BILL ANALYSIS S.B. 1347 By: West Natural Resources 04-12-95 Committee Report (Unamended) BACKGROUND Current law permits the state to take royalty in-kind, such as oil or gas instead of money, to satisfy a lessee's royalty obligation. The state is authorized to negotiate contracts or any other instruments or agreements necessary to dispose of royalties taken in-kind. Most of the state's royalties taken in-kind are sold to state agencies with the remainder sold on the spot market. Since payment is not due until after delivery of the gas, it is necessary for the state to secure or guarantee payment by the purchasers. The General Land Office has concluded that the best choice would be to purchase credit insurance. The comptroller's office has indicated that it considers expenditures for insurance to be authorized under current law, but it recommended that this type of agreement be specifically mentioned in the codes. PURPOSE As proposed, S.B. 1347 authorizes the commissioner of the General Land Office, a soil owner, or the School Land Board to negotiate and enter into insurance contracts or other agreements to secure or guarantee payment on in-kind sales. 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 Section 52.133(c), Chapter 52D, Natural Resources Code, to authorize the commissioner of the General Land Office, the owner of the soil under Subchapter F of this chapter, the commissioner, acting on behalf of and at the direction of the soil owner, the School Land Board, or a board for lease to negotiate and execute contracts or any other instruments or agreements necessary to dispose of their portion of the royalty taken in kind, including contracts for sale, transportation, and storage, and including insurance contracts or other agreements to secure or guarantee payment. SECTION 2. Emergency clause. Effective date: 90 days after adjournment.