By:  Shelley                                          S.B. No. 1469
       73R10026 SMH-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the sale, lease, and development of state-owned oil,
    1-3  gas, and 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 by amending Subsection (a) and adding Subsection (e) to
    1-7  read as follows:
    1-8        (a)  This chapter does 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)  minerals <land> subject to lease under Subchapter
   1-20  F, Chapter 52, of this code, commonly known as the Relinquishment
   1-21  Act, and Subchapters 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,
   1-24  or alley, which is located in a producing area, unless the oil or
    2-1  gas is leased for the specific purpose of drilling a horizontal
    2-2  well;
    2-3              (5)  oil and gas underlying land owned by the state
    2-4  that was acquired to construct or maintain a highway, road, street,
    2-5  or alley if the Texas <State Highway and Public> Transportation
    2-6  Commission has determined that such right-of-way is no longer
    2-7  needed for use by citizens as a road pursuant to Chapter 99,
    2-8  General Laws, Acts of the 42nd Legislature, Regular Session, 1931
    2-9  (Article 6673a, Vernon's Texas Civil Statutes);
   2-10              (6)  land owned by the <Texas> Parks and Wildlife
   2-11  Department; or
   2-12              (7)  land owned by the Texas Department of Criminal
   2-13  Justice <Corrections>.
   2-14        (e)  If title to land subject to Subchapter C, Chapter 53, of
   2-15  this code is acquired by a department, board, or agency of the
   2-16  state, the land shall be leased as provided by Chapter 53 of this
   2-17  code for the leasing of unsold surveyed public school lands.
   2-18        SECTION 2.  Section 32.061, Natural Resources Code, is
   2-19  amended to read as follows:
   2-20        Sec. 32.061.  Board's General Duties.  Except as provided by
   2-21  Subchapter G, Chapter 51, of this code, the board shall:
   2-22              (1)  set the dates to open received bids for the sale
   2-23  of surveyed land dedicated to the permanent school fund, <and> for
   2-24  the lease of land for prospecting or exploring for, mining,
   2-25  producing, storing, caring for, transporting, preserving, selling,
   2-26  or disposing of oil, gas, or other minerals leased under this
   2-27  chapter, and for the commitment of land to a contract for
    3-1  development;
    3-2              (2)  determine the prices and set the terms of the
    3-3  contract for which land shall be sold, <and> leased, or committed
    3-4  to a contract for development;
    3-5              (3)  consult with the president, chairman, or other
    3-6  head of the department, board, or agency, as applicable, or with
    3-7  the representative of the head, on each matter before the board
    3-8  that affects land owned or held in trust for the use and benefit of
    3-9  a department, board, or agency of the state; and
   3-10              (4)  perform any other duties which may be required by
   3-11  law.
   3-12        SECTION 3.  Subsection (a), Section 32.062, Natural Resources
   3-13  Code, is amended to read as follows:
   3-14        (a)  The board shall adopt rules of procedure and rules for
   3-15  the sale, <and> lease, and commitment to a contract for development
   3-16  of land as provided by this chapter.
   3-17        SECTION 4.  Section 32.064, Natural Resources Code, is
   3-18  amended to read as follows:
   3-19        Sec. 32.064.  Survey or Subdivision of Land.  The board may
   3-20  have land surveyed or subdivided into tracts, lots, or blocks based
   3-21  on its determination of which method will be most conducive and
   3-22  convenient to facilitate the advantageous sale of land, the lease
   3-23  of land for oil, gas, or other minerals, or the commitment of land
   3-24  to a contract for development <or oil, gas, or mineral leases>.
   3-25        SECTION 5.  Section 32.065, Natural Resources Code, is
   3-26  amended to read as follows:
   3-27        Sec. 32.065.  Permits for Surveys or Investigations.  If land
    4-1  other than public school land is not under a valid lease or
    4-2  committed to a contract for development, the board may issue a
    4-3  permit for a geological, geophysical, or other survey or
    4-4  investigation of that land that will encourage the development of
    4-5  the land for oil, gas, or other minerals.  The permit may be issued
    4-6  for the consideration and under the terms and conditions the board
    4-7  considers to be in the best interest of the state.
    4-8        SECTION 6.  Section 32.101, Natural Resources Code, is
    4-9  amended to read as follows:
   4-10        Sec. 32.101.  Applicable Law.  Land shall be offered for
   4-11  sale, lease, or commitment to a contract for development <sold and
   4-12  leased> subject to the terms and conditions provided by law.
   4-13        SECTION 7.  Section 32.105, Natural Resources Code, is
   4-14  amended to read as follows:
   4-15        Sec. 32.105.  Date for Opening Bids <of Sale and Lease>.  The
   4-16  <sale> date for opening bids for the sale, <or> lease, or
   4-17  commitment to a contract for development of land shall be the first
   4-18  or third Tuesday of the month.
   4-19        SECTION 8.  Section 32.106, Natural Resources Code, is
   4-20  amended to read as follows:
   4-21        Sec. 32.106.  Description of Land.  The description of public
   4-22  school land offered for sale, <or> lease, or commitment to a
   4-23  contract for development shall be in accord with the description
   4-24  which may be found in the School Land Registry in the land office.
   4-25        SECTION 9.  Section 32.107, Natural Resources Code, is
   4-26  amended to read as follows:
   4-27        Sec. 32.107.  NOTICE OF SALE, <AND> LEASE, AND CONTRACT FOR
    5-1  DEVELOPMENT.  (a)  The board shall publish notice that the board
    5-2  will receive bids for <of> the sale, <or> lease, or commitment to a
    5-3  contract for development of land in at least three issues of at
    5-4  least four daily newspapers.
    5-5        (b)  The notice shall be published at least 30 days before
    5-6  the date the bids are advertised to be opened <of sale or lease>.
    5-7        (c)  The notice shall state that land is to be offered for
    5-8  sale, <or> lease, or commitment to a contract for development on a
    5-9  certain date and at a certain time and the method of the sale,
   5-10  lease, or commitment to a contract for development and shall give
   5-11  notice that a person may obtain publications from <lists describing
   5-12  the land may be obtained at> the land office that describe the land
   5-13  offered for sale, lease, or commitment to a contract for
   5-14  development.
   5-15        (d)  The land office may solicit and include advertising in
   5-16  its publications.  The commissioner shall deposit fees paid for
   5-17  advertising in land office publications in a separate account in
   5-18  the state treasury.
   5-19        SECTION 10.  Section 32.1071, Natural Resources Code, is
   5-20  amended by adding Subsection (c) to read as follows:
   5-21        (c)  The leases shall be made on terms and conditions that
   5-22  may be prescribed by the board.
   5-23        SECTION 11.  Section 32.1072, Natural Resources Code, is
   5-24  amended to read as follows:
   5-25        Sec. 32.1072.  Minimum Royalty, Bonus, and Rental.  The board
   5-26  may not accept a bid on an oil and gas lease that offers:
   5-27              (1)  a royalty of less than one-eighth of the gross
    6-1  production of oil and<,> gas<, or other minerals>; or
    6-2              (2)  a cash bonus of less than $10 an acre.
    6-3        SECTION 12.  Section 32.109, Natural Resources Code, is
    6-4  amended to read as follows:
    6-5        Sec. 32.109.  Acceptance and Rejection of Bids.  (a)  For
    6-6  each tract offered for sale, lease, or commitment to a contract for
    6-7  development, the board must <The board may reject any and all bids,
    6-8  but if the board elects not to reject any and all bids, it is
    6-9  required to> accept the best bid submitted that meets the minimum
   6-10  requirements set by the board or by law or reject all bids.
   6-11        (b)  The minutes of the board shall reflect the acceptance or
   6-12  rejection of a bid<, and the approval of the minutes constitutes
   6-13  approval of the act of acceptance or rejection>.
   6-14        SECTION 13.  Section 32.110, Natural Resources Code, is
   6-15  amended to read as follows:
   6-16        Sec. 32.110.  Special Sale Fee.  (a)  On land sales and
   6-17  mineral leases made by the board, the purchaser or bidder is
   6-18  required to pay by separate check an amount equal to one and
   6-19  one-half percent of the bid payable to the commissioner as a
   6-20  special fee.
   6-21        (b)  If the sale is by bid, only <Only> the special fees paid
   6-22  on the <high> bids accepted by the board shall be deposited by the
   6-23  commissioner in the State Treasury as a special fund.
   6-24        (c)  Failure to pay the special fee shall <does> not void
   6-25  <render> a bid <void>, but the commissioner shall demand payment of
   6-26  the fee before <he issues> a lease is issued to the best
   6-27  <successful> bidder.  If the best <successful> bidder fails or
    7-1  refuses to make the payment within 30 days after demand by the
    7-2  commissioner, the bidder is not entitled to a <lease or> sale of or
    7-3  a lease on the tract covered by that <his> bid and the cash bonus
    7-4  shall be automatically forfeited to be deposited by the
    7-5  commissioner in the State Treasury to the credit of the permanent
    7-6  school fund or the appropriate special mineral fund.  The board, at
    7-7  its option, may offer the tract for sale or lease to the next best
    7-8  bidder under the same terms as submitted by and as would have been
    7-9  granted to the best bidder.
   7-10        (d)  Checks submitted by unsuccessful bidders shall be
   7-11  returned to the bidders <with their bid checks>.
   7-12        SECTION 14.  Section 32.151, Natural Resources Code, is
   7-13  amended to read as follows:
   7-14        Sec. 32.151.  Term of Lease.  Each oil and gas lease shall be
   7-15  for a primary term <of> not to exceed 10 <five> years and for as
   7-16  long thereafter as oil or<,> gas is<, or other minerals covered by
   7-17  the lease are> produced in paying quantities.
   7-18        SECTION 15.  Subchapter F, Chapter 32, Natural Resources
   7-19  Code, is amended by adding Section 32.206 to read as follows:
   7-20        Sec. 32.206.  RATIFICATIONS AND OTHER AGREEMENTS.  (a)  The
   7-21  board may approve by rule or order a ratification or other
   7-22  agreement that includes in the benefits of production a mineral or
   7-23  royalty interest in land owned by the state that was acquired to
   7-24  construct or maintain a highway, road, street, or alley.
   7-25        (b)  An agreement approved by the board under this section
   7-26  must be executed by the commissioner to be effective.
   7-27        (c)  This section does not apply to an interest subject to
    8-1  pooling or unitization by a lessee under a lease issued under this
    8-2  subchapter.
    8-3        SECTION 16.  Section 52.014, Natural Resources Code, is
    8-4  amended to read as follows:
    8-5        Sec. 52.014.  Date for Lease and Notice.  <(a)>  The date for
    8-6  opening bids to lease <of> areas covered by this subchapter shall
    8-7  be set and notice of the date shall be given in the manner provided
    8-8  in Sections 32.105 and 32.107 of this code.
    8-9        <(b)  Notice of areas being offered for lease shall be
   8-10  advertised for a period of 30 days before the lease date.>
   8-11        SECTION 17.  Section 52.015, Natural Resources Code, is
   8-12  amended to read as follows:
   8-13        Sec. 52.015.  BID TO LEASE <APPLICATION FOR LEASE>.  (a)  To
   8-14  apply to lease a tract, a bidder must submit a separate bid for
   8-15  each separate tract to be leased <Each application for a separate
   8-16  area and the first payment shall be delivered to the land office on
   8-17  or before the day and hour on which the area is subject to lease>.
   8-18        (b)  A bid must include a completed application to lease
   8-19  form, a payment to the commissioner in the amount of the actual
   8-20  bonus bid or set, and a separate payment to the commissioner in the
   8-21  amount of the special fee provided by Section 52.016 of this code
   8-22  <The application and payment shall be delivered in a sealed
   8-23  envelope endorsed with "application to lease oil and gas" and the
   8-24  date on which the area is subject to lease>.
   8-25        (c)  A bid must be delivered to the land office on or before
   8-26  the date and time the board advertises that the bids will be opened
   8-27  <Any application received up to the hour in which the applications
    9-1  are to be opened shall be considered to be properly delivered
    9-2  regardless of whether it is opened or sealed or endorsed or
    9-3  unendorsed>.
    9-4        SECTION 18.  Section 52.017, Natural Resources Code, is
    9-5  amended to read as follows:
    9-6        Sec. 52.017.  Keeping and Opening Bids.  Bids <The envelopes>
    9-7  shall be kept secure <securely> and unopened by the commissioner or
    9-8  the commissioner's designee until opened on the date and at the
    9-9  time set as provided in Section 52.014 of this code <or his chief
   9-10  clerk until the day on which the applications are to be opened, and
   9-11  at that time, the board shall open the envelopes in the presence of
   9-12  any persons who desire to be present>.
   9-13        SECTION 19.  Section 52.021, Natural Resources Code, is
   9-14  amended to read as follows:
   9-15        Sec. 52.021.  Term of Lease.  A lease granted under this
   9-16  subchapter shall be for a primary term not to exceed 10 <five>
   9-17  years and for as long after that time as oil or gas is produced
   9-18  from the leased area.
   9-19        SECTION 20.  Section 52.022, Natural Resources Code, is
   9-20  amended to read as follows:
   9-21        Sec. 52.022.  ROYALTY RATE <AND DELAY RENTALS>.  <(a)>  The
   9-22  board shall set the royalty rate on production of oil and gas from
   9-23  land leased under this subchapter.  The royalty rate set must be at
   9-24  least one-eighth of the gross production or the market value of the
   9-25  oil and gas produced <In addition to the cash amount bid for a
   9-26  lease, the area included in the lease shall be leased for not less
   9-27  than one-eighth of the gross production of oil produced and saved,
   10-1  or its value, and not less than one-eighth of the gross production
   10-2  of gas produced and sold off the area or its value, plus an amount
   10-3  determined by the board, until production is secured.>
   10-4        <(b)  If production is secured in commercial quantities and
   10-5  the payment of royalty begins and continues to be paid, the lessee
   10-6  is exempt from further delay rental payments on the acreage.>
   10-7        <(c)  If production ceases and royalty is not paid, the
   10-8  lessee shall pay at the end of the lease year in which the royalty
   10-9  ceased to be paid and annually after that time in advance, an
  10-10  amount determined by the board for as long as the lessee desires to
  10-11  maintain the rights acquired under the lease, but not for more than
  10-12  five years from the date of the lease>.
  10-13        SECTION 21.  Section 52.023, Natural Resources Code, is
  10-14  amended to read as follows:
  10-15        Sec. 52.023.  Lease Provisions for Drilling and Reworking.
  10-16  Each lease shall provide that:
  10-17              (1)  if the production of oil or gas on premises leased
  10-18  under this subchapter ceases for any reason <at or> after the
  10-19  expiration of the primary term, the lease will not terminate if the
  10-20  lessee commences additional drilling or reworking operations within
  10-21  60 days after the cessation of production;
  10-22              (2)  the lease shall remain in effect as long as <the>
  10-23  drilling or <and> reworking operations continue in good faith and
  10-24  in a workmanlike manner<,> without interruptions<,> totaling more
  10-25  than 60 days <during any one such operation>; <and>
  10-26              (3)  if the drilling or reworking operations result in
  10-27  the production of oil or gas, the lease shall remain in effect so
   11-1  <as> long as oil or gas is produced from the leased premises in
   11-2  paying quantities or payment of shut-in <gas> royalties or payment
   11-3  of compensatory royalties is made as provided by law; and
   11-4              (4)  if the drilling or reworking operations result in
   11-5  the completion of a well as a dry hole, the lease will not
   11-6  terminate if the lessee commences additional drilling or reworking
   11-7  operations within 60 days after the completion of the well as a dry
   11-8  hole, and the lease shall remain in effect so long as the lessee
   11-9  continues drilling or reworking operations in good faith and in a
  11-10  workmanlike manner without interruptions totaling more than 60
  11-11  days.
  11-12        SECTION 22.  Section 52.024, Natural Resources Code, is
  11-13  amended to read as follows:
  11-14        Sec. 52.024.  Lease Provisions for Shut-in Oil or Gas Royalty
  11-15  and Compensatory Royalty.  (a)  For purposes of this section,
  11-16  "well" means any well that has been assigned a well number by the
  11-17  state agency having jurisdiction over the production of oil and
  11-18  gas.
  11-19        (b)  Each lease shall provide that:
  11-20              (1)  if, at any time after the expiration of the
  11-21  primary term <or at any time after the expiration> of <the primary
  11-22  term> a lease that, until being shut in, was being maintained in
  11-23  force and effect, a well <or wells> capable of producing oil or gas
  11-24  in paying quantities is <are> located on the leased premises but
  11-25  oil or gas is not being produced for lack of suitable production
  11-26  facilities or lack of a suitable market <and the lease is not being
  11-27  maintained in force and effect>, then the lessee may pay as a
   12-1  shut-in oil or gas royalty an amount equal to double the annual
   12-2  rental provided in the lease but not less than $1,200 a year for
   12-3  each well capable of producing oil or gas in paying quantities.  To
   12-4  be effective, each initial <Any> shut-in oil or gas royalty must be
   12-5  paid on or before:  (A) the expiration of the primary term, (B) 60
   12-6  days after the lessee ceases to produce oil or gas from the leased
   12-7  premises, or (C) 60 days after the lessee completes a drilling or
   12-8  <and> reworking operation in accordance with the lease provisions,
   12-9  whichever date is latest <later>;
  12-10              (2)  if the shut-in oil or gas royalty is paid, the
  12-11  lease shall be considered to be a producing lease and the payment
  12-12  shall extend the term of the lease for a period of one year from
  12-13  the end of the primary term or from the first day of the month
  12-14  following <next succeeding> the month in which production ceased,
  12-15  and, after that, if no suitable production facilities or suitable
  12-16  market for the oil or gas exists, the lessee may extend the lease
  12-17  for four more <additional and> successive periods of one year by
  12-18  paying the same amount each year on or before the expiration of
  12-19  each shut-in year <the extended term>;
  12-20              (3)  if, during the period the lease is kept in effect
  12-21  by payment of the shut-in oil or gas royalty, oil or gas is sold
  12-22  and delivered in paying quantities from a well located within 1,000
  12-23  feet of the leased premises and completed in the same producing
  12-24  reservoir, or in any case in which drainage is occurring, the right
  12-25  to continue to maintain <extend> the lease by paying the shut-in
  12-26  oil or gas royalty shall cease, but the lease shall remain
  12-27  effective for the remainder of the year for which the royalty has
   13-1  been paid.  The lessee may maintain the lease <and> for four more
   13-2  <additional and> successive years <periods of one year each> by the
   13-3  lessee paying compensatory royalty at the royalty rate provided in
   13-4  the lease of the market value <at the well> of production from the
   13-5  well <which is> causing the drainage or which is completed in the
   13-6  same producing reservoir and within 1,000 feet of the leased
   13-7  premises;
   13-8              (4)  the compensatory royalty is to be paid monthly to
   13-9  the commissioner beginning on or before the last day of the month
  13-10  following <next succeeding> the month in which the oil or gas is
  13-11  produced <sold and delivered> from the well causing the drainage or
  13-12  that is completed in the same producing reservoir and located
  13-13  within 1,000 feet of <or draining> the leased premises <and
  13-14  completed in the same reservoir>;
  13-15              (5)  if the compensatory royalty paid in any 12-month
  13-16  period is in an amount less than the annual shut-in oil or gas
  13-17  royalty, the lessee shall pay an amount equal to the difference
  13-18  within 30 days from the end of the 12-month period; and
  13-19              (6)  none of these provisions will relieve the lessee
  13-20  of the obligation of reasonable development nor the obligation to
  13-21  drill offset wells as provided in Section 52.034 of this code;
  13-22  however, at the determination of the commissioner and with the
  13-23  commissioner's <his> written approval, the payment of compensatory
  13-24  royalties shall satisfy the obligation to drill offset wells.
  13-25        SECTION 23.  Section 52.028, Natural Resources Code, is
  13-26  amended to read as follows:
  13-27        Sec. 52.028.  SUSPENSION OF LEASE BECAUSE OF LITIGATION <OIL
   14-1  AND GAS LEASES>.  (a)  If an oil and gas lease that has been issued
   14-2  by the commissioner is involved in litigation relating to the <its>
   14-3  validity of the lease or to the authority of the commissioner to
   14-4  issue the lease, the lease and all the conditions and covenants
   14-5  contained in <land, the primary term of> the lease shall be
   14-6  suspended <and all obligations imposed by the lease set aside>
   14-7  during the period of the litigation, except as otherwise provided
   14-8  by this section.
   14-9        (b)  If the litigation is instituted during the primary term
  14-10  of the lease, then, after a final, nonappealable judgment is
  14-11  entered in the litigation <at least six months before the
  14-12  expiration of the primary term, after final judgment is rendered>,
  14-13  the primary term provided in the lease shall resume <begin to run
  14-14  again> and the lease shall continue to run for the remainder of the
  14-15  period specified in the lease, and all conditions and covenants
  14-16  contained in <obligations and duties imposed by> the lease shall be
  14-17  operative.
  14-18        (c)  If the litigation is instituted during the secondary
  14-19  term of the lease, then, after a final, nonappealable judgment is
  14-20  entered in the litigation, the lease and all the conditions and
  14-21  convenants contained in the lease shall be operative, and the
  14-22  lessee shall have 60 days from the date a final, nonappealable
  14-23  judgment is entered in the litigation to produce in paying
  14-24  quantities or to commence drilling or reworking operations on the
  14-25  lease as if production had ceased on that date under Section 52.023
  14-26  of this code.
  14-27        (d)  The lessee shall pay <all annual delay rentals and> any
   15-1  royalties that accrue during the period of suspension of the lease
   15-2  <litigation> in the same manner as they are to be paid under the
   15-3  terms of the lease <during the primary term.  If such delay rentals
   15-4  are not paid as the lease requires, the lease shall not
   15-5  automatically terminate; however, the delay rentals continue to be
   15-6  an obligation and debt owed by the lessee.  The delay rentals paid
   15-7  during the period of litigation shall be held and returned to the
   15-8  lessee if the state is unsuccessful in the litigation>.
   15-9        SECTION 24.  Section 52.0301, Natural Resources Code, is
  15-10  amended to read as follows:
  15-11        Sec. 52.0301.  Suspension of Terms of Lease in Certain
  15-12  Situations.  (a)  If the lessee <owner> of a valid oil and gas
  15-13  lease granted by the state is unable to obtain access to the leased
  15-14  premises, or is unable to obtain in a timely manner <denied access
  15-15  to or is denied> a permit to drill on or produce from the leased
  15-16  premises by any duly constituted authority of the United States or
  15-17  of this state after a diligent, good faith <bona fide> attempt has
  15-18  been made by the lessee <owner> to obtain access to, or a permit to
  15-19  drill on or produce from, the leased premises, the lessee <owner>
  15-20  may file with the board an application describing and giving the
  15-21  date of the action that deprives the lessee <him> of access to or a
  15-22  permit <the right> to drill on or produce from the leased premises.
  15-23        (b)  If the board is satisfied that the facts included in the
  15-24  application are true and that the lessee acted diligently and in
  15-25  good faith in an attempt to gain access to or the right to drill on
  15-26  or produce from the leased premises, the board may <enter an> order
  15-27  the suspension of the lease or any condition or covenant contained
   16-1  in <its minutes suspending the running of both the primary and the
   16-2  principal term of the lease or suspending any condition,
   16-3  obligation, or duty under> the lease<,> from the date <of> the
   16-4  board determines to be the date the cause for the suspension began,
   16-5  except as otherwise provided by this section <through the continued
   16-6  existence of the cause for the suspension, so long as the lessee
   16-7  continues to make the annual rental payments that are stipulated in
   16-8  the lease on each anniversary date of the lease during the period
   16-9  of suspension>.
  16-10        (c)  The board may set as a condition to approving the
  16-11  application for a suspension of the lease any term or requirement
  16-12  that relates to the duration of the suspension, the administration
  16-13  of the property during the suspension, reporting requirements
  16-14  during the suspension, or another administrative matter that the
  16-15  board determines is in the best interest of the state <After the
  16-16  board enters an order in its minutes stating that the cause for
  16-17  suspension has ceased to exist, the oil and gas lease shall again
  16-18  become operative if the rental payments have been made during the
  16-19  period of suspension, and all suspended obligations and conditions
  16-20  shall again attach and be in force for a period equivalent to the
  16-21  unexpired term of the lease>.
  16-22        (d)  If the lease is suspended during its primary term, the
  16-23  lessee shall make payments in the amount of the annual delay rental
  16-24  stipulated in the lease by each anniversary date of the lease
  16-25  during the period of suspension.  If the payments in the amount of
  16-26  the annual delay rental are not paid by each anniversary date of
  16-27  the lease, the lease shall not automatically terminate.  However,
   17-1  the amount of the annual delay rental stipulated in the lease due
   17-2  by each anniversary date of the lease during the period of
   17-3  suspension continues to be an obligation and debt owed by the
   17-4  lessee.  The lessee shall pay all royalties, if any, that accrue
   17-5  during the period of suspension of the lease in the same manner as
   17-6  they are to be paid under the terms of the lease.
   17-7        (e)  If the lease is suspended during its primary term, then,
   17-8  when the suspension ends, the primary term provided in the lease
   17-9  shall resume and continue to run for the remainder of the period
  17-10  specified in the lease, and all conditions and covenants contained
  17-11  in the lease shall be operative <The commissioner shall give notice
  17-12  immediately to the lessee of the entry of an order stating that the
  17-13  cause of suspension has ceased to exist, provided annual rental
  17-14  payments have been made>.
  17-15        (f)  If the lease is suspended during its secondary term,
  17-16  then, when the suspension ends, the lease and all of the conditions
  17-17  and covenants contained in the lease shall be operative, and the
  17-18  lessee shall have 60 days from the date the suspension ends to
  17-19  produce in paying quantities or to commence drilling or reworking
  17-20  operations on the lease as if production had ceased on that date
  17-21  under Section 52.023 of this code.
  17-22        (g)  This section may not be construed as abridging any
  17-23  rights or privileges conveyed under Chapter 287, Acts of the 47th
  17-24  Legislature, Regular Session, 1941 (Article 5366a, Vernon's Texas
  17-25  Civil Statutes).
  17-26        SECTION 25.  Subsection (a), Section 52.035, Natural
  17-27  Resources Code, is amended to read as follows:
   18-1        (a)  The governor may execute agreements on behalf of the
   18-2  state to obtain access to confidential and proprietary information
   18-3  from the secretary of the United States Department of the Interior
   18-4  regarding exploration, development, or production of oil, <or> gas,
   18-5  or other minerals on the outer continental shelf.  The governor may
   18-6  agree to waive sovereign immunity and other defenses as prescribed
   18-7  by this section, and may agree to indemnify the United States
   18-8  government from unauthorized disclosure of the information
   18-9  obtained.
  18-10        SECTION 26.  Section 52.076, Natural Resources Code, is
  18-11  amended to read as follows:
  18-12        Sec. 52.076.  Duty to Advertise.  (a)  The board may <shall
  18-13  advertise for proposals>:
  18-14              (1)  advertise for bids to lease riverbeds and channels
  18-15  for oil and gas development;
  18-16              (2)  advertise for bids to contract to develop the oil
  18-17  or gas under <to drill> riverbeds and channels on consideration
  18-18  involving compensation with oil and gas or money so that the state
  18-19  will receive a portion of the oil and gas as it is produced or
  18-20  advanced royalties paid in money; <and>
  18-21              (3)  advertise for bids to purchase oil and gas in
  18-22  place under riverbeds and channels <or recoverable> without
  18-23  requiring mineral development; and
  18-24              (4)  pool or bring an action to force pool unleased
  18-25  riverbeds and channels.
  18-26        (b)  The board shall advertise that the board will receive
  18-27  bids and award the right to lease, develop, or purchase under this
   19-1  section in the same manner <the proposals and conduct the sales> as
   19-2  provided in Subchapter D, Chapter 32, of this code and Subchapter B
   19-3  of this chapter.
   19-4        SECTION 27.  Subchapter C, Chapter 52, Natural Resources
   19-5  Code, is amended by adding Section 52.077 to read as follows:
   19-6        Sec. 52.077.  SPECIAL FEE.  Each bidder on a lease under this
   19-7  subchapter shall remit with each bid by separate payment a special
   19-8  sale fee in the amount and in the manner provided by Section 32.110
   19-9  of this code.
  19-10        SECTION 28.  Section 52.082, Natural Resources Code, is
  19-11  amended to read as follows:
  19-12        Sec. 52.082.  TERM OF LEASE.  A lease granted under this
  19-13  subchapter shall be for a primary term not to exceed 10 <five>
  19-14  years and for as long after that time as oil or gas is produced
  19-15  from the leased area.
  19-16        SECTION 29.  Section 52.088, Natural Resources Code, is
  19-17  amended to read as follows:
  19-18        Sec. 52.088.  ROYALTY RATE <AND DELAY RENTALS>.  <(a)>  The
  19-19  board shall set the royalty rate on production of oil and gas from
  19-20  riverbeds and channels leased under this subchapter.  The royalty
  19-21  rate set must be at least one-eighth of the gross production or the
  19-22  market value of the oil and gas produced  <In addition to the cash
  19-23  amount bid for a lease, the board shall lease the area for not less
  19-24  than one-eighth of the gross production of oil produced and saved
  19-25  or its value and not less than one-eighth of the gross production
  19-26  of gas produced and sold off the area or its value plus an amount
  19-27  determined by the board until production is secured.>
   20-1        <(b)  If production is secured in commercial quantities and
   20-2  the payment of royalty begins and continues to be paid, the lessee
   20-3  is exempt from further delay rental payments on the acreage.>
   20-4        <(c)  If production ceases and royalty is not paid, the
   20-5  lessee shall pay at the end of the lease year in which the royalty
   20-6  ceased to be paid and annually after that time in advance, in an
   20-7  amount determined by the board as long as the lessee desires to
   20-8  maintain the rights acquired under the lease, but not for more than
   20-9  five years from the date of the lease>.
  20-10        SECTION 30.  Section 52.131, Natural Resources Code, is
  20-11  amended by amending Subsection (e) and adding Subsection (j) to
  20-12  read as follows:
  20-13        (e)  If any royalty is not paid when due but is paid before
  20-14  the 31st day after the date on which it is due, a penalty of five
  20-15  percent of the royalty due shall be added to the unpaid amount due.
  20-16  If the royalty is not paid before the 31st day after the date on
  20-17  which it is due, a penalty of an additional five percent of the
  20-18  royalty due shall be imposed.  The minimum penalty under this
  20-19  section is $25.  The penalty may not be imposed in cases of title
  20-20  dispute as to the state's portion of the royalty or to that portion
  20-21  of the royalty in dispute as to the <fair> market value of the
  20-22  production.
  20-23        (j)  By rule, the board may provide procedures and standards
  20-24  for reduction of interest charged or penalties assessed under this
  20-25  section or any other interest or penalties assessed by the
  20-26  commissioner relating to unpaid or delinquent royalties.
  20-27        SECTION 31.  Section 52.133, Natural Resources Code, is
   21-1  amended to read as follows:
   21-2        Sec. 52.133.  Payment of Royalty in Kind.  (a)  <In this
   21-3  section, "royalty" means royalty payable in a sum of money equal to
   21-4  the market value for the general area where produced and when run
   21-5  or royalty that may be collected in kind.>
   21-6        <(b)>  Each oil or gas lease covering land leased by the
   21-7  board, by a board for lease other than the Board for Lease of
   21-8  University Lands, or by the surface owner of land under which the
   21-9  state owns the minerals, commonly referred to as Relinquishment Act
  21-10  land, which shall be subject to approval by the commissioner before
  21-11  it is effective, shall include a provision granting the board
  21-12  authorized to lease the land or the owner of the soil of
  21-13  Relinquishment Act land and the commissioner authority to take
  21-14  their royalty in kind, and the commissioner and the boards for
  21-15  lease may include any other reasonable provisions that are not
  21-16  inconsistent with this section.
  21-17        (b) <(c)>  The option to take the royalty in kind may be
  21-18  exercised at any time or from time to time on not less than 60
  21-19  days' notice to the holder of the lease.
  21-20        (c) <(d)>  The <board, the> commissioner, <each board for
  21-21  lease other than the Board for Lease of University Lands, or> the
  21-22  owner of the soil under Subchapter F of this chapter, or the
  21-23  commissioner, acting on the behalf of and at the direction of an
  21-24  owner of the soil under Subchapter F of this chapter, the board, or
  21-25  a board for lease  may negotiate and execute <sales> contracts or
  21-26  any other instruments or agreements necessary to dispose of their
  21-27  portion of the royalty taken in kind, including contracts for sale,
   22-1  transportation, or storage.
   22-2        (d) <(e)>  This section does not apply to or have any effect
   22-3  on the Board for Lease of University Lands or any lease executed on
   22-4  university land.
   22-5        (e) <(f)>  This section shall not be construed to surrender
   22-6  or in any way affect the right of the state or the owner of the
   22-7  soil under existing or future leases to receive royalty from its
   22-8  lessee on the basis of the <fair> market value of the production
   22-9  <produced> from state public land or land under the provisions of
  22-10  Subchapter F of this chapter.
  22-11        SECTION 32.  Section 52.151, Natural Resources Code, is
  22-12  amended to read as follows:
  22-13        Sec. 52.151.  Authorization to Operate Areas as Units.
  22-14  (a)  The commissioner, on behalf of the state or any fund that
  22-15  belongs to the state, may execute agreements that provide for
  22-16  operating areas as a unit for the exploration, development, and
  22-17  production of oil or gas or both and to commit to the agreements:
  22-18              (1)  the royalty interests in oil, <or> gas, or both
  22-19  oil and gas, reserved to the state or any fund of the state by law,
  22-20  in a patent, in a contract of sale, or under the terms of an oil
  22-21  and gas lease legally executed by an official, board, agent,
  22-22  agency, or authority of the state; or
  22-23              (2)  the free royalty interests, whether leased or
  22-24  unleased, reserved to the state pursuant to Section 51.201 or
  22-25  51.054 of this code.
  22-26        (b)  Before executing an agreement authorized by Subsection
  22-27  (a) of this section, the <The> commissioner must find that the
   23-1  agreement is in the best interest of the state.
   23-2        SECTION 33.  Section 52.152, Natural Resources Code, is
   23-3  amended to read as follows:
   23-4        Sec. 52.152.  Approval of <Unit> Agreements.  (a)  An
   23-5  agreement must be approved by the board and executed by the
   23-6  commissioner to be effective if the agreement <that (1)> commits:
   23-7              (1)  a <the> royalty interest in land belonging to the
   23-8  permanent school fund or the asylum funds, in riverbeds, inland
   23-9  lakes, and channels, or in an area within tidewater limits,
  23-10  including islands, lakes, bays, inlets, marshes, reefs, and the bed
  23-11  of the sea; or
  23-12              (2) the free royalty interests, whether leased or
  23-13  unleased, reserved to the state pursuant to Section 51.201 or
  23-14  51.054 of this code.
  23-15        (b)  An <must be approved by the board and executed by the>
  23-16  owner of the soil who is subject to <if the agreement covers land
  23-17  leased for oil and gas under> Subchapter F of this chapter may
  23-18  grant to a lessee prior authority to pool or unitize the interest
  23-19  of the owner in a lease executed under that subchapter.  For the
  23-20  provisions of an agreement to bind the interest of an owner of the
  23-21  soil who is subject to Subchapter F of this chapter and who has not
  23-22  granted the lessee prior authorization to pool or unitize the
  23-23  owner's interest in an oil and gas lease executed under that
  23-24  subchapter, the agreement must be executed by the owner of the
  23-25  soil.
  23-26        (c) <(b)>  An agreement that commits any <the royalty>
  23-27  interest in any land <or an area> not listed in Subsection (a) of
   24-1  this section must be approved by the board, official, agent,
   24-2  agency, or authority of the state which has the authority to lease
   24-3  or to approve the lease of the land for oil and gas and must be
   24-4  executed by the commissioner to be effective.
   24-5        SECTION 34.  Section 52.153, Natural Resources Code, is
   24-6  amended to read as follows:
   24-7        Sec. 52.153.  PROVISIONS OF AGREEMENT <PROVISIONS>.  (a)  An
   24-8  agreement executed under this subchapter may include the following
   24-9  provisions <The agreement to operate areas as units may provide>:
  24-10              (1)  that operations incident to drilling a well on any
  24-11  portion of a unit shall be considered for all purposes to be
  24-12  conduct of the operations on each <separately owned> tract in the
  24-13  unit <by the several owners>;
  24-14              (2)  that production allocated by the agreement to each
  24-15  tract included in the unit when produced shall be considered for
  24-16  all purposes to have been production <produced> from the tract;
  24-17              (3)  that the interest reserved to or provided for the
  24-18  state or any of its funds on production from any tract included in
  24-19  the unit shall be paid only on that portion of the production from
  24-20  the unit that is allocated to the tract under the agreement <and
  24-21  lease, with respect to the interest of the state, shall be
  24-22  effective as long as oil or gas or both are produced from the unit
  24-23  in paying quantities and royalties are paid to the state>; and
  24-24              (4)  that each lease <royalties reserved to the state
  24-25  or to any fund of the state on production from any tract or portion
  24-26  of a tract> included in the unit shall remain in effect as long as
  24-27  the agreement remains in effect and that on termination of the
   25-1  agreement each lease shall continue in effect under the terms and
   25-2  conditions of the lease <be paid only on the portion of the
   25-3  production allocated to the tract by the agreement>.
   25-4        (b)  The agreement may include any other terms and conditions
   25-5  the commissioner or any <provision which the> board, official,
   25-6  agent,  agency, or authority of the state that <which> has the
   25-7  authority to lease or to approve a lease <the leasing> of the land
   25-8  for oil and gas may consider to be in the best interest  <necessary
   25-9  for the protection of the interests> of the state.
  25-10        SECTION 35.  Subchapter E, Chapter 52, Natural Resources
  25-11  Code, is amended by adding Section 52.154 to read as follows:
  25-12        Sec. 52.154.  RATIFICATIONS AND OTHER AGREEMENTS.  (a)  The
  25-13  board may approve, by rule or order, a ratification or other
  25-14  agreement that includes in the benefits of production a mineral or
  25-15  royalty interest in land belonging to the permanent school fund or
  25-16  the asylum funds.
  25-17        (b)  An agreement approved by the board under this section
  25-18  must be executed by the commissioner to be effective.
  25-19        (c)  A ratification or other agreement that commits any of
  25-20  the interests listed in Subsection (a) of this section in land not
  25-21  belonging to the permanent school fund or the asylum funds must be
  25-22  approved by the board, official, agent, agency, or authority of the
  25-23  state that has the authority to lease or to approve the lease of
  25-24  the land for oil and gas and must be executed by the commissioner
  25-25  to be effective.
  25-26        SECTION 36.  Section 52.175, Natural Resources Code, is
  25-27  amended to read as follows:
   26-1        Sec. 52.175.  LEASE OF OIL AND GAS AFTER FORFEITURE.  When
   26-2  the relinquishment or agency right herein granted has been
   26-3  forfeited, the land shall be subject to lease for oil and gas under
   26-4  the procedure provided by law for the leasing of unsold surveyed
   26-5  public school lands.  The substantive provisions of Subchapter B of
   26-6  this chapter and Subchapters D and E, Chapter 32, of this code
   26-7  shall apply to the oil and gas lease.  No oil and gas lease shall
   26-8  be executed which provides for a royalty of less than one-eighth,
   26-9  payable to the state for the benefit of the permanent free school
  26-10  fund.  The owner of the soil shall not be entitled to any revenue
  26-11  generated by a lease executed pursuant to this section.  Upon the
  26-12  termination or expiration of a lease so executed by the
  26-13  Commissioner of the General Land Office, the rights of the surface
  26-14  owner to act under this law shall be ipso facto reinstated.
  26-15        SECTION 37.  Subsection (a), Section 52.186, Natural
  26-16  Resources Code, is amended to read as follows:
  26-17        (a)  If an owner of the soil or of any undivided interest
  26-18  therein of any land subject to the terms of this subchapter or
  26-19  Subchapter C, Chapter 53, of this code is found to be unavailable
  26-20  under Subsection (b) of this section to act as the state's agent
  26-21  for leasing oil and gas or any mineral leased under Subchapter C,
  26-22  Chapter 53, of this code, such land or undivided interest therein
  26-23  shall be subject to lease for the applicable minerals under the
  26-24  procedure provided by Subchapter B of this chapter <Chapter 52> for
  26-25  the leasing of unsold surveyed public school lands.  The
  26-26  substantive provisions of Subchapter B of this chapter and
  26-27  Subchapters D and E, Chapter 32, of this code shall apply to a
   27-1  lease of land subject to lease under this subchapter.  The
   27-2  substantive provisions of Subchapter E, Chapter 53, of this code
   27-3  and Subchapters D and E, Chapter 32, of this code shall apply to a
   27-4  lease of land subject to lease under Subchapter C, Chapter 53, of
   27-5  this code.  Subject to the provisions of Subsection (b)(4) of this
   27-6  section, the owner of the soil shall not be entitled to any revenue
   27-7  generated by a lease executed pursuant to this section.
   27-8        SECTION 38.  Section 52.291, Natural Resources Code, is
   27-9  amended to read as follows:
  27-10        Sec. 52.291.  Coverage.  The following persons, agencies, and
  27-11  entities are subject to the provisions of Sections 52.292 through
  27-12  52.293 of this code:
  27-13              (1)  the commissioner;
  27-14              (2)  the board;
  27-15              (3)  boards for lease of land owned by a department,
  27-16  board, or agency of the state created by Chapter 34 of this code;
  27-17              (4)  the Board for Lease of University Lands;
  27-18              (5)  the Board of Regents of Texas A&M University;
  27-19              (6)  the Board of Regents of Texas Tech University;
  27-20              (7)  the Board of Directors of Texas A&I University;
  27-21              (8)  the Board of Regents, State Senior Colleges;
  27-22              (9)  the Board of Regents of the University of Houston;
  27-23              (10)  any other board of regents or other governing
  27-24  board of a state-supported institution of higher learning having
  27-25  authority to execute oil and<,> gas<, and mineral> leases on land
  27-26  owned by the institution;
  27-27              (11)  an owner of land or minerals in this state whose
   28-1  authority to lease the land or minerals as agent for the state
   28-2  arises in whole or in part from what is commonly known as the
   28-3  Relinquishment Act, codified in Subchapter F of this chapter;
   28-4              (12)  the Board for Lease of State Park Lands;
   28-5              (13)  the Board for Lease of the Texas Department of
   28-6  Criminal Justice <Corrections>; and
   28-7              (14)  the commissioners court of any county in this
   28-8  state.
   28-9        SECTION 39.  Section 52.292, Natural Resources Code, is
  28-10  amended to read as follows:
  28-11        Sec. 52.292.  Prohibited Leases.  It is illegal for any
  28-12  person included in Section 52.291 of this code to execute an oil
  28-13  and<,> gas<, or mineral> lease on land on which he is authorized by
  28-14  law to execute the lease unless the lease includes the terms
  28-15  provided in Section 52.293 of this code.
  28-16        SECTION 40.  Section 52.294, Natural Resources Code, is
  28-17  amended to read as follows:
  28-18        Sec. 52.294.  Prerequisite to Filing Leases.  The
  28-19  commissioner shall not receive and file an oil and<,> gas<, and
  28-20  mineral> lease required to be filed by law unless the lease
  28-21  includes the terms and conditions provided in Section 52.293 of
  28-22  this code.
  28-23        SECTION 41.  Section 52.295, Natural Resources Code, is
  28-24  amended to read as follows:
  28-25        Sec. 52.295.  Certain Leases Null, Void, and of No Force and
  28-26  Effect.  An oil and<,> gas<, and mineral> lease executed or
  28-27  received and filed in violation of the provisions of this
   29-1  subchapter is null, void, and of no force and effect.
   29-2        SECTION 42.  Section 52.297, Natural Resources Code, is
   29-3  amended to read as follows:
   29-4        Sec. 52.297.  COMPENSATION FOR <Payment of> Damages FROM
   29-5  <for> Use of Surface.  (a)  Leases issued under Subchapter B of
   29-6  this chapter  for unsold surveyed or unsurveyed school land, other
   29-7  than land included in islands, saltwater lakes, bays, inlets,
   29-8  marshes, and reefs owned by the state in tidewater limits and other
   29-9  than that portion of the Gulf of Mexico within the jurisdiction of
  29-10  the state, must include a provision requiring the compensation for
  29-11  <payment of> damages from <for> the use of the surface in
  29-12  prospecting for, exploring, developing, or producing the leased
  29-13  minerals.
  29-14        (b)  The commissioner by rule shall set the procedure for
  29-15  receiving compensation <amount of and shall collect money> for
  29-16  damages to the surface of land dedicated to the permanent school
  29-17  fund.
  29-18        (c)  Money collected for surface damages shall be deposited
  29-19  in a special fund account in the State Treasury to be used for
  29-20  conservation, reclamation, or construction of permanent
  29-21  improvements on land that belongs to the permanent school fund.
  29-22        (d)  The special fund account must be an interest-bearing
  29-23  account, and the interest received on the account shall be
  29-24  deposited in the State Treasury to the credit of the available
  29-25  school fund.
  29-26        (e)  Money collected under this section and designated for
  29-27  the construction of permanent improvements as provided by this
   30-1  section must be used not later than two years after the date on
   30-2  which the money is collected.
   30-3        (f)  Any money that remains in the special fund account for
   30-4  longer than two years shall be deposited in the State Treasury to
   30-5  the credit of the permanent school fund.
   30-6        (g)  The compensation for <payment of> damages under this
   30-7  section is in addition to any bonus, rental, royalty, or other
   30-8  payment required by the lease.
   30-9        SECTION 43.  Subdivision (3), Section 52.321, Natural
  30-10  Resources Code, is amended to read as follows:
  30-11              (3)  "Public school land" means land dedicated by the
  30-12  constitution or laws of this state to the permanent <free> school
  30-13  fund, and specifically includes land with a mineral classification
  30-14  under Subchapter F of this chapter  in which the state has retained
  30-15  the oil and gas interest and areas within tidewater limits <or the
  30-16  portion of the Gulf of Mexico that is under the jurisdiction of
  30-17  this state>.
  30-18        SECTION 44.  Subsection (a), Section 52.324, Natural
  30-19  Resources Code, is amended to read as follows:
  30-20        (a)  The commissioner:
  30-21              (1)  as a condition of issuing a permit, shall collect
  30-22  reasonable fees from the applicant in an amount determined by the
  30-23  commissioner;
  30-24              (2)  may require a permittee to furnish to the
  30-25  commissioner, upon the commissioner's request, copies of maps,
  30-26  plats, reports, data, and any other information in the possession
  30-27  of the permittee that relates to the progress or results of an
   31-1  exploration under a permit; provided however, the commissioner
   31-2  shall not require a permittee to furnish any of its interpretive
   31-3  data;
   31-4              (3)  shall by rule require a permittee to restore land
   31-5  explored under the permit as nearly as is practicable to its
   31-6  condition immediately prior to the exploration;
   31-7              (4)  shall by rule determine <set> the procedure for
   31-8  receiving compensation <amount of and shall collect money> for
   31-9  damages to the surface of public school land except land with a
  31-10  mineral classification under Subchapter F of this chapter;  and
  31-11              (5)  may make any other rules relating to geophysical
  31-12  or geochemical explorations, permits, or permittees the
  31-13  commissioner considers appropriate.
  31-14        SECTION 45.  Section 53.001, Natural Resources Code, is
  31-15  amended by adding Subdivision (3) to read as follows:
  31-16              (3)  "Board" means the School Land Board.
  31-17        SECTION 46.  Subsection (c), Section 53.012, Natural
  31-18  Resources Code, is amended to read as follows:
  31-19        (c)  The commissioner may determine the contents of an
  31-20  application <Each application shall be accompanied by a rental
  31-21  payment of not less than 25 cents an acre>.
  31-22        SECTION 47.  Subsections (a) and (b), Section 53.013, Natural
  31-23  Resources Code, are amended to read as follows:
  31-24        (a)  After receipt of the rental payment set by the
  31-25  commissioner, the <The> commissioner shall issue to the first
  31-26  applicant a permit to prospect the area designated in the
  31-27  applicant's <his> application for a period of one year from the
   32-1  date the <his> application is filed.
   32-2        (b)  After receipt of an additional rental payment set by the
   32-3  commissioner, the <The> commissioner may extend the permit for a
   32-4  period of one year <on payment of an annual rental of not less than
   32-5  25 cents an acre>.
   32-6        SECTION 48.  Subsections (b) and (c), Section 53.015, Natural
   32-7  Resources Code, are amended to read as follows:
   32-8        (b)  An application to lease must designate the specific
   32-9  minerals the permittee is applying to lease.  The commissioner may
  32-10  determine any additional information an application must contain
  32-11  <The application shall be accompanied by the first lease payment of
  32-12  not less than $2 an acre>.
  32-13        (c)  If the area designated for lease in the application is
  32-14  less than the area covered by the permit, the applicant shall
  32-15  include with the <his> application field notes prepared by the
  32-16  county surveyor or by a licensed state land surveyor describing the
  32-17  land designated.
  32-18        SECTION 49.  Section 53.016, Natural Resources Code, is
  32-19  amended to read as follows:
  32-20        Sec. 53.016.  ISSUANCE OF LEASE.  (a)  After receipt of the
  32-21  bonus payment set by the commissioner, the <The> lease shall be
  32-22  issued by the commissioner under the provisions of this subchapter
  32-23  and shall be for a primary term not to exceed 20 years and as long
  32-24  after that time as the minerals are produced in paying quantities.
  32-25        (b)  The commissioner may include in the lease any other
  32-26  provision the commissioner <he> considers necessary for protection
  32-27  of the interests of the state.
   33-1        SECTION 50.  Section 53.020, Natural Resources Code, is
   33-2  amended to read as follows:
   33-3        Sec. 53.020.  ASSIGNMENT AND TRANSFER <OF LEASE>.  <(a)>  A
   33-4  lease issued under this subchapter may be transferred or assigned
   33-5  at any time in the manner provided by Section 52.026 of this code
   33-6  <may be assigned in quantities of not less than 40 acres, but if
   33-7  there are fewer than 40 acres remaining in the tract originally
   33-8  leased, the lesser area may be assigned.>
   33-9        <(b)  The assignment shall be recorded in the county in which
  33-10  the land is located, and within 90 days after it is recorded a
  33-11  certified copy of the assignment, certified by the county clerk
  33-12  from his records, shall be sent to the land office, together with a
  33-13  filing fee set by the commissioner in an amount not less than $1
  33-14  for each tract affected>.
  33-15        SECTION 51.  Section 53.024, Natural Resources Code, is
  33-16  amended to read as follows:
  33-17        Sec. 53.024.  PENALTY AND INTEREST <OTHER LEASE PROVISIONS>.
  33-18  A lease issued under this subchapter shall be subject to Sections
  33-19  52.131(e) through (j) <For any lease issued under this chapter, the
  33-20  penalty and interest on delinquent royalties, and the penalty for
  33-21  failure to file a report, are assessed in the same manner and in
  33-22  the same amounts as provided in Section 52.131> of this code.
  33-23        SECTION 52.  Subchapter B, Chapter 53, Natural Resources
  33-24  Code, is amended by adding Sections 53.025, 53.026, 53.027, and
  33-25  53.028 to read as follows:
  33-26        Sec. 53.025.  LEASE RELINQUISHMENT.  A lease issued under
  33-27  this subchapter may be relinquished to the state at any time in the
   34-1  manner provided by Section 52.027 of this code.
   34-2        Sec. 53.026.  IN KIND ROYALTY.  (a)  The commissioner or the
   34-3  commissioner acting on behalf of and at the direction of the board
   34-4  or a board for lease may negotiate and execute a contract or any
   34-5  other instrument or agreement necessary to dispose of the royalty
   34-6  taken in kind, including a contract for sale, transportation, or
   34-7  storage.
   34-8        (b)  This section shall not be construed to surrender or in
   34-9  any way affect the right of the state under an existing or future
  34-10  lease to receive monetary royalty from its lessee.
  34-11        Sec. 53.027.  CONTRACTS AND AGREEMENTS.  On the land office's
  34-12  written request, mailed to the lessee's address as shown on its
  34-13  lease or otherwise properly changed in conformity with the terms of
  34-14  the lease, a copy of a contract for the sale or processing of
  34-15  minerals leased under this subchapter and any subsequent agreement
  34-16  or amendment to the contract shall be filed in the land office
  34-17  within 30 days after the date the land office mails the written
  34-18  request.  The land office shall treat a contract, agreement, or
  34-19  amendment filed in the land office as confidential unless otherwise
  34-20  authorized by the lessee.
  34-21        Sec. 53.028.  AUDIT INFORMATION CONFIDENTIAL.  (a)  All
  34-22  information secured, derived, or obtained during the course of an
  34-23  inspection or examination of books, accounts, reports, or other
  34-24  records as provided by this code, a rule, or a lease provision is
  34-25  confidential and may not be used publicly, opened for public
  34-26  inspection, or disclosed, except for information in a lien filed
  34-27  under this chapter and except as permitted under Subsection (d) of
   35-1  this section.
   35-2        (b)  All information made confidential in this section is not
   35-3  subject to subpoena directed to the commissioner, the attorney
   35-4  general, or the governor except in a judicial or administrative
   35-5  proceeding to which this state is a party.
   35-6        (c)  The commissioner or the attorney general may use
   35-7  information made confidential by this section and contracts made
   35-8  confidential by Section 53.027 of this code to enforce this chapter
   35-9  or may authorize their use in judicial or administrative
  35-10  proceedings to which this state is a party.
  35-11        (d)  This section does not prohibit:
  35-12              (1)  the delivery of information made confidential by
  35-13  this section to the lessee or its successor, receiver, executor,
  35-14  guarantor, administrator, assignee, or representative;
  35-15              (2)  the publication of statistics classified to
  35-16  prevent the identification of a particular audit or items in a
  35-17  particular audit;
  35-18              (3)  the release of information that is otherwise
  35-19  available to the public; or
  35-20              (4)  the release of information concerning the amount
  35-21  of royalty assessed as a result of an examination conducted under
  35-22  this code, a rule, or a lease provision or the release of other
  35-23  information that would have been properly included in reports
  35-24  required under this code, a rule, or a lease provision.
  35-25        SECTION 53.  Subsection (d), Section 53.074, Natural
  35-26  Resources Code, is amended to read as follows:
  35-27        (d)  Leasing Procedure When Surface Owner's Agency Rights
   36-1  Have Been Forfeited.  When the surface owner's agency rights have
   36-2  been forfeited in accordance with Subsection (c) of this section,
   36-3  the minerals subject to lease under this subchapter can then be
   36-4  leased under the leasing procedure set out for the lease of oil and
   36-5  gas under Section 52.175 of this code.  The substantive provisions
   36-6  of Subchapter E of this chapter and Subchapters D and E, Chapter
   36-7  32, of this code shall apply to the lease.
   36-8        SECTION 54.  Subchapter C, Chapter 53, Natural Resources
   36-9  Code, is amended by adding Sections 53.075, 53.076, 53.077, 53.078,
  36-10  53.079, and 53.080 to read as follows:
  36-11        Sec. 53.075.  ASSIGNMENT AND TRANSFER.  A lease issued under
  36-12  this subchapter may be assigned or transferred at any time in the
  36-13  manner provided by Section 52.026 of this code.
  36-14        Sec. 53.076.  LEASE RELINQUISHMENT.  A lease issued under
  36-15  this subchapter may be relinquished to the state at any time in the
  36-16  manner provided by Section 52.027 of this code.
  36-17        Sec. 53.077.  IN KIND ROYALTY.  (a)  The commissioner, each
  36-18  owner of the soil under this subchapter, or the commissioner acting
  36-19  on the behalf of and at the direction of an owner of the soil under
  36-20  this subchapter may negotiate and execute a contract or any other
  36-21  instrument or agreement necessary to dispose of the royalty taken
  36-22  in kind, including a contract for sale, transportation, or storage.
  36-23        (b)  This section shall not be construed to surrender or in
  36-24  any way affect the right of the state or the owner of the soil
  36-25  under an existing or future lease to receive monetary royalty from
  36-26  its lessee.
  36-27        Sec. 53.078.  PENALTY AND INTEREST.  A lease issued under
   37-1  this subchapter shall be subject to Sections 52.131(e) through (j)
   37-2  of this code.
   37-3        Sec. 53.079.  CONTRACTS AND AGREEMENTS.  On the land office's
   37-4  written request, mailed to the lessee's address as shown on its
   37-5  lease or otherwise properly changed in conformity with the terms of
   37-6  the lease, a copy of a contract for the sale or processing of
   37-7  minerals leased under this subchapter and any subsequent agreement
   37-8  or amendment to the contract shall be filed in the land office
   37-9  within 30 days after the date the land office mails the written
  37-10  request.  The land office shall treat a contract, agreement, or
  37-11  amendment filed in the land office as confidential unless otherwise
  37-12  authorized by the lessee.
  37-13        Sec. 53.080.  AUDIT INFORMATION CONFIDENTIAL.  (a)  All
  37-14  information secured, derived, or obtained during the course of an
  37-15  inspection or examination of books, accounts, reports, or other
  37-16  records as provided by Section 53.068 of this code, a rule, or a
  37-17  lease provision is confidential and may not be used publicly,
  37-18  opened for public inspection, or disclosed, except for information
  37-19  in a lien filed under this chapter and except as permitted under
  37-20  Subsection (d) of this section.
  37-21        (b)  All information made confidential by this section is not
  37-22  subject to subpoena directed to the commissioner, the attorney
  37-23  general, or the governor except in a judicial or administrative
  37-24  proceeding to which this state is a party.
  37-25        (c)  The commissioner or the attorney general may use
  37-26  information made confidential by this section and contracts made
  37-27  confidential by Section 53.079 of this code to enforce this chapter
   38-1  or may authorize their use in judicial or administrative
   38-2  proceedings to which this state is a party.
   38-3        (d)  This section does not prohibit:
   38-4              (1)  the delivery of information made confidential by
   38-5  this section to the lessee or its successor, receiver, executor,
   38-6  guarantor, administrator, assignee, or representative;
   38-7              (2)  the publication of statistics classified to
   38-8  prevent the identification of a particular audit or items in a
   38-9  particular audit;
  38-10              (3)  the release of information that is otherwise
  38-11  available to the public; or
  38-12              (4)  the release of information concerning the amount
  38-13  of royalty assessed as a result of an examination conducted under
  38-14  Section 53.068 of this code, a rule, or a lease provision or the
  38-15  release of other information that would have been properly included
  38-16  in reports required under Section 53.068 of this code, a rule, or a
  38-17  lease provision.
  38-18        SECTION 55.  Section 53.111, Natural Resources Code, is
  38-19  amended to read as follows:
  38-20        Sec. 53.111.  Authority to Operate an Area as a Unit for
  38-21  Production of Sulphur.  The <Subject to the provisions of this
  38-22  subchapter, the> commissioner<,> on behalf of the state or any fund
  38-23  that belongs to the state <of its funds,> may execute agreements
  38-24  that provide for operating <the operation of> areas as a unit for
  38-25  the exploration, development, and production of sulphur and may
  38-26  commit to the agreements:
  38-27              (1)  the royalty interests in sulphur reserved to <or
   39-1  provided for> the state or any fund of the state by law in a<, in
   39-2  or in connection with any> patent, award, mining claim, or contract
   39-3  of sale or under the terms of any lease legally executed <made> by
   39-4  an official, board, agent, agency, or authority of the state; or
   39-5              (2)  the free royalty interests, whether leased or
   39-6  unleased, reserved to the state under Section 51.201 or 51.054 of
   39-7  this code.
   39-8        SECTION 56.  Section 53.112, Natural Resources Code, is
   39-9  amended to read as follows:
  39-10        Sec. 53.112.  APPROVAL OF CERTAIN AGREEMENTS BY SCHOOL LAND
  39-11  BOARD.  (a)  An agreement must be approved by the board and
  39-12  executed by the commissioner to be effective if the agreement
  39-13  <authorized by Section 53.111 of this code that> commits:
  39-14              (1)  a royalty interest <interests> in land belonging
  39-15  <dedicated> to the permanent <free> school fund or <and> the asylum
  39-16  funds, in riverbeds, inland lakes, channels, or <and> areas within
  39-17  tidewater limits, including islands, lakes, bays, inlets, marshes,
  39-18  reefs, and the bed of the sea; or
  39-19              (2)  the free royalty interests, whether leased or
  39-20  unleased, reserved to the state under Section 51.201 or 51.054 of
  39-21  this code.
  39-22        (b)  An owner of the soil who is subject to Subchapter C of
  39-23  this chapter may grant to a lessee prior authority to pool or
  39-24  unitize the interest of the owner in a lease executed under that
  39-25  subchapter.  For the agreement to bind the interest of an owner of
  39-26  the soil who is subject to Subchapter C of this chapter and who has
  39-27  not granted the lessee prior authorization to pool or unitize the
   40-1  interest of the owner in a sulphur lease executed under that
   40-2  subchapter, the agreement must be executed by the owner of the soil
   40-3  <must be approved by the school land board and must be executed by
   40-4  the owners of the surface if the agreements cover land leased for
   40-5  sulphur under Subchapter C of this chapter>.
   40-6        SECTION 57.  Section 53.113, Natural Resources Code, is
   40-7  amended to read as follows:
   40-8        Sec. 53.113.  APPROVAL OF <OTHER> AGREEMENTS.  An agreement
   40-9  <Agreements> that commits <commit> the royalty interest in any land
  40-10  <that is> not listed in <covered by> Section 53.112 of this code
  40-11  must be approved by the board, official, agent, agency, or
  40-12  authority of the state which has the authority to lease or to
  40-13  approve the <a> lease of the land <or area> for sulphur and must be
  40-14  executed by the commissioner to be effective.
  40-15        SECTION 58.  Section 53.114, Natural Resources Code, is
  40-16  amended to read as follows:
  40-17        Sec. 53.114.  Commissioner's Approval.  Before executing an
  40-18  <An> agreement authorized by Section 53.111 of this code, <must be
  40-19  found by> the commissioner must find that the agreement is <to be>
  40-20  in the best interest of the state.
  40-21        SECTION 59.  Section 53.115, Natural Resources Code, is
  40-22  amended to read as follows:
  40-23        Sec. 53.115.  Provisions of Agreement.  (a)  An agreement
  40-24  executed under this subchapter may include the following
  40-25  provisions:
  40-26              (1)  that operations incident to <the> drilling <of> a
  40-27  well on any portion of a <the> unit shall be <are> considered for
   41-1  all purposes to be <the> conduct of the operations on each tract in
   41-2  the unit;
   41-3              (2)  that <the> production allocated by the agreement
   41-4  to each tract included in the unit shall be considered for all
   41-5  purposes to have been production <after production to be produced>
   41-6  from the tract;
   41-7              (3)  that the <royalty> interest reserved to or
   41-8  provided for the state or any of its funds on production from any
   41-9  tract included in the unit shall be paid only on that portion of
  41-10  the production from the unit that <which> is allocated to the tract
  41-11  under the agreement; and
  41-12              (4)  that each lease included in the unit shall remain
  41-13  in effect so long as the agreement remains in effect and that on
  41-14  termination of the agreement each lease shall continue in effect
  41-15  under the terms and conditions <provisions> of the lease.
  41-16        (b)  The agreement may include any other terms and<,>
  41-17  conditions<, and provisions> the commissioner or any board,
  41-18  official, agent, agency, or authority of the state that has the
  41-19  authority to lease or to approve a lease of the land <or area> for
  41-20  sulphur may consider to be in the best interest of the state.
  41-21        SECTION 60.  Subchapter D, Chapter 53, Natural Resources
  41-22  Code, is amended by adding Section 53.118 to read as follows:
  41-23        Sec. 53.118.  RATIFICATIONS AND OTHER AGREEMENTS.  (a)  The
  41-24  board may approve, by rule or order, a ratification or other
  41-25  agreement that includes in the benefits of production a mineral or
  41-26  royalty interest in land belonging to the permanent school fund or
  41-27  the asylum funds.
   42-1        (b)  An agreement approved by the board under this section
   42-2  must be executed by the commissioner to be effective.
   42-3        (c)  A ratification or other agreement that commits any of
   42-4  the interests listed by Subsection (a) of this section in land not
   42-5  belonging to the permanent school fund or the asylum funds must be
   42-6  approved by the board, official, agent, agency, or authority of the
   42-7  state that has the authority to lease or to approve the lease of
   42-8  the land for sulphur and must be executed by the commissioner to be
   42-9  effective.
  42-10        SECTION 61.  Section 53.152, Natural Resources Code, is
  42-11  amended to read as follows:
  42-12        Sec. 53.152.  Laws Applicable to Leases.  <(a)>  Leases of
  42-13  land described by Section 53.151 of this code shall be made in the
  42-14  same procedural manner as leases of that land for oil and gas under
  42-15  Chapter 52 of this code.
  42-16        <(b)  Sections 52.034 and 52.086 of this code do not apply to
  42-17  leases of coal, lignite, sulphur, salt, and potash under this
  42-18  subchapter.>
  42-19        SECTION 62.  Section 53.153, Natural Resources Code, is
  42-20  amended to read as follows:
  42-21        Sec. 53.153.  Conditions of Lease.  (a)  Coal, lignite,
  42-22  sulphur, salt, and potash may be leased together or separately.
  42-23        (b)  A lease granted under this subchapter shall be for a
  42-24  primary term not to exceed 20 years and as long after that time as
  42-25  the minerals are produced in paying quantities.
  42-26        SECTION 63.  Section 53.154, Natural Resources Code, is
  42-27  amended to read as follows:
   43-1        Sec. 53.154.  ROYALTY RATE <AND DELAY RENTALS>.  The board
   43-2  shall set the royalty rate on and determine the market value
   43-3  <(a)  In addition to the cash amount bid for a lease, the board
   43-4  shall lease the area for not less than one-eighth> of the gross
   43-5  production of sulphur, <or the value of the sulphur that may be
   43-6  produced or that may be produced and sold off the area and not less
   43-7  than one-sixteenth of the value of the> coal, lignite, salt, and
   43-8  potash from land leased under this subchapter.  The royalty rate
   43-9  shall be at least one-eighth of the gross production or the market
  43-10  value of the sulphur produced and at least one-sixteenth of the
  43-11  gross production or the market value of the coal, lignite, salt,
  43-12  and potash produced.  If the board determines that a lesser royalty
  43-13  rate is necessary to promote economic development of coal, lignite,
  43-14  salt, or potash, the board may lease coal, lignite, salt, or potash
  43-15  under this subchapter for a lesser royalty rate, but the board may
  43-16  not lease coal, lignite, salt, or potash for a royalty rate of less
  43-17  than 20 cents for a short ton <that may be produced plus an amount
  43-18  determined by the board until production is secured.>
  43-19        <(b)  If production is secured in commercial quantities and
  43-20  the payment of royalty begins and continues to be paid, the lessee
  43-21  is exempt from further delay rental payments on the acreage.>
  43-22        <(c)  If production ceases and royalty is not paid, the
  43-23  lessee shall pay at the end of the lease year in which the royalty
  43-24  ceased to be paid and annually after that time in advance, in an
  43-25  amount determined by the board as long as the lessee desires to
  43-26  maintain the rights acquired under the lease, but not for more than
  43-27  five years from the date of the lease>.
   44-1        SECTION 64.  Section 53.155, Natural Resources Code, is
   44-2  amended to read as follows:
   44-3        Sec. 53.155.  COMPENSATION FOR <PAYMENT OF> DAMAGES FROM
   44-4  <FOR> USE OF SURFACE.  (a)  Leases issued under Subchapter B or E
   44-5  of this chapter  for unsold surveyed or unsurveyed school land,
   44-6  other than land included in islands, saltwater lakes, bays, inlets,
   44-7  marshes, and reefs owned by the state in tidewater limits and other
   44-8  than that portion of the Gulf of Mexico within the jurisdiction of
   44-9  the state, must include a provision requiring compensation for <the
  44-10  payment of> damages from <for> the use of the surface in
  44-11  prospecting for, exploring, developing, or producing the leased
  44-12  minerals.
  44-13        (b)  The commissioner by rule shall set the procedure for
  44-14  receiving compensation <amount of and shall collect money> for
  44-15  damages to the surface of land dedicated to the permanent school
  44-16  fund.
  44-17        (c)  Money collected for surface damages shall be deposited
  44-18  in a special fund account in the State Treasury to be used for
  44-19  conservation, reclamation, or constructing permanent improvements
  44-20  on land that belongs to the permanent school fund.
  44-21        (d)  The special fund account must be an interest-bearing
  44-22  account, and the interest received on the account shall be
  44-23  deposited in the State Treasury to the credit of the available
  44-24  school fund.
  44-25        (e)  Money collected under this section and designated for
  44-26  the construction of permanent improvements as provided by this
  44-27  section must be used not later than two years after the date on
   45-1  which the money is collected.
   45-2        (f)  Any money that remains in the special fund account for
   45-3  longer than two years shall be deposited in the State Treasury to
   45-4  the credit of the permanent school fund.
   45-5        (g)  Compensation for <The payment of> damages under this
   45-6  section is in addition to any bonus, rental, royalty, or other
   45-7  payment required by the lease.
   45-8        SECTION 65.  Subchapter E, Chapter 53, Natural Resources
   45-9  Code, is amended by adding Section 53.156 to read as follows:
  45-10        Sec. 53.156.  CONTRACTS AND AGREEMENTS.  On the land office's
  45-11  written request, mailed to the lessee's address as shown on its
  45-12  lease or otherwise properly changed in conformity with the terms of
  45-13  the lease, a copy of a contract for the sale or processing of
  45-14  minerals leased under this subchapter and any subsequent agreement
  45-15  or amendment to the contract shall be filed in the land office
  45-16  within 30 days after the date the land office mails the written
  45-17  request.  The land office shall treat a contract, agreement, or
  45-18  amendment filed in the land office as confidential unless otherwise
  45-19  authorized by the lessee.
  45-20        SECTION 66.  Section 53.161, Natural Resources Code, is
  45-21  amended by amending Subsection (4) and adding Subsection (7) to
  45-22  read as follows:
  45-23              (4)  "Public school land" means land dedicated by the
  45-24  constitution or laws of this state to the permanent <free> school
  45-25  fund, but does not include land with a mineral classification
  45-26  described in Section 53.061 of this chapter in which the state has
  45-27  retained the minerals, nor does it include areas within tidewater
   46-1  limits <or the portion of the Gulf of Mexico that is under the
   46-2  jurisdiction of this state>.
   46-3              (7)  "Areas within tidewater limits" means islands,
   46-4  saltwater lakes, bays, inlets, marshes, and reefs within tidewater
   46-5  limits and that portion of the Gulf of Mexico within the
   46-6  jurisdiction of Texas.
   46-7        SECTION 67.  Subsection (b), Section 53.162, Natural
   46-8  Resources Code, is amended to read as follows:
   46-9        (b)  Every person who is authorized to conduct a geophysical
  46-10  or geochemical exploration on public school land shall comply with
  46-11  the commissioner's rules relating to such exploration.  A person
  46-12  with a valid mineral lease on land subject to this chapter shall
  46-13  comply with the commissioner's rules concerning exploration.
  46-14        SECTION 68.  Sections 52.079, 52.081, 52.086, 52.089, and
  46-15  53.017, Natural Resources Code, are repealed.
  46-16        SECTION 69.  This Act does not affect the state's right to
  46-17  take its royalty in kind or the calculation of the state's royalty
  46-18  under a patent, lease, or unitization agreement executed before the
  46-19  effective date of this Act.
  46-20        SECTION 70.  This Act takes effect September 1, 1993.
  46-21        SECTION 71.  The importance of this legislation and the
  46-22  crowded condition of the calendars in both houses create an
  46-23  emergency and an imperative public necessity that the
  46-24  constitutional rule requiring bills to be read on three several
  46-25  days in each house be suspended, and this rule is hereby suspended.