By Ellis                                               S.B. No. 905
       74R5299 MI-F
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to royalty rates applicable to certain oil and gas
    1-3  properties on public lands.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Subchapter C, Chapter 32, Natural Resources Code,
    1-6  is amended  by adding Section 32.067 to read as follows:
    1-7        Sec. 32.067.  MARGINAL PROPERTY ROYALTY RATES.  (a)  In this
    1-8  section:
    1-9              (1)  "Barrel of oil equivalent" means 6,000 cubic feet
   1-10  of natural gas for each 42-gallon barrel of crude oil.
   1-11              (2)  "Qualifying Gulf of Mexico property" means  land
   1-12  described in Section 52.011(2) that is subject to a lease issued
   1-13  under Subchapter B, Chapter 52.
   1-14              (3)  "Qualifying Gulf of Mexico reservoir" means a
   1-15  reservoir that:
   1-16                    (A)  during a period established by board rule
   1-17  has an average daily per well production equal to or less than 15
   1-18  barrels of oil or barrels of oil equivalent; and
   1-19                    (B)  underlies:
   1-20                          (i)  a qualifying Gulf of Mexico property;
   1-21  or
   1-22                          (ii)  a pooled unit that includes a
   1-23  qualifying Gulf of Mexico property.
   1-24              (4)  "Qualifying property" means land subject to a
    2-1  lease issued under this chapter, under Subchapter E, Chapter 51, or
    2-2  under Chapter 52.
    2-3              (5)  "Qualifying reservoir" means a reservoir that:
    2-4                    (A)  during a period established by board rule
    2-5  has an average daily per well production equal to or less than 15
    2-6  barrels of oil or barrels of oil equivalent; and
    2-7                    (B)  underlies:
    2-8                          (i)  a qualifying property; or
    2-9                          (ii)  a pooled unit that includes a
   2-10  qualifying property.
   2-11              (6)  "Reservoir" has the same meaning as "common
   2-12  reservoir" as that term is defined in Section 86.002.
   2-13        (b)  The board by rule may provide for the reduction of
   2-14  royalty rates as provided by this section.
   2-15        (c)  The royalty rate for oil and gas produced from a
   2-16  qualifying reservoir may be reduced to not less than one-sixteenth
   2-17  (6.25 percent).
   2-18        (d)  The royalty rate for the state's share under a lease
   2-19  issued under Subchapter F, Chapter 52, or Sections 51.195(c)(2) and
   2-20  (d) may be reduced under this section to not less than
   2-21  one-thirty-second (3.125 percent).  The state's royalty rate may be
   2-22  reduced under this subsection only if the royalty rate for the
   2-23  owner of the soil is reduced in the same proportion.
   2-24        (e)  The royalty rate under a lease issued under Subchapter
   2-25  C, Chapter 52, may not be reduced to a rate that is lower than the
   2-26  rate under lease of land that:
   2-27              (1)  adjoins the land leased under Subchapter C; and
    3-1              (2)  is held or operated by, or under the significant
    3-2  control of,  the state's lessee.
    3-3        (f)  The royalty rate under a lease issued under Subchapter F
    3-4  of this chapter may not be reduced to a rate that is lower than the
    3-5  rate under a lease of land that adjoins the land leased under
    3-6  Subchapter F.
    3-7        (g)  If a qualifying reservoir for which a royalty rate
    3-8  reduction is sought under this section is included in a unit
    3-9  subject to the board's authority, the board may modify the terms
   3-10  and conditions for the unit as a condition of approving the
   3-11  requested reduction in the royalty rate.
   3-12        (h)  This section does not apply to the free royalty reserved
   3-13  by the state under Section 51.054.
   3-14        SECTION 2.  Section 32.067, Natural Resources Code, as added
   3-15  by this Act, applies to the royalty rate under a lease issued or
   3-16  approved by the state that is in effect on, or takes effect on or
   3-17  after, the effective date of this Act.
   3-18        SECTION 3.  The importance of this legislation and the
   3-19  crowded condition of the calendars in both houses create an
   3-20  emergency and an imperative public necessity that the
   3-21  constitutional rule requiring bills to be read on three several
   3-22  days in each house be suspended, and this rule is hereby suspended,
   3-23  and that this Act take effect and be in force from and after its
   3-24  passage, and it is so enacted.