By: Ellis S.B. No. 905
A BILL TO BE ENTITLED
AN ACT
1-1 relating to royalty rates applicable to certain oil and gas
1-2 properties on public lands.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subchapter C, Chapter 32, Natural Resources Code,
1-5 is amended by adding Section 32.067 to read as follows:
1-6 Sec. 32.067. MARGINAL PROPERTY ROYALTY RATES. (a) In this
1-7 section:
1-8 (1) "Barrel of oil equivalent" means 6,000 cubic feet
1-9 of natural gas for each 42-gallon barrel of crude oil or a volume
1-10 of gas with a minimum heating value of 6,000,000 British thermal
1-11 units (6,000 Mbtu), whichever is greater.
1-12 (2) "Qualifying Gulf of Mexico property" means land
1-13 described in Section 52.011(2) that is subject to a lease issued
1-14 under Subchapter B, Chapter 52.
1-15 (3) "Qualifying Gulf of Mexico reservoir" means a
1-16 reservoir that:
1-17 (A) during a period established by board rule
1-18 has an average daily per well production equal to or less than 50
1-19 barrels of oil or barrels of oil equivalent; and
1-20 (B) underlies:
1-21 (i) a qualifying Gulf of Mexico property;
1-22 or
1-23 (ii) a pooled unit that includes a
1-24 qualifying Gulf of Mexico property.
2-1 (4) "Qualifying property" means land subject to a
2-2 lease issued under this chapter, under Subchapter E, Chapter 51, or
2-3 under Chapter 52.
2-4 (5) "Qualifying reservoir" means a reservoir that:
2-5 (A) during a period established by board rule
2-6 has an average daily per well production equal to or less than 15
2-7 barrels of oil or barrels of oil equivalent; and
2-8 (B) underlies:
2-9 (i) a qualifying property; or
2-10 (ii) a pooled unit that includes a
2-11 qualifying property.
2-12 (6) "Reservoir" has the same meaning as "common
2-13 reservoir" as that term is defined in Section 86.002.
2-14 (b) The board by rule may provide for the reduction of
2-15 royalty rates as provided by this section.
2-16 (c) The royalty rate for oil and gas produced from a
2-17 qualifying reservoir may be reduced to not less than one-sixteenth
2-18 (6.25 percent). In determining whether to grant a reduction in the
2-19 royalty rate, the board may consider whether the qualifying
2-20 property is being operated efficiently, including whether the
2-21 property is pooled or has reasonable potential for the application
2-22 of secondary or tertiary recovery techniques.
2-23 (d) The royalty rate for the state's share under a lease
2-24 issued under Subchapter F, Chapter 52, or Sections 51.195(c)(2) and
2-25 (d) may be reduced under this section to not less than
2-26 one-thirty-second (3.125 percent). The state's royalty rate may be
2-27 reduced under this subsection only if the royalty rate for the
3-1 owner of the soil is reduced in the same proportion.
3-2 (e) The royalty rate under a lease issued under Subchapter
3-3 C, Chapter 52, may not be reduced to a rate that is lower than the
3-4 rate under lease of land that:
3-5 (1) adjoins the land leased under Subchapter C; and
3-6 (2) is held or operated by, or under the significant
3-7 control of, the state's lessee.
3-8 (f) The royalty rate under a lease issued under Subchapter F
3-9 of this chapter may not be reduced to a rate that is lower than the
3-10 rate under a lease of land that adjoins the land leased under
3-11 Subchapter F.
3-12 (g) If a qualifying reservoir for which a royalty rate
3-13 reduction is sought under this section is included in a unit
3-14 subject to the board's authority, the board may modify the terms
3-15 and conditions for the unit as a condition of approving the
3-16 requested reduction in the royalty rate.
3-17 (h) This section does not apply to the free royalty reserved
3-18 by the state under Section 51.054.
3-19 SECTION 2. Subchapter D, Chapter 66, Education Code, is
3-20 amended by adding Section 66.84 to read as follows:
3-21 Sec. 66.84. MARGINAL PROPERTY ROYALTY RATES. (a) In this
3-22 section:
3-23 (1) "Barrel of oil equivalent" means 6,000 cubic feet
3-24 of natural gas per 42-gallon barrel of crude oil.
3-25 (2) "Lease" or "leases" means an oil and gas lease
3-26 issued or approved by the state that is valid and in force on or
3-27 after the effective date of this section.
4-1 (3) "Qualifying property" means land subject to a
4-2 lease issued under this subchapter.
4-3 (4) "Qualifying reservoir" means a reservoir having an
4-4 average daily per well production equal to or less than 15 barrels
4-5 of oil equivalent during a period established by the board by rule
4-6 and underlying either:
4-7 (A) a qualifying property; or
4-8 (B) a pooled unit including a qualifying
4-9 property.
4-10 (5) "Reservoir" has the same meaning as "common
4-11 reservoir" as defined in Section 86.002, Natural Resources Code.
4-12 (b) The board may provide by rule that the royalty rate for
4-13 qualifying reservoirs may be reduced to not less than one-sixteenth
4-14 (6.25 percent).
4-15 (c) If a qualifying reservoir for which royalty rate
4-16 reduction is sought under this section is included in a unit
4-17 subject to the authority of the board, the board may modify the
4-18 terms and conditions of the unit as a condition of approving a
4-19 reduction in the royalty rate.
4-20 SECTION 3. Section 32.067, Natural Resources Code, as added
4-21 by this Act, applies to the royalty rate under a lease issued or
4-22 approved by the state that is in effect on, or takes effect on or
4-23 after, the effective date of this Act.
4-24 SECTION 4. The importance of this legislation and the
4-25 crowded condition of the calendars in both houses create an
4-26 emergency and an imperative public necessity that the
4-27 constitutional rule requiring bills to be read on three several
5-1 days in each house be suspended, and this rule is hereby suspended,
5-2 and that this Act take effect and be in force from and after its
5-3 passage, and it is so enacted.