H.B. No. 2477
    1-1                                AN ACT
    1-2  relating to authorizing the School Land Board to allow owners of
    1-3  the soil to waive agency rights and to lease oil, gas, and other
    1-4  minerals in, on, and under mineral classified lands.
    1-5        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-6        SECTION 1.  Subchapter F, Chapter 52, Natural Resources Code,
    1-7  is amended by adding Section 52.190 to read as follows:
    1-8        Sec. 52.190.  LEASE BY OWNER OF THE SOIL.  (a)  An owner of
    1-9  the soil of lands covered by this subchapter may lease those lands
   1-10  for the purpose of exploring for and producing oil and gas in the
   1-11  manner provided by this section.
   1-12        (b)  An owner of the soil may apply in writing to the board
   1-13  for an oil and gas lease.
   1-14        (c)  The application shall contain the following:
   1-15              (1)  the name and address of the applicant;
   1-16              (2)  a complete legal description of the land the
   1-17  applicant seeks to lease;
   1-18              (3)  the name and address of every owner of the soil of
   1-19  the land the applicant seeks to lease, if the applicant is not the
   1-20  sole owner of the soil;
   1-21              (4)  a brief letter opinion signed by an attorney
   1-22  licensed in this state setting out the surface ownership of the
   1-23  land sought to be leased;
    2-1              (5)  a statement of the applicant's experience in oil
    2-2  and gas exploration and production, including, without limitation,
    2-3  the applicant's Railroad Commission of Texas operator number and a
    2-4  list of any State of Texas or federal oil and gas leases held or
    2-5  operated by the applicant or other entity in which the applicant
    2-6  has or had a significant interest during the five-year period
    2-7  preceding the date of the application;
    2-8              (6)  a statement that the applicant intends to explore
    2-9  for and, if commercially reasonable, produce oil and gas or if the
   2-10  applicant plans that another person or firm shall conduct
   2-11  exploration and production:
   2-12                    (A)  the name and address of the person or firm;
   2-13                    (B)  a description of the person's or firm's
   2-14  experience in oil and gas exploration and production, including,
   2-15  without limitation, the person's or firm's Railroad Commission of
   2-16  Texas operator number and a list of any State of Texas or federal
   2-17  oil and gas leases held or operated by the person or firm during
   2-18  the five-year period preceding the date of the application; and
   2-19                    (C)  a description of the applicant's intended
   2-20  degree and type of participation in the exploration of and
   2-21  production from the property and all consideration or benefits the
   2-22  applicant expects to receive in connection with the exploration of
   2-23  and production from the property; and
   2-24              (7)  the amount of bonus, rental, royalty, and other
   2-25  lease terms that the applicant proposes to pay or offer or pay and
    3-1  offer for the lease.
    3-2        (d)  The applicant shall provide geological, geophysical,
    3-3  geochemical, and other data or copies of the data, including
    3-4  interpretative data, pertinent to mineral exploration on the lands
    3-5  for which the application is made, in the applicant's possession or
    3-6  to which the applicant has reasonable access and which the
    3-7  applicant has the ability to provide to the land office.  All such
    3-8  data shall be  confidential and not subject to the provisions of
    3-9  the open records law, Chapter 552, Government Code, until one year
   3-10  after the expiration, termination, or forfeiture of a lease granted
   3-11  pursuant to this section.  After one year after the expiration,
   3-12  termination, or forfeiture  of such a lease, the data shall remain
   3-13  confidential to the extent permitted by Chapter 552, Government
   3-14  Code.  If a lease is not issued, the data shall be returned to the
   3-15  applicant.
   3-16        (e)  The board may prescribe the form of the application,
   3-17  specify information required to be submitted in support of an
   3-18  application, and, by rule, otherwise provide for the implementation
   3-19  of this section.
   3-20        (f)  The staff of the land office shall review the
   3-21  information presented in the application, other geological,
   3-22  geophysical, and geochemical data reasonably available to it
   3-23  relevant to the land proposed to be leased, and leasing information
   3-24  reasonably available to it relevant to the land proposed to be
   3-25  leased.  The staff shall prepare a report to the board that
    4-1  contains:
    4-2              (1)  a summary of bonus, rental, royalty, and other
    4-3  lease terms then being offered and asked for leases of similar
    4-4  lands in the area of the land proposed to be leased; and
    4-5              (2)  any factual data considered by the staff to be
    4-6  relevant, including, but not limited to, data concerning the land
    4-7  proposed to be leased and its estimated value for oil and gas
    4-8  exploration and production, recommended lease terms, and the
    4-9  applicant, including the applicant's history of leasing State of
   4-10  Texas or federal lands for oil and gas.
   4-11        (g)  The board shall consider the application at a regular
   4-12  meeting.  It may, in its sole discretion, grant or deny the
   4-13  application or grant the application subject to specified
   4-14  conditions.  Such conditions may include a requirement that if the
   4-15  applicant does not materially participate in the exploration or
   4-16  development of the leased premises, through labor performed, cash
   4-17  or goods contributed, or supplying other enhancement in value, the
   4-18  applicant must share equally with the permanent school fund any
   4-19  benefit derived from the lease.
   4-20        (h)  After the board has approved an application, the
   4-21  commissioner shall issue a lease to the applicant.  The lease shall
   4-22  conform, as nearly as is practicable, to the form of lease
   4-23  prescribed by the board under Section 32.1071.
   4-24        (i)  The commissioner may not deliver a lease issued under
   4-25  this section until the applicant has executed and delivered to the
    5-1  commissioner a waiver of the applicant's right and duty to act as
    5-2  agent for the state in leasing the leased premises and to receive
    5-3  any part of the bonus, rental, royalty, and other consideration
    5-4  accruing to the owner of the soil under this subchapter.  The
    5-5  waiver and the lease shall be effective as of the date the
    5-6  commissioner executes the lease.
    5-7        (j)  Upon the expiration, termination, or forfeiture of a
    5-8  lease issued under this section, the agency rights and duties of
    5-9  the applicant as owner of the soil are reinstated without the
   5-10  necessity for further action by the owner of the soil, the board,
   5-11  or the commissioner.
   5-12        (k)  If an applicant is not the sole owner of the soil, the
   5-13  applicant may secure leases from the other owners of the soil from
   5-14  which the applicant is not prohibited from leasing under Section
   5-15  52.189.  If the applicant must obtain a lease from an owner of the
   5-16  soil from whom the applicant would otherwise not be permitted to
   5-17  lease in order reasonably to explore for or produce or explore for
   5-18  and produce oil or gas, the commissioner may approve the lease on
   5-19  the condition that the applicant shall not receive any benefit
   5-20  from the lease, and, if the applicant should acquire by any method,
   5-21  including devise or inheritance, the right to receive any rental,
   5-22  royalty, or other benefit accruing to the owner of the soil's
   5-23  interest under the lease, the applicant shall assign the benefit to
   5-24  the commissioner for the benefit of the permanent school fund.
   5-25        (l)  The commissioner shall not approve any lease obtained by
    6-1  an applicant from another owner of the soil if the lease contains
    6-2  terms that are substantially inconsistent with or provide for a
    6-3  lesser bonus, rental, or royalty than the lease approved by the
    6-4  board.  If the bonus, rental, or royalty in a lease obtained by an
    6-5  applicant from another owner of the soil for a comparable interest
    6-6  is greater than that approved by the board, then the lease approved
    6-7  by the board shall be amended to provide for the greater bonus,
    6-8  rental, or royalty, and the applicant shall be liable for all
    6-9  greater sums due.  In determining whether an interest is
   6-10  comparable, the board shall consider the quantum of the interest,
   6-11  the time at which the lease was taken, and any other aspects of the
   6-12  lease transaction that the board considers to be relevant.
   6-13        SECTION 2.  Section 52.189(a), Natural Resources Code, is
   6-14  amended to read as follows:
   6-15        (a)  Prohibition Against Self-Dealing.  (1)  The owner of the
   6-16  soil may not lease, either directly or indirectly, to himself or to
   6-17  a nominee, to any corporation or subsidiary in which he is a
   6-18  principal stockholder<,> or to an employee of such a corporation or
   6-19  subsidiary, or to a partnership in which he is a partner<,> or to
   6-20  an employee of such a partnership.  If the owner of the soil is a
   6-21  corporation or a partnership, then the owner of the soil may not
   6-22  lease, either directly or indirectly, to a principal stockholder of
   6-23  the corporation or to a partner of the partnership, or any employee
   6-24  of the corporation or partnership.  The owner of the soil may not
   6-25  lease, either directly or indirectly, to his fiduciary, including
    7-1  but not limited to a guardian, trustee, executor, administrator,
    7-2  receiver, or conservator.
    7-3              (2)  Except as provided by this section <Further>, the
    7-4  owner of the soil may not lease, directly or indirectly, to a
    7-5  person related to him within and including the second degree of
    7-6  consanguinity or affinity, including a person related by adoption,
    7-7  or to a corporation or subsidiary in which that person is a
    7-8  principal stockholder, or to a partnership in which that person is
    7-9  a partner, or to an employee of such a corporation or subsidiary or
   7-10  partnership <a member of his family or anyone related to him by
   7-11  marriage, blood, or adoption>.
   7-12              (3)  An owner of the soil who wishes to lease to a
   7-13  person, corporation, or partnership described in Subdivision (2)
   7-14  may request the approval of the board for authority to execute such
   7-15  a lease before its  execution.  The owner of the soil requesting
   7-16  approval must also execute and file with the commissioner a sworn
   7-17  affidavit stating that the owner of the soil will not receive any
   7-18  benefit under a lease so approved by the board that will not be
   7-19  shared with the permanent school fund in the proportion prescribed
   7-20  by this subchapter.
   7-21              (4)  If an owner of the soil makes any material
   7-22  misstatement of fact in connection with an application to the board
   7-23  or affidavit made pursuant to Subdivision (3), then any lease
   7-24  executed pursuant to the authority of the board shall be voidable
   7-25  at the election of the commissioner.  The election to void such a
    8-1  lease shall be cumulative of and in addition to all other remedies
    8-2  available to the commissioner or the state.
    8-3        SECTION 3.  Subchapter C, Chapter 53, Natural Resources Code,
    8-4  is amended by adding Section 53.081 to read as follows:
    8-5        Sec. 53.081.  LEASE BY OWNER OF THE SOIL.  (a)  An owner of
    8-6  the soil of lands covered by this subchapter may lease those lands
    8-7  for the purpose of exploring for and producing minerals other than
    8-8  oil and gas in the manner provided by this section.
    8-9        (b)  An owner of the soil may apply in writing to the board
   8-10  for a lease of a mineral or minerals other than oil and gas.
   8-11        (c)  The application shall contain the following:
   8-12              (1)  the name and address of the applicant;
   8-13              (2)  a complete legal description of the land the
   8-14  applicant seeks to lease;
   8-15              (3)  the name and address of every owner of the soil of
   8-16  the land the applicant seeks to lease, if the applicant is not the
   8-17  sole owner of the soil;
   8-18              (4)  a brief letter opinion signed by an attorney
   8-19  licensed in this state setting out the surface ownership of the
   8-20  land sought to be leased;
   8-21              (5)  a statement of the applicant's experience in the
   8-22  exploration for and production of minerals other than oil and gas,
   8-23  including, without limitation, a list of any State of Texas or
   8-24  federal mineral leases currently or previously held or operated by
   8-25  the applicant or other entity in which the applicant has or had a
    9-1  significant interest during the five-year period preceding the date
    9-2  of the application;
    9-3              (6)  a statement that the applicant intends to explore
    9-4  for and, if commercially reasonable, produce minerals other than
    9-5  oil and gas or if the applicant plans that another person or firm
    9-6  shall conduct exploration and production:
    9-7                    (A)  the name and address of the person or firm;
    9-8                    (B)  a description of such person's or firm's
    9-9  experience in the exploration for and production of minerals other
   9-10  than oil and gas, including, without limitation, a list of any
   9-11  State of Texas or federal minerals other than oil and gas leases
   9-12  currently or previously held or operated by the person or firm
   9-13  during the five-year period preceding the date of the application;
   9-14  and
   9-15                    (C)  a description of the applicant's intended
   9-16  degree and type of participation in the exploration of and
   9-17  production from the property and all consideration or benefits the
   9-18  applicant expects to receive in connection with the exploration of
   9-19  and production from the property; and
   9-20              (7)  the amount of bonus, rental, royalty, and other
   9-21  lease terms that the applicant proposes to pay or offer or pay and
   9-22  offer for the lease.
   9-23        (d)  The applicant shall provide geological, geophysical,
   9-24  geochemical, and other data or copies of the data, including
   9-25  interpretative data, pertinent to exploration for minerals other
   10-1  than oil and gas on the lands for which the application is made, in
   10-2  the applicant's possession or to which the applicant has reasonable
   10-3  access and which the applicant has the ability to provide to the
   10-4  land office.  All such data shall be confidential and not subject
   10-5  to the provisions of the open records law, Chapter 552, Government
   10-6  Code, until one year after the expiration, termination, or
   10-7  forfeiture of a lease granted pursuant to this section.  After one
   10-8  year after the expiration, termination, or forfeiture of such a
   10-9  lease, the data shall remain confidential to the extent permitted
  10-10  by Chapter 552, Government Code.  If a lease is not issued, the
  10-11  data shall be returned to the applicant.
  10-12        (e)  The board may prescribe the form of the application,
  10-13  require additional information as it considers appropriate, and, by
  10-14  rule, otherwise provide for the implementation of this section.
  10-15        (f)  The staff of the land office shall review the
  10-16  information presented in the application, such other geological,
  10-17  geophysical, and geochemical data reasonably available to it
  10-18  relevant to the land proposed to be leased, and leasing information
  10-19  reasonably available to it relevant to the land proposed to be
  10-20  leased.  The staff shall prepare a report to the board that
  10-21  contains:
  10-22              (1)  a summary of bonus, rental, royalty, and other
  10-23  lease terms then being offered and asked for leases of similar
  10-24  lands in the area of the land proposed to be leased; and
  10-25              (2)  data considered by the staff to be relevant,
   11-1  including, but not limited to, data concerning the land proposed to
   11-2  be leased and its estimated value for minerals other than oil and
   11-3  gas, recommended lease terms, and the applicant, including the
   11-4  applicant's history of leasing State of Texas or federal lands for
   11-5  minerals other than oil and gas.
   11-6        (g)  The board shall consider the application at a regular
   11-7  meeting.  It may, in its sole discretion, grant or deny the
   11-8  application or grant the application subject to specified
   11-9  conditions.  Such conditions may include a requirement that if the
  11-10  applicant does not materially participate in the exploration or
  11-11  development of the leased premises, through labor performed, cash
  11-12  or goods contributed, or supplying other enhancement in value, the
  11-13  applicant must share equally with the permanent school fund any
  11-14  benefit derived from the lease.
  11-15        (h)  After the board has approved an application, the
  11-16  commissioner shall issue a lease to the applicant.  The lease shall
  11-17  conform, as nearly as is practicable, to the form of lease
  11-18  prescribed by the commissioner under this chapter.
  11-19        (i)  The commissioner may not deliver a lease issued under
  11-20  this section until the applicant has executed and delivered to the
  11-21  commissioner a waiver of the applicant's right and duty to act as
  11-22  agent for the state in leasing the leased premises and to receive
  11-23  any part of the bonus, rental, royalty, and other consideration
  11-24  accruing to the owner of the soil under this subchapter.  The
  11-25  waiver and the lease shall be effective as of the date the
   12-1  commissioner executes the lease.
   12-2        (j)  Upon the expiration, termination, or forfeiture of a
   12-3  lease issued under this section, the agency rights and duties of
   12-4  the applicant as owner of the soil are reinstated without the
   12-5  necessity for further action by the owner of the soil, the board,
   12-6  or the commissioner.
   12-7        (k)  If an applicant is not the sole owner of the soil, the
   12-8  applicant may secure leases from the other owners of the soil from
   12-9  which the applicant is not prohibited from leasing under Section
  12-10  53.074.  If the applicant must obtain a lease from an owner of the
  12-11  soil from whom the applicant would otherwise not be permitted to
  12-12  lease in order reasonably to explore for or produce or explore for
  12-13  and produce minerals other than oil or gas, the commissioner may
  12-14  approve the lease on the condition that the applicant shall not
  12-15  receive any benefit from the lease, and, if the applicant should
  12-16  acquire by any method, including devise or inheritance, the right
  12-17  to receive any rental, royalty, or other benefit accruing to the
  12-18  owner of the soil's interest under the lease, the applicant shall
  12-19  assign the benefit to the commissioner for the benefit of the
  12-20  permanent school fund.
  12-21        (l)  The commissioner shall not approve any lease obtained by
  12-22  an applicant from another owner of the soil if the lease contains
  12-23  terms that are substantially inconsistent with or provide for a
  12-24  lesser bonus, rental, or royalty than the lease approved by the
  12-25  board.  If the bonus, rental, or royalty in a lease obtained by an
   13-1  applicant from another owner of the soil for a comparable interest
   13-2  is greater than that approved by the board, then the lease approved
   13-3  by the board shall be amended to provide for the greater bonus,
   13-4  rental, or royalty, and the applicant shall be liable for all
   13-5  greater sums due.  In determining whether an interest is
   13-6  comparable, the board shall consider the quantum of the interest,
   13-7  the time at which the lease was taken, and any other aspects of the
   13-8  lease transaction that the board considers to be relevant.
   13-9        SECTION 4.  Section 53.074(a), Natural Resources Code, is
  13-10  amended to read as follows:
  13-11        (a)  Prohibition Against Self-Dealing.  (1)  The owner of the
  13-12  soil may not lease, either directly or indirectly, to himself or to
  13-13  a nominee, to any corporation or subsidiary in which he is a
  13-14  principal stockholder<,> or to an employee of such a corporation or
  13-15  subsidiary, or to a partnership in which he is a partner<,> or to
  13-16  an employee of such a partnership.  If the owner of the soil is a
  13-17  corporation or a partnership, then the owner of the soil may not
  13-18  lease, either directly or indirectly, to a principal stockholder of
  13-19  the corporation or to a partner of the partnership, or any employee
  13-20  of the corporation or partnership.  The owner of the soil may not
  13-21  lease, either directly or indirectly, to his fiduciary, including
  13-22  but not limited to a guardian, trustee, executor, administrator,
  13-23  receiver, or conservator.
  13-24              (2)  Except as provided by this section <Further>, the
  13-25  owner of the soil may not lease, directly or indirectly, to a
   14-1  person related to him within and including the second degree of
   14-2  consanguinity or affinity, including a person related by adoption,
   14-3  or to a corporation or subsidiary in which that person is a
   14-4  principal stockholder, or to a partnership in which that person is
   14-5  a partner, or to an employee of such a corporation or subsidiary or
   14-6  partnership <a member of his family or anyone related to him by
   14-7  marriage, blood, or adoption>.
   14-8              (3)  An owner of the soil who wishes to lease to a
   14-9  person, corporation, or partnership described in Subdivision (2)
  14-10  may request the approval of the board for authority to execute such
  14-11  a lease before its execution.  The owner of the soil requesting
  14-12  approval must also execute and file with the commissioner a sworn
  14-13  affidavit stating that the owner of the soil will not receive any
  14-14  benefit under a lease so approved by the board that will not be
  14-15  shared with the permanent school fund in the proportion prescribed
  14-16  by this subchapter.
  14-17              (4)  If an owner of the soil makes any material
  14-18  misstatement of fact in connection with an application to the board
  14-19  or affidavit made pursuant to Subdivision (3), then any lease
  14-20  executed pursuant to the authority of the board shall be voidable
  14-21  at the election of the commissioner.  The election to void such a
  14-22  lease shall be cumulative of and in addition to all other remedies
  14-23  available to the commissioner or the state.
  14-24        SECTION 5.  An owner of the soil may obtain a lease under the
  14-25  provisions of this Act only after the effective date of this Act,
   15-1  and this Act shall not be construed to ratify or approve in any way
   15-2  the acquisition by an owner of the soil, acting as agent for the
   15-3  State of Texas, any interest not shared with the State of Texas,
   15-4  except as expressly permitted by statute, in any lease covering or
   15-5  purporting to cover any land subject to Subchapter F, Chapter 52,
   15-6  Natural Resources Code, or Subchapter C, Chapter 53, Natural
   15-7  Resources Code.
   15-8        SECTION 6.  This Act takes effect September 1, 1995.
   15-9        SECTION 7.  The importance of this legislation and the
  15-10  crowded condition of the calendars in both houses create an
  15-11  emergency and an imperative public necessity that the
  15-12  constitutional rule requiring bills to be read on three several
  15-13  days in each house be suspended, and this rule is hereby suspended.