to the owner of the soil's last known
  34-12  address and shall also be provided by publication in the manner
  34-13  provided by the Texas Rules of Civil Procedure for citation by
  34-14  publication in actions against unknown owners or claimants of an
  34-15  interest in land.
  34-16              (3)  If the owner of the soil has not contacted the
  34-17  commissioner within 30 days after the completion of all notice
  34-18  procedures provided under Subdivision (2) of this subsection, then
  34-19  the owner of the soil will be deemed unavailable to act as the
  34-20  state's leasing agent and the School Land Board may lease the
  34-21  state's mineral interest under Subsection (a) of this section.
  34-22  However, if prior to the execution of a lease under Subsection (a)
  34-23  the owner of the soil notifies the commissioner in writing that he
  34-24  can and will act as the state's agent, then the owner of the soil's
  34-25  ability to act as a leasing agent under this subchapter or under
   35-1  Subchapter C, Chapter 53, of this code shall be reinstated.
   35-2              (4)  If the owner of the soil or of any undivided
   35-3  interest therein appears within two years after the execution of a
   35-4  lease on his land pursuant to this section, he shall be entitled to
   35-5  one-half of all royalties theretofore paid or thereafter to be paid
   35-6  under such lease, reduced in the proportion which his interest
   35-7  bears to the whole and undivided surface estate, upon showing to
   35-8  the satisfaction of the commissioner that the information submitted
   35-9  under Subsection (b)(1) was inaccurate or that a reasonably
  35-10  diligent search would have resulted in his being located.
  35-11        (c)  Upon the termination or expiration of a lease for oil
  35-12  and gas or any mineral leased under Subchapter C, Chapter 53, of
  35-13  this code executed pursuant to this section, the rights of the
  35-14  owner of the soil to act under this subchapter shall be ipso facto
  35-15  reinstated.
  35-16        SECTION 42.  Section 52.291, Natural Resources Code, is
  35-17  amended to read as follows:
  35-18        Sec. 52.291.  Coverage.  The following persons, agencies, and
  35-19  entities are subject to the provisions of Sections 52.292 through
  35-20  52.293 of this code:
  35-21              (1)  the commissioner;
  35-22              (2)  the board;
  35-23              (3)  boards for lease of land owned by a department,
  35-24  board, or agency of the state created by Chapter 34 of this code;
  35-25              (4)  the Board for Lease of University Lands;
   36-1              (5)  the Board of Regents of Texas A&M University;
   36-2              (6)  the Board of Regents of Texas Tech University;
   36-3              (7)  the Board of Directors of Texas A&I University;
   36-4              (8)  the Board of Regents, State Senior Colleges;
   36-5              (9)  the Board of Regents of the University of Houston;
   36-6              (10)  any other board of regents or other governing
   36-7  board of a state-supported institution of higher learning having
   36-8  authority to execute oil<,> and gas<, and mineral> leases on land
   36-9  owned by the institution;
  36-10              (11)  an owner of land or minerals in this state whose
  36-11  authority to lease the land or minerals as agent for the state
  36-12  arises in whole or in part from what is commonly known as the
  36-13  Relinquishment Act, codified in Subchapter F of this chapter;
  36-14              (12)  the Board for Lease of State Park Lands;
  36-15              (13)  the Board for Lease of the Texas Department of
  36-16  Corrections; and
  36-17              (14)  the commissioners court of any county in this
  36-18  state.
  36-19        SECTION 43.  Section 52.292, Natural Resources Code, is
  36-20  amended to read as follows:
  36-21        Sec. 52.292.  Prohibited Leases.  It is illegal for any
  36-22  person included in Section 52.291 of this code to execute an oil<,>
  36-23  and gas<, or mineral> lease on land on which he is authorized by
  36-24  law to execute the lease unless the lease includes the terms
  36-25  provided in Section 52.293 of this code.
   37-1        SECTION 44.  Section 52.294, Natural Resources Code, is
   37-2  amended to read as follows:
   37-3        Sec. 52.294.  Prerequisite to Filing Leases.  The
   37-4  commissioner shall not receive and file an oil<,> and gas<, and
   37-5  mineral> lease required to be filed by law unless the lease
   37-6  includes the terms and conditions provided in Section 52.293 of
   37-7  this code.
   37-8        SECTION 45.  Section 52.295, Natural Resources Code, is
   37-9  amended to read as follows:
  37-10        Sec. 52.295.  Certain Leases Null, Void, and of No Force and
  37-11  Effect.  An oil<,> and gas<, and mineral> lease executed or
  37-12  received and filed in violation of the provisions of this
  37-13  subchapter is null, void, and of no force and effect.
  37-14        SECTION 46.  Section 52.297, Natural Resources Code, is
  37-15  amended to read as follows:
  37-16        Sec. 52.297.  <Payment of> Compensation for Damages <for>
  37-17  from Use of Surface.  (a)  Leases issued under Subchapter B of this
  37-18  chapter  for unsold surveyed or unsurveyed school land, other than
  37-19  land included in islands, saltwater lakes, bays, inlets, marshes,
  37-20  and reefs owned by the state in tidewater limits and other than
  37-21  that portion of the Gulf of Mexico within the jurisdiction of the
  37-22  state, must include a provision requiring the <payment of>
  37-23  compensation for damages <for> from the use of the surface in
  37-24  prospecting for, exploring, developing, or producing the leased
  37-25  minerals.
   38-1        (b)  The commissioner by rule shall set the <amount of and
   38-2  shall collect money> procedure for receiving compensation for
   38-3  damages to the surface of land dedicated to the permanent school
   38-4  fund.
   38-5        (c)  Money collected for surface damages shall be deposited
   38-6  in a special fund account in the State Treasury to be used for
   38-7  conservation, reclamation, or constructing permanent improvements
   38-8  on land that belongs to the permanent school fund.
   38-9        (d)  The special fund account must be an interest-bearing
  38-10  account, and the interest received on the account shall be
  38-11  deposited in the State Treasury to the credit of the available
  38-12  school fund.
  38-13        (e)  Money collected under this section and designated for
  38-14  the construction of permanent improvements as provided by this
  38-15  section must be used not later than two years after the date on
  38-16  which the money is collected.
  38-17        (f)  Any money that remains in the special fund account for
  38-18  longer than two years shall be deposited in the State Treasury to
  38-19  the credit of the permanent school fund.
  38-20        (g)  The <payment of> compensation for damages under this
  38-21  section is in addition to any bonus, rental, royalty, or other
  38-22  payment required by the lease.
  38-23        SECTION 47.  Section 52.321, Natural Resources Code, is
  38-24  amended to read as follows:
  38-25        Sec. 52.321.  Definitions.  In this subchapter:
   39-1              (1)  "Geophysical exploration" means a survey or
   39-2  investigation conducted to discover or locate oil and gas prospects
   39-3  using magnetic, gravity, seismic, and/or electrical techniques.
   39-4              (2)  "Geochemical exploration" means a survey or
   39-5  investigation conducted to discover or locate oil and gas prospects
   39-6  using techniques involving soil sampling and analysis.
   39-7              (3)  "Public school land" means land dedicated by the
   39-8  constitution laws of this state to the permanent free school fund,
   39-9  and specifically includes land with a mineral classification under
  39-10  Subchapter F of this chapter  in which the state has retained the
  39-11  oil and gas interest and areas within tidewater limits <or the
  39-12  portion of the Gulf of Mexico that is under the jurisdiction of
  39-13  this state>.
  39-14              (4)  "Areas within tidewater limits" means islands,
  39-15  saltwater lakes, bays, inlets, marshes, and reefs within tidewater
  39-16  limits and that portion of the Gulf of Mexico within the
  39-17  jurisdiction of Texas.
  39-18              (5)  "Permit" means a license issued by the
  39-19  commissioner authorizing geophysical and/or geochemical exploration
  39-20  on public school land.
  39-21              (6)  "Permittee" means the holder of a permit.
  39-22        SECTION 48.  Section 52.324, Natural Resources Code, is
  39-23  amended to read as follows:
  39-24        Sec. 52.324.  Authority of Commissioner.  (a)  The
  39-25  commissioner:
   40-1              (1)  as a condition of issuing a permit, shall collect
   40-2  reasonable fees from the applicant in an amount determined by the
   40-3  commissioner;
   40-4              (2)  may require a permittee to furnish to the
   40-5  commissioner, upon the commissioner's request, copies of maps,
   40-6  plats, reports, data, and any other information in the possession
   40-7  of the permittee that relates to the progress or results of an
   40-8  exploration under a permit; provided however, the commissioner
   40-9  shall not require a permittee to furnish any of its interpretive
  40-10  data;
  40-11              (3)  shall by rule require a permittee to restore land
  40-12  explored under the permit as nearly as is practicable to its
  40-13  condition immediately prior to the exploration;
  40-14              (4)  shall by rule set the <amount of and shall collect
  40-15  money> procedure for receiving compensation for damages to the
  40-16  surface of public school land except land with a mineral
  40-17  classification under Subchapter F of this chapter;  and
  40-18              (5)  may make any other rules relating to geophysical
  40-19  or geochemical explorations, permits, or permittees the
  40-20  commissioner considers appropriate.
  40-21        (b)  Money collected for surface damages shall be deposited
  40-22  and used in the manner provided by Section 52.297 of this chapter.
  40-23        (c)  In the case of areas within tidewater limits, the
  40-24  commissioner shall follow the recommendations of the Parks and
  40-25  Wildlife Department in making rules to prevent unnecessary
   41-1  pollution of water, destruction of fish, oysters, and other marine
   41-2  life, and obstruction of navigation.
   41-3        (d)  If a permittee violates a rule of the commissioner or a
   41-4  term of a permit, the commissioner may cancel the permit.
   41-5        (e)  If by authority of Subsection (a)(2) of this section the
   41-6  commissioner acquires information concerning a permittee's
   41-7  geophysical or geochemical exploration, the commissioner shall
   41-8  consider the information to be confidential and may not disclose
   41-9  it, except by authority of a court order, to the public or any
  41-10  other agency of this state.
  41-11        SECTION 49.  Section 53.001, Natural Resources Code, is
  41-12  amended to read as follows:
  41-13        Sec. 53.001.  Definitions.  In this chapter:
  41-14              (1)  "Commissioner" means the Commissioner of the
  41-15  General Land Office.
  41-16              (2)  "Land office" means the General Land Office.
  41-17              (3)  "Board" means the school land board.
  41-18        SECTION 50.  Section 53.012, Natural Resources Code, is
  41-19  amended to read as follows:
  41-20        Sec. 53.012.  Application for Right to Prospect.  (a)  A
  41-21  person who desires to prospect land covered by this subchapter
  41-22  shall file an application with the commissioner designating the
  41-23  area to be prospected.
  41-24        (b)  Each area covered by an application may not be in excess
  41-25  of 640 acres with a 10 percent tolerance for tracts, sections, and
   42-1  surveys that include more than 640 acres.
   42-2        (c)  <Each application shall be accompanied by a rental
   42-3  payment> what an application must contain.
   42-4        SECTION 51.  Section 53.013, Natural Resources Code, is
   42-5  amended to read as follows:
   42-6        Sec. 53.013.  Conditions of Permit.  (a)  <The> After receipt
   42-7  of the rental payment set by the commissioner, the commissioner
   42-8  shall issue to the first applicant a permit to prospect the area
   42-9  designated in <his> the applicant's application for a period of one
  42-10  year from the date <his> said application is filed.
  42-11        (b)  <The> After receipt of an additional rental payment set
  42-12  by the commissioner, the commissioner may extend the permit for a
  42-13  period of one year <on payment of an annual rental of not less than
  42-14  25 cents an acre>.
  42-15        (c)  No permit may be extended for a period of more than five
  42-16  consecutive years from the date of its issuance.
  42-17        SECTION 52.  Section 53.015, Natural Resources Code, is
  42-18  amended to read as follows:
  42-19        Sec. 53.015.  Application for Lease.  (a)  At any time during
  42-20  the term of the permit, the permittee may file an application to
  42-21  lease the area or a designated portion of the area covered by the
  42-22  permit for the purpose of mining or producing the minerals covered
  42-23  by the permit.
  42-24        (b)  <The application shall be accompanied by the first lease
  42-25  payment of not less than $2 an acre> An application to lease must
   43-1  designate the specific minerals the permittee is applying to lease.
   43-2  The commissioner may delineate what other information an
   43-3  application must contain.
   43-4        (c)  If the area designated for lease in the application is
   43-5  less than the area covered by the permit, the applicant shall
   43-6  include with <his> the application field notes prepared by the
   43-7  county surveyor or by a licensed state land surveyor describing the
   43-8  land designated.
   43-9        SECTION 53.  Section 53.016, Natural Resources Code, is
  43-10  amended to read as follows:
  43-11        Sec. 53.016.  Issuance of Lease.  (a)  <The> After receipt of
  43-12  the bonus payment set by the commissioner, the lease shall be
  43-13  issued by the commissioner under the provisions of this subchapter
  43-14  and shall be for a primary term not to exceed 20 years and as long
  43-15  after that time as the minerals are produced in paying quantities.
  43-16        (b)  The commissioner may include in the lease any other
  43-17  provision <he> the commissioner considers necessary for protection
  43-18  of the interests of the state.
  43-19        SECTION 54.  REPEALER.  Section 53.017, Natural Resources
  43-20  Code, is repealed.
  43-21        SECTION 55.  Section 53.020, Natural Resources Code, is
  43-22  amended to read as follows:
  43-23        Sec. 53.020.  ASSIGNMENT AND TRANSFER.  A lease issued under
  43-24  this subchapter may be transferred or assigned at any time in the
  43-25  manner provided by Section 52.026 of this code <Of Lease.  (a)  A
   44-1  lease may be assigned in quantities of not less than 40 acres, but
   44-2  if there are fewer than 40 acres remaining in the tract originally
   44-3  leased, the lesser area may be assigned.>
   44-4        <(b)  The assignment shall be recorded in the county in which
   44-5  the land is located, and within 90 days after it is recorded a
   44-6  certified copy of the assignment, certified by the county clerk
   44-7  from his records, shall be sent to the land office, together with a
   44-8  filing fee set by the commissioner in an amount not less than $1
   44-9  for each tract affected>.
  44-10        SECTION 56.  Section 53.024, Natural Resources Code, is
  44-11  amended to read as follows:
  44-12        Sec. 53.024.  <Other Lease Provisions.  For any lease issued
  44-13  under this chapter, the penalty and interest on delinquent
  44-14  royalties, and the penalty for failure to file a report, are
  44-15  assessed in the same manner and in the same amounts as provided in
  44-16  Section 52.131> Penalty and Interest.  Leases issued under this
  44-17  subchapter shall be subject to the provisions of Section 52.131 (e)
  44-18  through (j) of this code.
  44-19        SECTION 57.  Subchapter B, Chapter 53, Natural Resources
  44-20  Code, is amended by adding Section 53.025 to read as follows:
  44-21        Section 53.025.  Lease Relinquishment.  A lease issued under
  44-22  this subchapter may be relinquished to the state at any time in the
  44-23  manner provided by Section 52.027 of this code.
  44-24        SECTION 58.  Subchapter B, Chapter 53, Natural Resources
  44-25  Code, is amended by adding Section 53.026 to read as follows:
   45-1        Section 53.026.  In Kind Royalty.  (a)  The commissioner or
   45-2  the commissioner acting on behalf of and at the direction of the
   45-3  board or a board for lease may negotiate and execute contracts or
   45-4  any other instruments or agreements necessary to dispose of their
   45-5  portion of the royalty taken in kind, including, but not limited
   45-6  to, contracts for sale, transportation, or storage.
   45-7        (b)  This section shall not be construed to surrender or in
   45-8  any way affect the right of the state under existing or future
   45-9  leases to receive royalty from its lessee on the basis of the
  45-10  market value of the production from land leased under the
  45-11  provisions of this subchapter.
  45-12        SECTION 59.  Subchapter B, Chapter 53, Natural Resources
  45-13  Code, is amended by adding Section 53.027 to read as follows:
  45-14        Section 53.027.  Contracts and Agreements.  Upon the land
  45-15  office's written request, mailed to the lessee's address as shown
  45-16  on its lease or otherwise properly changed in conformity with the
  45-17  terms of the lease, copies of contracts for the sale or processing
  45-18  of minerals leased under this subchapter and subsequent agreements
  45-19  and amendments to those contracts shall be filed in the land office
  45-20  within 30 days after the land office mails such written request.
  45-21  These contracts, agreements, and amendments so filed in the land
  45-22  office shall be held in confidence by the land office unless
  45-23  otherwise authorized by the lessee.
  45-24        SECTION 60.  Subchapter B, Chapter 53, Natural Resources
  45-25  Code, is amended by adding Section 53.028 to read as follows:
   46-1        Section 53.028.  Audit Information Confidential.  (a)  All
   46-2  information secured, derived, or obtained during the course of an
   46-3  inspection or examination of books, accounts, reports, or other
   46-4  records, as provided in this code, a rule, or a lease provision, is
   46-5  confidential and may not be used publicly, opened for public
   46-6  inspection, or disclosed, except for information set forth in a
   46-7  lien filed under this chapter and except as permitted under
   46-8  Subsection (d) of this section.
   46-9        (b)  All information made confidential in this section shall
  46-10  not be subject to subpoena directed to the commissioner, the
  46-11  attorney general, or the governor except in a judicial or
  46-12  administrative proceeding in which this state is a party.
  46-13        (c)  The commissioner or the attorney general may use
  46-14  information made confidential by the provisions of this section and
  46-15  contracts made confidential by Section 53.027 of this code to
  46-16  enforce any provisions of this chapter or may authorize their use
  46-17  in judicial or administrative proceedings in which this state is a
  46-18  party.
  46-19        (d)  This section does not prohibit:
  46-20              (1)  the delivery of information made confidential by
  46-21  this section to the lessee or its successor, receiver, executor,
  46-22  guarantor, administrator, assignee, or representative;
  46-23              (2)  the publication of statistics classified to
  46-24  prevent the identification of a particular audit or items in a
  46-25  particular audit;
   47-1              (3)  the release of information which is otherwise
   47-2  available to the public; or
   47-3              (4)  the release of information concerning the amount
   47-4  of royalty assessed as a result of an examination conducted under
   47-5  this code, a rule, or a lease provision or the release of other
   47-6  information which would have been properly included in reports
   47-7  required under this code, a rule, or a lease provision.
   47-8        SECTION 61.  Section 53.074, Natural Resources Code, is
   47-9  amended to read as follows:
  47-10        Sec. 53.074.  Authority and Duties of Agent.
  47-11  (a)  Prohibition Against Self-Dealing.  The owner of the soil may
  47-12  not lease, either directly or indirectly, to himself or to a
  47-13  nominee, to any corporation or subsidiary in which he is a
  47-14  principal stockholder, or to an employee of such a corporation or
  47-15  subsidiary, or to a partnership in which he is a partner, or to an
  47-16  employee of such a partnership.  If the owner of the soil is a
  47-17  corporation or a partnership, the owner of the soil may not lease,
  47-18  either directly or indirectly, to a principal stockholder of the
  47-19  corporation or to a partner of the partnership, or any employee of
  47-20  the corporation or partnership.  The owner of the soil may not
  47-21  lease, either directly or indirectly, to his fiduciary, including
  47-22  but not limited to a guardian, trustee, executor, administrator,
  47-23  receiver, or conservator.  Further, the owner of the soil may not
  47-24  lease, directly or indirectly, to a member of his family or anyone
  47-25  related to him by marriage, blood, or adoption.
   48-1        (b)  Fiduciary Duty of Agent.  An owner of the soil owes the
   48-2  state a fiduciary duty and a duty of utmost good faith.  An owner
   48-3  of the soil must fully disclose any facts affecting the state's
   48-4  interest and must act in the best interest of the state.  Any
   48-5  conflict of interest must be resolved by putting the interests of
   48-6  the state before the interests of the owner of the soil.  In
   48-7  addition to these specific statutory duties, the owner of the soil
   48-8  owes the state all the common-law duties of a holder of executive
   48-9  rights.
  48-10        (c)  Consequences of a Breach of the Surface Owner's
  48-11  Fiduciary Duty or a Violation of the Prohibition Against
  48-12  Self-Dealing.  When the commissioner determines that an owner of
  48-13  the soil has breached any duty or obligation under this subchapter,
  48-14  the commissioner may request that the attorney general file an
  48-15  action or proceeding either to enforce the duties and obligations
  48-16  of the owner of the soil or to forfeit the then applicable agency
  48-17  rights of the surface owner.  Such an action or proceeding shall be
  48-18  filed in a district court in Travis County.
  48-19        (d)  Leasing Procedure When Surface Owner's Agency Rights
  48-20  Have Been Forfeited.  When the surface owner's agency rights have
  48-21  been forfeited in accordance with Subsection (c) of this section,
  48-22  the minerals subject to lease under this subchapter can then be
  48-23  leased under the leasing procedure set out for the lease of oil and
  48-24  gas under Section 52.175 of this code.  The substantive provisions
  48-25  of Subchapter E of this chapter and Subchapter D and E of Chapter
   49-1  32 of this code shall apply to such a lease.
   49-2        (e)  A penalty of 10 percent shall be imposed on any sums due
   49-3  the state because a surface owner breaches a fiduciary duty.  This
   49-4  penalty shall be applied only to amounts owed as a result of
   49-5  breaches occurring on and after the effective date of this section.
   49-6  The imposition of this penalty will not limit the right of the
   49-7  state to obtain punitive damages, exemplary damages, or interest.
   49-8  Any punitive damages or exemplary damages assessed by a court shall
   49-9  be offset by the 10 percent penalty imposed by this subsection.
  49-10        SECTION 62.  Subchapter C, Chapter 53, Natural Resources
  49-11  Code, is amended by adding Section 53.075 to read as follows:
  49-12        Section 53.075.  Assignment and Transfer.  A lease issued
  49-13  under this subchapter may be transferred or assigned at any time in
  49-14  the manner provided by Section 52.026 of this code.
  49-15        SECTION 63.  Subchapter C, Chapter 53, Natural Resources
  49-16  Code, is amended by adding Section 53.076 to read as follows:
  49-17        Section 53.076.  Lease Relinquishment.  A lease issued under
  49-18  this subchapter may be relinquished to the state at any time in the
  49-19  manner provided by Section 52.027 of this code.
  49-20        SECTION 64.  Subchapter C, Chapter 53, Natural Resources
  49-21  Code, is amended by adding Section 53.077 to read as follows:
  49-22        Section 53.077.  In Kind Royalty.  (a)  The commissioner,
  49-23  each owner of the soil under this subchapter, or the commissioner,
  49-24  acting on the behalf of and at the direction of an owner of the
  49-25  soil under this subchapter may negotiate and execute contracts or
   50-1  any other instruments or agreements necessary to dispose of their
   50-2  portion of the royalty taken in kind, including, but not limited
   50-3  to, contracts for sale, transportation, or storage.
   50-4        (b)  This section shall not be construed to surrender or in
   50-5  any way affect the right of the state or the owner of the soil
   50-6  under existing or future leases to receive royalty from its lessee
   50-7  on the basis of the market value of the production from land leased
   50-8  under the provisions of this subchapter.
   50-9        SECTION 65.  Subchapter C, Chapter 53, Natural Resources
  50-10  Code, is amended by adding Section 53.078 to read as follows:
  50-11        Section 53.078. Penalty and Interest.  Leases issued under
  50-12  this subchapter shall be subject to the provisions of Section
  50-13  52.131 (e) through (j) of this code.
  50-14        SECTION 66.  Subchapter C, Chapter 53, Natural Resources
  50-15  Code, is amended by adding Section 53.079 to read as follows:
  50-16        Section 53.079.  Contracts and Agreements.  Upon the land
  50-17  office's written request, mailed to the lessee's address as shown
  50-18  on its lease or otherwise properly changed in conformity with the
  50-19  terms of the lease, copies of contracts for the sale or processing
  50-20  of minerals leased under this subchapter and subsequent agreements
  50-21  and amendments to those contracts shall be filed in the land office
  50-22  within 30 days after the land office mails such written request.
  50-23  These contracts, agreements, and amendments so filed in the land
  50-24  office shall be held in confidence by the land office unless
  50-25  otherwise authorized by the lessee.
   51-1        SECTION 67.  Subchapter C, Chapter 53, Natural Resources
   51-2  Code, is amended by adding Section 53.080 to read as follows:
   51-3        Section 53.080.  Audit Information Confidential.  (a)  All
   51-4  information secured, derived, or obtained during the course of an
   51-5  inspection or examination of books, accounts, reports, or other
   51-6  records, as provided in Section 53.068 of this code, a rule, or a
   51-7  lease provision is confidential and may not be used publicly,
   51-8  opened for public inspection, or disclosed, except for information
   51-9  set forth in a lien filed under this chapter and except as
  51-10  permitted under Subsection (d) of this section.
  51-11        (b)  All information made confidential in this section shall
  51-12  not be subject to subpoena directed to the commissioner, the
  51-13  attorney general, or the governor except in a judicial or
  51-14  administrative proceeding in which this state is a party.
  51-15        (c)  The commissioner or the attorney general may use
  51-16  information made confidential by the provisions of this section and
  51-17  contracts made confidential by Section 53.079 of this code to
  51-18  enforce any provisions of this chapter or may authorize their use
  51-19  in judicial or administrative proceedings in which this state is a
  51-20  party.
  51-21        (d)  This section does not prohibit:
  51-22              (1)  the delivery of information made confidential by
  51-23  this section to the lessee or its successor, receiver, executor,
  51-24  guarantor, administrator, assignee, or representative;
  51-25              (2)  the publication of statistics classified to
   52-1  prevent the identification of a particular audit or items in a
   52-2  particular audit;
   52-3              (3)  the release of information which is otherwise
   52-4  available to the public; or
   52-5              (4)  the release of information concerning the amount
   52-6  of royalty assessed as a result of an examination conducted under
   52-7  Section 53.068 of this code, a rule, or a lease provision or the
   52-8  release of other information which would have been properly
   52-9  included in reports required under Section 53.068 of this code, a
  52-10  rule, or a lease provision.
  52-11        SECTION 68.  Section 53.111, Natural Resources Code, is
  52-12  amended to read as follows:
  52-13        Sec. 53.111.  Authority to Operate an Area as a Unit for
  52-14  Production of Sulphur.  <Subject to the provisions of this
  52-15  subchapter, the> The commissioner <,> on behalf of the state or any
  52-16  <of its funds,> fund that belongs to the state  may execute
  52-17  agreements that provide for <the operation of> operating  areas as
  52-18  a unit for the exploration, development, and production of sulphur
  52-19  and <may> to commit to the agreements (1) the royalty interests in
  52-20  sulphur reserved to <or provided for> the state or any fund of the
  52-21  state<, in or in connection with any> by law, in a patent, award,
  52-22  mining claim,  <or> contract of sale, or under the terms of any
  52-23  lease  <made> legally executed by an official, board, agent,
  52-24  agency, or authority of the state, or (2) the free royalty
  52-25  interests, whether leased or unleased, reserved to the state
   53-1  pursuant to Section 51.201 or 51.054 of this code.
   53-2        SECTION 69.  Section 53.112, Natural Resources Code, is
   53-3  amended to read as follows:
   53-4        Sec. 53.112.  APPROVAL OF CERTAIN AGREEMENTS BY <THE>SCHOOL
   53-5  LAND BOARD.  (a)  An agreement <authorized by Section 53.111 of
   53-6  this code> that commits (1) a royalty <interests> interest  in land
   53-7  <dedicated> belonging to to the permanent <free> school fund <and>
   53-8  or the asylum funds, in riverbeds, inland lakes, and channels, <and
   53-9  areas> or in an area within tidewater limits, including islands,
  53-10  lakes, bays, inlets, marshes, reefs, and the bed of the sea, or (2)
  53-11  the free royalty interests, whether leased or unleased, reserved to
  53-12  the state pursuant to Section 51.201 or 51.054 of this code, must
  53-13  be approved by the <school land board and must be executed by the
  53-14  owners of the surface if the agreements cover land leased for
  53-15  sulphur under> board and executed by the commissioner to be
  53-16  effective.
  53-17        (b)  An owner of the soil who is subject to the provisions of
  53-18  Subchapter C of this chapter may grant to a lessee prior authority
  53-19  to pool or unitize the interest of such owner in a lease executed
  53-20  under the provisions of such subchapter.  In order for the
  53-21  provisions of such an agreement to bind the interest of an owner of
  53-22  the soil who is subject to the provisions of Subchapter C of this
  53-23  chapter and who has not granted the lessee prior authorization to
  53-24  pool or unitize such interest in a sulphur lease executed under the
  53-25  provisions of that subchapter, the agreement must be executed by
   54-1  the owner of the soil.
   54-2        SECTION 70.  Section 53.113, Natural Resources Code, is
   54-3  amended to read as follows:
   54-4        Sec. 53.113.  Approval of <Other> Agreements.  <Agreements>
   54-5  An agreement that <commit> commits the royalty interest in any land
   54-6  <that is> not <covered by> listed in Section 53.112 of this code
   54-7  must be approved by the board, official, agent, agency, or
   54-8  authority of the state which has the authority to lease or to
   54-9  approve <a> the lease of the land <or area> for sulphur and must be
  54-10  executed by the commissioner to be effective.
  54-11        SECTION 71.  Section 53.114, Natural Resources Code, is
  54-12  amended to read as follows:
  54-13        Sec. 53.114.  Commissioner's Approval.  <An> For an agreement
  54-14  authorized by Section 53.111 of this code <must> to be <found by>
  54-15  effective, the commissioner <to be> must find that the agreement is
  54-16  in the best interest of the state.
  54-17        SECTION 72.  Section 53.115, Natural Resources Code, is
  54-18  amended to read as follows:
  54-19        Sec. 53.115.  Provisions of Agreement.  (a)  An agreement
  54-20  executed under this subchapter may include the following
  54-21  provisions:
  54-22              (1)  that operations incident to <the> drilling <of> a
  54-23  well on any portion of <the> a unit <are> shall be considered for
  54-24  all purposes to be <the> conduct of the operations on each tract in
  54-25  the unit;
   55-1              (2)  that <the> production allocated by the agreement
   55-2  to each tract included in the unit shall be considered for all
   55-3  purposes <after production to be produced> to have been production
   55-4  from the tract;
   55-5              (3)  that the <royalty> interest reserved to or
   55-6  provided for the state, or any of its funds, on production from any
   55-7  tract included in the unit shall be paid only on that portion of
   55-8  the production from the unit which is allocated to the tract under
   55-9  the agreement; and
  55-10              (4)  that each lease included in the unit shall remain
  55-11  in effect so long as the agreement remains in effect and that on
  55-12  termination of the agreement each lease shall continue in effect
  55-13  under the terms and <provisions> conditions of the lease.
  55-14        (b)  The agreement may include any other terms<,> and
  55-15  conditions<, and provisions> the commissioner or any board,
  55-16  official, agent, agency, or authority of the state that has the
  55-17  authority to lease or to approve a lease of the land <or area> for
  55-18  sulphur may consider to be in the best interest of the state.
  55-19        SECTION 73.  Subchapter D, Chapter 53, Natural Resources
  55-20  Code, is amended by adding Section 53.118 to read as follows:
  55-21        Section 53.118.  Ratifications and Other Agreements.  (a)
  55-22  The board is authorized to approve, by board action or by rule, in
  55-23  a manner deemed by the board to be in the best interest of the
  55-24  state, ratifications, or other contracts or agreements, to include
  55-25  in the benefits of production any mineral or royalty interest in
   56-1  land belonging to the permanent school fund or the asylum funds.
   56-2        (b)  Any agreement approved by the board under this section
   56-3  must be executed by the commissioner to be effective.
   56-4        (c)  A ratification, or other contract or agreement, that
   56-5  commits any of the interests listed in Subsection (a) of this
   56-6  section in land not belonging to the permanent school fund or the
   56-7  asylum funds must be approved by the board, official, agent,
   56-8  agency, or authority of the state which has the authority to lease
   56-9  or to approve the lease of the land for sulphur and must be
  56-10  executed by the commissioner to be effective.
  56-11        SECTION 74.  Section 53.152, Natural Resources Code, is
  56-12  amended to read as follows:
  56-13        Sec. 53.152.  Laws Applicable to Leases.  <(a)>  Leases of
  56-14  land described by Section 53.151 of this code shall be made in the
  56-15  same procedural manner as leases of that land for oil and gas under
  56-16  Chapter 52 of this code.
  56-17        <(b)  Sections 52.034 and 52.086 of this code do not apply to
  56-18  leases of coal, lignite, sulphur, salt, and potash under this
  56-19  subchapter.>
  56-20        SECTION 75.  Section 53.153, Natural Resources Code, is
  56-21  amended to read as follows:
  56-22        Sec. 53.153.  Conditions of Lease.  (a)  Coal, lignite,
  56-23  sulphur, salt, and potash may be leased together or separately.
  56-24        (b)  A lease granted under this subchapter shall be for a
  56-25  primary term not to exceed twenty years and as long after that time
   57-1  as the minerals are produced in paying quantities.
   57-2        SECTION 76.  Section 53.154, Natural Resources Code, is
   57-3  amended to read as follows:
   57-4        Sec. 53.154.  Royalty <and Delay Rentals.  (a)  In addition
   57-5  to the cash amount bid for a lease, the board shall lease the area
   57-6  for not less than one-eighth of the gross> Rate.  The board shall
   57-7  set the royalty rate on production of sulphur <or the value of the
   57-8  sulphur that may be produced or that may be produced and sold off
   57-9  the area and not less than one-sixteenth of the value of the> ,
  57-10  coal, lignite, salt, and potash from land leased under this
  57-11  subchapter.  The royalty rate set must be at least one-eighth of
  57-12  gross production, or the market value thereof, of the sulphur
  57-13  produced and at least one-sixteenth of gross production, or the
  57-14  market value thereof, of the coal, lignite, salt, and potash
  57-15  produced <that may be produced plus an amount determined by the
  57-16  board until production is secured>.
  57-17        <(b)  If production is secured in commercial quantities and
  57-18  the payment of royalty begins and continues to be paid, the lessee
  57-19  is exempt from further delay rental payments on the acreage.>
  57-20        <(c)  If production ceases and royalty is not paid, the
  57-21  lessee shall pay at the end of the lease year in which the royalty
  57-22  ceased to be paid and annually after that time in advance, in an
  57-23  amount determined by the board as long as the lessee desires to
  57-24  maintain the rights acquired under the lease, but not for more than
  57-25  five years from the date of the lease>.
   58-1        SECTION 77.  Section 53.155, Natural Resources Code, is
   58-2  amended to read as follows:
   58-3        Sec. 53.155.  <Payment of> Compensation for Damages <for>
   58-4  from Use of Surface.  (a)  Leases issued under Subchapter B or E of
   58-5  this chapter  for unsold surveyed or unsurveyed school land, other
   58-6  than land included in islands, saltwater lakes, bays, inlets,
   58-7  marshes, and reefs owned by the state in tidewater limits and other
   58-8  than that portion of the Gulf of Mexico within the jurisdiction of
   58-9  the state, must include a provision requiring the <payment of>
  58-10  compensation for damages <for> from the use of the surface in
  58-11  prospecting for, exploring, developing, or producing the leased
  58-12  minerals.
  58-13        (b)  The commissioner by rule shall set the <amount of and
  58-14  shall collect money> procedure for receiving compensation for
  58-15  damages to the surface of land dedicated to the permanent school
  58-16  fund.
  58-17        (c)  Money collected for surface damages shall be deposited
  58-18  in a special fund account in the State Treasury to be used for
  58-19  conservation, reclamation, or constructing permanent improvements
  58-20  on land that belongs to the permanent school fund.
  58-21        (d)  The special fund account must be an interest-bearing
  58-22  account, and the interest received on the account shall be
  58-23  deposited in the State Treasury to the credit of the available
  58-24  school fund.
  58-25        (e)  Money collected under this section and designated for
   59-1  the construction of permanent improvements as provided by this
   59-2  section must be used not later than two years after the date on
   59-3  which the money is collected.
   59-4        (f)  Any money that remains in the special fund account for
   59-5  longer than two years shall be deposited in the State Treasury to
   59-6  the credit of the permanent school fund.
   59-7        (g)  The <payment of> compensation for damages under this
   59-8  section is in addition to any bonus, rental, royalty, or other
   59-9  payment required by the lease.
  59-10        SECTION 78.  Subchapter E, Chapter 53, Natural Resources
  59-11  Code, is amended by adding Section 53.156 to read as follows:
  59-12        Section 53.156.  Contracts and Agreements.  Upon the land
  59-13  office's written request, mailed to the lessee's address as shown
  59-14  on its lease or otherwise properly changed in conformity with the
  59-15  terms of the lease, copies of contracts for the sale or processing
  59-16  of minerals leased under this subchapter and subsequent agreements
  59-17  and amendments to those contracts shall be filed in the land office
  59-18  within 30 days after the land office mails such written request.
  59-19  These contracts, agreements, and amendments so filed in the land
  59-20  office shall be held in confidence by the land office unless
  59-21  otherwise authorized by the lessee.
  59-22        SECTION 79.  Section 53.161, Natural Resources Code, is
  59-23  amended to read as follows:
  59-24        Sec. 53.161.  Definitions.  In this subchapter:
  59-25              (1)  "Mineral(s)" means coal, lignite, sulphur, salt,
   60-1  and potash.
   60-2              (2)  "Geophysical exploration" means a survey or
   60-3  investigation conducted to discover or locate mineral prospects
   60-4  using magnetic, gravity, seismic, and/or electrical techniques.
   60-5              (3)  "Geochemical exploration" means a survey or
   60-6  investigation conducted to discover or locate mineral prospects
   60-7  using techniques involving soil sampling and analysis.
   60-8              (4)  "Public school land" means land dedicated by the
   60-9  constitution or laws of this state to the permanent free school
  60-10  fund, but does not include land with a mineral classification
  60-11  described in Section 53.061 of this chapter in which the state has
  60-12  retained the minerals, nor does it include areas within tidewater
  60-13  limits <or the portion of the Gulf of Mexico that is under the
  60-14  jurisdiction of this state>.
  60-15              (5)  "Permit" means a license issued by the
  60-16  commissioner authorizing geophysical and/or geochemical exploration
  60-17  on public school land.
  60-18              (6)  "Permittee" means the holder of a permit.
  60-19              (7)  "Areas within tidewater limits" means islands,
  60-20  saltwater lakes, bays, inlets, marshes, and reefs within tidewater
  60-21  limits and that portion of the Gulf of Mexico within the
  60-22  jurisdiction of Texas.
  60-23        SECTION 80.  Section 53.162, Natural Resources Code, is
  60-24  amended to read as follows:
  60-25        Sec. 53.162.  Permit Required for Exploration.  (a)  Except
   61-1  for a person who has a valid mineral lease on public school land
   61-2  authorized by this chapter, a person may not conduct geophysical or
   61-3  geochemical exploration on public school land unless the person
   61-4  obtains a permit from the commissioner.
   61-5        (b)  Every person who is authorized to conduct a geophysical
   61-6  or geochemical exploration on public school land shall comply with
   61-7  the commissioner's rules relating to such exploration.  Any person
   61-8  with a valid mineral lease on land subject to this chapter must
   61-9  comply with the commissioner's rules concerning exploration.
  61-10        SECTION 81.  Chapters 32, 52, and 53, Natural Resources Code,
  61-11  are hereby re-enacted subject to the preceding amendments thereto.
  61-12        SECTION 82.  SEVERABILITY.  If any provision of this Act or
  61-13  its application to any person or circumstance is held invalid, the
  61-14  invalidity does not affect other provisions or applications of this
  61-15  Act that can be given effect without the invalid provision or
  61-16  application, and to this end the provisions of this Act are
  61-17  declared to be severable.
  61-18        SECTION 83.  EMERGENCY.  The importance of this legislation
  61-19  and the crowded condition of the calendars in both houses create an
  61-20  emergency and an imperative public necessity that the
  61-21  constitutional rule requiring bills to be read on three several
  61-22  days in each house be suspended, and this rule is hereby suspended.