BILL ANALYSIS



S.B. 1357
By: Haywood (Holzheauser)
May 4, 1995
Committee Report (Amended)


BACKGROUND

Surface commingling of oil and gas is a production handling method
used by operators to reduce operating expenses.  Current law
authorizes surface commingling of production if working and royalty
interests are common or if the production is metered separately
before being commingled.  For economic reasons, however, it is
preferable to meter production at a single point and allocate
production to specific tracts or horizons.

When interests differ and metering production separately is not
preferred, the Texas Railroad Commission requires the operator to
obtain 100 percent approval from the working and royalty interest
owners.  Obtaining this approval can become difficult when the
royalty interests are very small, or if recipients of ballots do
not return them.  Under the current system, a single, small
interest owner can prevent the approval of an application by not
returning a ballot even though the owner may not be opposed to the
action.



PURPOSE

S.B. 1357 authorizes the Railroad Commission of Texas to permit
surface commingling of oil or gas, or oil and gas production from
tracts and horizons if the commission determines that such
commingling would prevent waste, promote conservation, or protect
correlative rights.



RULEMAKING AUTHORITY

It is the committee's opinion that SECTION 1 of this bill grants
broad rulemaking authority to the Railroad Commission of Texas to
administer Subsection (c), Section 85.046, Natural Resources Code,
as added by this bill.



SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 85.046, Natural Resources Code, by adding
Subsection (c) to authorize the Railroad Commission of Texas, after
notice and opportunity for hearing, to permit the commingling of
oil or gas or both in production from two or more tracts from the
same reservoir or from one or more tracts producing from different
reservoirs, if the commission finds that commingling will prevent
waste, promote conservation, or protect correlative rights.
Authorizes the commission to permit the commingling regardless of
whether the tracts or horizons have the same working or royalty
interest ownership.  Requires that the attributable production
amount be determined in a manner consistent with this title. 
Grants the commission rulemaking authority to administer this
subsection.

SECTION 2. Effective Date: September 1, 1995.

SECTION 3. Emergency Clause.


EXPLANATION OF AMENDMENTS

Committee Amendment No. 1 changes the word horizon(s) to
"commission designated reservoir(s)" because multiple horizons may
be included in one reservoir. This clarifies the intent that
multiple reservoirs may be permitted to commingle oil or gas or
both.


SUMMARY OF COMMITTEE ACTION

S.B. 1357 was considered by the Energy Resources Committee in a
public hearing on May 2, 1995. Elizabeth Bush, Representing ARCO
Permian and Texas Mid-Continent Oil and Gas Association, testified
in favor of the bill. The committee considered one amendment to the
bill. The amendment was adopted without objection. The bill was
reported favorably as amended, 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 7 ayes, 0 nays, 0 PNV, and
2 absent.