1-1 By: Sims S.B. No. 962
1-2 (In the Senate - Filed March 11, 1993; March 15, 1993, read
1-3 first time and referred to Committee on Natural Resources;
1-4 April 2, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 8, Nays 0; April 2, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Sims x
1-10 Truan x
1-11 Armbrister x
1-12 Barrientos x
1-13 Bivins x
1-14 Brown x
1-15 Carriker x
1-16 Lucio x
1-17 Montford x
1-18 Ratliff x
1-19 Shelley x
1-20 COMMITTEE SUBSTITUTE FOR S.B. No. 962 By: Sims
1-21 A BILL TO BE ENTITLED
1-22 AN ACT
1-23 relating to the sale, lease, and development of state-owned oil,
1-24 gas, and other minerals.
1-25 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-26 SECTION 1. Section 32.002, Natural Resources Code, is
1-27 amended by amending Subsection (a) and adding Subsection (e) to
1-28 read as follows:
1-29 (a) This chapter does not apply to:
1-30 (1) land dedicated by the constitution or a law of
1-31 this state to The University of Texas System, land donated by a
1-32 will or instrument in writing or otherwise to The University of
1-33 Texas System, as trustee, for a scientific, educational, or other
1-34 charitable or public purpose, or any other land under the control
1-35 of the Board of Regents of The University of Texas System;
1-36 (2) land whose title is vested in the state for the
1-37 use and benefit of any part of The Texas A&M University System or
1-38 land under the control of the Board of Regents of The Texas A&M
1-39 University System;
1-40 (3) minerals <land> subject to lease under Subchapter
1-41 F, Chapter 52, of this code, commonly known as the Relinquishment
1-42 Act, and Subchapters B and C, Chapter 53, of this code;
1-43 (4) oil and gas underlying land owned by the state
1-44 that was acquired to construct or maintain a highway, road, street,
1-45 or alley, which is located in a producing area, unless the oil or
1-46 gas is leased for the specific purpose of drilling a horizontal
1-47 well;
1-48 (5) oil and gas underlying land owned by the state
1-49 that was acquired to construct or maintain a highway, road, street,
1-50 or alley if the State Highway and Public Transportation Commission
1-51 has determined that such right-of-way is no longer needed for use
1-52 by citizens as a road pursuant to Chapter 99, General Laws, Acts of
1-53 the 42nd Legislature, Regular Session, 1931 (Article 6673a,
1-54 Vernon's Texas Civil Statutes);
1-55 (6) land owned by the Texas Parks and Wildlife
1-56 Department; or
1-57 (7) land owned by the Texas Department of Corrections.
1-58 (e) If title to land subject to Subchapter C, Chapter 53, of
1-59 this code is acquired by a department, board, or agency of the
1-60 state, the land shall be leased as provided by Chapter 53 of this
1-61 code for the leasing of unsold surveyed public school lands.
1-62 SECTION 2. Section 32.061, Natural Resources Code, is
1-63 amended to read as follows:
1-64 Sec. 32.061. Board's General Duties. Except as provided by
1-65 Subchapter G, Chapter 51, of this code, the board shall:
1-66 (1) set the dates to open received bids for the sale
1-67 of surveyed land dedicated to the permanent school fund, <and> for
1-68 the lease of land for prospecting or exploring for, mining,
2-1 producing, storing, caring for, transporting, preserving, selling,
2-2 or disposing of oil, gas, or other minerals leased under this
2-3 chapter, and for the commitment of land to a contract for
2-4 development;
2-5 (2) determine the prices and set the terms of the
2-6 contract for which land shall be sold, <and> leased, or committed
2-7 to a contract for development;
2-8 (3) consult with the president, chairman, or other
2-9 head of the department, board, or agency, as applicable, or with
2-10 the representative of the head, on each matter before the board
2-11 that affects land owned or held in trust for the use and benefit of
2-12 a department, board, or agency of the state; and
2-13 (4) perform any other duties which may be required by
2-14 law.
2-15 SECTION 3. Subsection (a), Section 32.062, Natural Resources
2-16 Code, is amended to read as follows:
2-17 (a) The board shall adopt rules of procedure and rules for
2-18 the sale, <and> lease, and commitment to a contract for development
2-19 of land as provided by this chapter.
2-20 SECTION 4. Section 32.064, Natural Resources Code, is
2-21 amended to read as follows:
2-22 Sec. 32.064. Survey or Subdivision of Land. The board may
2-23 have land surveyed or subdivided into tracts, lots, or blocks based
2-24 on its determination of which method will be most conducive and
2-25 convenient to facilitate the advantageous sale of land, the lease
2-26 of land for oil, gas, or other minerals, or the commitment of land
2-27 to a contract for development <or oil, gas, or mineral leases>.
2-28 SECTION 5. Section 32.065, Natural Resources Code, is
2-29 amended to read as follows:
2-30 Sec. 32.065. Permits for Surveys or Investigations. If land
2-31 other than public school land is not under a valid lease or
2-32 committed to a contract for development, the board may issue a
2-33 permit for a geological, geophysical, or other survey or
2-34 investigation of that land that will encourage the development of
2-35 the land for oil, gas, or other minerals. The permit may be issued
2-36 for the consideration and under the terms and conditions the board
2-37 considers to be in the best interest of the state.
2-38 SECTION 6. Section 32.101, Natural Resources Code, is
2-39 amended to read as follows:
2-40 Sec. 32.101. Applicable Law. Land shall be offered for
2-41 sale, lease, or commitment to a contract for development <sold and
2-42 leased> subject to the terms and conditions provided by law.
2-43 SECTION 7. Section 32.105, Natural Resources Code, is
2-44 amended to read as follows:
2-45 Sec. 32.105. Date for Opening Bids <of Sale and Lease>. The
2-46 <sale> date for opening bids for the sale, <or> lease, or
2-47 commitment to a contract for development of land shall be the first
2-48 or third Tuesday of the month.
2-49 SECTION 8. Section 32.106, Natural Resources Code, is
2-50 amended to read as follows:
2-51 Sec. 32.106. Description of Land. The description of public
2-52 school land offered for sale, <or> lease, or commitment to a
2-53 contract for development shall be in accord with the description
2-54 which may be found in the School Land Registry in the land office.
2-55 SECTION 9. Section 32.107, Natural Resources Code, is
2-56 amended to read as follows:
2-57 Sec. 32.107. NOTICE OF SALE, <AND> LEASE, AND CONTRACT FOR
2-58 DEVELOPMENT. (a) The board shall publish notice that the board
2-59 will receive bids for <of> the sale, <or> lease, or commitment to a
2-60 contract for development of land in at least three issues of at
2-61 least four daily newspapers.
2-62 (b) The notice shall be published at least 30 days before
2-63 the date the bids are advertised to be opened <of sale or lease>.
2-64 (c) The notice shall state that land is to be offered for
2-65 sale, <or> lease, or commitment to a contract for development on a
2-66 certain date and at a certain time and the method of the sale,
2-67 lease, or commitment to a contract for development and shall give
2-68 notice that a person may obtain publications from <lists describing
2-69 the land may be obtained at> the land office that describe the land
2-70 offered for sale, lease, or commitment to a contract for
3-1 development.
3-2 (d) The land office may solicit and include advertising in
3-3 its publications. The commissioner shall deposit fees paid for
3-4 advertising in land office publications in a separate account in
3-5 the state treasury.
3-6 SECTION 10. Section 32.1071, Natural Resources Code, is
3-7 amended by adding Subsection (c) to read as follows:
3-8 (c) The leases shall be made on terms and conditions that
3-9 may be prescribed by the board.
3-10 SECTION 11. Section 32.1072, Natural Resources Code, is
3-11 amended to read as follows:
3-12 Sec. 32.1072. Minimum Royalty, Bonus, and Rental. The board
3-13 may not accept a bid on an oil and gas lease that offers:
3-14 (1) a royalty of less than one-eighth of the gross
3-15 production of oil and<,> gas<, or other minerals>; or
3-16 (2) a cash bonus of less than $10 an acre.
3-17 SECTION 12. Section 32.109, Natural Resources Code, is
3-18 amended to read as follows:
3-19 Sec. 32.109. Acceptance and Rejection of Bids. (a) For
3-20 each tract offered for sale, lease, or commitment to a contract for
3-21 development, the board must <The board may reject any and all bids,
3-22 but if the board elects not to reject any and all bids, it is
3-23 required to> accept the best bid submitted that meets the minimum
3-24 requirements set by the board or by law or reject all bids.
3-25 (b) The minutes of the board shall reflect the acceptance or
3-26 rejection of a bid<, and the approval of the minutes constitutes
3-27 approval of the act of acceptance or rejection>.
3-28 SECTION 13. Section 32.110, Natural Resources Code, is
3-29 amended to read as follows:
3-30 Sec. 32.110. Special Sale Fee. (a) On land sales and
3-31 mineral leases made by the board, the purchaser or bidder is
3-32 required to pay by separate check an amount equal to one and
3-33 one-half percent of the bid payable to the commissioner as a
3-34 special fee.
3-35 (b) If the sale is by bid, only <Only> the special fees paid
3-36 on the <high> bids accepted by the board shall be deposited by the
3-37 commissioner in the State Treasury as a special fund.
3-38 (c) Failure to pay the special fee shall <does> not void
3-39 <render> a bid <void>, but the commissioner shall demand payment of
3-40 the fee before <he issues> a lease is issued to the best
3-41 <successful> bidder. If the best <successful> bidder fails or
3-42 refuses to make the payment within 30 days after demand by the
3-43 commissioner, the bidder is not entitled to a <lease or> sale of or
3-44 a lease on the tract covered by that <his> bid and the cash bonus
3-45 shall be automatically forfeited to be deposited by the
3-46 commissioner in the State Treasury to the credit of the permanent
3-47 school fund or the appropriate special mineral fund. The board, at
3-48 its option, may offer the tract for sale or lease to the next best
3-49 bidder under the same terms as submitted by and as would have been
3-50 granted to the best bidder.
3-51 (d) Checks submitted by unsuccessful bidders shall be
3-52 returned to the bidders <with their bid checks>.
3-53 SECTION 14. Section 32.151, Natural Resources Code, is
3-54 amended to read as follows:
3-55 Sec. 32.151. Term of Lease. Each oil and gas lease shall be
3-56 for a primary term <of> not to exceed 10 <five> years and for as
3-57 long thereafter as oil or<,> gas is<, or other minerals covered by
3-58 the lease are> produced in paying quantities.
3-59 SECTION 15. Subchapter F, Chapter 32, Natural Resources
3-60 Code, is amended by adding Section 32.206 to read as follows:
3-61 Sec. 32.206. RATIFICATIONS AND OTHER AGREEMENTS. (a) The
3-62 board may approve by rule or order a ratification or other
3-63 agreement that includes in the benefits of production a mineral or
3-64 royalty interest in land owned by the state that was acquired to
3-65 construct or maintain a highway, road, street, or alley.
3-66 (b) An agreement approved by the board under this section
3-67 must be executed by the commissioner to be effective.
3-68 (c) This section does not apply to an interest subject to
3-69 pooling or unitization by a lessee under a lease issued under this
3-70 subchapter.
4-1 SECTION 16. Section 52.014, Natural Resources Code, is
4-2 amended to read as follows:
4-3 Sec. 52.014. Date for Lease and Notice. <(a)> The date for
4-4 opening bids to lease <of> areas covered by this subchapter shall
4-5 be set and notice of the date shall be given in the manner provided
4-6 in Sections 32.105 and 32.107 of this code.
4-7 <(b) Notice of areas being offered for lease shall be
4-8 advertised for a period of 30 days before the lease date.>
4-9 SECTION 17. Section 52.015, Natural Resources Code, is
4-10 amended to read as follows:
4-11 Sec. 52.015. BID TO LEASE <APPLICATION FOR LEASE>. (a) To
4-12 apply to lease a tract, a bidder must submit a separate bid for
4-13 each separate tract to be leased <Each application for a separate
4-14 area and the first payment shall be delivered to the land office on
4-15 or before the day and hour on which the area is subject to lease>.
4-16 (b) A bid must include a completed application to lease
4-17 form, a payment to the commissioner in the amount of the actual
4-18 bonus bid or set, and a separate payment to the commissioner in the
4-19 amount of the special fee provided by Section 52.016 of this code
4-20 <The application and payment shall be delivered in a sealed
4-21 envelope endorsed with "application to lease oil and gas" and the
4-22 date on which the area is subject to lease>.
4-23 (c) A bid must be delivered to the land office on or before
4-24 the date and time the board advertises that the bids will be opened
4-25 <Any application received up to the hour in which the applications
4-26 are to be opened shall be considered to be properly delivered
4-27 regardless of whether it is opened or sealed or endorsed or
4-28 unendorsed>.
4-29 SECTION 18. Section 52.017, Natural Resources Code, is
4-30 amended to read as follows:
4-31 Sec. 52.017. Keeping and Opening Bids. Bids <The envelopes>
4-32 shall be kept secure <securely> and unopened by the commissioner or
4-33 the commissioner's designee until opened on the date and at the
4-34 time set as provided in Section 52.014 of this code <or his chief
4-35 clerk until the day on which the applications are to be opened, and
4-36 at that time, the board shall open the envelopes in the presence of
4-37 any persons who desire to be present>.
4-38 SECTION 19. Section 52.021, Natural Resources Code, is
4-39 amended to read as follows:
4-40 Sec. 52.021. Term of Lease. A lease granted under this
4-41 subchapter shall be for a primary term not to exceed 10 <five>
4-42 years and for as long after that time as oil or gas is produced
4-43 from the leased area.
4-44 SECTION 20. Section 52.022, Natural Resources Code, is
4-45 amended to read as follows:
4-46 Sec. 52.022. ROYALTY RATE <AND DELAY RENTALS>. <(a)> The
4-47 board shall set the royalty rate on production of oil and gas from
4-48 land leased under this subchapter. The royalty rate set must be at
4-49 least one-eighth of the gross production or the market value of the
4-50 oil and gas produced <In addition to the cash amount bid for a
4-51 lease, the area included in the lease shall be leased for not less
4-52 than one-eighth of the gross production of oil produced and saved,
4-53 or its value, and not less than one-eighth of the gross production
4-54 of gas produced and sold off the area or its value, plus an amount
4-55 determined by the board, until production is secured.>
4-56 <(b) If production is secured in commercial quantities and
4-57 the payment of royalty begins and continues to be paid, the lessee
4-58 is exempt from further delay rental payments on the acreage.>
4-59 <(c) If production ceases and royalty is not paid, the
4-60 lessee shall pay at the end of the lease year in which the royalty
4-61 ceased to be paid and annually after that time in advance, an
4-62 amount determined by the board for as long as the lessee desires to
4-63 maintain the rights acquired under the lease, but not for more than
4-64 five years from the date of the lease>.
4-65 SECTION 21. Section 52.023, Natural Resources Code, is
4-66 amended to read as follows:
4-67 Sec. 52.023. Lease Provisions for Drilling and Reworking.
4-68 Each lease shall provide that:
4-69 (1) if the production of oil or gas on premises leased
4-70 under this subchapter ceases for any reason <at or> after the
5-1 expiration of the primary term, the lease will not terminate if the
5-2 lessee commences additional drilling or reworking operations within
5-3 60 days after the cessation of production;
5-4 (2) the lease shall remain in effect as long as <the>
5-5 drilling or <and> reworking operations continue in good faith and
5-6 in a workmanlike manner<,> without interruptions<,> totaling more
5-7 than 60 days <during any one such operation>; <and>
5-8 (3) if the drilling or reworking operations result in
5-9 the production of oil or gas, the lease shall remain in effect so
5-10 <as> long as oil or gas is produced from the leased premises in
5-11 paying quantities or payment of shut-in <gas> royalties or payment
5-12 of compensatory royalties is made as provided by law; and
5-13 (4) if the drilling or reworking operations result in
5-14 the completion of a well as a dry hole, the lease will not
5-15 terminate if the lessee commences additional drilling or reworkng
5-16 operations within 60 days after the completion of the well as a dry
5-17 hole, and the lease shall remain in effect so long as the lessee
5-18 continues drilling or reworking operations in good faith and in a
5-19 workmanlike manner without interruptions totaling more than 60
5-20 days.
5-21 SECTION 22. Section 52.024, Natural Resources Code, is
5-22 amended to read as follows:
5-23 Sec. 52.024. Lease Provisions for Shut-in Oil or Gas Royalty
5-24 and Compensatory Royalty. (a) For purposes of this section,
5-25 "well" means any well that has been assigned a well number by the
5-26 state agency having jurisdiction over the production of oil and
5-27 gas.
5-28 (b) Each lease shall provide that:
5-29 (1) if, at any time after the expiration of the
5-30 primary term <or at any time after the expiration> of <the primary
5-31 term> a lease that, until being shut in, was being maintained in
5-32 force and effect, a well <or wells> capable of producing oil or gas
5-33 in paying quantities is <are> located on the leased premises but
5-34 oil or gas is not being produced for lack of suitable production
5-35 facilities or lack of a suitable market <and the lease is not being
5-36 maintained in force and effect>, then the lessee may pay as a
5-37 shut-in oil or gas royalty an amount equal to double the annual
5-38 rental provided in the lease but not less than $1,200 a year for
5-39 each well capable of producing oil or gas in paying quantities. To
5-40 be effective, each initial <Any> shut-in oil or gas royalty must be
5-41 paid on or before: (A) the expiration of the primary term, (B) 60
5-42 days after the lessee ceases to produce oil or gas from the leased
5-43 premises, or (C) 60 days after the lessee completes a drilling or
5-44 <and> reworking operation in accordance with the lease provisions,
5-45 whichever date is latest <later>;
5-46 (2) if the shut-in oil or gas royalty is paid, the
5-47 lease shall be considered to be a producing lease and the payment
5-48 shall extend the term of the lease for a period of one year from
5-49 the end of the primary term or from the first day of the month
5-50 following <next succeeding> the month in which production ceased,
5-51 and, after that, if no suitable production facilities or suitable
5-52 market for the oil or gas exists, the lessee may extend the lease
5-53 for four more <additional and> successive periods of one year by
5-54 paying the same amount each year on or before the expiration of
5-55 each shut-in year <the extended term>;
5-56 (3) if, during the period the lease is kept in effect
5-57 by payment of the shut-in oil or gas royalty, oil or gas is sold
5-58 and delivered in paying quantities from a well located within 1,000
5-59 feet of the leased premises and completed in the same producing
5-60 reservoir, or in any case in which drainage is occurring, the right
5-61 to continue to maintain <extend> the lease by paying the shut-in
5-62 oil or gas royalty shall cease, but the lease shall remain
5-63 effective for the remainder of the year for which the royalty has
5-64 been paid. The lessee may maintain the lease <and> for four more
5-65 <additional and> successive years <periods of one year each> by the
5-66 lessee paying compensatory royalty at the royalty rate provided in
5-67 the lease of the market value <at the well> of production from the
5-68 well <which is> causing the drainage or which is completed in the
5-69 same producing reservoir and within 1,000 feet of the leased
5-70 premises;
6-1 (4) the compensatory royalty is to be paid monthly to
6-2 the commissioner beginning on or before the last day of the month
6-3 following <next succeeding> the month in which the oil or gas is
6-4 produced <sold and delivered> from the well causing the drainage or
6-5 that is completed in the same producing reservoir and located
6-6 within 1,000 feet of <or draining> the leased premises <and
6-7 completed in the same reservoir>;
6-8 (5) if the compensatory royalty paid in any 12-month
6-9 period is in an amount less than the annual shut-in oil or gas
6-10 royalty, the lessee shall pay an amount equal to the difference
6-11 within 30 days from the end of the 12-month period; and
6-12 (6) none of these provisions will relieve the lessee
6-13 of the obligation of reasonable development nor the obligation to
6-14 drill offset wells as provided in Section 52.034 of this code;
6-15 however, at the determination of the commissioner and with the
6-16 commissioner's <his> written approval, the payment of compensatory
6-17 royalties shall satisfy the obligation to drill offset wells.
6-18 SECTION 23. Section 52.028, Natural Resources Code, is
6-19 amended to read as follows:
6-20 Sec. 52.028. SUSPENSION OF LEASE BECAUSE OF LITIGATION <OIL
6-21 AND GAS LEASES>. (a) If an oil and gas lease that has been issued
6-22 by the commissioner is involved in litigation relating to the <its>
6-23 validity of the lease or to the authority of the commissioner to
6-24 issue the lease, the lease and all of the conditions and covenants
6-25 contained in the lease <land, the primary term of the lease> shall
6-26 be suspended <and all obligations imposed by the lease set aside>
6-27 during the period of the litigation, except as otherwise provided
6-28 by this section.
6-29 (b) If the litigation is instituted during the primary term
6-30 of the lease, then, after a final, nonappealable judgment is
6-31 entered in the litigation, <at least six months before the
6-32 expiration of the primary term, after final judgment is rendered,>
6-33 the primary term provided in the lease shall resume <begin to run
6-34 again> and the lease shall continue to run for the remainder of the
6-35 period specified in the lease, and all conditions and covenants
6-36 contained in <obligations and duties imposed by> the lease shall be
6-37 operative.
6-38 (c) If the litigation is instituted during the secondary
6-39 term of the lease, then, after a final, nonappealable judgment is
6-40 entered in the litigation, the lease and all the conditions and
6-41 convenants contained in the lease shall be operative, and the
6-42 lessee shall have 60 days from the date a final, nonappealable
6-43 judgment is entered in the litigation to produce in paying
6-44 quantities or to commence drilling or reworking operations on the
6-45 lease as if production had ceased on that date under Section 52.023
6-46 of this code.
6-47 (d) The lessee shall pay <all annual delay rentals and> any
6-48 royalties that accrue during the period of suspension of the lease
6-49 <litigation> in the same manner as they are to be paid under the
6-50 terms of the lease <during the primary term. If such delay rentals
6-51 are not paid as the lease requires, the lease shall not
6-52 automatically terminate; however, the delay rentals continue to be
6-53 an obligation and debt owed by the lessee. The delay rentals paid
6-54 during the period of litigation shall be held and returned to the
6-55 lessee if the state is unsuccessful in the litigation>.
6-56 SECTION 24. Section 52.0301, Natural Resources Code, is
6-57 amended to read as follows:
6-58 Sec. 52.0301. Suspension of Terms of Lease in Certain
6-59 Situations. (a) If the lessee <owner> of a valid oil and gas
6-60 lease granted by the state is unable to obtain access to the leased
6-61 premises, or is unable to obtain in a timely manner <denied access
6-62 to or is denied> a permit to drill on or produce from the leased
6-63 premises by any duly constituted authority of the United States or
6-64 of this state after a diligent, good faith <bona fide> attempt has
6-65 been made by the lessee <owner> to obtain access to, or a permit to
6-66 drill on or produce from, the leased premises, the lessee <owner>
6-67 may file with the board an application describing and giving the
6-68 date of the action that deprives the lessee <him> of access to or a
6-69 permit <the right> to drill on or produce from the leased premises.
6-70 (b) If the board is satisfied that the facts included in the
7-1 application are true and that the lessee acted diligently and in
7-2 good faith in an attempt to gain access to or the right to drill on
7-3 or produce from the leased premises, the board may <enter an> order
7-4 the suspension of the lease or any condition or covenant contained
7-5 in <its minutes suspending the running of both the primary and the
7-6 principal term of the lease or suspending any condition,
7-7 obligation, or duty under> the lease<,> from the date <of> the
7-8 board determines to be the date the cause for the suspension began,
7-9 except as otherwise provided by this section <through the continued
7-10 existence of the cause for the suspension, so long as the lessee
7-11 continues to make the annual rental payments that are stipulated in
7-12 the lease on each anniversary date of the lease during the period
7-13 of suspension>.
7-14 (c) The board may set as a condition to approving the
7-15 application for a suspension of the lease any term or requirement
7-16 that relates to the duration of the suspension, the administration
7-17 of the property during the suspension, reporting requirements
7-18 during the suspension, or another administrative matter that the
7-19 board determines is in the best interest of the state <After the
7-20 board enters an order in its minutes stating that the cause for
7-21 suspension has ceased to exist, the oil and gas lease shall again
7-22 become operative if the rental payments have been made during the
7-23 period of suspension, and all suspended obligations and conditions
7-24 shall again attach and be in force for a period equivalent to the
7-25 unexpired term of the lease>.
7-26 (d) If the lease is suspended during its primary term, the
7-27 lessee shall make payments in the amount of the annual delay rental
7-28 stipulated in the lease by each anniversary date of the lease
7-29 during the period of suspension. If the payments in the amount of
7-30 the annual delay rental are not paid by each anniversary date of
7-31 the lease, the lease shall not automatically terminate. However,
7-32 the amount of the annual delay rental stipulated in the lease due
7-33 by each anniversary date of the lease during the period of
7-34 suspension continues to be an obligation and debt owed by the
7-35 lessee. The lessee shall pay all royalties, if any, that accrue
7-36 during the period of suspension of the lease in the same manner as
7-37 they are to be paid under the terms of the lease.
7-38 (e) If the lease is suspended during its primary term, then,
7-39 when the suspension ends, the primary term provided in the lease
7-40 shall resume and continue to run for the remainder of the period
7-41 specified in the lease, and all conditions and covenants contained
7-42 in the lease shall be operative <The commissioner shall give notice
7-43 immediately to the lessee of the entry of an order stating that the
7-44 cause of suspension has ceased to exist, provided annual rental
7-45 payments have been made>.
7-46 (f) If the lease is suspended during its secondary term,
7-47 then, when the suspension ends, the lease and all of the conditions
7-48 and covenants contained in the lease shall be operative, and the
7-49 lessee shall have 60 days from the date the suspension ends to
7-50 produce in paying quantities or to commence drilling or reworking
7-51 operations on the lease as if production had ceased on that date
7-52 under Section 52.023 of this code.
7-53 (g) This section may not be construed as abridging any
7-54 rights or privileges conveyed under Chapter 287, Acts of the 47th
7-55 Legislature, Regular Session, 1941 (Article 5366a, Vernon's Texas
7-56 Civil Statutes).
7-57 SECTION 25. Subsection (a), Section 52.035, Natural
7-58 Resources Code, is amended to read as follows:
7-59 (a) The governor may execute agreements on behalf of the
7-60 state to obtain access to confidential and proprietary information
7-61 from the secretary of the United States Department of the Interior
7-62 regarding exploration, development, or production of oil, <or> gas,
7-63 or other minerals on the outer continental shelf. The governor may
7-64 agree to waive sovereign immunity and other defenses as prescribed
7-65 by this section, and may agree to indemnify the United States
7-66 government from unauthorized disclosure of the information
7-67 obtained.
7-68 SECTION 26. Section 52.076, Natural Resources Code, is
7-69 amended to read as follows:
7-70 Sec. 52.076. Duty to Advertise. (a) The board may <shall
8-1 advertise for proposals>:
8-2 (1) advertise for bids to lease riverbeds and channels
8-3 for oil and gas development;
8-4 (2) advertise for bids to contract to develop the oil
8-5 or gas under <to drill> riverbeds and channels on consideration
8-6 involving compensation with oil and gas or money so that the state
8-7 will receive a portion of the oil and gas as it is produced or
8-8 advanced royalties paid in money; <and>
8-9 (3) advertise for bids to purchase oil and gas in
8-10 place under riverbeds and channels <or recoverable> without
8-11 requiring mineral development; and
8-12 (4) pool or bring an action to force pool unleased
8-13 riverbeds and channels.
8-14 (b) The board shall advertise that the board will receive
8-15 bids and award the right to lease, develop, or purchase under this
8-16 section in the same manner <the proposals and conduct the sales> as
8-17 provided in Subchapter D, Chapter 32, of this code and Subchapter B
8-18 of this chapter.
8-19 SECTION 27. Subchapter C, Chapter 52, Natural Resources
8-20 Code, is amended by adding Section 52.077 to read as follows:
8-21 Sec. 52.077. SPECIAL FEE. Each bidder on a lease under this
8-22 subchapter shall remit with each bid by separate payment a special
8-23 sale fee in the amount and in the manner provided by Section 32.110
8-24 of this code.
8-25 SECTION 28. Section 52.082, Natural Resources Code, is
8-26 amended to read as follows:
8-27 Sec. 52.082. TERM OF LEASE. A lease granted under this
8-28 subchapter shall be for a primary term not to exceed 10 <five>
8-29 years and for as long after that time as oil or gas is produced
8-30 from the leased area.
8-31 SECTION 29. Section 52.088, Natural Resources Code, is
8-32 amended to read as follows:
8-33 Sec. 52.088. ROYALTY RATE <AND DELAY RENTALS>. <(a)> The
8-34 board shall set the royalty rate on production of oil and gas from
8-35 riverbeds and channels leased under this subchapter. The royalty
8-36 rate set must be at least one-eighth of the gross production or the
8-37 market value of the oil and gas produced <In addition to the cash
8-38 amount bid for a lease, the board shall lease the area for not less
8-39 than one-eighth of the gross production of oil produced and saved
8-40 or its value and not less than one-eighth of the gross production
8-41 of gas produced and sold off the area or its value plus an amount
8-42 determined by the board until production is secured.>
8-43 <(b) If production is secured in commercial quantities and
8-44 the payment of royalty begins and continues to be paid, the lessee
8-45 is exempt from further delay rental payments on the acreage.>
8-46 <(c) If production ceases and royalty is not paid, the
8-47 lessee shall pay at the end of the lease year in which the royalty
8-48 ceased to be paid and annually after that time in advance, in an
8-49 amount determined by the board as long as the lessee desires to
8-50 maintain the rights acquired under the lease, but not for more than
8-51 five years from the date of the lease>.
8-52 SECTION 30. Section 52.131, Natural Resources Code, is
8-53 amended by amending Subsection (e) and adding Subsection (j) to
8-54 read as follows:
8-55 (e) If any royalty is not paid when due but is paid before
8-56 the 31st day after the date on which it is due, a penalty of five
8-57 percent of the royalty due shall be added to the unpaid amount due.
8-58 If the royalty is not paid before the 31st day after the date on
8-59 which it is due, a penalty of an additional five percent of the
8-60 royalty due shall be imposed. The minimum penalty under this
8-61 section is $25. The penalty may not be imposed in cases of title
8-62 dispute as to the state's portion of the royalty or to that portion
8-63 of the royalty in dispute as to the <fair> market value of the
8-64 production.
8-65 (j) By rule, the board may provide procedures and standards
8-66 for reduction of interest charged or penalties assessed under this
8-67 section or any other interest or penalties assessed by the
8-68 commissioner relating to unpaid or delinquent royalties.
8-69 SECTION 31. Section 52.133, Natural Resources Code, is
8-70 amended to read as follows:
9-1 Sec. 52.133. Payment of Royalty in Kind. (a) <In this
9-2 section, "royalty" means royalty payable in a sum of money equal to
9-3 the market value for the general area where produced and when run
9-4 or royalty that may be collected in kind.>
9-5 <(b)> Each oil or gas lease covering land leased by the
9-6 board, by a board for lease other than the Board for Lease of
9-7 University Lands, or by the surface owner of land under which the
9-8 state owns the minerals, commonly referred to as Relinquishment Act
9-9 land, which shall be subject to approval by the commissioner before
9-10 it is effective, shall include a provision granting the board
9-11 authorized to lease the land or the owner of the soil of
9-12 Relinquishment Act land and the commissioner authority to take
9-13 their royalty in kind, and the commissioner and the boards for
9-14 lease may include any other reasonable provisions that are not
9-15 inconsistent with this section.
9-16 (b) <(c)> The option to take the royalty in kind may be
9-17 exercised at any time or from time to time on not less than 60
9-18 days' notice to the holder of the lease.
9-19 (c) <(d)> The <board, the> commissioner, <each board for
9-20 lease other than the Board for Lease of University Lands, or> the
9-21 owner of the soil under Subchapter F of this chapter, or the
9-22 commissioner, acting on the behalf of and at the direction of an
9-23 owner of the soil under Subchapter F of this chapter, the board, or
9-24 a board for lease may negotiate and execute <sales> contracts or
9-25 any other instruments or agreements necessary to dispose of their
9-26 portion of the royalty taken in kind, including contracts for sale,
9-27 transportation, or storage.
9-28 (d) <(e)> This section does not apply to or have any effect
9-29 on the Board for Lease of University Lands or any lease executed on
9-30 university land.
9-31 (e) <(f)> This section shall not be construed to surrender
9-32 or in any way affect the right of the state or the owner of the
9-33 soil under existing or future leases to receive royalty from its
9-34 lessee on the basis of the <fair> market value of the production
9-35 <produced> from state public land or land under the provisions of
9-36 Subchapter F of this chapter.
9-37 SECTION 32. Section 52.151, Natural Resources Code, is
9-38 amended to read as follows:
9-39 Sec. 52.151. Authorization to Operate Areas as Units.
9-40 (a) The commissioner, on behalf of the state or any fund that
9-41 belongs to the state, may execute agreements that provide for
9-42 operating areas as a unit for the exploration, development, and
9-43 production of oil or gas or both and to commit to the agreements:
9-44 (1) the royalty interests in oil, <or> gas, or both
9-45 oil and gas, reserved to the state or any fund of the state by law,
9-46 in a patent, in a contract of sale, or under the terms of an oil
9-47 and gas lease legally executed by an official, board, agent,
9-48 agency, or authority of the state; or
9-49 (2) the free royalty interests, whether leased or
9-50 unleased, reserved to the state pursuant to Section 51.201 or
9-51 51.054 of this code.
9-52 (b) Before executing an agreement authorized by Subsection
9-53 (a) of this section, the <The> commissioner must find that the
9-54 agreement is in the best interest of the state.
9-55 SECTION 33. Section 52.152, Natural Resources Code, is
9-56 amended to read as follows:
9-57 Sec. 52.152. Approval of <Unit> Agreements. (a) An
9-58 agreement must be approved by the board and executed by the
9-59 commissioner to be effective if the agreement <that (1)> commits:
9-60 (1) a <the> royalty interest in land belonging to the
9-61 permanent school fund or the asylum funds, in riverbeds, inland
9-62 lakes, and channels, or in an area within tidewater limits,
9-63 including islands, lakes, bays, inlets, marshes, reefs, and the bed
9-64 of the sea; or
9-65 (2) the free royalty interests, whether leased or
9-66 unleased, reserved to the state pursuant to Section 51.201 or
9-67 51.054 of this code.
9-68 (b) An <must be approved by the board and executed by the>
9-69 owner of the soil who is subject to <if the agreement covers land
9-70 leased for oil and gas under> Subchapter F of this chapter may
10-1 grant to a lessee prior authority to pool or unitize the interest
10-2 of the owner in a lease executed under that subchapter. For the
10-3 provisions of an agreement to bind the interest of an owner of the
10-4 soil who is subject to Subchapter F of this chapter and who has not
10-5 granted the lessee prior authorization to pool or unitize the
10-6 owner's interest in an oil and gas lease executed under that
10-7 subchapter, the agreement must be executed by the owner of the
10-8 soil.
10-9 (c) <(b)> An agreement that commits any <the royalty>
10-10 interest in any land <or an area> not listed in Subsection (a) of
10-11 this section must be approved by the board, official, agent,
10-12 agency, or authority of the state which has the authority to lease
10-13 or to approve the lease of the land for oil and gas and must be
10-14 executed by the commissioner to be effective.
10-15 SECTION 34. Section 52.153, Natural Resources Code, is
10-16 amended to read as follows:
10-17 Sec. 52.153. PROVISIONS OF AGREEMENT <PROVISIONS>. (a) An
10-18 agreement executed under this subchapter may include the following
10-19 provisions <The agreement to operate areas as units may provide>:
10-20 (1) that operations incident to drilling a well on any
10-21 portion of a unit shall be considered for all purposes to be
10-22 conduct of the operations on each <separately owned> tract in the
10-23 unit <by the several owners>;
10-24 (2) that production allocated by the agreement to each
10-25 tract included in the unit when produced shall be considered for
10-26 all purposes to have been production <produced> from the tract;
10-27 (3) that the interest reserved to or provided for the
10-28 state or any of its funds on production from any tract included in
10-29 the unit shall be paid only on that portion of the production from
10-30 the unit that is allocated to the tract under the agreement <and
10-31 lease, with respect to the interest of the state, shall be
10-32 effective as long as oil or gas or both are produced from the unit
10-33 in paying quantities and royalties are paid to the state>; and
10-34 (4) that each lease <royalties reserved to the state
10-35 or to any fund of the state on production from any tract or portion
10-36 of a tract> included in the unit shall remain in effect as long as
10-37 the agreement remains in effect and that on termination of the
10-38 agreement each lease shall continue in effect under the terms and
10-39 conditions of the lease <be paid only on the portion of the
10-40 production allocated to the tract by the agreement>.
10-41 (b) The agreement may include any other terms and conditions
10-42 the commissioner or any <provision which the> board, official,
10-43 agent, agency, or authority of the state that <which> has the
10-44 authority to lease or to approve a lease <the leasing> of the land
10-45 for oil and gas may consider to be in the best interest <necessary
10-46 for the protection of the interests> of the state.
10-47 SECTION 35. Subchapter E, Chapter 52, Natural Resources
10-48 Code, is amended by adding Section 52.154 to read as follows:
10-49 Sec. 52.154. RATIFICATIONS AND OTHER AGREEMENTS. (a) The
10-50 board may approve, by rule or order, a ratification or other
10-51 agreement that includes in the benefits of production a mineral or
10-52 royalty interest in land belonging to the permanent school fund or
10-53 the asylum funds.
10-54 (b) An agreement approved by the board under this section
10-55 must be executed by the commissioner to be effective.
10-56 (c) A ratification or other agreement that commits any of
10-57 the interests listed in Subsection (a) of this section in land not
10-58 belonging to the permanent school fund or the asylum funds must be
10-59 approved by the board, official, agent, agency, or authority of the
10-60 state that has the authority to lease or to approve the lease of
10-61 the land for oil and gas and must be executed by the commissioner
10-62 to be effective.
10-63 SECTION 36. Section 52.175, Natural Resources Code, is
10-64 amended to read as follows:
10-65 Sec. 52.175. LEASE OF OIL AND GAS AFTER FORFEITURE. When
10-66 the relinquishment or agency right herein granted has been
10-67 forfeited, the land shall be subject to lease for oil and gas under
10-68 the procedure provided by law for the leasing of unsold surveyed
10-69 public school lands. The substantive provisions of Subchapter B of
10-70 this chapter and Subchapters D and E, Chapter 32, of this code
11-1 shall apply to the oil and gas lease. No oil and gas lease shall
11-2 be executed which provides for a royalty of less than one-eighth,
11-3 payable to the state for the benefit of the permanent free school
11-4 fund. The owner of the soil shall not be entitled to any revenue
11-5 generated by a lease executed pursuant to this section. Upon the
11-6 termination or expiration of a lease so executed by the
11-7 Commissioner of the General Land Office, the rights of the surface
11-8 owner to act under this law shall be ipso facto reinstated.
11-9 SECTION 37. Subsection (a), Section 52.186, Natural
11-10 Resources Code, is amended to read as follows:
11-11 (a) If an owner of the soil or of any undivided interest
11-12 therein of any land subject to the terms of this subchapter or
11-13 Subchapter C, Chapter 53, of this code is found to be unavailable
11-14 under Subsection (b) of this section to act as the state's agent
11-15 for leasing oil and gas or any mineral leased under Subchapter C,
11-16 Chapter 53, of this code, such land or undivided interest therein
11-17 shall be subject to lease for the applicable minerals under the
11-18 procedure provided by Subchapter B of this chapter <Chapter 52> for
11-19 the leasing of unsold surveyed public school lands. The
11-20 substantive provisions of Subchapter B of this chapter and
11-21 Subchapters D and E, Chapter 32, of this code shall apply to a
11-22 lease of land subject to lease under this subchapter. The
11-23 substantive provisions of Subchapter E, Chapter 53, of this code
11-24 and Subchapters D and E, Chapter 32, of this code shall apply to a
11-25 lease of land subject to lease under Subchapter C, Chapter 53, of
11-26 this code. Subject to the provisions of Subsection (b)(4) of this
11-27 section, the owner of the soil shall not be entitled to any revenue
11-28 generated by a lease executed pursuant to this section.
11-29 SECTION 38. Section 52.291, Natural Resources Code, is
11-30 amended to read as follows:
11-31 Sec. 52.291. Coverage. The following persons, agencies, and
11-32 entities are subject to the provisions of Sections 52.292 through
11-33 52.293 of this code:
11-34 (1) the commissioner;
11-35 (2) the board;
11-36 (3) boards for lease of land owned by a department,
11-37 board, or agency of the state created by Chapter 34 of this code;
11-38 (4) the Board for Lease of University Lands;
11-39 (5) the Board of Regents of Texas A&M University;
11-40 (6) the Board of Regents of Texas Tech University;
11-41 (7) the Board of Directors of Texas A&I University;
11-42 (8) the Board of Regents, State Senior Colleges;
11-43 (9) the Board of Regents of the University of Houston;
11-44 (10) any other board of regents or other governing
11-45 board of a state-supported institution of higher learning having
11-46 authority to execute oil and<,> gas<, and mineral> leases on land
11-47 owned by the institution;
11-48 (11) an owner of land or minerals in this state whose
11-49 authority to lease the land or minerals as agent for the state
11-50 arises in whole or in part from what is commonly known as the
11-51 Relinquishment Act, codified in Subchapter F of this chapter;
11-52 (12) the Board for Lease of State Park Lands;
11-53 (13) the Board for Lease of the Texas Department of
11-54 Corrections; and
11-55 (14) the commissioners court of any county in this
11-56 state.
11-57 SECTION 39. Section 52.292, Natural Resources Code, is
11-58 amended to read as follows:
11-59 Sec. 52.292. Prohibited Leases. It is illegal for any
11-60 person included in Section 52.291 of this code to execute an oil
11-61 and<,> gas<, or mineral> lease on land on which he is authorized by
11-62 law to execute the lease unless the lease includes the terms
11-63 provided in Section 52.293 of this code.
11-64 SECTION 40. Section 52.294, Natural Resources Code, is
11-65 amended to read as follows:
11-66 Sec. 52.294. Prerequisite to Filing Leases. The
11-67 commissioner shall not receive and file an oil and<,> gas<, and
11-68 mineral> lease required to be filed by law unless the lease
11-69 includes the terms and conditions provided in Section 52.293 of
11-70 this code.
12-1 SECTION 41. Section 52.295, Natural Resources Code, is
12-2 amended to read as follows:
12-3 Sec. 52.295. Certain Leases Null, Void, and of No Force and
12-4 Effect. An oil and<,> gas<, and mineral> lease executed or
12-5 received and filed in violation of the provisions of this
12-6 subchapter is null, void, and of no force and effect.
12-7 SECTION 42. Section 52.297, Natural Resources Code, is
12-8 amended to read as follows:
12-9 Sec. 52.297. COMPENSATION FOR <Payment of> Damages FROM
12-10 <for> Use of Surface. (a) Leases issued under Subchapter B of
12-11 this chapter for unsold surveyed or unsurveyed school land, other
12-12 than land included in islands, saltwater lakes, bays, inlets,
12-13 marshes, and reefs owned by the state in tidewater limits and other
12-14 than that portion of the Gulf of Mexico within the jurisdiction of
12-15 the state, must include a provision requiring the compensation for
12-16 <payment of> damages from <for> the use of the surface in
12-17 prospecting for, exploring, developing, or producing the leased
12-18 minerals.
12-19 (b) The commissioner by rule shall set the procedure for
12-20 receiving compensation <amount of and shall collect money> for
12-21 damages to the surface of land dedicated to the permanent school
12-22 fund.
12-23 (c) Money collected for surface damages shall be deposited
12-24 in a special fund account in the State Treasury to be used for
12-25 conservation, reclamation, or construction of permanent
12-26 improvements on land that belongs to the permanent school fund.
12-27 (d) The special fund account must be an interest-bearing
12-28 account, and the interest received on the account shall be
12-29 deposited in the State Treasury to the credit of the available
12-30 school fund.
12-31 (e) Money collected under this section and designated for
12-32 the construction of permanent improvements as provided by this
12-33 section must be used not later than two years after the date on
12-34 which the money is collected.
12-35 (f) Any money that remains in the special fund account for
12-36 longer than two years shall be deposited in the State Treasury to
12-37 the credit of the permanent school fund.
12-38 (g) The compensation for <payment of> damages under this
12-39 section is in addition to any bonus, rental, royalty, or other
12-40 payment required by the lease.
12-41 SECTION 43. Subdivision (3), Section 52.321, Natural
12-42 Resources Code, is amended to read as follows:
12-43 (3) "Public school land" means land dedicated by the
12-44 constitution or laws of this state to the permanent free school
12-45 fund, and specifically includes land with a mineral classification
12-46 under Subchapter F of this chapter in which the state has retained
12-47 the oil and gas interest and areas within tidewater limits <or the
12-48 portion of the Gulf of Mexico that is under the jurisdiction of
12-49 this state>.
12-50 SECTION 44. Subsection (a), Section 52.324, Natural
12-51 Resources Code, is amended to read as follows:
12-52 (a) The commissioner:
12-53 (1) as a condition of issuing a permit, shall collect
12-54 reasonable fees from the applicant in an amount determined by the
12-55 commissioner;
12-56 (2) may require a permittee to furnish to the
12-57 commissioner, upon the commissioner's request, copies of maps,
12-58 plats, reports, data, and any other information in the possession
12-59 of the permittee that relates to the progress or results of an
12-60 exploration under a permit; provided however, the commissioner
12-61 shall not require a permittee to furnish any of its interpretive
12-62 data;
12-63 (3) shall by rule require a permittee to restore land
12-64 explored under the permit as nearly as is practicable to its
12-65 condition immediately prior to the exploration;
12-66 (4) shall by rule determine <set> the procedure for
12-67 receiving compensation <amount of and shall collect money> for
12-68 damages to the surface of public school land except land with a
12-69 mineral classification under Subchapter F of this chapter; and
12-70 (5) may make any other rules relating to geophysical
13-1 or geochemical explorations, permits, or permittees the
13-2 commissioner considers appropriate.
13-3 SECTION 45. Section 53.001, Natural Resources Code, is
13-4 amended by adding Subdivision (3) to read as follows:
13-5 (3) "Board" means the School Land Board.
13-6 SECTION 46. Subsection (c), Section 53.012, Natural
13-7 Resources Code, is amended to read as follows:
13-8 (c) The commissioner may determine the contents of an
13-9 application <Each application shall be accompanied by a rental
13-10 payment of not less than 25 cents an acre>.
13-11 SECTION 47. Subsections (a) and (b), Section 53.013, Natural
13-12 Resources Code, are amended to read as follows:
13-13 (a) After receipt of the rental payment set by the
13-14 commissioner, the <The> commissioner shall issue to the first
13-15 applicant a permit to prospect the area designated in the
13-16 applicant's <his> application for a period of one year from the
13-17 date the <his> application is filed.
13-18 (b) After receipt of an additional rental payment set by the
13-19 commissioner, the <The> commissioner may extend the permit for a
13-20 period of one year <on payment of an annual rental of not less than
13-21 25 cents an acre>.
13-22 SECTION 48. Subsections (b) and (c), Section 53.015, Natural
13-23 Resources Code, are amended to read as follows:
13-24 (b) An application to lease must designate the specific
13-25 minerals the permittee is applying to lease. The commissioner may
13-26 determine any additional information an application must contain
13-27 <The application shall be accompanied by the first lease payment of
13-28 not less than $2 an acre>.
13-29 (c) If the area designated for lease in the application is
13-30 less than the area covered by the permit, the applicant shall
13-31 include with the <his> application field notes prepared by the
13-32 county surveyor or by a licensed state land surveyor describing the
13-33 land designated.
13-34 SECTION 49. Section 53.016, Natural Resources Code, is
13-35 amended to read as follows:
13-36 Sec. 53.016. ISSUANCE OF LEASE. (a) After receipt of the
13-37 bonus payment set by the commissioner, the <The> lease shall be
13-38 issued by the commissioner under the provisions of this subchapter
13-39 and shall be for a primary term not to exceed 20 years and as long
13-40 after that time as the minerals are produced in paying quantities.
13-41 (b) The commissioner may include in the lease any other
13-42 provision the commissioner <he> considers necessary for protection
13-43 of the interests of the state.
13-44 SECTION 50. Section 53.020, Natural Resources Code, is
13-45 amended to read as follows:
13-46 Sec. 53.020. ASSIGNMENT AND TRANSFER <OF LEASE>. <(a)> A
13-47 lease issued under this subchapter may be transferred or assigned
13-48 at any time in the manner provided by Section 52.026 of this code
13-49 <may be assigned in quantities of not less than 40 acres, but if
13-50 there are fewer than 40 acres remaining in the tract originally
13-51 leased, the lesser area may be assigned.>
13-52 <(b) The assignment shall be recorded in the county in which
13-53 the land is located, and within 90 days after it is recorded a
13-54 certified copy of the assignment, certified by the county clerk
13-55 from his records, shall be sent to the land office, together with a
13-56 filing fee set by the commissioner in an amount not less than $1
13-57 for each tract affected>.
13-58 SECTION 51. Section 53.024, Natural Resources Code, is
13-59 amended to read as follows:
13-60 Sec. 53.024. PENALTY AND INTEREST <OTHER LEASE PROVISIONS>.
13-61 A lease issued under this subchapter shall be subject to Sections
13-62 52.131(e) through (j) <For any lease issued under this chapter, the
13-63 penalty and interest on delinquent royalties, and the penalty for
13-64 failure to file a report, are assessed in the same manner and in
13-65 the same amounts as provided in Section 52.131> of this code.
13-66 SECTION 52. Subchapter B, Chapter 53, Natural Resources
13-67 Code, is amended by adding Sections 53.025, 53.026, 53.027, and
13-68 53.028 to read as follows:
13-69 Sec. 53.025. LEASE RELINQUISHMENT. A lease issued under
13-70 this subchapter may be relinquished to the state at any time in the
14-1 manner provided by Section 52.027 of this code.
14-2 Sec. 53.026. IN KIND ROYALTY. (a) The commissioner or the
14-3 commissioner acting on behalf of and at the direction of the board
14-4 or a board for lease may negotiate and execute a contract or any
14-5 other instrument or agreement necessary to dispose of the royalty
14-6 taken in kind, including a contract for sale, transportation, or
14-7 storage.
14-8 (b) This section shall not be construed to surrender or in
14-9 any way affect the right of the state under an existing or future
14-10 lease to receive monetary royalty from its lessee.
14-11 Sec. 53.027. CONTRACTS AND AGREEMENTS. On the land office's
14-12 written request, mailed to the lessee's address as shown on its
14-13 lease or otherwise properly changed in conformity with the terms of
14-14 the lease, a copy of a contract for the sale or processing of
14-15 minerals leased under this subchapter and any subsequent agreement
14-16 or amendment to the contract shall be filed in the land office
14-17 within 30 days after the date the land office mails the written
14-18 request. The land office shall treat a contract, agreement, or
14-19 amendment filed in the land office as confidential unless otherwise
14-20 authorized by the lessee.
14-21 Sec. 53.028. AUDIT INFORMATION CONFIDENTIAL. (a) All
14-22 information secured, derived, or obtained during the course of an
14-23 inspection or examination of books, accounts, reports, or other
14-24 records as provided by this code, a rule, or a lease provision is
14-25 confidential and may not be used publicly, opened for public
14-26 inspection, or disclosed, except for information in a lien filed
14-27 under this chapter and except as permitted under Subsection (d) of
14-28 this section.
14-29 (b) All information made confidential in this section is not
14-30 subject to subpoena directed to the commissioner, the attorney
14-31 general, or the governor except in a judicial or administrative
14-32 proceeding to which this state is a party.
14-33 (c) The commissioner or the attorney general may use
14-34 information made confidential by this section and contracts made
14-35 confidential by Section 53.027 of this code to enforce this chapter
14-36 or may authorize their use in judicial or administrative
14-37 proceedings to which this state is a party.
14-38 (d) This section does not prohibit:
14-39 (1) the delivery of information made confidential by
14-40 this section to the lessee or its successor, receiver, executor,
14-41 guarantor, administrator, assignee, or representative;
14-42 (2) the publication of statistics classified to
14-43 prevent the identification of a particular audit or items in a
14-44 particular audit;
14-45 (3) the release of information that is otherwise
14-46 available to the public; or
14-47 (4) the release of information concerning the amount
14-48 of royalty assessed as a result of an examination conducted under
14-49 this code, a rule, or a lease provision or the release of other
14-50 information that would have been properly included in reports
14-51 required under this code, a rule, or a lease provision.
14-52 SECTION 53. Subsection (d), Section 53.074, Natural
14-53 Resources Code, is amended to read as follows:
14-54 (d) Leasing Procedure When Surface Owner's Agency Rights
14-55 Have Been Forfeited. When the surface owner's agency rights have
14-56 been forfeited in accordance with Subsection (c) of this section,
14-57 the minerals subject to lease under this subchapter can then be
14-58 leased under the leasing procedure set out for the lease of oil and
14-59 gas under Section 52.175 of this code. The substantive provisions
14-60 of Subchapter E of this chapter and Subchapters D and E, Chapter
14-61 32, of this code shall apply to the lease.
14-62 SECTION 54. Subchapter C, Chapter 53, Natural Resources
14-63 Code, is amended by adding Sections 53.075, 53.076, 53.077, 53.078,
14-64 53.079, and 53.080 to read as follows:
14-65 Sec. 53.075. ASSIGNMENT AND TRANSFER. A lease issued under
14-66 this subchapter may be assigned or transferred at any time in the
14-67 manner provided by Section 52.026 of this code.
14-68 Sec. 53.076. LEASE RELINQUISHMENT. A lease issued under
14-69 this subchapter may be relinquished to the state at any time in the
14-70 manner provided by Section 52.027 of this code.
15-1 Sec. 53.077. IN KIND ROYALTY. (a) The commissioner, each
15-2 owner of the soil under this subchapter, or the commissioner acting
15-3 on the behalf of and at the direction of an owner of the soil under
15-4 this subchapter may negotiate and execute a contract or any other
15-5 instrument or agreement necessary to dispose of the royalty taken
15-6 in kind, including a contract for sale, transportation, or storage.
15-7 (b) This section shall not be construed to surrender or in
15-8 any way affect the right of the state or the owner of the soil
15-9 under an existing or future lease to receive monetary royalty from
15-10 its lessee.
15-11 Sec. 53.078. PENALTY AND INTEREST. A lease issued under
15-12 this subchapter shall be subject to Sections 52.131(e) through (j)
15-13 of this code.
15-14 Sec. 53.079. CONTRACTS AND AGREEMENTS. On the land office's
15-15 written request, mailed to the lessee's address as shown on its
15-16 lease or otherwise properly changed in conformity with the terms of
15-17 the lease, a copy of a contract for the sale or processing of
15-18 minerals leased under this subchapter and any subsequent agreement
15-19 or amendment to the contract shall be filed in the land office
15-20 within 30 days after the date the land office mails the written
15-21 request. The land office shall treat a contract, agreement, or
15-22 amendment filed in the land office as confidential unless otherwise
15-23 authorized by the lessee.
15-24 Sec. 53.080. AUDIT INFORMATION CONFIDENTIAL. (a) All
15-25 information secured, derived, or obtained during the course of an
15-26 inspection or examination of books, accounts, reports, or other
15-27 records as provided by Section 53.068 of this code, a rule, or a
15-28 lease provision is confidential and may not be used publicly,
15-29 opened for public inspection, or disclosed, except for information
15-30 in a lien filed under this chapter and except as permitted under
15-31 Subsection (d) of this section.
15-32 (b) All information made confidential by this section is not
15-33 subject to subpoena directed to the commissioner, the attorney
15-34 general, or the governor except in a judicial or administrative
15-35 proceeding to which this state is a party.
15-36 (c) The commissioner or the attorney general may use
15-37 information made confidential by this section and contracts made
15-38 confidential by Section 53.079 of this code to enforce this chapter
15-39 or may authorize their use in judicial or administrative
15-40 proceedings to which this state is a party.
15-41 (d) This section does not prohibit:
15-42 (1) the delivery of information made confidential by
15-43 this section to the lessee or its successor, receiver, executor,
15-44 guarantor, administrator, assignee, or representative;
15-45 (2) the publication of statistics classified to
15-46 prevent the identification of a particular audit or items in a
15-47 particular audit;
15-48 (3) the release of information that is otherwise
15-49 available to the public; or
15-50 (4) the release of information concerning the amount
15-51 of royalty assessed as a result of an examination conducted under
15-52 Section 53.068 of this code, a rule, or a lease provision or the
15-53 release of other information that would have been properly included
15-54 in reports required under Section 53.068 of this code, a rule, or a
15-55 lease provision.
15-56 SECTION 55. Section 53.111, Natural Resources Code, is
15-57 amended to read as follows:
15-58 Sec. 53.111. Authority to Operate an Area as a Unit for
15-59 Production of Sulphur. The <Subject to the provisions of this
15-60 subchapter, the> commissioner<,> on behalf of the state or any fund
15-61 that belongs to the state <of its funds,> may execute agreements
15-62 that provide for operating <the operation of> areas as a unit for
15-63 the exploration, development, and production of sulphur and may
15-64 commit to the agreements:
15-65 (1) the royalty interests in sulphur reserved to <or
15-66 provided for> the state or any fund of the state by law in a<, in
15-67 or in connection with any> patent, award, mining claim, or contract
15-68 of sale or under the terms of any lease legally executed <made> by
15-69 an official, board, agent, agency, or authority of the state; or
15-70 (2) the free royalty interests, whether leased or
16-1 unleased, reserved to the state under Section 51.201 or 51.054 of
16-2 this code.
16-3 SECTION 56. Section 53.112, Natural Resources Code, is
16-4 amended to read as follows:
16-5 Sec. 53.112. APPROVAL OF CERTAIN AGREEMENTS BY SCHOOL LAND
16-6 BOARD. (a) An agreement must be approved by the board and
16-7 executed by the commissioner to be effective if the agreement
16-8 <authorized by Section 53.111 of this code that> commits:
16-9 (1) a royalty interest <interests> in land belonging
16-10 <dedicated> to the permanent <free> school fund or <and> the asylum
16-11 funds, in riverbeds, inland lakes, channels, or <and> areas within
16-12 tidewater limits, including islands, lakes, bays, inlets, marshes,
16-13 reefs, and the bed of the sea; or
16-14 (2) the free royalty interests, whether leased or
16-15 unleased, reserved to the state under Section 51.201 or 51.054 of
16-16 this code.
16-17 (b) An owner of the soil who is subject to Subchapter C of
16-18 this chapter may grant to a lessee prior authority to pool or
16-19 unitize the interest of the owner in a lease executed under that
16-20 subchapter. For the agreement to bind the interest of an owner of
16-21 the soil who is subject to Subchapter C of this chapter and who has
16-22 not granted the lessee prior authorization to pool or unitize the
16-23 interest of the owner in a sulphur lease executed under that
16-24 subchapter, the agreement must be executed by the owner of the soil
16-25 <must be approved by the school land board and must be executed by
16-26 the owners of the surface if the agreements cover land leased for
16-27 sulphur under Subchapter C of this chapter>.
16-28 SECTION 57. Section 53.113, Natural Resources Code, is
16-29 amended to read as follows:
16-30 Sec. 53.113. APPROVAL OF <OTHER> AGREEMENTS. An agreement
16-31 <Agreements> that commits <commit> the royalty interest in any land
16-32 <that is> not listed in <covered by> Section 53.112 of this code
16-33 must be approved by the board, official, agent, agency, or
16-34 authority of the state which has the authority to lease or to
16-35 approve the <a> lease of the land <or area> for sulphur and must be
16-36 executed by the commissioner to be effective.
16-37 SECTION 58. Section 53.114, Natural Resources Code, is
16-38 amended to read as follows:
16-39 Sec. 53.114. Commissioner's Approval. Before executing an
16-40 <An> agreement authorized by Section 53.111 of this code, <must be
16-41 found by> the commissioner must find that the agreement is <to be>
16-42 in the best interest of the state.
16-43 SECTION 59. Section 53.115, Natural Resources Code, is
16-44 amended to read as follows:
16-45 Sec. 53.115. Provisions of Agreement. (a) An agreement
16-46 executed under this subchapter may include the following
16-47 provisions:
16-48 (1) that operations incident to <the> drilling <of> a
16-49 well on any portion of a <the> unit shall be <are> considered for
16-50 all purposes to be <the> conduct of the operations on each tract in
16-51 the unit;
16-52 (2) that <the> production allocated by the agreement
16-53 to each tract included in the unit shall be considered for all
16-54 purposes to have been production <after production to be produced>
16-55 from the tract;
16-56 (3) that the <royalty> interest reserved to or
16-57 provided for the state or any of its funds on production from any
16-58 tract included in the unit shall be paid only on that portion of
16-59 the production from the unit that <which> is allocated to the tract
16-60 under the agreement; and
16-61 (4) that each lease included in the unit shall remain
16-62 in effect so long as the agreement remains in effect and that on
16-63 termination of the agreement each lease shall continue in effect
16-64 under the terms and conditions <provisions> of the lease.
16-65 (b) The agreement may include any other terms and<,>
16-66 conditions<, and provisions> the commissioner or any board,
16-67 official, agent, agency, or authority of the state that has the
16-68 authority to lease or to approve a lease of the land <or area> for
16-69 sulphur may consider to be in the best interest of the state.
16-70 SECTION 60. Subchapter D, Chapter 53, Natural Resources
17-1 Code, is amended by adding Section 53.118 to read as follows:
17-2 Sec. 53.118. RATIFICATIONS AND OTHER AGREEMENTS. (a) The
17-3 board may approve, by rule or order, a ratification or other
17-4 agreement that includes in the benefits of production a mineral or
17-5 royalty interest in land belonging to the permanent school fund or
17-6 the asylum funds.
17-7 (b) An agreement approved by the board under this section
17-8 must be executed by the commissioner to be effective.
17-9 (c) A ratification or other agreement that commits any of
17-10 the interests listed by Subsection (a) of this section in land not
17-11 belonging to the permanent school fund or the asylum funds must be
17-12 approved by the board, official, agent, agency, or authority of the
17-13 state that has the authority to lease or to approve the lease of
17-14 the land for sulphur and must be executed by the commissioner to be
17-15 effective.
17-16 SECTION 61. Section 53.152, Natural Resources Code, is
17-17 amended to read as follows:
17-18 Sec. 53.152. Laws Applicable to Leases. <(a)> Leases of
17-19 land described by Section 53.151 of this code shall be made in the
17-20 same procedural manner as leases of that land for oil and gas under
17-21 Chapter 52 of this code.
17-22 <(b) Sections 52.034 and 52.086 of this code do not apply to
17-23 leases of coal, lignite, sulphur, salt, and potash under this
17-24 subchapter.>
17-25 SECTION 62. Section 53.153, Natural Resources Code, is
17-26 amended to read as follows:
17-27 Sec. 53.153. Conditions of Lease. (a) Coal, lignite,
17-28 sulphur, salt, and potash may be leased together or separately.
17-29 (b) A lease granted under this subchapter shall be for a
17-30 primary term not to exceed 20 years and as long after that time as
17-31 the minerals are produced in paying quantities.
17-32 SECTION 63. Section 53.154, Natural Resources Code, is
17-33 amended to read as follows:
17-34 Sec. 53.154. ROYALTY RATE <AND DELAY RENTALS>. The board
17-35 shall set the royalty rate on <(a) In addition to the cash amount
17-36 bid for a lease, the board shall lease the area for not less than
17-37 one-eighth of the gross> production of sulphur, <or the value of
17-38 the sulphur that may be produced or that may be produced and sold
17-39 off the area and not less than one-sixteenth of the value of the>
17-40 coal, lignite, salt, and potash from land leased under this
17-41 subchapter. The royalty rate set must be at least one-eighth of
17-42 the gross production or the market value of the sulphur produced
17-43 and at least one-sixteenth of the gross production or the market
17-44 value of the coal, lignite, salt, and potash produced <that may be
17-45 produced plus an amount determined by the board until production is
17-46 secured.>
17-47 <(b) If production is secured in commercial quantities and
17-48 the payment of royalty begins and continues to be paid, the lessee
17-49 is exempt from further delay rental payments on the acreage.>
17-50 <(c) If production ceases and royalty is not paid, the
17-51 lessee shall pay at the end of the lease year in which the royalty
17-52 ceased to be paid and annually after that time in advance, in an
17-53 amount determined by the board as long as the lessee desires to
17-54 maintain the rights acquired under the lease, but not for more than
17-55 five years from the date of the lease>.
17-56 SECTION 64. Section 53.155, Natural Resources Code, is
17-57 amended to read as follows:
17-58 Sec. 53.155. COMPENSATION FOR <PAYMENT OF> DAMAGES FROM
17-59 <FOR> USE OF SURFACE. (a) Leases issued under Subchapter B or E
17-60 of this chapter for unsold surveyed or unsurveyed school land,
17-61 other than land included in islands, saltwater lakes, bays, inlets,
17-62 marshes, and reefs owned by the state in tidewater limits and other
17-63 than that portion of the Gulf of Mexico within the jurisdiction of
17-64 the state, must include a provision requiring compensation for <the
17-65 payment of> damages from <for> the use of the surface in
17-66 prospecting for, exploring, developing, or producing the leased
17-67 minerals.
17-68 (b) The commissioner by rule shall set the procedure for
17-69 receiving compensation <amount of and shall collect money> for
17-70 damages to the surface of land dedicated to the permanent school
18-1 fund.
18-2 (c) Money collected for surface damages shall be deposited
18-3 in a special fund account in the State Treasury to be used for
18-4 conservation, reclamation, or constructing permanent improvements
18-5 on land that belongs to the permanent school fund.
18-6 (d) The special fund account must be an interest-bearing
18-7 account, and the interest received on the account shall be
18-8 deposited in the State Treasury to the credit of the available
18-9 school fund.
18-10 (e) Money collected under this section and designated for
18-11 the construction of permanent improvements as provided by this
18-12 section must be used not later than two years after the date on
18-13 which the money is collected.
18-14 (f) Any money that remains in the special fund account for
18-15 longer than two years shall be deposited in the State Treasury to
18-16 the credit of the permanent school fund.
18-17 (g) Compensation for <The payment of> damages under this
18-18 section is in addition to any bonus, rental, royalty, or other
18-19 payment required by the lease.
18-20 SECTION 65. Subchapter E, Chapter 53, Natural Resources
18-21 Code, is amended by adding Section 53.156 to read as follows:
18-22 Sec. 53.156. CONTRACTS AND AGREEMENTS. On the land office's
18-23 written request, mailed to the lessee's address as shown on its
18-24 lease or otherwise properly changed in conformity with the terms of
18-25 the lease, a copy of a contract for the sale or processing of
18-26 minerals leased under this subchapter and any subsequent agreement
18-27 or amendment to the contract shall be filed in the land office
18-28 within 30 days after the date the land office mails the written
18-29 request. The land office shall treat a contract, agreement, or
18-30 amendment filed in the land office as confidential unless otherwise
18-31 authorized by the lessee.
18-32 SECTION 66. Section 53.161, Natural Resources Code, is
18-33 amended by amending Subsection (4) and adding Subsection (7) to
18-34 read as follows:
18-35 (4) "Public school land" means land dedicated by the
18-36 constitution or laws of this state to the permanent free school
18-37 fund, but does not include land with a mineral classification
18-38 described in Section 53.061 of this chapter in which the state has
18-39 retained the minerals, nor does it include areas within tidewater
18-40 limits <or the portion of the Gulf of Mexico that is under the
18-41 jurisdiction of this state>.
18-42 (7) "Areas within tidewater limits" means islands,
18-43 saltwater lakes, bays, inlets, marshes, and reefs within tidewater
18-44 limits and that portion of the Gulf of Mexico within the
18-45 jurisdiction of Texas.
18-46 SECTION 67. Subsection (b), Section 53.162, Natural
18-47 Resources Code, is amended to read as follows:
18-48 (b) Every person who is authorized to conduct a geophysical
18-49 or geochemical exploration on public school land shall comply with
18-50 the commissioner's rules relating to such exploration. A person
18-51 with a valid mineral lease on land subject to this chapter shall
18-52 comply with the commissioner's rules concerning exploration.
18-53 SECTION 68. Sections 52.079, 52.081, 52.086, 52.089, and
18-54 53.017, Natural Resources Code, are repealed.
18-55 SECTION 69. This Act does not affect the state's right to
18-56 take its royalty in kind or the calculation of the state's royalty
18-57 under a patent, lease, or unitization agreement executed before the
18-58 effective date of this Act.
18-59 SECTION 70. This Act takes effect September 1, 1993.
18-60 SECTION 71. The importance of this legislation and the
18-61 crowded condition of the calendars in both houses create an
18-62 emergency and an imperative public necessity that the
18-63 constitutional rule requiring bills to be read on three several
18-64 days in each house be suspended, and this rule is hereby suspended.
18-65 * * * * *
18-66 Austin,
18-67 Texas
18-68 April 2, 1993
18-69 Hon. Bob Bullock
18-70 President of the Senate
19-1 Sir:
19-2 We, your Committee on Natural Resources to which was referred S.B.
19-3 No. 962, have had the same under consideration, and I am instructed
19-4 to report it back to the Senate with the recommendation that it do
19-5 not pass, but that the Committee Substitute adopted in lieu thereof
19-6 do pass and be printed.
19-7 Sims,
19-8 Chairman
19-9 * * * * *
19-10 WITNESSES
19-11 FOR AGAINST ON
19-12 ___________________________________________________________________
19-13 Name: Nancy L. Sauer x
19-14 Representing: Pennzoil Sulphur Co.
19-15 City: Houston
19-16 -------------------------------------------------------------------
19-17 Name: Ben W. Bebrer x
19-18 Representing: Tx Mid Continent Oil & Gas
19-19 City: Austin
19-20 -------------------------------------------------------------------
19-21 Name: Matt Edling x
19-22 Representing: General Land Office
19-23 City: Austin
19-24 -------------------------------------------------------------------
19-25 Name: Terri Unsell Loeffler x
19-26 Representing: Tx General Land Office
19-27 City: Austin
19-28 -------------------------------------------------------------------
19-29 Name: Walt Rosenbusch x
19-30 Representing: General Land Office
19-31 City: Austin
19-32 -------------------------------------------------------------------
19-33 Name: Bill Farr x
19-34 Representing: Tx General Land Office
19-35 City: Austin
19-36 -------------------------------------------------------------------