By Turner of Coleman H.B. No. 2477 A BILL TO BE ENTITLED 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. The Natural Resources Code is amended by adding 1-7 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 such 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 applicant 1-17 seeks to lease; 1-18 (3) the name and address of every owner of the soil of 1-19 the land applicant seeks to lease, if the applicant is not the sole 1-20 owner of the soil; 1-21 (4) a brief letter opinion signed by an attorney 1-22 licensed in Texas setting out the surface ownership of the land 1-23 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 operator number and a list of 2-4 any State of Texas or federal oil and gas leases held or operated 2-5 by the applicant or other entity in which applicant has or had a 2-6 significant interest during the five year period preceding the date 2-7 of the application; and 2-8 (6) a statement that applicant intends to explore for 2-9 and, if commercially reasonable, produce oil and gas, or, if 2-10 applicant plans that another person or firm shall conduct 2-11 exploration and production: 2-12 (A) the name and address of such person or firm; 2-13 (B) a description of such person or firm's 2-14 experience in oil and gas exploration and production, including, 2-15 without limitation, such person or firm's Railroad Commission 2-16 operator number and a list of any State of Texas or federal oil and 2-17 gas leases held or operated by such person or firm during the 2-18 five-year period preceding the date of the application; 2-19 (C) a description of applicant's intended degree 2-20 and type of participation in the exploration of and production from 2-21 the property, and all consideration or benefits the applicant 2-22 expects to receive in connection with the exploration of and 2-23 production from the property; and 2-24 (7) the amount of bonus, rental, royalty, and other 2-25 lease terms that applicant proposes to pay and/or offer for the 3-1 lease. 3-2 (d) The applicant shall provide geological, geophysical, 3-3 geochemical, and other data, or copies thereof, including 3-4 interpretative data, pertinent to mineral exploration on the lands 3-5 for which the application is made in applicant's possession or to 3-6 which applicant has reasonable access and which applicant has the 3-7 ability to provide. All such data shall be confidential and not 3-8 subject to the provisions of the Open Records Act, Government Code, 3-9 Ch. 552 until one year after the expiration, termination, or 3-10 forfeiture of a lease granted pursuant to this section. If a lease 3-11 is not issued the data shall be returned to the applicant. 3-12 (e) The board may prescribe the form of the application, 3-13 specify information required to be submitted in support of an 3-14 application, and, by rule, otherwise provide for the implementation 3-15 of this section. 3-16 (f) The staff of the General Land Office shall review the 3-17 information presented in the application, such other geological, 3-18 geophysical, and geochemical data reasonably available to it 3-19 relevant to the land proposed to be leased, and leasing information 3-20 reasonably available to it relevant to the land proposed to be 3-21 leased. The staff shall prepare a report to the board that 3-22 contains: 3-23 (1) a summary of bonus, rentals, royalties, and other 3-24 lease terms then being offered and asked for leases of similar 3-25 lands in the area of the land proposed to be leased; 4-1 (2) any factual data considered by the staff to be 4-2 relevant, including, but not limited to, data concerning the land 4-3 proposed to be leased and its estimated value for oil and gas 4-4 exploration and production, recommended lease terms, and the 4-5 applicant, including applicant's history of leasing State of Texas 4-6 or federal lands for oil and gas. 4-7 (g) The board shall consider the application at a regular 4-8 meeting. It may, in its sole discretion, grant or deny the 4-9 application, or grant the application subject to specified 4-10 conditions. Such conditions may include a requirement that if the 4-11 applicant does not materially participate in the exploration or 4-12 development of the leased premises, through labor performed, cash 4-13 or goods contributed, or supplying other enhancement in value, the 4-14 applicant must share equally with the permanent school fund any 4-15 benefit derived from the lease. 4-16 (h) After the board has approved an application, the 4-17 commissioner shall issue a lease to the applicant. The lease shall 4-18 conform, as nearly as is practicable, to the form of lease 4-19 prescribed by the board under Section 32.1071. 4-20 (i) The commissioner may not deliver a lease issued under 4-21 this section until the applicant has executed and delivered to the 4-22 commissioner a waiver of the applicant's right and duty to act as 4-23 agent for the state in leasing the leased premises, and to receive 4-24 any part of the bonus, rental, royalty, and other consideration 4-25 accruing to the owner of the soil under this subchapter. The 5-1 waiver and the lease shall be effective as of the date the 5-2 commissioner executes the lease. 5-3 (j) Upon the expiration, termination, or forfeiture of a 5-4 lease issued under this subsection, the agency rights and duties of 5-5 the applicant as owner of the soil are reinstated without the 5-6 necessity for further action by the owner of the soil, the board, 5-7 or the commissioner. 5-8 (k) If an applicant is not the sole owner of the soil, the 5-9 applicant may secure leases from the other owners of the soil from 5-10 which the applicant is not prohibited from leasing under Section 5-11 52.189 of this Code. If the applicant must obtain a lease from an 5-12 owner of the soil from whom the applicant would otherwise not be 5-13 permitted to lease in order reasonably to explore for and/or 5-14 produce oil or gas, the commissioner may approve such lease on the 5-15 condition that the applicant shall not receive any benefit 5-16 therefrom, and, if applicant should acquire by any method, 5-17 including devise or inheritance, the right to receive any rental, 5-18 royalty, or other benefit accruing to the owner of the soil's 5-19 interest under such lease, applicant shall assign such benefit to 5-20 the commissioner for the benefit of the permanent school fund. 5-21 (l) The commissioner shall not approve any lease obtained by 5-22 an applicant from another owner of the soil if the lease contains 5-23 terms that are substantially inconsistent with or provide for a 5-24 lesser bonus, rental, or royalty than the lease approved by the 5-25 board. If the bonus, rental, or royalty in a lease obtained by an 6-1 applicant from another owner of the soil for a comparable interest 6-2 is greater than that approved by the board, then the lease approved 6-3 by the board shall be amended to provide for such greater bonus, 6-4 rental, or royalty, and the applicant shall be liable for all such 6-5 greater sums due. In determining whether an interest is 6-6 comparable, the board shall consider the quantum of the interest, 6-7 the time at which the lease was taken, and any other aspects of the 6-8 lease transaction that the board considers to be relevant. 6-9 SECTION 2. The Natural Resources Code is amended by adding 6-10 Section 53.081 to read as follows: 6-11 Sec. 53.081. LEASE BY OWNER OF THE SOIL. (a) An owner of 6-12 the soil of lands covered by this subchapter may lease such lands 6-13 for the purpose of exploring for and producing minerals other than 6-14 oil and gas in the manner provided by this section. 6-15 (b) An owner of the soil may apply in writing to the board 6-16 for a lease of a mineral or minerals other than oil and gas. 6-17 (c) The application shall contain the following: 6-18 (1) the name and address of the applicant; 6-19 (2) a complete legal description of the land applicant 6-20 seeks to lease; 6-21 (3) the name and address of every owner of the soil of 6-22 the land applicant seeks to lease, if the applicant is not the sole 6-23 owner of the soil; 6-24 (4) a brief letter opinion signed by an attorney 6-25 licensed in Texas setting out the surface ownership of the land 7-1 sought to be leased; 7-2 (5) a statement of the applicant's experience in the 7-3 exploration for and production of minerals other than oil and gas, 7-4 including, without limitation, a list of any State of Texas or 7-5 federal mineral leases currently or previously held or operated by 7-6 the applicant or other entity in which applicant has or had a 7-7 significant interest during the five year period preceding the date 7-8 of the application; 7-9 (6) a statement that applicant intends to explore for 7-10 and, if commercially reasonable, produce minerals other than oil 7-11 and gas, or, if applicant plans that another person or firm shall 7-12 conduct exploration and production: 7-13 (A) the name and address of such person or firm 7-14 (B) a description of such person or firm's 7-15 experience in the exploration for and production of minerals other 7-16 than oil and gas, including, without limitation, a list of any 7-17 State of Texas or federal minerals other than oil and gas leases 7-18 currently or previously held or operated by such person or firm 7-19 during the five year period preceding the date of the application; 7-20 (C) a description of applicant's intended degree 7-21 and type of participation in the exploration of and production from 7-22 the property, and all consideration or benefits the applicant 7-23 expects to receive in connection with the exploration of and 7-24 production from the property; and 7-25 (7) the amount of bonus, rental, royalty, and other 8-1 lease terms that applicant proposes to pay and/or offer for the 8-2 lease. 8-3 (d) The applicant shall provide geological, geophysical, 8-4 geochemical, and other data, or copies thereof, including 8-5 interpretative data, pertinent to exploration for minerals other 8-6 than oil and gas on the lands for which the application is made in 8-7 applicant's possession or to which applicant has reasonable access 8-8 and which the applicant has the ability to provide. All such data 8-9 shall be confidential and not subject to the provisions of the Open 8-10 Records Act, Government Code, Ch. 552 until one year after the 8-11 expiration, termination, or forfeiture of a lease granted pursuant 8-12 to this section. If a lease is not issued, the data shall be 8-13 returned to the applicant. 8-14 (e) The board may prescribe the form of the application, 8-15 require such additional information as it considers appropriate, by 8-16 rule, and otherwise provide for the implementation of this section. 8-17 (f) The staff of the General Land Office shall review the 8-18 information presented in the application, such other geological, 8-19 geophysical, and geochemical data reasonably available to it 8-20 relevant to the land proposed to be leased, and leasing information 8-21 reasonably available to it relevant to the land proposed to be 8-22 leased. The staff shall prepare a report to the board that 8-23 contains: 8-24 (1) a summary of bonus, rentals, royalties, and other 8-25 lease terms then being offered and asked for leases of similar 9-1 lands in the area of the land proposed to be leased; 9-2 (2) any factual data considered by the staff to be 9-3 relevant, including, but not limited to, data concerning the land 9-4 proposed to be leased and its estimated value for minerals other 9-5 than oil and gas, recommended lease terms, and the applicant, 9-6 including applicant's history of leasing State of Texas or federal 9-7 lands for minerals other than oil and gas. 9-8 (g) The board shall consider the application at a regular 9-9 meeting. It may, in its sole discretion, grant or deny the 9-10 application, or grant the application subject to specified 9-11 conditions. Such conditions may include a requirement that if the 9-12 applicant does not materially participate in the exploration or 9-13 development of the leased premises, through labor performed, cash 9-14 or goods contributed, or supplying other enhancement in value, the 9-15 applicant must share equally with the permanent school fund any 9-16 benefit derived from the lease. 9-17 (h) After the board has approved an application, the 9-18 commissioner shall issue a lease to the applicant. The lease shall 9-19 conform, as nearly as is practicable, to the form of lease 9-20 prescribed by the commissioner under this chapter. 9-21 (i) The commissioner may not deliver a lease issued under 9-22 this section until the applicant has executed and delivered to the 9-23 commissioner a waiver of the applicant's right and duty to act as 9-24 agent for the state in leasing the leased premises, and to receive 9-25 any part of the bonus, rental, royalty, and other consideration 10-1 accruing to the owner of the soil under this subchapter. The 10-2 waiver and the lease shall be effective as of the date the 10-3 commissioner executes the lease. 10-4 (j) Upon the expiration, termination, or forfeiture of a 10-5 lease issued under this subsection, the agency rights and duties of 10-6 the applicant as owner of the soil are reinstated without the 10-7 necessity for further action by the owner of the soil, the board, 10-8 or the commissioner. 10-9 (k) If an applicant is not the sole owner of the soil, the 10-10 applicant may secure leases from the other owners of the soil from 10-11 which the applicant is not prohibited from leasing under Section 10-12 53.074 of this code. If the applicant must obtain a lease from an 10-13 owner of the soil from whom the applicant would otherwise not be 10-14 permitted to lease in order reasonably to explore for and/or 10-15 produce minerals other than oil or gas, the commissioner may 10-16 approve such lease on the condition that the applicant shall not 10-17 receive any benefit therefrom, and, if applicant should acquire by 10-18 any method, including devise or inheritance, the right to receive 10-19 any rental, royalty, or other benefit accruing to the owner of the 10-20 soil's interest under such lease, applicant shall assign such 10-21 benefit to the commissioner for the benefit of the permanent school 10-22 fund. 10-23 (l) The commissioner shall not approve any lease obtained by 10-24 an applicant from another owner of the soil if the lease contains 10-25 terms that are substantially inconsistent with or provide for a 11-1 lesser bonus, rental, or royalty than the lease approved by the 11-2 board. If the bonus, rental, or royalty in a lease obtained by an 11-3 applicant from another owner of the soil for a comparable interest 11-4 is greater than that approved by the board, then the lease approved 11-5 by the board shall be amended to provide for such greater bonus, 11-6 rental, or royalty, and the applicant shall be liable for all such 11-7 greater sums due. In determining whether an interest is 11-8 comparable, the board shall consider the quantum of the interest, 11-9 the time at which the lease was taken, and any other aspects of the 11-10 lease transaction that the board considers to be relevant. 11-11 SECTION 3. An owner of the soil may obtain a lease under the 11-12 provisions of this Act only after the effective date hereof, and 11-13 this Act shall not be construed to ratify or approve in any way the 11-14 acquisition by an owner of the soil, acting as agent for the State 11-15 of Texas, any interest not shared with the State of Texas, except 11-16 as expressly permitted by statute, in any lease covering or 11-17 purporting to cover any land subject to Subchapter F, Chapter 52, 11-18 Natural Resources Code. 11-19 SECTION 4. EMERGENCY. The importance of this legislation 11-20 and the crowded condition of the calendars in both houses create an 11-21 emergency and an imperative public necessity that the 11-22 constitutional rule requiring bills to be read on three several 11-23 days in each house be suspended, and this rule is hereby suspended. 11-24 SECTION 5. This Act shall be effective on and after 11-25 September 1, 1995.