BILL ANALYSIS
H.B. 2477
By: Turner, B. (Haywood)
Natural Resources
5-21-95
Senate Committee Report (Unamended)
BACKGROUND
Approximately seven million acres of land in Texas is known as
mineral classified or Relinquishment Act land. This land was sold
by the state from 1895 to 1931 and was reserved to the Permanent
School Fund. The Relinquishment Act of 1919 provides that the owner
of the surface estate of mineral classified land is the agent of
the state for leasing oil and gas. In return for services as state
agents and as compensation for damages to the surface of lands, the
surface owners receive half of the benefits, usually bonus, rental,
royalty, from the leases they negotiate. Surface owners who lease
minerals other than oil and gas receive 20 percent of the lease
benefits.
While dealing as state agents in leasing Permanent School Fund
minerals, a surface owner, relatives of the owner, and/or
controlled and affiliated businesses may not acquire an interest in
a Relinquishment Act lease that the surface owner executes. An
owner may accept an assignment of a lease that executed but is not
allowed to waive agency rights and duties and receive a lease
directly. Surface owners desiring to lease minerals other than oil
and gas may, under General Land Office rules, waive their agency
rights and duties and obtain a prospect permit that can then be
converted to a lease.
There are a number of surface owners of mineral classified lands
that are also active in the oil and gas or minerals industries and
who are capable of competently exploring and developing state oil
and gas or minerals on those lands that they own. However, current
restrictions do not allow such exploration and development.
PURPOSE
As proposed, H.B. 2477 authorizes the School Land Board to allow
owners of the soil to waive agency rights and to lease oil, gas,
and other minerals in, on, and under mineral classified lands.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the School Land Board under SECTION 1 (Sec. 52.190(e), Natural
Resources Code) and SECTION 3 (Sec. 53.081(e), Natural Resources
Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amend Chapter 52F, Natural Resources Code, by adding
Section 52.190, as follows:
Sec. 52.190. LEASE BY OWNER OF THE SOIL. (a) Authorizes an
owner of the soil of lands covered by this subchapter to lease
those lands for the purpose of exploring for and producing oil
and gas in the manner provided by this section.
(b) Authorizes an owner of the soil to apply in writing to
the School Land Board (board) for an oil gas lease.
(c) Sets forth requirements for the application.
(d) Requires the applicant to provide geological,
geophysical, geochemical, and other data (data) or copies of
the data, pertinent to mineral exploration on the lands for
which the application is made, in the applicant's possession
or to which the applicant has access and which the applicant
has the ability to provide to the General Land Office (land
office). Requires all such data to be confidential and not
subject to the provisions of the open records law until one
year after the expiration, termination, or forfeiture of a
lease granted pursuant to this section. Requires the data,
after one year after the expiration, termination, or
forfeiture of such a lease, to remain confidential to the
extent permitted by Chapter 552, Government Code. Requires
the data, if a lease is not issued, to be returned to the
applicant.
(e) Authorizes the board to prescribe the form of the
application, specify information required to be submitted in
support of an application, and, by rule, otherwise provide
for the implementation of this section.
(f) Requires the staff of the land office to review the
information presented in the application, other data
available to it relevant to the land proposed to be leased,
and leasing information available to it relevant to the land
proposed to be leased. Sets forth provisions for a report
the staff shall prepare for the board.
(g) Requires the board to consider the application at a
regular meeting. Authorizes the board to grant or deny the
application or grant the application subject to specified
conditions. Authorizes conditions to include a requirement
that if the applicant does not participate in the
exploration or development of the leased premises the
application must share equally with the permanent school
fund any benefit derived from the lease.
(h) Requires the Commissioner of the General Land Office
(commissioner), after the board has approved an application,
to issue a lease to the applicant. Requires the lease to
conform to the form of lease prescribed by the board under
Section 32.1071.
(i) Prohibits the commissioner from delivering a lease
issued under this section until the applicant has executed
and delivered to the commissioner a waiver of the
applicant's right and duty to act as agent for the state in
leasing the leased premises and to receive any part of the
bonus, rental, royalty, and other consideration accruing to
the owner of the soil under this subchapter. Requires the
waiver and the lease to be effective as of the date the
commissioner executes the lease.
(j) Provides that upon the expiration, termination, or
forfeiture of a lease issued under this section, the agency
rights and duties of the applicant as owner of the soil are
reinstated without the necessity for further action by the
owner of the soil, the board, or the commissioner.
(k) Authorizes the applicant, if an applicant is not the
sole owner of the soil, to secure leases from the other
owners of the soil from which the applicant is not
prohibited from leasing under Section 52.189. Authorizes the
commissioner, if the applicant must obtain a lease from an
owner of the soil from whom the applicant would otherwise
not be permitted to lease in order to explore for or produce
oil or gas, to approve the lease on certain conditions.
(l) Prohibits the commissioner from approving any lease
obtained by an applicant from another owner of the soil if
the lease contains terms that are inconsistent with or
provide for a lesser bonus, rental, or royalty than the
lease approved by the board. Requires a lease approved by
the board, if the bonus, rental, or royalty in a lease
obtained by an applicant from another owner of the soil for
a comparable interest is greater than that approved by the
board, to be amended to provide for the greater bonus,
rental, or royalty, and the applicant shall be liable for
all greater sums due. Requires the board, in determining
whether an interest is comparable, to consider the quantum
of the interest, the time at which the lease was taken, and
any other aspects of the lease transaction that the board
considers to be relevant.
SECTION 2. Amends Section 52.189(a), Natural Resources Code, as
follows:
(a) PROHIBITION AGAINST SELF-DEALING. (1) Created from
existing text. Makes no change.
(2) Prohibits the owner of the soil from leasing to a
relative, or a corporation in which the relative is a
principal stock holder, or to a partnership in which that
relative is a partner, or to an employee of such a
corporation or subsidiary or partnership. Makes a
nonsubstantive change.
(3) Authorizes an owner of the soil who wishes to lease to
a person, corporation, or partnership described in
Subdivision (2) to request the approval of the board for
authority to execute such a lease before its execution.
Requires the owner of the soil requesting approval to also
execute and file with the commissioner a sworn affidavit
stating that the owner of the soil will not receive any
benefit under a lease so approved by the board that will not
be shared with the permanent school fund in the proportion
prescribed by this subchapter.
(4) Requires a lease executed pursuant to the authority of
the board, if an owner of the soil makes any material
misstatement of fact in connection with an application to
the board or affidavit made pursuant to Subdivision (3), to
be voidable at the election of the commissioner. Requires
the election, to void such a lease, to be cumulative of and
in addition to all other remedies available to the
commissioner or the state.
SECTION 3. Amends Chapter 53C, Natural Resources Code, by adding
Section 53.081, as follows:
Sec. 53.081. LEASE BY OWNER OF THE SOIL. (a) Authorizes an
owner of the soil of lands covered by this subchapter to lease
those lands for the purpose of exploring for and producing
minerals other than oil and gas in the manner provided by this
section.
(b) Authorizes an owner of the soil to apply in writing to
the board for a lease of a mineral or minerals other than
oil and gas.
(c) Sets forth requirements for the application.
(d) Requires the applicant to provide data pertinent to
exploration for minerals other than oil and gas on the lands
for which the application is made, in the applicant's
possession or to which the applicant has access and which
the applicant has the ability to provide to the land office.
Requires all such data to be confidential until one year
after the expiration, termination, or forfeiture of a lease
granted pursuant to this section. Requires the data to
remain confidential to the extent permitted by Chapter 552,
Government Code. Requires the data, if a lease is not
issued, to be returned to the applicant.
(e) Authorizes the board to prescribe the form of the
application, require additional information, and, by rule,
otherwise provide for the implementation of this section.
(f) Requires the staff of the land office to review the
information presented in the application, such data
available to it relevant to the land proposed to be leased,
and leasing information available to it relevant to the land
proposed to be leased. Sets forth provisions the staff shall
include in a report to the board.
(g) Requires the board to consider the application at a
regular meeting. Requires the board to grant or deny the
application or grant the application subject to specified
conditions. Authorizes conditions to include a requirement
that if the applicant does not participate in the
exploration or development of the leased premises the
applicant must share equally with the permanent school fund
any benefit derived from the lease.
(h) Requires the commissioner, after the board has approved
an application, to issue a lease to the applicant. Requires
the lease to conform to the form of lease prescribed by the
commissioner under this chapter.
(i) Prohibits the commissioner from delivering a lease
issued under this section until the applicant has executed
and delivered to the commissioner a waiver of the
applicant's right and duty to act as agency for the state in
leasing the leased premises and to receive any part of the
bonus, rental, royalty, and other consideration accruing to
the owner of the soil under this subchapter. Requires the
waiver and the lease to be effective as of the date the
commissioner executes the lease.
(j) Provides that upon the expiration, termination, or
forfeiture of a lease issued under this section, the agency
rights and duties of the applicant as owner of the soil are
reinstated without the necessity for further action by the
owner of the soil, the board, or the commissioner.
(k) Authorizes an applicant, if an applicant is not the sole
owner of the soil, to secure leases from the other owners of
the soil from which the applicant is not prohibited from
leasing under Section 53.074. Authorizes the commissioner,
if an applicant must obtain a lease from an owner of the
soil from whom the applicant would otherwise not be
permitted to lease in order to explore for or produce
minerals other than oil or gas, to approve the lease on
certain conditions.
(l) Prohibits the commissioner from approving any lease
obtained by an applicant from another owner of the soil if
the lease contains terms that are inconsistent with or
provide for a lesser bonus, rental, or royalty than the
lease approved by the board. Requires a lease approved by
the board, if the bonus, rental, or royalty in a lease
obtained by an applicant from another owner of the soil for
a comparable interest is greater than that approved by the
board, to be amended to provide for the greater bonus,
rental, or royalty, and the applicant shall be liable for
all greater sums due. Requires the board, in determining
whether an interest is comparable, to consider the quantum
of the interest, the time at which the lease was taken, and
any other aspects of the lease transaction that the board
considers to be relevant.
SECTION 4. Amends Section 53.074(a), Natural Resources Code, to
make conforming changes.
SECTION 5. Authorizes an owner of the soil to obtain a lease under
the provisions of this Act only after the effective date of this
Act, and this Act shall not be construed to ratify or approve in
any way the acquisition by an owner of the soil, acting as agent
for the State of Texas, any interest not shared with the State of
Texas, except as expressly permitted by statute, in any lease
covering or purporting to cover any land subject to Chapter 52F or
53C, Natural Resources Code.
SECTION 6. Effective date: September 1, 1995.
SECTION 7. Emergency clause.