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.