BILL ANALYSIS



C.S.H.B. 1593
By: CRADDICK
March 23, 1995
Committee Report (Substituted)



BACKGROUND

An increasing number of small checks for proceeds from production
are being issued as interests are transferred to more and more
owners.  This "dilution of interest" is an increasing
administrative problem for both royalty and working interest
owners.  Both groups through a Fractionalization Committee
sponsored by the National Association of Royalty Owners have been
studying this issue.  A recent survey sponsored by National
Association of Division Order Analysts indicates that industry is
experiencing a dilution rate of 5% to 10% per year.  Other
statistics from the survey show that over 50% of checks remitted
are less than $100 and that up to 33% of checks issued for less
than $10 are never cashed.  Uncashed checks present further
problems in that they require more handling as they must be
redeposited and ultimately reported as unclaimed property.  These
trends are expected to continue to burden both payors and owners. 


PURPOSE

This legislation will reduce the administrative burden and
resultant costs in addition to providing a measure in dealing with
the ever increasing number of royalty and working interest owners. 
By reducing the number of checks issued, the overhead associated
with the property is reduced which can mean an increased economic
life for a well.


RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.


SECTION BY SECTION ANALYSIS

SECTION 1:  Amends Sections 91.402(d) and (f), Natural Resources
Code as follows:

     Subsection (d) increases from $25 to $100 the amount that may
be accrued before        disbursement or allows the disbursement to
be made after "12 months' proceeds           accumulate" (deleting
the December 31 deadline) or allows more than 12 months          accumulation if the proceeds amount to less than $10.

     Subsection (f), "Payments" is changed to "Payment,""payees" is
changed to "payee." The       payor can remit annually for the
aggregate of up to 12 months' accumulation of          proceeds if
the "payor owes the payee" a total of $100, up from $25 or less
"for           production from all oil and gas wells for which the
payor must pay the payee."
           However, if the payee requests payment monthly, the
payment must be made if       the accumulation is more than $25.
Additionally, a payee may request payment         annually for
disbursements of less than $10.


SECTION 2: Emergency clause.


COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute allows payors to accumulate proceeds for more than
12 months if the proceeds amount to less than $10. The original
bill did not allow for this. However, by written request of the
payee, the payor can be required to pay monthly for amounts of $25
or more (rather than waiting for the $100 threshold set in the
bill) and yearly for amounts of less than $10.

SUMMARY OF COMMITTEE ACTION

H.B. 1593 was considered by the Energy Resources Committee in a
public hearing on March 6, 1995. The following witnesses testified
in favor of the bill:

     Ben Sebree, representing Texas Mid-Continent Oil & Gas
Association;
     Sara K. Tays, representing Exxon Co. U.S.A. and Texas Mid-Continent Oil & Gas        Association; and,
     Lynda Clinger, representing Koch Oil Company;
     Stephen W. Murchison, representing Marathon Oil Company;
     Tracy Elm, representing G.P.M. Gas Co., Phillips Petroleum
Co., and the National         Association of Division Order
Analysts;
     Ken Rigsbee, representing Phillips Petroleum Co.;
     Lindsey Dingmore, representing T.I.P.R.O;
     David Sebree, representing Cononco Inc. and DuPont; and,
     Rachel Sanders, representing Scurlock Permian Corp.

The bill was left pending.

H.B. 1593 was considered by the Energy Resources Committee in a
formal meeting on March 22, 1995. The committee considered a
complete substitute to the bill. The substitute was adopted without
objection. The bill was reported favorably as substituted, with the
recommendation that it do pass and be printed and be sent to the
Committee on Local and Consent Calendars, by a record vote of 8
ayes, 0 nays, 0 PNV, and 1 absent.