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.