BILL ANALYSIS C.S.S.B. 1357 By: Haywood Natural Resources 3-24-95 Committee Report (Substituted) 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 As proposed, C.S.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 under certain conditions. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the Railroad Commission of Texas under SECTION 1 (Section 85.046(c), Natural Resources Code) of 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 (commission), after notice and opportunity for hearing, to permit the commingling of oil or gas, or oil and gas, production from two or more tracts of land producing from the same reservoir, or from one or more tracts of land producing from different reservoirs, if the commission finds that the 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 the amount of production attributable to each tract or horizon to be determined in a manner consistent with this title. Grants the commission broad discretion in administering this subsection, and requires the commission to adopt and enforce rules or orders necessary to administer this subsection. SECTION 2. Effective date: September 1, 1995. SECTION 3. Emergency clause.