1-1        By:  Turner of Coleman, Gallego                 H.B. No. 2477
    1-2       (Senate Sponsor - Haywood)
    1-3        (In the Senate - Received from the House May 15, 1995;
    1-4  May 18, 1995, read first time and referred to Committee on Natural
    1-5  Resources; May 19, 1995, reported favorably by the following vote:
    1-6  Yeas 9, Nays 0; May 19, 1995, sent to printer.)
    1-7                         A BILL TO BE ENTITLED
    1-8                                AN ACT
    1-9  relating to authorizing the School Land Board to allow owners of
   1-10  the soil to waive agency rights and to lease oil, gas, and other
   1-11  minerals in, on, and under mineral classified lands.
   1-12        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-13        SECTION 1.  Subchapter F, Chapter 52, Natural Resources Code,
   1-14  is amended by adding Section 52.190 to read as follows:
   1-15        Sec. 52.190.  LEASE BY OWNER OF THE SOIL.  (a)  An owner of
   1-16  the soil of lands covered by this subchapter may lease those lands
   1-17  for the purpose of exploring for and producing oil and gas in the
   1-18  manner provided by this section.
   1-19        (b)  An owner of the soil may apply in writing to the board
   1-20  for an oil and gas lease.
   1-21        (c)  The application shall contain the following:
   1-22              (1)  the name and address of the applicant;
   1-23              (2)  a complete legal description of the land the
   1-24  applicant seeks to lease;
   1-25              (3)  the name and address of every owner of the soil of
   1-26  the land the applicant seeks to lease, if the applicant is not the
   1-27  sole owner of the soil;
   1-28              (4)  a brief letter opinion signed by an attorney
   1-29  licensed in this state setting out the surface ownership of the
   1-30  land sought to be leased;
   1-31              (5)  a statement of the applicant's experience in oil
   1-32  and gas exploration and production, including, without limitation,
   1-33  the applicant's Railroad Commission of Texas operator number and a
   1-34  list of any State of Texas or federal oil and gas leases held or
   1-35  operated by the applicant or other entity in which the applicant
   1-36  has or had a significant interest during the five-year period
   1-37  preceding the date of the application;
   1-38              (6)  a statement that the applicant intends to explore
   1-39  for and, if commercially reasonable, produce oil and gas or if the
   1-40  applicant plans that another person or firm shall conduct
   1-41  exploration and production:
   1-42                    (A)  the name and address of the person or firm;
   1-43                    (B)  a description of the person's or firm's
   1-44  experience in oil and gas exploration and production, including,
   1-45  without limitation, the person's or firm's Railroad Commission of
   1-46  Texas operator number and a list of any State of Texas or federal
   1-47  oil and gas leases held or operated by the person or firm during
   1-48  the five-year period preceding the date of the application; and
   1-49                    (C)  a description of the applicant's intended
   1-50  degree and type of participation in the exploration of and
   1-51  production from the property and all consideration or benefits the
   1-52  applicant expects to receive in connection with the exploration of
   1-53  and production from the property; and
   1-54              (7)  the amount of bonus, rental, royalty, and other
   1-55  lease terms that the applicant proposes to pay or offer or pay and
   1-56  offer for the lease.
   1-57        (d)  The applicant shall provide geological, geophysical,
   1-58  geochemical, and other data or copies of the data, including
   1-59  interpretative data, pertinent to mineral exploration on the lands
   1-60  for which the application is made, in the applicant's possession or
   1-61  to which the applicant has reasonable access and which the
   1-62  applicant has the ability to provide to the land office.  All such
   1-63  data shall be  confidential and not subject to the provisions of
   1-64  the open records law, Chapter 552, Government Code, until one year
   1-65  after the expiration, termination, or forfeiture of a lease granted
   1-66  pursuant to this section.  After one year after the expiration,
   1-67  termination, or forfeiture  of such a lease, the data shall remain
   1-68  confidential to the extent permitted by Chapter 552, Government
    2-1  Code.  If a lease is not issued, the data shall be returned to the
    2-2  applicant.
    2-3        (e)  The board may prescribe the form of the application,
    2-4  specify information required to be submitted in support of an
    2-5  application, and, by rule, otherwise provide for the implementation
    2-6  of this section.
    2-7        (f)  The staff of the land office shall review the
    2-8  information presented in the application, other geological,
    2-9  geophysical, and geochemical data reasonably available to it
   2-10  relevant to the land proposed to be leased, and leasing information
   2-11  reasonably available to it relevant to the land proposed to be
   2-12  leased.  The staff shall prepare a report to the board that
   2-13  contains:
   2-14              (1)  a summary of bonus, rental, royalty, and other
   2-15  lease terms then being offered and asked for leases of similar
   2-16  lands in the area of the land proposed to be leased; and
   2-17              (2)  any factual data considered by the staff to be
   2-18  relevant, including, but not limited to, data concerning the land
   2-19  proposed to be leased and its estimated value for oil and gas
   2-20  exploration and production, recommended lease terms, and the
   2-21  applicant, including the applicant's history of leasing State of
   2-22  Texas or federal lands for oil and gas.
   2-23        (g)  The board shall consider the application at a regular
   2-24  meeting.  It may, in its sole discretion, grant or deny the
   2-25  application or grant the application subject to specified
   2-26  conditions.  Such conditions may include a requirement that if the
   2-27  applicant does not materially participate in the exploration or
   2-28  development of the leased premises, through labor performed, cash
   2-29  or goods contributed, or supplying other enhancement in value, the
   2-30  applicant must share equally with the permanent school fund any
   2-31  benefit derived from the lease.
   2-32        (h)  After the board has approved an application, the
   2-33  commissioner shall issue a lease to the applicant.  The lease shall
   2-34  conform, as nearly as is practicable, to the form of lease
   2-35  prescribed by the board under Section 32.1071.
   2-36        (i)  The commissioner may not deliver a lease issued under
   2-37  this section until the applicant has executed and delivered to the
   2-38  commissioner a waiver of the applicant's right and duty to act as
   2-39  agent for the state in leasing the leased premises and to receive
   2-40  any part of the bonus, rental, royalty, and other consideration
   2-41  accruing to the owner of the soil under this subchapter.  The
   2-42  waiver and the lease shall be effective as of the date the
   2-43  commissioner executes the lease.
   2-44        (j)  Upon the expiration, termination, or forfeiture of a
   2-45  lease issued under this section, the agency rights and duties of
   2-46  the applicant as owner of the soil are reinstated without the
   2-47  necessity for further action by the owner of the soil, the board,
   2-48  or the commissioner.
   2-49        (k)  If an applicant is not the sole owner of the soil, the
   2-50  applicant may secure leases from the other owners of the soil from
   2-51  which the applicant is not prohibited from leasing under Section
   2-52  52.189.  If the applicant must obtain a lease from an owner of the
   2-53  soil from whom the applicant would otherwise not be permitted to
   2-54  lease in order reasonably to explore for or produce or explore for
   2-55  and produce oil or gas, the commissioner may approve the lease on
   2-56  the condition that the applicant shall not receive any benefit
   2-57  from the lease, and, if the applicant should acquire by any method,
   2-58  including devise or inheritance, the right to receive any rental,
   2-59  royalty, or other benefit accruing to the owner of the soil's
   2-60  interest under the lease, the applicant shall assign the benefit to
   2-61  the commissioner for the benefit of the permanent school fund.
   2-62        (l)  The commissioner shall not approve any lease obtained by
   2-63  an applicant from another owner of the soil if the lease contains
   2-64  terms that are substantially inconsistent with or provide for a
   2-65  lesser bonus, rental, or royalty than the lease approved by the
   2-66  board.  If the bonus, rental, or royalty in a lease obtained by an
   2-67  applicant from another owner of the soil for a comparable interest
   2-68  is greater than that approved by the board, then the lease approved
   2-69  by the board shall be amended to provide for the greater bonus,
   2-70  rental, or royalty, and the applicant shall be liable for all
    3-1  greater sums due.  In determining whether an interest is
    3-2  comparable, the board shall consider the quantum of the interest,
    3-3  the time at which the lease was taken, and any other aspects of the
    3-4  lease transaction that the board considers to be relevant.
    3-5        SECTION 2.  Section 52.189(a), Natural Resources Code, is
    3-6  amended to read as follows:
    3-7        (a)  Prohibition Against Self-Dealing.  (1)  The owner of the
    3-8  soil may not lease, either directly or indirectly, to himself or to
    3-9  a nominee, to any corporation or subsidiary in which he is a
   3-10  principal stockholder<,> or to an employee of such a corporation or
   3-11  subsidiary, or to a partnership in which he is a partner<,> or to
   3-12  an employee of such a partnership.  If the owner of the soil is a
   3-13  corporation or a partnership, then the owner of the soil may not
   3-14  lease, either directly or indirectly, to a principal stockholder of
   3-15  the corporation or to a partner of the partnership, or any employee
   3-16  of the corporation or partnership.  The owner of the soil may not
   3-17  lease, either directly or indirectly, to his fiduciary, including
   3-18  but not limited to a guardian, trustee, executor, administrator,
   3-19  receiver, or conservator.
   3-20              (2)  Except as provided by this section <Further>, the
   3-21  owner of the soil may not lease, directly or indirectly, to a
   3-22  person related to him within and including the second degree of
   3-23  consanguinity or affinity, including a person related by adoption,
   3-24  or to a corporation or subsidiary in which that person is a
   3-25  principal stockholder, or to a partnership in which that person is
   3-26  a partner, or to an employee of such a corporation or subsidiary or
   3-27  partnership <a member of his family or anyone related to him by
   3-28  marriage, blood, or adoption>.
   3-29              (3)  An owner of the soil who wishes to lease to a
   3-30  person, corporation, or partnership described in Subdivision (2)
   3-31  may request the approval of the board for authority to execute such
   3-32  a lease before its  execution.  The owner of the soil requesting
   3-33  approval must also execute and file with the commissioner a sworn
   3-34  affidavit stating that the owner of the soil will not receive any
   3-35  benefit under a lease so approved by the board that will not be
   3-36  shared with the permanent school fund in the proportion prescribed
   3-37  by this subchapter.
   3-38              (4)  If an owner of the soil makes any material
   3-39  misstatement of fact in connection with an application to the board
   3-40  or affidavit made pursuant to Subdivision (3), then any lease
   3-41  executed pursuant to the authority of the board shall be voidable
   3-42  at the election of the commissioner.  The election to void such a
   3-43  lease shall be cumulative of and in addition to all other remedies
   3-44  available to the commissioner or the state.
   3-45        SECTION 3.  Subchapter C, Chapter 53, Natural Resources Code,
   3-46  is amended by adding Section 53.081 to read as follows:
   3-47        Sec. 53.081.  LEASE BY OWNER OF THE SOIL.  (a)  An owner of
   3-48  the soil of lands covered by this subchapter may lease those lands
   3-49  for the purpose of exploring for and producing minerals other than
   3-50  oil and gas in the manner provided by this section.
   3-51        (b)  An owner of the soil may apply in writing to the board
   3-52  for a lease of a mineral or minerals other than oil and gas.
   3-53        (c)  The application shall contain the following:
   3-54              (1)  the name and address of the applicant;
   3-55              (2)  a complete legal description of the land the
   3-56  applicant seeks to lease;
   3-57              (3)  the name and address of every owner of the soil of
   3-58  the land the applicant seeks to lease, if the applicant is not the
   3-59  sole owner of the soil;
   3-60              (4)  a brief letter opinion signed by an attorney
   3-61  licensed in this state setting out the surface ownership of the
   3-62  land sought to be leased;
   3-63              (5)  a statement of the applicant's experience in the
   3-64  exploration for and production of minerals other than oil and gas,
   3-65  including, without limitation, a list of any State of Texas or
   3-66  federal mineral leases currently or previously held or operated by
   3-67  the applicant or other entity in which the applicant has or had a
   3-68  significant interest during the five-year period preceding the date
   3-69  of the application;
   3-70              (6)  a statement that the applicant intends to explore
    4-1  for and, if commercially reasonable, produce minerals other than
    4-2  oil and gas or if the applicant plans that another person or firm
    4-3  shall conduct exploration and production:
    4-4                    (A)  the name and address of the person or firm;
    4-5                    (B)  a description of such person's or firm's
    4-6  experience in the exploration for and production of minerals other
    4-7  than oil and gas, including, without limitation, a list of any
    4-8  State of Texas or federal minerals other than oil and gas leases
    4-9  currently or previously held or operated by the person or firm
   4-10  during the five-year period preceding the date of the application;
   4-11  and
   4-12                    (C)  a description of the applicant's intended
   4-13  degree and type of participation in the exploration of and
   4-14  production from the property and all consideration or benefits the
   4-15  applicant expects to receive in connection with the exploration of
   4-16  and production from the property; and
   4-17              (7)  the amount of bonus, rental, royalty, and other
   4-18  lease terms that the applicant proposes to pay or offer or pay and
   4-19  offer for the lease.
   4-20        (d)  The applicant shall provide geological, geophysical,
   4-21  geochemical, and other data or copies of the data, including
   4-22  interpretative data, pertinent to exploration for minerals other
   4-23  than oil and gas on the lands for which the application is made, in
   4-24  the applicant's possession or to which the applicant has reasonable
   4-25  access and which the applicant has the ability to provide to the
   4-26  land office.  All such data shall be confidential and not subject
   4-27  to the provisions of the open records law, Chapter 552, Government
   4-28  Code, until one year after the expiration, termination, or
   4-29  forfeiture of a lease granted pursuant to this section.  After one
   4-30  year after the expiration, termination, or forfeiture of such a
   4-31  lease, the data shall remain confidential to the extent permitted
   4-32  by Chapter 552, Government Code.  If a lease is not issued, the
   4-33  data shall be returned to the applicant.
   4-34        (e)  The board may prescribe the form of the application,
   4-35  require additional information as it considers appropriate, and, by
   4-36  rule, otherwise provide for the implementation of this section.
   4-37        (f)  The staff of the land office shall review the
   4-38  information presented in the application, such other geological,
   4-39  geophysical, and geochemical data reasonably available to it
   4-40  relevant to the land proposed to be leased, and leasing information
   4-41  reasonably available to it relevant to the land proposed to be
   4-42  leased.  The staff shall prepare a report to the board that
   4-43  contains:
   4-44              (1)  a summary of bonus, rental, royalty, and other
   4-45  lease terms then being offered and asked for leases of similar
   4-46  lands in the area of the land proposed to be leased; and
   4-47              (2)  data considered by the staff to be relevant,
   4-48  including, but not limited to, data concerning the land proposed to
   4-49  be leased and its estimated value for minerals other than oil and
   4-50  gas, recommended lease terms, and the applicant, including the
   4-51  applicant's history of leasing State of Texas or federal lands for
   4-52  minerals other than oil and gas.
   4-53        (g)  The board shall consider the application at a regular
   4-54  meeting.  It may, in its sole discretion, grant or deny the
   4-55  application or grant the application subject to specified
   4-56  conditions.  Such conditions may include a requirement that if the
   4-57  applicant does not materially participate in the exploration or
   4-58  development of the leased premises, through labor performed, cash
   4-59  or goods contributed, or supplying other enhancement in value, the
   4-60  applicant must share equally with the permanent school fund any
   4-61  benefit derived from the lease.
   4-62        (h)  After the board has approved an application, the
   4-63  commissioner shall issue a lease to the applicant.  The lease shall
   4-64  conform, as nearly as is practicable, to the form of lease
   4-65  prescribed by the commissioner under this chapter.
   4-66        (i)  The commissioner may not deliver a lease issued under
   4-67  this section until the applicant has executed and delivered to the
   4-68  commissioner a waiver of the applicant's right and duty to act as
   4-69  agent for the state in leasing the leased premises and to receive
   4-70  any part of the bonus, rental, royalty, and other consideration
    5-1  accruing to the owner of the soil under this subchapter.  The
    5-2  waiver and the lease shall be effective as of the date the
    5-3  commissioner executes the lease.
    5-4        (j)  Upon the expiration, termination, or forfeiture of a
    5-5  lease issued under this section, the agency rights and duties of
    5-6  the applicant as owner of the soil are reinstated without the
    5-7  necessity for further action by the owner of the soil, the board,
    5-8  or the commissioner.
    5-9        (k)  If an applicant is not the sole owner of the soil, the
   5-10  applicant may secure leases from the other owners of the soil from
   5-11  which the applicant is not prohibited from leasing under Section
   5-12  53.074.  If the applicant must obtain a lease from an owner of the
   5-13  soil from whom the applicant would otherwise not be permitted to
   5-14  lease in order reasonably to explore for or produce or explore for
   5-15  and produce minerals other than oil or gas, the commissioner may
   5-16  approve the lease on the condition that the applicant shall not
   5-17  receive any benefit from the lease, and, if the applicant should
   5-18  acquire by any method, including devise or inheritance, the right
   5-19  to receive any rental, royalty, or other benefit accruing to the
   5-20  owner of the soil's interest under the lease, the applicant shall
   5-21  assign the benefit to the commissioner for the benefit of the
   5-22  permanent school fund.
   5-23        (l)  The commissioner shall not approve any lease obtained by
   5-24  an applicant from another owner of the soil if the lease contains
   5-25  terms that are substantially inconsistent with or provide for a
   5-26  lesser bonus, rental, or royalty than the lease approved by the
   5-27  board.  If the bonus, rental, or royalty in a lease obtained by an
   5-28  applicant from another owner of the soil for a comparable interest
   5-29  is greater than that approved by the board, then the lease approved
   5-30  by the board shall be amended to provide for the greater bonus,
   5-31  rental, or royalty, and the applicant shall be liable for all
   5-32  greater sums due.  In determining whether an interest is
   5-33  comparable, the board shall consider the quantum of the interest,
   5-34  the time at which the lease was taken, and any other aspects of the
   5-35  lease transaction that the board considers to be relevant.
   5-36        SECTION 4.  Section 53.074(a), Natural Resources Code, is
   5-37  amended to read as follows:
   5-38        (a)  Prohibition Against Self-Dealing.  (1)  The owner of the
   5-39  soil may not lease, either directly or indirectly, to himself or to
   5-40  a nominee, to any corporation or subsidiary in which he is a
   5-41  principal stockholder<,> or to an employee of such a corporation or
   5-42  subsidiary, or to a partnership in which he is a partner<,> or to
   5-43  an employee of such a partnership.  If the owner of the soil is a
   5-44  corporation or a partnership, then the owner of the soil may not
   5-45  lease, either directly or indirectly, to a principal stockholder of
   5-46  the corporation or to a partner of the partnership, or any employee
   5-47  of the corporation or partnership.  The owner of the soil may not
   5-48  lease, either directly or indirectly, to his fiduciary, including
   5-49  but not limited to a guardian, trustee, executor, administrator,
   5-50  receiver, or conservator.
   5-51              (2)  Except as provided by this section <Further>, the
   5-52  owner of the soil may not lease, directly or indirectly, to a
   5-53  person related to him within and including the second degree of
   5-54  consanguinity or affinity, including a person related by adoption,
   5-55  or to a corporation or subsidiary in which that person is a
   5-56  principal stockholder, or to a partnership in which that person is
   5-57  a partner, or to an employee of such a corporation or subsidiary or
   5-58  partnership <a member of his family or anyone related to him by
   5-59  marriage, blood, or adoption>.
   5-60              (3)  An owner of the soil who wishes to lease to a
   5-61  person, corporation, or partnership described in Subdivision (2)
   5-62  may request the approval of the board for authority to execute such
   5-63  a lease before its execution.  The owner of the soil requesting
   5-64  approval must also execute and file with the commissioner a sworn
   5-65  affidavit stating that the owner of the soil will not receive any
   5-66  benefit under a lease so approved by the board that will not be
   5-67  shared with the permanent school fund in the proportion prescribed
   5-68  by this subchapter.
   5-69              (4)  If an owner of the soil makes any material
   5-70  misstatement of fact in connection with an application to the board
    6-1  or affidavit made pursuant to Subdivision (3), then any lease
    6-2  executed pursuant to the authority of the board shall be voidable
    6-3  at the election of the commissioner.  The election to void such a
    6-4  lease shall be cumulative of and in addition to all other remedies
    6-5  available to the commissioner or the state.
    6-6        SECTION 5.  An owner of the soil may obtain a lease under the
    6-7  provisions of this Act only after the effective date of this Act,
    6-8  and this Act shall not be construed to ratify or approve in any way
    6-9  the acquisition by an owner of the soil, acting as agent for the
   6-10  State of Texas, any interest not shared with the State of Texas,
   6-11  except as expressly permitted by statute, in any lease covering or
   6-12  purporting to cover any land subject to Subchapter F, Chapter 52,
   6-13  Natural Resources Code, or Subchapter C, Chapter 53, Natural
   6-14  Resources Code.
   6-15        SECTION 6.  This Act takes effect September 1, 1995.
   6-16        SECTION 7.  The importance of this legislation and the
   6-17  crowded condition of the calendars in both houses create an
   6-18  emergency and an imperative public necessity that the
   6-19  constitutional rule requiring bills to be read on three several
   6-20  days in each house be suspended, and this rule is hereby suspended.
   6-21                               * * * * *