By Seidlits H.B. No. 2111 74R6962 E A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to permitting the creation of gas marketing cooperative 1-3 corporations under the authority of the Railroad Commission of 1-4 Texas. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Subtitle C, Title 3, Natural Resources Code, is 1-7 amended by adding Chapter 104 to read as follows: 1-8 CHAPTER 104. PRODUCERS' COOPERATIVE MARKETING ASSOCIATIONS 1-9 SUBCHAPTER A. GENERAL PROVISIONS 1-10 Sec. 104.001. POLICY. The purpose of this chapter is to: 1-11 (1) prevent waste, protect correlative rights, and 1-12 promote conservation through the orderly production and efficient 1-13 marketing of Texas gas by producers; 1-14 (2) provide independent gas producers in Texas a 1-15 method of collectively making their product more accessible to 1-16 markets; 1-17 (3) replace competitive forces with state regulation 1-18 of gas marketing activities conducted in furtherance of 1-19 Subdivisions (1) and (2); and 1-20 (4) ensure that persons operating under this chapter 1-21 do not engage in anticompetitive acts that do not further the 1-22 regulatory policies expressed in this section. 1-23 Sec. 104.002. DEFINITIONS. In this chapter: 1-24 (1) "Commission" means the Railroad Commission of 2-1 Texas. 2-2 (2) "Gas" means natural gas or casinghead gas. 2-3 (3) "Marketing association" or "gas marketing 2-4 association" means an association organized under this chapter. 2-5 (4) "Member" includes a member of an association 2-6 organized under this chapter without capital stock and a holder of 2-7 common stock of an association under this chapter with capital 2-8 stock. 2-9 (5) "Person" includes natural persons, partnerships of 2-10 two or more persons having a joint or common interest, and 2-11 corporations. 2-12 (6) "Producer" or "independent producer" means any 2-13 person who produces gas in Texas other than a person to whom 2-14 Section 613A(c) of the Internal Revenue Code of 1986 does not apply 2-15 by reason of Section 613A(d)(2) or (4) of that code. 2-16 Sec. 104.003. NONPROFIT ORGANIZATION. Because a marketing 2-17 association is organized not to make money for itself or for its 2-18 members as individuals but only to make money for its members as 2-19 producers, the association is considered to be a nonprofit 2-20 organization. 2-21 Sec. 104.004. APPLICATION OF GENERAL CORPORATION LAWS. The 2-22 general corporation laws of this state apply to marketing 2-23 associations unless those laws conflict with this chapter. 2-24 Sec. 104.005. APPLICABILITY. None of the provisions in this 2-25 chapter impair the power of the commission to prevent waste under 2-26 the oil and gas conservation laws of this state, except as provided 2-27 in Section 104.006, or repeal, modify, or impair any of the 3-1 provisions of Sections 85.002, 85.125, 85.241-85.243, 3-2 85.249-85.252, and 85.381-85.385 or Subchapters C, E, F, and J, 3-3 Chapter 85, relating to oil and gas conservation. 3-4 Sec. 104.006. CONFLICT WITH ANTITRUST ACTS. (a) Agreements 3-5 and operations under agreements that are in accordance with the 3-6 provisions of this chapter, being necessary to improve market 3-7 efficiency and thereby serving to help prevent waste, protect 3-8 correlative rights, and conserve the natural resources of this 3-9 state, shall not be construed to be in violation of Chapter 15, 3-10 Business & Commerce Code. 3-11 (b) If a court finds a conflict between this chapter and 3-12 Chapter 15, Business & Commerce Code, this chapter is intended as a 3-13 reasonable exception to that law, necessary for the public 3-14 interests stated in Subsection (a). 3-15 (c) If a court finds that a conflict exists between this 3-16 chapter and Chapter 15, Business & Commerce Code, and finds that 3-17 this chapter is not a reasonable exception to Chapter 15, Business 3-18 & Commerce Code, it is the intent of the legislature that this 3-19 chapter, or any conflicting portion of it, shall be declared 3-20 invalid rather than Chapter 15, Business & Commerce Code, or any 3-21 portion of it, being declared invalid. 3-22 (Sections 104.007-104.020 reserved for expansion 3-23 SUBCHAPTER B. PURPOSE AND POWERS 3-24 Sec. 104.021. PURPOSE. A gas marketing association may 3-25 engage in any activity in connection with: 3-26 (1) the selling, transporting, or storing of gas that 3-27 is produced and delivered to it by its members; or 4-1 (2) the purchase, hiring, or use by its members of 4-2 supplies, machinery, or equipment directly related to the 4-3 production, transmission, storage, or marketing of gas or in the 4-4 financing of those activities. 4-5 Sec. 104.022. RESTRICTIONS. (a) A gas marketing 4-6 association shall be operated for the mutual benefit of its members 4-7 as gas producers and shall conform to one or both of the following 4-8 requirements: 4-9 (1) a member of the association may not have more than 4-10 one vote based on the member's ownership of stock or membership 4-11 capital in the association; or 4-12 (2) the association may not pay dividends on stock or 4-13 membership capital in excess of eight percent a year. 4-14 (b) A gas marketing association may deal in the gas 4-15 production of nonmembers but is restricted to an amount that is not 4-16 greater than the value of the gas that it handles for its members. 4-17 (c) A person is not eligible to be a member of a gas 4-18 marketing association if that person is a "gas utility," "utility," 4-19 "affiliated interest," or "affiliate" as defined in Section 1.03, 4-20 Gas Utility Regulatory Act (Article 1446e, Vernon's Texas Civil 4-21 Statutes). 4-22 (d) A person may not be a member of a gas marketing 4-23 association unless the person is: 4-24 (1) an independent producer; or 4-25 (2) a landowner, royalty owner, lessor, lessee, or 4-26 overriding royalty owner in the gas-producing property of the 4-27 independent producer. 5-1 (e) A gas marketing association may not limit the right of 5-2 any member to establish price and volume categories for gas the 5-3 member produces and contracts to sell through the association. 5-4 (f) Unless a higher level of production is permitted to be 5-5 produced and sold by gas marketing associations under applicable 5-6 federal law existing after August 31, 1995, a gas marketing 5-7 association or combination of associations operating under Section 5-8 104.024 may not market in any calendar year more than 25 percent of 5-9 the total volume of natural gas produced in Texas during the 5-10 preceding calendar year. 5-11 Sec. 104.023. GENERAL POWERS. A marketing association may: 5-12 (1) subject to the prior approval of the commission, 5-13 engage in the marketing of gas on behalf of its members; 5-14 (2) borrow money and make advances to its members; 5-15 (3) act as an agent or representative of a member in 5-16 an activity authorized by Subdivision (1) or (2); 5-17 (4) acquire, hold, own, exercise all rights of 5-18 ownership in, sell, transfer, or pledge shares of capital stocks or 5-19 bonds of a corporation or association engaged in an activity 5-20 related to that of the marketing association; 5-21 (5) establish reserves and invest the money in those 5-22 reserves in bonds or other property as provided by the 5-23 association's bylaws; 5-24 (6) buy, hold, and exercise all privileges of 5-25 ownership over real or personal property that is determined by the 5-26 association to be necessary or convenient for, or incidental to, 5-27 conducting and operating its business; 6-1 (7) perform, in or outside this state, acts that are 6-2 necessary, suitable, or proper to accomplish the purposes and 6-3 objectives permitted by this section or that are conducive to or 6-4 expedient for the interest or benefit of the association and may 6-5 contract for the performance of those acts; 6-6 (8) possess and exercise, in or outside this state, 6-7 all powers, rights, and privileges necessary for or incidental to 6-8 the purposes for which the association is organized or the 6-9 activities in which it is engaged; and 6-10 (9) exercise the rights, powers, and privileges that 6-11 are granted by the laws of this state to general corporations and 6-12 that are not inconsistent with this chapter. 6-13 Sec. 104.024. CONTRACTS AND AGREEMENTS WITH OTHER 6-14 ASSOCIATIONS. (a) A marketing association, by resolution of its 6-15 board of directors but subject to prior review by the commission 6-16 for compliance with the regulatory policies and objectives of this 6-17 chapter, may make agreements, contracts, and arrangements with any 6-18 other gas marketing cooperative corporation or association formed 6-19 in this or any other state for the cooperative and more economical 6-20 conduct of its business or a part of its business. 6-21 (b) Two or more marketing associations, jointly or 6-22 separately, may use the same methods and agencies to conduct their 6-23 respective businesses. 6-24 Sec. 104.025. MARKETING CONTRACT. (a) Subject to prior 6-25 commission review for compliance with the regulatory policies and 6-26 objectives of this chapter, a gas marketing association may from 6-27 time to time establish a form of contract with its members to 7-1 market their gas on reasonable terms, including a requirement that 7-2 the members sell during a fixed term all or a specified part of 7-3 their gas production exclusively to or through the association or 7-4 any facilities to be created by the association. 7-5 (b) The form contract may provide that the marketing 7-6 association may: 7-7 (1) sell or resell its members' gas production with or 7-8 without taking title to the gas; and 7-9 (2) pay to its members the resale price less necessary 7-10 expenses. 7-11 (c) The expenses that may be deducted from the resale price 7-12 under Subsection (b) include: 7-13 (1) sales, overhead, and other expenses; 7-14 (2) interest on preferred stock, not exceeding eight 7-15 percent a year; 7-16 (3) interest on common stock, not exceeding eight 7-17 percent a year; and 7-18 (4) reserves, including reserves for redeeming any 7-19 stock issued. 7-20 (d) A marketing association's bylaws and marketing contract 7-21 form may: 7-22 (1) fix as liquidated damages specific amounts to be 7-23 paid by a member if the member breaches the marketing contract 7-24 regarding the sale, delivery, or withholding of gas; and 7-25 (2) provide that the member will pay all costs, 7-26 premiums for bonds, expenses, and fees if the association brings an 7-27 action on the contract. 8-1 Sec. 104.026. PERSONS BOUND BY AGREEMENT. An agreement 8-2 under this chapter does not bind a landowner, royalty owner, 8-3 lessor, lessee, overriding royalty owner, or any other person who 8-4 does not execute the agreement or cause it to be executed on the 8-5 person's behalf. The agreement binds only the persons who execute 8-6 it, or on whose behalf the agreement is executed by a duly 8-7 authorized agent, and the persons' heirs, successors, assigns, and 8-8 legal representatives. A person may not be compelled or required 8-9 to enter into an agreement under this chapter, but shall be allowed 8-10 to enter into an agreement on a nondiscriminatory basis. 8-11 Sec. 104.027. COMMISSION APPROVAL. An agreement for the 8-12 cooperative marketing of gas by members is not legal or effective 8-13 until the commission finds after application, notice, and hearing 8-14 that the agreement: 8-15 (1) is appropriate and necessary to accomplish the 8-16 regulatory policies and objectives of this chapter; 8-17 (2) is in the interest of the public welfare as being 8-18 reasonably necessary to help prevent waste, protect correlative 8-19 rights, and promote the conservation of oil or gas or both; and 8-20 (3) enhances the efficient marketing of Texas gas 8-21 without permitting anticompetitive acts that do not further the 8-22 regulatory policies and objectives of this chapter. 8-23 Sec. 104.028. COMMISSION REGULATION. (a) An agreement 8-24 executed under this chapter is subject to any valid order or rule 8-25 of the commission relating to the setting of allowables, proration, 8-26 conservation, or other matters within the authority of the 8-27 commission, whether adopted before or after the execution of the 9-1 agreement. 9-2 (b) The commission may provide, on such terms and conditions 9-3 as it establishes by regulation, for the operation of a statewide 9-4 gas marketing data clearinghouse to assist any marketing 9-5 association created under this chapter. 9-6 (c) In furtherance of its regulatory authority under this 9-7 chapter, the commission may provide by regulation for the maximum 9-8 and minimum prices to be charged from time to time for gas sold by 9-9 or through a marketing association. Except for good cause shown on 9-10 application, notice, and hearing, a marketing agreement may not 9-11 provide for pricing that conflicts with any pricing provisions 9-12 established by the commission under this subsection. 9-13 Sec. 104.029. PROHIBITED PROVISIONS. (a) An agreement 9-14 authorized by this chapter may not attempt to provide for or limit 9-15 the amount of production of oil or gas by any member, unless 9-16 authorized by the commission. 9-17 (b) An agreement authorized by this chapter may not provide 9-18 directly or indirectly for the cooperative refining of crude 9-19 petroleum, distillate, condensate, or gas or a by-product of crude 9-20 petroleum, distillate, condensate, or gas. The extraction of 9-21 liquid hydrocarbons from gas, and the separation of the liquid 9-22 hydrocarbons into propanes, butanes, ethanes, distillate, 9-23 condensate, and natural gasoline, without any additional 9-24 processing, is not considered to be refining. 9-25 (c) An agreement authorized by this chapter may not provide 9-26 for the cooperative marketing of crude petroleum, condensate, or 9-27 distillate or a by-product of crude petroleum, condensate, or 10-1 distillate. 10-2 (Sections 104.030-104.040 reserved for expansion 10-3 SUBCHAPTER C. PUBLIC LAND 10-4 Sec. 104.041. AUTHORITY OF COMMISSIONER OF GENERAL LAND 10-5 OFFICE. Subject to the approval specified in Section 104.042, the 10-6 commissioner of the General Land Office, on behalf of the state or 10-7 of any fund belonging to the state, may execute contracts 10-8 committing to the agreements declared lawful by this chapter: 10-9 (1) the royalty interests in oil or gas or both 10-10 reserved by law to the state or any fund of the state in any 10-11 patent, or any contract of sale, or under the terms of any oil and 10-12 gas lease lawfully issued by an official, board, agent, agency, or 10-13 authority of the state; or 10-14 (2) the free royalty interests, whether leased or 10-15 unleased, reserved to the state under Section 51.054 or 51.201. 10-16 Sec. 104.042. NECESSARY APPROVAL BY OTHER PERSONS AND STATE 10-17 AGENCIES. (a) The School Land Board must approve an agreement 10-18 that commits: 10-19 (1) the royalty interests in land set apart by the 10-20 constitution and laws of this state for the permanent free school 10-21 fund and the several asylum funds, in river beds, inland lakes, and 10-22 channels, and the area within tidewater limits, including islands, 10-23 lakes, bays, inlets, marshes, reefs, and the bed of the sea; or 10-24 (2) the free royalty interests, whether leased or 10-25 unleased, reserved to the state under Section 51.054 or 51.201. 10-26 (b) An agreement that covers land leased for oil and gas 10-27 under Subchapter F, Chapter 52, must be executed by the owners of 11-1 the soil. 11-2 (c) An agreement that commits the royalty interests in land 11-3 or areas other than those covered by Subsections (a) and (b) must 11-4 be approved by the board, official, agent, agency, or authority of 11-5 the state vested with authority to lease or to approve the leasing 11-6 of the land or areas for oil and gas. 11-7 (Sections 104.043-104.060 reserved for expansion 11-8 SUBCHAPTER D. INCORPORATION 11-9 Sec. 104.061. INCORPORATORS. Five or more producers may 11-10 form a marketing association under this chapter. 11-11 Sec. 104.062. EXECUTION OF ARTICLES OF INCORPORATION. (a) 11-12 Each marketing association shall prepare and file articles of 11-13 incorporation signed by each incorporator. 11-14 (b) One of the incorporators shall acknowledge the articles 11-15 before an officer authorized by the laws of this state to take and 11-16 certify acknowledgements of deeds and conveyances. 11-17 Sec. 104.063. CONTENTS OF ARTICLES OF INCORPORATION. (a) 11-18 The articles of incorporation must state: 11-19 (1) the name of the marketing association; 11-20 (2) the term of existence, if it is limited; 11-21 (3) the purpose for which the association is formed; 11-22 (4) the location and street address of the 11-23 association's principal place of business; 11-24 (5) the number of directors; and 11-25 (6) the term of office of each director. 11-26 (b) If the marketing association is organized without 11-27 capital stock, the articles must state whether property rights and 12-1 interests of each member are equal or unequal and, if unequal, the 12-2 general rules applicable to all members by which the property 12-3 rights and interests of each are determined and fixed. 12-4 (c) If the marketing association is organized with capital 12-5 stock, the articles must state: 12-6 (1) the amount of capital stock authorized; 12-7 (2) the number of shares authorized; 12-8 (3) the par value of the shares; and 12-9 (4) if preferred stock is to be issued: 12-10 (A) the number of shares of common stock; 12-11 (B) the number of shares of preferred stock; 12-12 (C) the rights, preferences, and privileges 12-13 granted; and 12-14 (D) the conditions under which the association 12-15 may redeem the preferred stock. 12-16 Sec. 104.064. FILING OF ARTICLES OF INCORPORATION. (a) The 12-17 incorporators shall file the articles of incorporation in 12-18 accordance with the general corporation laws of this state. 12-19 (b) The incorporators shall file a certified copy of the 12-20 articles with the commission. 12-21 (c) If the marketing association is formed with capital 12-22 stock, the incorporators are not required to obtain subscriptions 12-23 or payment for any part of the association's capital stock as a 12-24 prerequisite to filing the articles. 12-25 Sec. 104.065. EFFECT OF FILING ARTICLES OF INCORPORATION. 12-26 When the articles of incorporation are filed with the secretary of 12-27 state, all courts shall receive the articles or a certified copy of 13-1 the articles as prima facie evidence of: 13-2 (1) facts stated in the articles; and 13-3 (2) compliance with requirements for incorporation 13-4 under this chapter. 13-5 Sec. 104.066. AMENDMENT OF ARTICLES OF INCORPORATION. (a) 13-6 A marketing association may amend its articles of incorporation at 13-7 any regular meeting of the association or at a special meeting for 13-8 that purpose at which at least 10 percent of the members are voting 13-9 in person or by proxy or mail. 13-10 (b) An amendment must first be approved by two-thirds of the 13-11 directors and then, except as provided by Subsection (c), adopted 13-12 by: 13-13 (1) a simple majority vote if 50 percent or more of 13-14 the members vote in person or by proxy or mail; 13-15 (2) a two-thirds majority vote if less than 50 percent 13-16 but 25 percent or more of the members vote in person or by proxy or 13-17 mail; or 13-18 (3) a three-fourths majority vote if less than 25 13-19 percent but 10 percent or more of the members vote in person or by 13-20 proxy or mail. 13-21 (c) An amendment of the rules required by Section 104.063(b) 13-22 for determining the property rights and interests of members of a 13-23 marketing association formed without capital stock may be adopted 13-24 by a vote or written consent of two-thirds of the members who are 13-25 present at a meeting of the association at which a quorum is 13-26 present or who are voting by proxy or mail as prescribed by an 13-27 association bylaw. 14-1 (d) After an amendment is adopted, the amendment shall be 14-2 filed in accordance with the general corporation laws of this 14-3 state. 14-4 (Sections 104.067-104.080 reserved for expansion 14-5 SUBCHAPTER E. BYLAWS 14-6 Sec. 104.081. ADOPTION. (a) A marketing association shall 14-7 adopt bylaws before the 31st day after the date the articles of 14-8 incorporation are filed with the secretary of state. 14-9 (b) The initial bylaws may be adopted by a two-thirds vote 14-10 of the incorporating directors and: 14-11 (1) a simple majority vote, if 50 percent or more of 14-12 the members vote in person or by proxy or mail; 14-13 (2) a two-thirds majority vote, if less than 50 14-14 percent but 25 percent or more of the members vote in person or by 14-15 proxy or mail; or 14-16 (3) a three-fourths majority vote, if less than 25 14-17 percent but 10 percent or more of the members vote in person or by 14-18 proxy or mail. 14-19 Sec. 104.082. CONTENTS. The bylaws may provide for one or 14-20 more of the following: 14-21 (1) the time, place, and manner of calling and 14-22 conducting meetings of the marketing association; 14-23 (2) the number and qualifications of the members; 14-24 (3) the number of members constituting a quorum; 14-25 (4) the right of members to vote by proxy, by mail, or 14-26 both and the conditions, method, and effects of the vote; 14-27 (5) the method by which a member that is an 15-1 association may cast its vote; 15-2 (6) the number of directors constituting a quorum; 15-3 (7) the qualifications, compensation, duties, and 15-4 terms of directors and officers; 15-5 (8) the time of the election of directors and officers 15-6 and the method of giving notice of the election; 15-7 (9) the penalties for violations of the bylaws; 15-8 (10) the amount of entrance, organization, and 15-9 membership fees, if any, the method of collecting the fees, and the 15-10 purposes for which the association must use the fees; 15-11 (11) the amount, if any, that each member must pay for 15-12 the association's cost of conducting business; 15-13 (12) the amount that each member is required to pay 15-14 for services rendered to the member by the association, the time of 15-15 payment, and the method of collecting the payment; 15-16 (13) the marketing contract between the association 15-17 and its members; 15-18 (14) the requirements for ownership of common stock; 15-19 (15) the time and method by which a member may 15-20 withdraw from the association or may assign or transfer common 15-21 stock; 15-22 (16) the method of assignment and transfer of a 15-23 member's interest or shares of common stock; 15-24 (17) the time and conditions on which membership 15-25 ceases; 15-26 (18) the automatic suspension of a member's rights if 15-27 the member ceases to be eligible for membership; 16-1 (19) the method and effect of expulsion of a member; 16-2 (20) the purchase by the association of a member's 16-3 interest on the death, withdrawal, or expulsion of the member, on 16-4 forfeiture of a membership, or at the option of the association; 16-5 and 16-6 (21) the method by which the value of a member's 16-7 interest is determined by conclusive appraisal by the association's 16-8 board of directors. 16-9 (Sections 104.083-104.100 reserved for expansion 16-10 SUBCHAPTER F. MEMBERSHIP CERTIFICATES AND STOCK 16-11 Sec. 104.101. STOCK. A marketing association may be 16-12 organized with or without capital stock. 16-13 Sec. 104.102. ISSUANCE OF MEMBERSHIP CERTIFICATES. When a 16-14 member of a marketing association organized without capital stock 16-15 has paid the membership fee in full, the association shall issue to 16-16 the member a certificate of membership. 16-17 Sec. 104.103. ISSUANCE OF SHARES. (a) Subject to this 16-18 section, a marketing association organized with capital stock may 16-19 from time to time sell and issue shares of capital stock in the 16-20 manner and under the terms prescribed by its bylaws. 16-21 (b) A marketing association may issue common stock only to a 16-22 person who satisfies the membership requirements prescribed by 16-23 Section 104.121. 16-24 (c) A marketing association may not sell and issue shares of 16-25 preferred stock to a person who is not a member of the association 16-26 unless the association first complies with The Securities Act 16-27 (Article 581-1 et seq., Vernon's Texas Civil Statutes). 17-1 (d) A marketing association may not issue shares of stock to 17-2 a member until the member has fully paid for the shares. 17-3 (e) A marketing association may accept promissory notes of 17-4 members as full or partial payment for stock. The association 17-5 shall hold the stock as security for payment of the note. The 17-6 association's retention of the stock does not affect the member's 17-7 right to vote. 17-8 Sec. 104.104. COMMON STOCK. (a) A stockholder may not own 17-9 more than five percent of a marketing association's issued common 17-10 stock. A marketing association by its bylaws may limit the amount 17-11 of common stock that one stockholder may own to an amount of less 17-12 than five percent of the issued common stock. 17-13 (b) At any time, except when the association's debts exceed 17-14 50 percent of its assets, a marketing association may purchase its 17-15 common stock at the book value conclusively determined by its board 17-16 of directors and pay cash for the stock within one year thereafter. 17-17 (c) A person may not transfer common stock of a marketing 17-18 association to a person who does not produce gas handled by the 17-19 association. The association shall state this restriction in its 17-20 bylaws and shall print the restriction on each common stock 17-21 certificate. 17-22 Sec. 104.105. PREFERRED STOCK. (a) A marketing association 17-23 organized with capital stock may issue preferred stock with or 17-24 without the right to vote. 17-25 (b) A marketing association may redeem preferred stock on 17-26 conditions provided by the association's articles of incorporation 17-27 and printed on the face of the stock certificates. 18-1 Sec. 104.106. STOCK ISSUED ON PURCHASE OF PROPERTY. (a) If 18-2 a marketing association organized with capital stock purchases 18-3 stock, property, or an interest in property, it may discharge its 18-4 obligations, in whole or in part, by exchanging for its acquisition 18-5 shares of preferred stock the par value of which equals the value 18-6 of the purchased property as determined by the association's board 18-7 of directors. 18-8 (b) In a transaction described by Subsection (a), the 18-9 transfer of the purchased property to the marketing association is 18-10 considered payment in cash for the issued shares of preferred 18-11 stock. 18-12 (Sections 104.107-104.120 reserved for expansion 18-13 SUBCHAPTER G. MEMBERS 18-14 Sec. 104.121. MEMBERSHIP. (a) Membership of a marketing 18-15 association is limited to independent producers that produce gas 18-16 that is handled by or through the association, affected landowners 18-17 and royalty owners, lessors, lessees, and overriding royalty owners 18-18 of the gas. 18-19 (b) A marketing association shall admit members under terms 18-20 and conditions prescribed in its bylaws, provided that membership 18-21 shall be made available to eligible landowners, royalty owners, 18-22 lessors, lessees, and overriding royalty owners on a 18-23 nondiscriminatory basis. 18-24 (c) If a member of a marketing association organized without 18-25 capital stock is not an individual, the member may authorize in 18-26 writing an individual, an associate officer, or one of its members 18-27 to act for it. 19-1 Sec. 104.122. NEW MEMBERS. (a) A marketing association 19-2 organized without capital stock may admit new members. 19-3 (b) If the property rights of the marketing association's 19-4 members are unequal, a new member is entitled to share the property 19-5 of the association with the other members in accordance with the 19-6 general rules stated in the articles of incorporation. 19-7 Sec. 104.123. MEETINGS. (a) As prescribed by its bylaws, a 19-8 marketing association annually shall hold one or more regular 19-9 meetings of its members. 19-10 (b) The board of directors may call a special meeting of the 19-11 marketing association at any time. 19-12 (c) If at any time 10 percent or more of the members file 19-13 with the board of directors a petition demanding a special meeting 19-14 of the marketing association and stating the specific business to 19-15 be considered at the meeting, the board shall call the meeting. 19-16 Sec. 104.124. NOTICE OF MEETINGS. Not later than the 10th 19-17 day before the date of the meeting of a marketing association, the 19-18 association shall: 19-19 (1) mail to each member notice of the meeting and a 19-20 statement of the purpose of the meeting; or 19-21 (2) if the bylaws so provide, publish notice of the 19-22 meeting in a newspaper of general circulation in the area in which 19-23 the association's principal place of business is located. 19-24 Sec. 104.125. VOTING. (a) A member of a marketing 19-25 association is entitled to one vote. 19-26 (b) In accordance with a bylaw adopted under Sections 19-27 104.081 and 104.082, a marketing association may provide for its 20-1 members to vote by proxy or mail. 20-2 Sec. 104.126. TERMINATION OR SUSPENSION OF MEMBERSHIP. In 20-3 accordance with its articles of incorporation or a bylaw adopted 20-4 under Sections 104.081 and 104.082, a marketing association may 20-5 provide for the termination or suspension of membership in the 20-6 association and for the purchase of a member's common or preferred 20-7 stock, if any, and all other property interest in the association. 20-8 Sec. 104.127. LIABILITY OF MEMBERS. Except for debts 20-9 contracted with the association, a member of a marketing 20-10 association is not liable for the debts of the association in an 20-11 amount that exceeds the amount that is unpaid on the member's 20-12 membership fee or subscription to capital stock, including any 20-13 unpaid balance on promissory notes given in payment for the stock. 20-14 (Sections 104.128-104.140 reserved for expansion 20-15 SUBCHAPTER H. ADMINISTRATION 20-16 Sec. 104.141. BOARD OF DIRECTORS. (a) A board of directors 20-17 shall manage a marketing association. 20-18 (b) The board shall be composed of five or more directors 20-19 who are elected by the members of the marketing association. 20-20 (c) Except as provided by Subsection (d), a person must be a 20-21 member of the marketing association to be eligible to serve as a 20-22 director. 20-23 (d) As prescribed by the bylaws of the association that is 20-24 holding the meeting, a marketing association that is a member of 20-25 the association may designate any of its members to vote on behalf 20-26 of the member association or to serve as a director of the 20-27 association holding the meeting. 21-1 Sec. 104.142. OFFICERS. (a) The directors shall elect: 21-2 (1) a president or chairman; 21-3 (2) one or more vice presidents or vice chairmen; 21-4 (3) a secretary; and 21-5 (4) a treasurer. 21-6 (b) To be eligible to serve as president, chairman, vice 21-7 president, or vice chairman, a person must be a director. 21-8 (c) The directors may combine the offices of secretary and 21-9 treasurer as secretary-treasurer. 21-10 (d) A bank or depository may serve as treasurer but is not 21-11 considered to be an officer. If a bank or depository serves as 21-12 treasurer, the secretary shall perform the usual accounting duties 21-13 of the treasurer except that the secretary may deposit money only 21-14 as authorized by the board of directors. 21-15 Sec. 104.143. REMOVAL OF OFFICER OR DIRECTOR. (a) Except 21-16 as provided by Subsection (f), a member of a marketing association 21-17 may initiate removal of an officer or director by filing in writing 21-18 with the association's secretary: 21-19 (1) the charges; and 21-20 (2) a petition that is signed by 10 percent of the 21-21 members and that requests the removal of the officer or director in 21-22 question. 21-23 (b) The members of the marketing association shall vote on 21-24 the removal at the next regular or special meeting of the 21-25 association. 21-26 (c) Before the meeting, the marketing association shall 21-27 inform the officer or director in writing of the charges. 22-1 (d) At the meeting, the marketing association shall give the 22-2 officer or director and the person bringing the charges an 22-3 opportunity to be heard in person or by counsel and to present 22-4 witnesses. 22-5 (e) The marketing association by a majority vote may remove 22-6 the officer or director and fill the vacancy. 22-7 (f) If a marketing association's bylaws provide for the 22-8 election of directors by districts with primary elections in each 22-9 district, the petition for removal of a director must state the 22-10 charges and must be signed by 20 percent of the members residing in 22-11 the district from which the director was elected. The board of 22-12 directors shall call a special meeting of the members residing in 22-13 that district to consider removal of the director. The members in 22-14 that district may remove the director by a majority vote. 22-15 Sec. 104.144. BOND. (a) Each officer, employee, or agent 22-16 who handles money or property of a marketing association or any 22-17 money or property that is under the control or in possession of a 22-18 marketing association shall execute and deliver to the association 22-19 an indemnity bond that indemnifies the association and its members 22-20 against any fraudulent, dishonest, or unlawful act by the bonded 22-21 person and other acts as provided by the association's bylaws. 22-22 (b) If the officers and directors of a marketing association 22-23 fail to require a person to execute a bond as required by 22-24 Subsection (a), each officer and director is personally liable for 22-25 all losses that would have been recovered under the bond if the 22-26 person had been bonded. 22-27 Sec. 104.145. REFERENDUM. (a) On demand of one-third of 23-1 the board of directors, the board shall refer to the entire 23-2 membership of a marketing association for decision at the next 23-3 special or regular meeting any matter than has been approved or 23-4 passed by the board. 23-5 (b) The marketing association may call a special meeting to 23-6 consider the referred matter. 23-7 Sec. 104.146. PERMITS TO DO BUSINESS. (a) Any cooperative 23-8 marketing association incorporated under the laws of another state 23-9 may apply for and be granted a permit to do business in this state. 23-10 The association shall pay as a filing fee the amount required of 23-11 domestic corporations organized for a similar purpose. 23-12 (b) A marketing association is not required to have all or 23-13 part of a paid-up capital to be entitled to a permit under 23-14 Subsection (a). 23-15 (Sections 104.147-104.160 reserved for expansion 23-16 SUBCHAPTER I. REMEDIES 23-17 Sec. 104.161. BREACH OR THREATENED BREACH OF MARKETING 23-18 CONTRACT. (a) If a member breaches or threatens to breach a 23-19 marketing contract, the marketing association may sue and, if 23-20 successful, is entitled to: 23-21 (1) an injunction to prevent further breach of the 23-22 contract; and 23-23 (2) a decree of specific performance of the contract. 23-24 (b) Pending the adjudication of an action filed under 23-25 Subsection (a), the marketing association is entitled to a 23-26 temporary restraining order and preliminary injunction against the 23-27 member if the association files: 24-1 (1) a verified complaint showing the breach or 24-2 threatened breach; and 24-3 (2) sufficient bond. 24-4 Sec. 104.162. INDUCED BREACH OF MARKETING CONTRACT; FALSE 24-5 REPORTS. In a civil suit for damages, a person is liable to a 24-6 marketing association for an amount equal to three times the amount 24-7 of actual damages proven for each offense if the person or, if the 24-8 person is a corporation, an officer or employee of the corporation: 24-9 (1) knowingly induces or attempts to induce a member 24-10 of the association to breach the member's marketing contract with 24-11 the association; or 24-12 (2) maliciously and knowingly spreads false reports 24-13 concerning the finances or management of the association. 24-14 (Sections 104.163-104.180 reserved for expansion 24-15 SUBCHAPTER J. FEES AND REPORTS 24-16 Sec. 104.181. FEES. (a) The fee for filing articles of 24-17 incorporation under this chapter is $10. 24-18 (b) The fee for filing an amendment to the articles of 24-19 incorporation under this chapter is $2.50. 24-20 (c) Each marketing association shall pay to the commission 24-21 an annual license fee of $10. A marketing association is exempt 24-22 from all other franchise or license taxes, except that a marketing 24-23 association is exempt from the franchise tax imposed by Chapter 24-24 171, Tax Code, only if exempted by that chapter. 24-25 Sec. 104.182. ANNUAL REPORT. (a) Each marketing 24-26 association shall file an annual report with the commission. The 24-27 association shall prepare the report on forms furnished by the 25-1 commission. 25-2 (b) The report must contain: 25-3 (1) the name of the marketing association; 25-4 (2) the association's principal place of business; 25-5 (3) a general statement of the association's business 25-6 operations during the fiscal year; 25-7 (4) the amount of paid-up capital stock; 25-8 (5) if the association is a stock association, the 25-9 number of shareholders; 25-10 (6) if the association is a nonstock association, the 25-11 number of members and the amount of membership fees received; 25-12 (7) the total operation expenses for the fiscal year; 25-13 (8) the amount of the association's indebtedness or 25-14 liability; and 25-15 (9) the association's balance sheets. 25-16 SECTION 2. The importance of this legislation and the 25-17 crowded condition of the calendars in both houses create an 25-18 emergency and an imperative public necessity that the 25-19 constitutional rule requiring bills to be read on three several 25-20 days in each house be suspended, and this rule is hereby suspended.