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.