By: Bivins S.B. No. 1120 A BILL TO BE ENTITLED AN ACT 1-1 relating to permitting the creation of gas marketing cooperative 1-2 corporations under the authority of the Railroad Commission of 1-3 Texas and providing a state franchise tax exemption for such 1-4 associations. 1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-6 SECTION 1. Subtitle C, Title 3, Natural Resources Code, is 1-7 amended by adding Chapter 104 to read as follows: 1-8 CHAPTER 104. PRODUCERS' COOPERATIVE MARKETING ASSOCIATIONS 1-9 SUBCHAPTER A. GENERAL PROVISIONS 1-10 Sec. 104.001. POLICY. The purpose of this chapter is to: 1-11 (1) prevent waste, protect correlative rights, and 1-12 promote conservation through the orderly production and efficient 1-13 marketing of Texas gas by producers; 1-14 (2) provide independent gas producers in Texas a 1-15 method of collectively making their product more accessible to 1-16 markets; and 1-17 (3) to provide state regulation of gas marketing 1-18 activities conducted in furtherance of Subdivisions (1) and (2); 1-19 and 1-20 (4) ensure that persons operating under this chapter 1-21 do not engage in anticompetitive acts that do not further the 1-22 regulatory policies expressed in this section. 1-23 Sec. 104.002. DEFINITIONS. In this chapter: 2-1 (1) "Commission" means the Railroad Commission of 2-2 Texas. 2-3 (2) "Gas" means natural gas or casinghead gas. 2-4 (3) "Marketing association" or "gas marketing 2-5 association" means an association organized under this chapter. 2-6 (4) "Member" includes a member of an association 2-7 organized under this chapter without capital stock and a holder of 2-8 common stock of an association under this chapter with capital 2-9 stock. 2-10 (5) "Person" includes natural persons, partnerships of 2-11 two or more persons having a joint or common interest, and 2-12 corporations. 2-13 (6) "Producer" or "independent producer" means any 2-14 person who produces gas in Texas other than a person to whom 2-15 Section 613A(c) of the Internal Revenue Code of 1986 does not apply 2-16 by reason of Section 613A(d)(2) or (4) of that code. 2-17 Sec. 104.003. NONPROFIT ORGANIZATION. Because a marketing 2-18 association is organized not to make money for itself or for its 2-19 members as individuals but only to make money for its members as 2-20 producers, the association is considered to be a nonprofit 2-21 organization. 2-22 Sec. 104.004. APPLICATION OF GENERAL CORPORATION LAWS. The 2-23 general corporation laws of this state apply to marketing 2-24 associations unless those laws conflict with this chapter. 2-25 Sec. 104.005. APPLICABILITY. None of the provisions in this 3-1 chapter impair the power of the commission to prevent waste under 3-2 the oil and gas conservation laws of this state, except as provided 3-3 in Section 104.006, or repeal, modify, or impair any of the 3-4 provisions of Sections 85.002, 85.125, 85.241-85.243, 3-5 85.249-85.252, and 85.381-85.385 or Subchapters C, E, F, and J, 3-6 Chapter 85, relating to oil and gas conservation. 3-7 Sec. 104.006. CONFLICT WITH ANTITRUST ACTS. (a) Agreements 3-8 and operations under agreements that are in accordance with the 3-9 provisions of this chapter, being necessary to improve market 3-10 efficiency and thereby serving to help prevent waste, protect 3-11 correlative rights, and conserve the natural resources of this 3-12 state, shall not be construed to be in violation of Chapter 15, 3-13 Business & Commerce Code. 3-14 (b) If a court finds a conflict between this chapter and 3-15 Chapter 15, Business & Commerce Code, this chapter is intended as a 3-16 reasonable exception to that law, necessary for the public 3-17 interests stated in Subsection (a). 3-18 (c) If a court finds that a conflict exists between this 3-19 chapter and Chapter 15, Business & Commerce Code, and finds that 3-20 this chapter is not a reasonable exception to Chapter 15, Business 3-21 & Commerce Code, it is the intent of the legislature that this 3-22 chapter, or any conflicting portion of it, shall be declared 3-23 invalid rather than Chapter 15, Business & Commerce Code, or any 3-24 portion of it, being declared invalid. 3-25 (Sections 104.007-104.020 reserved for expansion 4-1 SUBCHAPTER B. PURPOSE AND POWERS 4-2 Sec. 104.021. PURPOSE. A gas marketing association may 4-3 engage in any activity in connection with: 4-4 (1) the selling, transporting, or storing of gas that 4-5 is produced and delivered to it by its members; or 4-6 (2) the purchase, hiring, or use by its members of 4-7 supplies, machinery, or equipment directly related to the 4-8 production, transmission, storage, or marketing of gas or in the 4-9 financing of those activities. 4-10 Sec. 104.022. RESTRICTIONS. (a) A gas marketing 4-11 association shall be operated for the mutual benefit of its members 4-12 as gas producers and shall conform to one or both of the following 4-13 requirements: 4-14 (1) a member of the association may not have more than 4-15 one vote based on the member's ownership of stock or membership 4-16 capital in the association; or 4-17 (2) the association may not pay dividends on stock or 4-18 membership capital in excess of eight percent a year. 4-19 (b) A gas marketing association may deal in the gas 4-20 production of nonmembers but is restricted to an amount that is not 4-21 greater than the value of the gas that it handles for its members. 4-22 (c) A person is not eligible to be a member of a gas 4-23 marketing association if that person is a "gas utility," "utility," 4-24 "affiliated interest," or "affiliate" as defined in Section 1.03, 4-25 Gas Utility Regulatory Act (Article 1446e, Vernon's Texas Civil 5-1 Statutes). 5-2 (d) A person may not be a member of a gas marketing 5-3 association unless the person is: 5-4 (1) an independent producer; or 5-5 (2) a landowner, royalty owner, lessor, lessee, or 5-6 overriding royalty owner in the gas-producing property of the 5-7 independent producer. 5-8 (e) A gas marketing association may not limit the right of 5-9 any member to establish price and volume categories for gas the 5-10 member produces and contracts to sell through the association. 5-11 (f) Unless a higher level of production is permitted to be 5-12 produced and sold by gas marketing associations under applicable 5-13 federal law existing after August 31, 1995, a gas marketing 5-14 association or combination of associations operating under Section 5-15 104.024 may not market in any calendar year more than 25 percent of 5-16 the total volume of natural gas produced in Texas during the 5-17 preceding calendar year. 5-18 Sec. 104.023. GENERAL POWERS. A marketing association may: 5-19 (1) subject to the prior approval of the commission, 5-20 engage in the marketing of gas on behalf of its members; 5-21 (2) borrow money and make advances to its members; 5-22 (3) act as an agent or representative of a member in 5-23 an activity authorized by Subdivision (1) or (2); 5-24 (4) acquire, hold, own, exercise all rights of 5-25 ownership in, sell, transfer, or pledge shares of capital stocks or 6-1 bonds of a corporation or association engaged in an activity 6-2 related to that of the marketing association; 6-3 (5) establish reserves and invest the money in those 6-4 reserves in bonds or other property as provided by the 6-5 association's bylaws; 6-6 (6) buy, hold, and exercise all privileges of 6-7 ownership over real or personal property that is determined by the 6-8 association to be necessary or convenient for, or incidental to, 6-9 conducting and operating its business; 6-10 (7) perform, in or outside this state, acts that are 6-11 necessary, suitable, or proper to accomplish the purposes and 6-12 objectives permitted by this section or that are conducive to or 6-13 expedient for the interest or benefit of the association and may 6-14 contract for the performance of those acts; 6-15 (8) possess and exercise, in or outside this state, 6-16 all powers, rights, and privileges necessary for or incidental to 6-17 the purposes for which the association is organized or the 6-18 activities in which it is engaged; and 6-19 (9) exercise the rights, powers, and privileges that 6-20 are granted by the laws of this state to general corporations and 6-21 that are not inconsistent with this chapter. 6-22 Sec. 104.024. CONTRACTS AND AGREEMENTS WITH OTHER 6-23 ASSOCIATIONS. (a) A marketing association, by resolution of its 6-24 board of directors but subject to prior review by the commission 6-25 for compliance with the regulatory policies and objectives of this 7-1 chapter, may make agreements, contracts, and arrangements with any 7-2 other gas marketing cooperative corporation or association formed 7-3 in this or any other state for the cooperative and more economical 7-4 conduct of its business or a part of its business. 7-5 (b) Two or more marketing associations, jointly or 7-6 separately, may use the same methods and agencies to conduct their 7-7 respective businesses. 7-8 Sec. 104.025. MARKETING CONTRACT. (a) Subject to prior 7-9 commission review for compliance with the regulatory policies and 7-10 objectives of this chapter, a gas marketing association may from 7-11 time to time establish a form of contract with its members to 7-12 market their gas on reasonable terms, including a requirement that 7-13 the members sell during a fixed term all or a specified part of 7-14 their gas production exclusively to or through the association or 7-15 any facilities to be created by the association. 7-16 (b) The form contract may provide that the marketing 7-17 association may: 7-18 (1) sell or resell its members' gas production with or 7-19 without taking title to the gas; and 7-20 (2) pay to its members the resale price less necessary 7-21 expenses. 7-22 (c) The expenses that may be deducted from the resale price 7-23 under Subsection (b) include: 7-24 (1) sales, overhead, and other expenses; 7-25 (2) interest on preferred stock, not exceeding eight 8-1 percent a year; 8-2 (3) interest on common stock, not exceeding eight 8-3 percent a year; and 8-4 (4) reserves, including reserves for redeeming any 8-5 stock issued. 8-6 (d) A marketing association's bylaws and marketing contract 8-7 form may: 8-8 (1) fix as liquidated damages specific amounts to be 8-9 paid by a member if the member breaches the marketing contract 8-10 regarding the sale, delivery, or withholding of gas; and 8-11 (2) provide that the member will pay all costs, 8-12 premiums for bonds, expenses, and fees if the association brings an 8-13 action on the contract. 8-14 Sec. 104.026. PERSONS BOUND BY AGREEMENT. An agreement 8-15 under this chapter does not bind a landowner, royalty owner, 8-16 lessor, lessee, overriding royalty owner, or any other person who 8-17 does not execute the agreement or cause it to be executed on the 8-18 person's behalf. The agreement binds only the persons who execute 8-19 it, or on whose behalf the agreement is executed by a duly 8-20 authorized agent, and the persons' heirs, successors, assigns, and 8-21 legal representatives. A person may not be compelled or required 8-22 to enter into an agreement under this chapter, but shall be allowed 8-23 to enter into an agreement on a nondiscriminatory basis. 8-24 Sec. 104.027. COMMISSION APPROVAL. An agreement for the 8-25 cooperative marketing of gas by members is not legal or effective 9-1 until the commission finds after application, notice, and hearing 9-2 that the agreement: 9-3 (1) is appropriate and necessary to accomplish the 9-4 regulatory policies and objectives of this chapter; 9-5 (2) is in the interest of the public welfare as being 9-6 reasonably necessary to help prevent waste, protect correlative 9-7 rights, and promote the conservation of oil or gas or both; and 9-8 (3) enhances the efficient marketing of Texas gas 9-9 without permitting anticompetitive acts that do not further the 9-10 regulatory policies and objectives of this chapter. 9-11 Sec. 104.028. COMMISSION REGULATION. (a) An agreement 9-12 executed under this chapter is subject to any valid order or rule 9-13 of the commission relating to the setting of allowables, proration, 9-14 conservation, or other matters within the authority of the 9-15 commission, whether adopted before or after the execution of the 9-16 agreement. 9-17 (b) The commission may provide, on such terms and conditions 9-18 as it establishes by regulation, for the operation of a statewide 9-19 gas marketing data clearinghouse to assist any marketing 9-20 association created under this chapter. 9-21 (c) In furtherance of its regulatory authority under this 9-22 chapter, the commission may provide by regulation for the maximum 9-23 and minimum prices to be charged from time to time for gas sold by 9-24 or through a marketing association. Except for good cause shown on 9-25 application, notice, and hearing, a marketing agreement may not 10-1 provide for pricing that conflicts with any pricing provisions 10-2 established by the commission under this subsection. 10-3 Sec. 104.029. PROHIBITED PROVISIONS. (a) An agreement 10-4 authorized by this chapter may not attempt to provide for or limit 10-5 the amount of production of oil or gas by any member, unless 10-6 authorized by the commission. 10-7 (b) An agreement authorized by this chapter may not provide 10-8 directly or indirectly for the cooperative refining of crude 10-9 petroleum, distillate, condensate, or gas or a by-product of crude 10-10 petroleum, distillate, condensate, or gas. The extraction of 10-11 liquid hydrocarbons from gas, and the separation of the liquid 10-12 hydrocarbons into propanes, butanes, ethanes, distillate, 10-13 condensate, and natural gasoline, without any additional 10-14 processing, is not considered to be refining. 10-15 (c) An agreement authorized by this chapter may not provide 10-16 for the cooperative marketing of crude petroleum, condensate, or 10-17 distillate or a by-product of crude petroleum, condensate, or 10-18 distillate. 10-19 (Sections 104.030-104.040 reserved for expansion 10-20 SUBCHAPTER C. PUBLIC LAND 10-21 Sec. 104.041. AUTHORITY OF COMMISSIONER OF GENERAL LAND 10-22 OFFICE. Subject to the approval specified in Section 104.042, the 10-23 commissioner of the General Land Office, on behalf of the state or 10-24 of any fund belonging to the state, may execute contracts 10-25 committing to the agreements declared lawful by this chapter: 11-1 (1) the royalty interests in oil or gas or both 11-2 reserved by law to the state or any fund of the state in any 11-3 patent, or any contract of sale, or under the terms of any oil and 11-4 gas lease lawfully issued by an official, board, agent, agency, or 11-5 authority of the state; or 11-6 (2) the free royalty interests, whether leased or 11-7 unleased, reserved to the state under Section 51.054 or 51.201. 11-8 Sec. 104.042. NECESSARY APPROVAL BY OTHER PERSONS AND STATE 11-9 AGENCIES. (a) The School Land Board must approve an agreement 11-10 that commits: 11-11 (1) the royalty interests in land set apart by the 11-12 constitution and laws of this state for the permanent free school 11-13 fund and the several asylum funds, in river beds, inland lakes, and 11-14 channels, and the area within tidewater limits, including islands, 11-15 lakes, bays, inlets, marshes, reefs, and the bed of the sea; or 11-16 (2) the free royalty interests, whether leased or 11-17 unleased, reserved to the state under Section 51.054 or 51.201. 11-18 (b) An agreement that covers land leased for oil and gas 11-19 under Subchapter F, Chapter 52, must be executed by the owners of 11-20 the soil. 11-21 (c) An agreement that commits the royalty interests in land 11-22 or areas other than those covered by Subsections (a) and (b) must 11-23 be approved by the board, official, agent, agency, or authority of 11-24 the state vested with authority to lease or to approve the leasing 11-25 of the land or areas for oil and gas. 12-1 (Sections 104.043-104.060 reserved for expansion 12-2 SUBCHAPTER D. INCORPORATION 12-3 Sec. 104.061. INCORPORATORS. Five or more producers may 12-4 form a marketing association under this chapter. 12-5 Sec. 104.062. EXECUTION OF ARTICLES OF INCORPORATION. 12-6 (a) Each marketing association shall prepare and file articles of 12-7 incorporation signed by each incorporator. 12-8 (b) One of the incorporators shall acknowledge the articles 12-9 before an officer authorized by the laws of this state to take and 12-10 certify acknowledgements of deeds and conveyances. 12-11 Sec. 104.063. CONTENTS OF ARTICLES OF INCORPORATION. 12-12 (a) The articles of incorporation must state: 12-13 (1) the name of the marketing association; 12-14 (2) the term of existence, if it is limited; 12-15 (3) the purpose for which the association is formed; 12-16 (4) the location and street address of the 12-17 association's principal place of business; 12-18 (5) the number of directors; and 12-19 (6) the term of office of each director. 12-20 (b) If the marketing association is organized without 12-21 capital stock, the articles must state whether property rights and 12-22 interests of each member are equal or unequal and, if unequal, the 12-23 general rules applicable to all members by which the property 12-24 rights and interests of each are determined and fixed. 12-25 (c) If the marketing association is organized with capital 13-1 stock, the articles must state: 13-2 (1) the amount of capital stock authorized; 13-3 (2) the number of shares authorized; 13-4 (3) the par value of the shares; and 13-5 (4) if preferred stock is to be issued: 13-6 (A) the number of shares of common stock; 13-7 (B) the number of shares of preferred stock; 13-8 (C) the rights, preferences, and privileges 13-9 granted; and 13-10 (D) the conditions under which the association 13-11 may redeem the preferred stock. 13-12 Sec. 104.064. FILING OF ARTICLES OF INCORPORATION. (a) The 13-13 incorporators shall file the articles of incorporation in 13-14 accordance with the general corporation laws of this state. 13-15 (b) The incorporators shall file a certified copy of the 13-16 articles with the commission. 13-17 (c) If the marketing association is formed with capital 13-18 stock, the incorporators are not required to obtain subscriptions 13-19 or payment for any part of the association's capital stock as a 13-20 prerequisite to filing the articles. 13-21 Sec. 104.065. EFFECT OF FILING ARTICLES OF INCORPORATION. 13-22 When the articles of incorporation are filed with the secretary of 13-23 state, all courts shall receive the articles or a certified copy of 13-24 the articles as prima facie evidence of: 13-25 (1) facts stated in the articles; and 14-1 (2) compliance with requirements for incorporation 14-2 under this chapter. 14-3 Sec. 104.066. AMENDMENT OF ARTICLES OF INCORPORATION. 14-4 (a) A marketing association may amend its articles of 14-5 incorporation at any regular meeting of the association or at a 14-6 special meeting for that purpose at which at least 10 percent of 14-7 the members are voting in person or by proxy or mail. 14-8 (b) An amendment must first be approved by two-thirds of the 14-9 directors and then, except as provided by Subsection (c), adopted 14-10 by: 14-11 (1) a simple majority vote if 50 percent or more of 14-12 the members vote in person or by proxy or mail; 14-13 (2) a two-thirds majority vote if less than 50 percent 14-14 but 25 percent or more of the members vote in person or by proxy or 14-15 mail; or 14-16 (3) a three-fourths majority vote if less than 25 14-17 percent but 10 percent or more of the members vote in person or by 14-18 proxy or mail. 14-19 (c) An amendment of the rules required by Section 104.063(b) 14-20 for determining the property rights and interests of members of a 14-21 marketing association formed without capital stock may be adopted 14-22 by a vote or written consent of two-thirds of the members who are 14-23 present at a meeting of the association at which a quorum is 14-24 present or who are voting by proxy or mail as prescribed by an 14-25 association bylaw. 15-1 (d) After an amendment is adopted, the amendment shall be 15-2 filed in accordance with the general corporation laws of this 15-3 state. 15-4 (Sections 104.067-104.080 reserved for expansion 15-5 SUBCHAPTER E. BYLAWS 15-6 Sec. 104.081. ADOPTION. (a) A marketing association shall 15-7 adopt bylaws before the 31st day after the date the articles of 15-8 incorporation are filed with the secretary of state. 15-9 (b) The initial bylaws may be adopted by a two-thirds vote 15-10 of the incorporating directors and: 15-11 (1) a simple majority vote, if 50 percent or more of 15-12 the members vote in person or by proxy or mail; 15-13 (2) a two-thirds majority vote, if less than 50 15-14 percent but 25 percent or more of the members vote in person or by 15-15 proxy or mail; or 15-16 (3) a three-fourths majority vote, if less than 25 15-17 percent but 10 percent or more of the members vote in person or by 15-18 proxy or mail. 15-19 Sec. 104.082. CONTENTS. The bylaws may provide for one or 15-20 more of the following: 15-21 (1) the time, place, and manner of calling and 15-22 conducting meetings of the marketing association; 15-23 (2) the number and qualifications of the members; 15-24 (3) the number of members constituting a quorum; 15-25 (4) the right of members to vote by proxy, by mail, or 16-1 both and the conditions, method, and effects of the vote; 16-2 (5) the method by which a member that is an 16-3 association may cast its vote; 16-4 (6) the number of directors constituting a quorum; 16-5 (7) the qualifications, compensation, duties, and 16-6 terms of directors and officers; 16-7 (8) the time of the election of directors and officers 16-8 and the method of giving notice of the election; 16-9 (9) the penalties for violations of the bylaws; 16-10 (10) the amount of entrance, organization, and 16-11 membership fees, if any, the method of collecting the fees, and the 16-12 purposes for which the association must use the fees; 16-13 (11) the amount, if any, that each member must pay for 16-14 the association's cost of conducting business; 16-15 (12) the amount that each member is required to pay 16-16 for services rendered to the member by the association, the time of 16-17 payment, and the method of collecting the payment; 16-18 (13) the marketing contract between the association 16-19 and its members; 16-20 (14) the requirements for ownership of common stock; 16-21 (15) the time and method by which a member may 16-22 withdraw from the association or may assign or transfer common 16-23 stock; 16-24 (16) the method of assignment and transfer of a 16-25 member's interest or shares of common stock; 17-1 (17) the time and conditions on which membership 17-2 ceases; 17-3 (18) the automatic suspension of a member's rights if 17-4 the member ceases to be eligible for membership; 17-5 (19) the method and effect of expulsion of a member; 17-6 (20) the purchase by the association of a member's 17-7 interest on the death, withdrawal, or expulsion of the member, on 17-8 forfeiture of a membership, or at the option of the association; 17-9 and 17-10 (21) the method by which the value of a member's 17-11 interest is determined by conclusive appraisal by the association's 17-12 board of directors. 17-13 (Sections 104.083-104.100 reserved for expansion 17-14 SUBCHAPTER F. MEMBERSHIP CERTIFICATES AND STOCK 17-15 Sec. 104.101. STOCK. A marketing association may be 17-16 organized with or without capital stock. 17-17 Sec. 104.102. ISSUANCE OF MEMBERSHIP CERTIFICATES. When a 17-18 member of a marketing association organized without capital stock 17-19 has paid the membership fee in full, the association shall issue to 17-20 the member a certificate of membership. 17-21 Sec. 104.103. ISSUANCE OF SHARES. (a) Subject to this 17-22 section, a marketing association organized with capital stock may 17-23 from time to time sell and issue shares of capital stock in the 17-24 manner and under the terms prescribed by its bylaws. 17-25 (b) A marketing association may issue common stock only to a 18-1 person who satisfies the membership requirements prescribed by 18-2 Section 104.121. 18-3 (c) A marketing association may not sell and issue shares of 18-4 preferred stock to a person who is not a member of the association 18-5 unless the association first complies with The Securities Act 18-6 (Article 581-1 et seq., Vernon's Texas Civil Statutes). 18-7 (d) A marketing association may not issue shares of stock to 18-8 a member until the member has fully paid for the shares. 18-9 (e) A marketing association may accept promissory notes of 18-10 members as full or partial payment for stock. The association 18-11 shall hold the stock as security for payment of the note. The 18-12 association's retention of the stock does not affect the member's 18-13 right to vote. 18-14 Sec. 104.104. COMMON STOCK. (a) A stockholder may not own 18-15 more than five percent of a marketing association's issued common 18-16 stock. A marketing association by its bylaws may limit the amount 18-17 of common stock that one stockholder may own to an amount of less 18-18 than five percent of the issued common stock. 18-19 (b) At any time, except when the association's debts exceed 18-20 50 percent of its assets, a marketing association may purchase its 18-21 common stock at the book value conclusively determined by its board 18-22 of directors and pay cash for the stock within one year thereafter. 18-23 (c) A person may not transfer common stock of a marketing 18-24 association to a person who does not produce gas handled by the 18-25 association. The association shall state this restriction in its 19-1 bylaws and shall print the restriction on each common stock 19-2 certificate. 19-3 Sec. 104.105. PREFERRED STOCK. (a) A marketing association 19-4 organized with capital stock may issue preferred stock with or 19-5 without the right to vote. 19-6 (b) A marketing association may redeem preferred stock on 19-7 conditions provided by the association's articles of incorporation 19-8 and printed on the face of the stock certificates. 19-9 Sec. 104.106. STOCK ISSUED ON PURCHASE OF PROPERTY. (a) If 19-10 a marketing association organized with capital stock purchases 19-11 stock, property, or an interest in property, it may discharge its 19-12 obligations, in whole or in part, by exchanging for its acquisition 19-13 shares of preferred stock the par value of which equals the value 19-14 of the purchased property as determined by the association's board 19-15 of directors. 19-16 (b) In a transaction described by Subsection (a), the 19-17 transfer of the purchased property to the marketing association is 19-18 considered payment in cash for the issued shares of preferred 19-19 stock. 19-20 (Sections 104.107-104.120 reserved for expansion 19-21 SUBCHAPTER G. MEMBERS 19-22 Sec. 104.121. MEMBERSHIP. (a) Membership of a marketing 19-23 association is limited to independent producers that produce gas 19-24 that is handled by or through the association, affected landowners 19-25 and royalty owners, lessors, lessees, and overriding royalty owners 20-1 of the gas. 20-2 (b) A marketing association shall admit members under terms 20-3 and conditions prescribed in its bylaws, provided that membership 20-4 shall be made available to eligible landowners, royalty owners, 20-5 lessors, lessees, and overriding royalty owners on a 20-6 nondiscriminatory basis. 20-7 (c) If a member of a marketing association organized without 20-8 capital stock is not an individual, the member may authorize in 20-9 writing an individual, an associate officer, or one of its members 20-10 to act for it. 20-11 Sec. 104.122. NEW MEMBERS. (a) A marketing association 20-12 organized without capital stock may admit new members. 20-13 (b) If the property rights of the marketing association's 20-14 members are unequal, a new member is entitled to share the property 20-15 of the association with the other members in accordance with the 20-16 general rules stated in the articles of incorporation. 20-17 Sec. 104.123. MEETINGS. (a) As prescribed by its bylaws, a 20-18 marketing association annually shall hold one or more regular 20-19 meetings of its members. 20-20 (b) The board of directors may call a special meeting of the 20-21 marketing association at any time. 20-22 (c) If at any time 10 percent or more of the members file 20-23 with the board of directors a petition demanding a special meeting 20-24 of the marketing association and stating the specific business to 20-25 be considered at the meeting, the board shall call the meeting. 21-1 Sec. 104.124. NOTICE OF MEETINGS. Not later than the 10th 21-2 day before the date of the meeting of a marketing association, the 21-3 association shall: 21-4 (1) mail to each member notice of the meeting and a 21-5 statement of the purpose of the meeting; or 21-6 (2) if the bylaws so provide, publish notice of the 21-7 meeting in a newspaper of general circulation in the area in which 21-8 the association's principal place of business is located. 21-9 Sec. 104.125. VOTING. (a) A member of a marketing 21-10 association is entitled to one vote. 21-11 (b) In accordance with a bylaw adopted under Sections 21-12 104.081 and 104.082, a marketing association may provide for its 21-13 members to vote by proxy or mail. 21-14 Sec. 104.126. TERMINATION OR SUSPENSION OF MEMBERSHIP. In 21-15 accordance with its articles of incorporation or a bylaw adopted 21-16 under Sections 104.081 and 104.082, a marketing association may 21-17 provide for the termination or suspension of membership in the 21-18 association and for the purchase of a member's common or preferred 21-19 stock, if any, and all other property interest in the association. 21-20 Sec. 104.127. LIABILITY OF MEMBERS. Except for debts 21-21 contracted with the association, a member of a marketing 21-22 association is not liable for the debts of the association in an 21-23 amount that exceeds the amount that is unpaid on the member's 21-24 membership fee or subscription to capital stock, including any 21-25 unpaid balance on promissory notes given in payment for the stock. 22-1 (Sections 104.128-104.140 reserved for expansion 22-2 SUBCHAPTER H. ADMINISTRATION 22-3 Sec. 104.141. BOARD OF DIRECTORS. (a) A board of directors 22-4 shall manage a marketing association. 22-5 (b) The board shall be composed of five or more directors 22-6 who are elected by the members of the marketing association. 22-7 (c) Except as provided by Subsection (d), a person must be a 22-8 member of the marketing association to be eligible to serve as a 22-9 director. 22-10 (d) As prescribed by the bylaws of the association that is 22-11 holding the meeting, a marketing association that is a member of 22-12 the association may designate any of its members to vote on behalf 22-13 of the member association or to serve as a director of the 22-14 association holding the meeting. 22-15 Sec. 104.142. OFFICERS. (a) The directors shall elect: 22-16 (1) a president or chairman; 22-17 (2) one or more vice presidents or vice chairmen; 22-18 (3) a secretary; and 22-19 (4) a treasurer. 22-20 (b) To be eligible to serve as president, chairman, vice 22-21 president, or vice chairman, a person must be a director. 22-22 (c) The directors may combine the offices of secretary and 22-23 treasurer as secretary-treasurer. 22-24 (d) A bank or depository may serve as treasurer but is not 22-25 considered to be an officer. If a bank or depository serves as 23-1 treasurer, the secretary shall perform the usual accounting duties 23-2 of the treasurer except that the secretary may deposit money only 23-3 as authorized by the board of directors. 23-4 Sec. 104.143. REMOVAL OF OFFICER OR DIRECTOR. (a) Except 23-5 as provided by Subsection (f), a member of a marketing association 23-6 may initiate removal of an officer or director by filing in writing 23-7 with the association's secretary: 23-8 (1) the charges; and 23-9 (2) a petition that is signed by 10 percent of the 23-10 members and that requests the removal of the officer or director in 23-11 question. 23-12 (b) The members of the marketing association shall vote on 23-13 the removal at the next regular or special meeting of the 23-14 association. 23-15 (c) Before the meeting, the marketing association shall 23-16 inform the officer or director in writing of the charges. 23-17 (d) At the meeting, the marketing association shall give the 23-18 officer or director and the person bringing the charges an 23-19 opportunity to be heard in person or by counsel and to present 23-20 witnesses. 23-21 (e) The marketing association by a majority vote may remove 23-22 the officer or director and fill the vacancy. 23-23 (f) If a marketing association's bylaws provide for the 23-24 election of directors by districts with primary elections in each 23-25 district, the petition for removal of a director must state the 24-1 charges and must be signed by 20 percent of the members residing in 24-2 the district from which the director was elected. The board of 24-3 directors shall call a special meeting of the members residing in 24-4 that district to consider removal of the director. The members in 24-5 that district may remove the director by a majority vote. 24-6 Sec. 104.144. BOND. (a) Each officer, employee, or agent 24-7 who handles money or property of a marketing association or any 24-8 money or property that is under the control or in possession of a 24-9 marketing association shall execute and deliver to the association 24-10 an indemnity bond that indemnifies the association and its members 24-11 against any fraudulent, dishonest, or unlawful act by the bonded 24-12 person and other acts as provided by the association's bylaws. 24-13 (b) If the officers and directors of a marketing association 24-14 fail to require a person to execute a bond as required by 24-15 Subsection (a), each officer and director is personally liable for 24-16 all losses that would have been recovered under the bond if the 24-17 person had been bonded. 24-18 Sec. 104.145. REFERENDUM. (a) On demand of one-third of 24-19 the board of directors, the board shall refer to the entire 24-20 membership of a marketing association for decision at the next 24-21 special or regular meeting any matter than has been approved or 24-22 passed by the board. 24-23 (b) The marketing association may call a special meeting to 24-24 consider the referred matter. 24-25 Sec. 104.146. PERMITS TO DO BUSINESS. (a) Any cooperative 25-1 marketing association incorporated under the laws of another state 25-2 may apply for and be granted a permit to do business in this state. 25-3 The association shall pay as a filing fee the amount required of 25-4 domestic corporations organized for a similar purpose. 25-5 (b) A marketing association is not required to have all or 25-6 part of a paid-up capital to be entitled to a permit under 25-7 Subsection (a). 25-8 (Sections 104.147-104.160 reserved for expansion 25-9 SUBCHAPTER I. REMEDIES 25-10 Sec. 104.161. BREACH OR THREATENED BREACH OF MARKETING 25-11 CONTRACT. (a) If a member breaches or threatens to breach a 25-12 marketing contract, the marketing association may sue and, if 25-13 successful, is entitled to: 25-14 (1) an injunction to prevent further breach of the 25-15 contract; and 25-16 (2) a decree of specific performance of the contract. 25-17 (b) Pending the adjudication of an action filed under 25-18 Subsection (a), the marketing association is entitled to a 25-19 temporary restraining order and preliminary injunction against the 25-20 member if the association files: 25-21 (1) a verified complaint showing the breach or 25-22 threatened breach; and 25-23 (2) sufficient bond. 25-24 Sec. 104.162. INDUCED BREACH OF MARKETING CONTRACT; FALSE 25-25 REPORTS. In a civil suit for damages, a person is liable to a 26-1 marketing association for an amount equal to three times the amount 26-2 of actual damages proven for each offense if the person or, if the 26-3 person is a corporation, an officer or employee of the corporation: 26-4 (1) knowingly induces or attempts to induce a member 26-5 of the association to breach the member's marketing contract with 26-6 the association; or 26-7 (2) maliciously and knowingly spreads false reports 26-8 concerning the finances or management of the association. 26-9 (Sections 104.163-104.180 reserved for expansion 26-10 SUBCHAPTER J. FEES AND REPORTS 26-11 Sec. 104.181. FEES. (a) The fee for filing articles of 26-12 incorporation under this chapter is $10. 26-13 (b) The fee for filing an amendment to the articles of 26-14 incorporation under this chapter is $2.50. 26-15 (c) Each marketing association shall pay to the commission 26-16 an annual license fee of $10. A marketing association is exempt 26-17 from all other franchise or license taxes, except that a marketing 26-18 association is exempt from the franchise tax imposed by Chapter 26-19 171, Tax Code, only if exempted by that chapter. 26-20 Sec. 104.182. ANNUAL REPORT. (a) Each marketing 26-21 association shall file an annual report with the commission. The 26-22 association shall prepare the report on forms furnished by the 26-23 commission. 26-24 (b) The report must contain: 26-25 (1) the name of the marketing association; 27-1 (2) the association's principal place of business; 27-2 (3) a general statement of the association's business 27-3 operations during the fiscal year; 27-4 (4) the amount of paid-up capital stock; 27-5 (5) if the association is a stock association, the 27-6 number of shareholders; 27-7 (6) if the association is a nonstock association, the 27-8 number of members and the amount of membership fees received; 27-9 (7) the total operation expenses for the fiscal year; 27-10 (8) the amount of the association's indebtedness or 27-11 liability; and 27-12 (9) the association's balance sheets. 27-13 SECTION 2. Subtitle B, Title 3, Tax Code is amended by 27-14 adding Section 171.087 to read as follows: 27-15 Section 171.087. Exemption--Marketing Association. 27-16 A marketing association created pursuant to Chapter 104 of 27-17 the Natural Resources Code is exempted from the franchise tax. 27-18 SECTION 3. The importance of this legislation and the 27-19 crowded condition of the calendars in both houses create an 27-20 emergency and an imperative public necessity that the 27-21 constitutional rule requiring bills to be read on three several 27-22 days in each house be suspended, and this rule is hereby suspended.