AN ACT
1-1 relating to the Board for Lease of University Lands, the leasing,
1-2 management, and administration of certain public lands, and related
1-3 fees and penalties.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter D, Chapter 66, Education Code, is
1-6 amended to read as follows:
1-7 SUBCHAPTER D. BOARD FOR LEASE OF UNIVERSITY LANDS
1-8 Sec. 66.61. DEFINITIONS. In this subchapter:
1-9 (1) "Board" means the Board for Lease of University
1-10 Lands.
1-11 (2) "Board of regents" means the board of regents of
1-12 The University of Texas System, except where otherwise specified.
1-13 (3) "Commissioner" means the commissioner of the
1-14 General Land Office.
1-15 (4) "Oil and gas" means crude oil, natural gas, and
1-16 all substances, including other hydrocarbons, produced in
1-17 association with crude oil and natural gas.
1-18 (5) "University lands" means land dedicated to the
1-19 permanent university fund.
1-20 (6) "Well" means an oil or gas well that has been
1-21 assigned a well number by the state agency having regulatory
1-22 jurisdiction over the production of oil and gas. A single wellbore
1-23 may contain more than one well.
2-1 Sec. 66.62. BOARD FOR LEASE OF UNIVERSITY LANDS. (a) The
2-2 board is composed of the commissioner, two members of the board of
2-3 regents selected by that board, and one member of the board of
2-4 regents of The Texas A&M University System selected by that board.
2-5 If a regent member is unable to attend a meeting of the board, the
2-6 presiding officer of the board of regents of the applicable system
2-7 may appoint another member of that board of regents as a substitute
2-8 member of the board to attend the meeting that the regular regent
2-9 member is unable to attend. The substitute regent member shall
2-10 exercise all the powers, duties, and responsibilities of the absent
2-11 regent member during the conduct of the meeting for which he was
2-12 appointed. A substitute regent member is subject to the provisions
2-13 of this subchapter.
2-14 (b) Members of the board, other than the commissioner, serve
2-15 two-year terms expiring February 1 of each odd-numbered year.
2-16 Regent members continue to serve until a successor is appointed and
2-17 qualified.
2-18 (c) The commissioner is chairman of the board.
2-19 (d) A person who is directly or indirectly employed by, or
2-20 is an officer or employee of a person or entity actively engaged in
2-21 the exploration for or production of oil and gas, other than as a
2-22 landowner or royalty owner, may not be a regent member.
2-23 (e) An officer, employee, or paid consultant of a trade
2-24 association in the oil and gas industry may not be a regent member
2-25 or employee of the board, nor may a person who cohabits with or is
3-1 the spouse of an officer, managerial employee, or paid consultant
3-2 of a trade association in the oil and gas industry be a regent
3-3 member of the board or a non-classified employee of the board.
3-4 (f) A person who is required to register as a lobbyist under
3-5 Chapter 305, Government Code, by virtue of his activities for
3-6 compensation in or on behalf of a profession related to the
3-7 operation of the board, may not serve as a regent member of the
3-8 board or act as the general counsel to the board.
3-9 (g) The board of regents of the university system appointing
3-10 a regent member may remove the regent member from the board if that
3-11 member:
3-12 (1) does not have at the time of appointment the
3-13 qualifications required by this section for appointment to the
3-14 board;
3-15 (2) does not maintain during the service on the board
3-16 the qualifications required by this section for appointment to the
3-17 board;
3-18 (3) violates a prohibition established by Subsection
3-19 (d), (e), or (f);
3-20 (4) is unable to discharge his duties for a
3-21 substantial portion of the term for which he was appointed because
3-22 of illness or disability; or
3-23 (5) is absent from more than one-half of the regularly
3-24 scheduled board meetings which the member is eligible to attend
3-25 during a calendar year, except when the absence is excused by
4-1 majority vote of the board.
4-2 (h) The board is exempt from the provisions of Chapter 2001,
4-3 Government Code.
4-4 Sec. 66.63. CERTAIN BOARD ACTIONS. (a) A majority of the
4-5 members of the board have the power to act for the board on a
4-6 matter before the board. Two members of the board have the power
4-7 to award leases issued on a form of lease previously approved by a
4-8 majority of the board.
4-9 (b) The validity of an action of the board is not affected
4-10 because it was taken when a ground for removal of a regent member
4-11 of the board existed. A regent member continues to serve until
4-12 removed under Section 66.62(g).
4-13 Sec. 66.64. POWERS AND DUTIES OF THE BOARD. (a) The board
4-14 shall in a manner consistent with this subchapter:
4-15 (1) lease university lands for oil and gas exploration
4-16 and development on terms, at times, and in the manner it may
4-17 determine;
4-18 (2) contract for the sale or other disposition of oil
4-19 and gas royalties taken in kind;
4-20 (3) adopt rules and policies for the administration
4-21 and enforcement of this subchapter and leases issued under this
4-22 subchapter;
4-23 (4) set fees and penalties for the administration and
4-24 enforcement of this subchapter;
4-25 (5) set the terms of a contract for the development of
5-1 university lands for oil and gas;
5-2 (6) approve agreements that commit the royalty
5-3 interest in university lands on terms acceptable to the board; and
5-4 (7) exercise other powers and authority and perform
5-5 other duties as may be reasonably necessary to administer and
5-6 enforce the provisions of this subchapter.
5-7 (b) The board shall hold meetings and keep records of its
5-8 proceedings in a manner consistent with the requirements of Chapter
5-9 551, Government Code. The board shall develop and implement
5-10 policies which provide the public with a reasonable opportunity to
5-11 appear before the board, to speak on an issue under the board's
5-12 jurisdiction, or be heard with respect to a declaration of
5-13 forfeiture. The board shall give written notice to each lessee
5-14 whose leasehold interest may be forfeited. Such notice shall be
5-15 given at least 21 days before the meeting at which the board will
5-16 consider forfeiture of the lease. The notice shall state the time,
5-17 date, and place of the meeting of the board and include a statement
5-18 of the board's policy concerning the public's opportunity to be
5-19 heard with respect to a declaration of forfeiture. Notice shall be
5-20 properly given when mailed to the last known address of the lessee
5-21 based on the records of the board of regents or, if the records do
5-22 not contain an address, to any address that may reasonably be
5-23 determined to be an address for the lessee.
5-24 (c) Except as otherwise provided in this subchapter, the
5-25 records of the board are subject to the requirements of Chapter
6-1 552, Government Code.
6-2 (d) The financial transactions of the board are subject to
6-3 audit by the state auditor in accordance with Chapter 321,
6-4 Government Code.
6-5 (e) The board may delegate to the staff provided to it by
6-6 the board of regents any duty except as prohibited by law.
6-7 (f) The board shall appoint a secretary.
6-8 Sec. 66.65. BOARD STAFF; EXCHANGE OF INFORMATION WITH STATE
6-9 AGENCIES. (a) The board of regents shall employ and compensate
6-10 personnel to assist the board in the performance of its powers and
6-11 duties under this subchapter or may assign employees of The
6-12 University of Texas System to those duties.
6-13 (b) The members of the board, personnel and counsel employed
6-14 or assigned to assist the board, the board of regents, staff of The
6-15 University of Texas System, the commissioner and staff of the
6-16 General Land Office, the board of regents and staff of The Texas
6-17 A&M University System, the office of the comptroller, the office of
6-18 the attorney general, and any other agency or official of the state
6-19 with a reasonable business interest in state or university lands,
6-20 minerals, or resources may consult with each other and exchange
6-21 information related to the administration of leases, collection and
6-22 disposition of royalties, whether in cash or in kind, and any other
6-23 matter related to the lease, sale, or production of, or the
6-24 exploration for, oil, gas, or any other mineral or resource,
6-25 including geothermal, wind, and solar energy on state or university
7-1 lands. The information so exchanged and consultations and related
7-2 communications shall be or shall remain confidential and shall be
7-3 privileged from discovery in the same manner and to the same extent
7-4 as if the persons consulted, which includes counsel, were members
7-5 of the same agency. Sections 52.134 and 52.140, Natural Resources
7-6 Code, shall not prohibit the consultations or exchange of
7-7 information provided for by this section; however, each agency
7-8 receiving such confidential information is required to keep the
7-9 information confidential under Sections 52.134 and 52.140, Natural
7-10 Resources Code, as appropriate, and to take all reasonable actions
7-11 necessary to protect the confidential and privileged nature of the
7-12 information.
7-13 Sec. 66.66. LEASE SALES. (a) Oil and gas leases shall be
7-14 offered at public auction or by sealed bid, or through a
7-15 combination of public auction and sealed bid, as the board elects.
7-16 Contracts for development may be awarded in the same manner.
7-17 (b) The board shall publish notice that the board will
7-18 receive bids for oil and gas leases or contracts for development of
7-19 oil and gas in two or more daily newspapers in this state and in
7-20 other publications as the board may choose.
7-21 (c) The notice shall be published at least 30 days before
7-22 the date the bids will be opened.
7-23 (d) The notice shall state that land is to be offered for
7-24 lease or a contract for development and that a person may obtain a
7-25 publication from The University of Texas System offices that
8-1 describes the land offered and the minimum terms.
8-2 (e) The board of regents may solicit and include advertising
8-3 in the publication describing a lease sale. Fees paid for
8-4 advertising shall be deposited into the special fee account
8-5 established by Subsection (g) and are available for the same
8-6 purposes as described in that subsection.
8-7 (f) The board may withdraw any lands advertised for lease
8-8 before the hour set for receiving bids.
8-9 (g) Each bid is subject to the payment of a special fee
8-10 equal to one and one-half percent of the total bonus whether
8-11 stipulated or bid, which special payment shall constitute a special
8-12 fund from which the board of regents shall defray the expenses of
8-13 the sale, including the payment of the general operating expenses
8-14 for geology, engineering, field inspection, and auditing oil and
8-15 gas production of university lands and including salaries and
8-16 traveling expenses of persons employed by the board of regents for
8-17 those purposes.
8-18 (h) The board of regents may direct the comptroller of The
8-19 University of Texas System to transmit to the state comptroller for
8-20 deposit to the credit of the permanent university fund unexpended
8-21 balances remaining in the special fee account after reserving a
8-22 sufficient amount in it for the payment of current expenses as set
8-23 out in Subsection (g).
8-24 Sec. 66.67. LEASE TERMS. (a) The oil and gas lease for
8-25 each tract shall be offered for a bonus to be determined by high
9-1 bid in addition to the stipulated royalty or for a stipulated bonus
9-2 and a royalty to be determined by high bid. Each tract shall be
9-3 offered separately and the minimum bonus or royalty, depending on
9-4 the basis for the bid, and the length of the primary term for each
9-5 tract shall be set out in the official publication describing the
9-6 tracts and terms.
9-7 (b) Except as otherwise provided by law, the minimum royalty
9-8 rate shall be one-eighth of the oil or gas produced or the value
9-9 thereof.
9-10 (c) The primary term of a lease shall not exceed 10 years.
9-11 (d) Each lease shall be subject to the provisions of this
9-12 subchapter and rules promulgated by the board.
9-13 (e) The successful bidder shall pay to the board of regents
9-14 on the day the bid is accepted the full amount of bonus, whether
9-15 stipulated or bid, and the special fee in the form of payment
9-16 specified by the board.
9-17 Sec. 66.68. MARGINAL PROPERTY ROYALTY RATES. (a) In this
9-18 section:
9-19 (1) "Barrel of oil equivalent" means 6,000 cubic feet
9-20 of natural gas per 42-gallon barrel of crude oil or a volume of gas
9-21 with a minimum heating value of 6,000,000 British thermal units
9-22 (6,000 Mbtu), whichever is greater.
9-23 (2) "Lease" or "leases" means an oil and gas lease
9-24 issued or approved by the board that is valid and in force on or
9-25 after the effective date of this section.
10-1 (3) "Qualifying property" means land subject to a
10-2 lease issued under this subchapter.
10-3 (4) "Qualifying reservoir" means a reservoir having an
10-4 average daily per well production equal to or less than 15 barrels
10-5 of oil equivalent during a period established by the board by rule
10-6 and underlying either:
10-7 (A) a qualifying property; or
10-8 (B) a pooled unit including a qualifying
10-9 property.
10-10 (5) "Reservoir" has the same meaning as "common
10-11 reservoir" as defined by Section 86.002, Natural Resources Code.
10-12 (b) The board may provide by rule that the royalty rate for
10-13 qualifying reservoirs may be reduced to not less than one-sixteenth
10-14 (6.25 percent). In determining whether to grant a reduction in the
10-15 royalty rate, the board may consider whether the qualifying
10-16 property is being operated efficiently, including whether the
10-17 property is pooled or has reasonable potential for the application
10-18 of secondary or tertiary recovery techniques.
10-19 (c) If a qualifying reservoir for which royalty rate
10-20 reduction is sought under this section is included in a unit
10-21 subject to the authority of the board, the board may modify the
10-22 terms and conditions of the unit as a condition of approving a
10-23 reduction in the royalty rate.
10-24 Sec. 66.69. AWARD OF LEASE. (a) Except as otherwise
10-25 provided in this subchapter, the board shall award a lease for each
11-1 tract to the person offering the highest bid that includes the
11-2 terms adopted by the board and consistent with this subchapter.
11-3 (b) The board may reject all bids for one or more tracts.
11-4 (c) The commissioner shall execute a lease awarded by the
11-5 board in conformance with this subchapter.
11-6 Sec. 66.70. ADDITIONAL LEASE PROVISIONS. An oil and gas
11-7 lease issued under this subchapter shall include the provisions
11-8 required by this subchapter and additional provisions not
11-9 inconsistent herewith that the board may adopt to preserve the
11-10 interests of the state. On submission of an application by all
11-11 lessees under the lease in the form required by the board and
11-12 payment of any applicable fee set by the board, the board may amend
11-13 a lease that does not include provisions required by Sections
11-14 66.71, 66.72, and 66.73 to include those provisions in the form
11-15 adopted by the board at the time the lease is amended.
11-16 Sec. 66.71. LEASE PROVISIONS. (a) An oil and gas lease
11-17 issued by the board shall provide for payment of a delay rental.
11-18 During the primary term of the lease, the lease shall terminate on
11-19 the anniversary date of the lease unless:
11-20 (1) oil or gas is being produced in paying quantities
11-21 from the leased premises;
11-22 (2) drilling operations are being conducted on the
11-23 leased premises; or
11-24 (3) the lessee pays timely in the manner provided in
11-25 the lease the amount of delay rental stated in the lease.
12-1 (b) If oil or gas is discovered in paying quantities on any
12-2 tract covered by a lease, the lease as to that tract shall remain
12-3 in force as long as oil and gas is produced in paying quantities
12-4 from the tract, provided that the other provisions of this
12-5 subchapter are complied with by the lessee.
12-6 (c) An oil and gas lease issued by the board shall provide
12-7 that royalty may be taken in kind at any time and from time to time
12-8 at the discretion of the board in the manner provided in this
12-9 subchapter.
12-10 Sec. 66.72. CESSATION OF PRODUCTION; DRILLING AND REWORKING.
12-11 Each lease shall provide that in the event production of oil or gas
12-12 on the leased premises, once obtained, shall cease for any cause
12-13 within 60 days before the expiration of the primary term of the
12-14 lease or at any time or times thereafter, the lease shall not
12-15 terminate if the lessee commences additional drilling or reworking
12-16 operations within 60 days thereafter, and the lease shall remain in
12-17 full force and effect so long as such operations continue in good
12-18 faith and in workmanlike manner, without interruptions, totalling
12-19 more than 60 days during any one such operation; and if such
12-20 drilling or reworking operations result in the production of oil
12-21 and/or gas, the lease shall remain in full force and effect so long
12-22 as oil or gas is produced therefrom in paying quantities or payment
12-23 of shut-in gas well royalty or compensatory royalties is made as
12-24 provided in this subchapter.
12-25 Sec. 66.73. SHUT-IN ROYALTY. An oil and gas lease issued
13-1 under this subchapter shall provide for the extension of the lease
13-2 by the payment of shut-in royalties on terms as the board may
13-3 adopt.
13-4 Sec. 66.74. LEASE EXTENSION OR SUSPENSION. (a) At the
13-5 expiration of the primary term of a lease, if production of oil or
13-6 gas has not been obtained on the leased premises, but drilling
13-7 operations are being conducted in good faith and in a good and
13-8 workmanlike manner, the lessee may apply in writing to extend the
13-9 lease for a period of 30 days. The application shall be filed with
13-10 the board of regents on or before the expiration of the primary
13-11 term.
13-12 (b) The applicant shall submit with the application a fee in
13-13 an amount set by the board of not less than $7.50 for each acre in
13-14 the lease requested to be extended.
13-15 (c) If the commissioner determines that the conditions of
13-16 this section have been met, the commissioner, or a designee
13-17 appointed by the commissioner, shall execute a written extension as
13-18 provided by this section.
13-19 (d) As long as drilling operations are being conducted in
13-20 good faith and in a good and workmanlike manner, additional
13-21 extensions of 30 days each may be granted up to an aggregate of 360
13-22 days. The lessee must submit a written application and payment on
13-23 or before the last day of the extended primary term. The payment
13-24 for each additional 30-day extension shall be in an amount set by
13-25 the board of not less than $7.50 for each acre in the lease.
14-1 (e) The board may elect to suspend a lease and all of the
14-2 conditions and covenants contained in the lease if there is a
14-3 legitimate dispute regarding the validity of the lease. The board
14-4 may rescind the suspension at any time, in which event the lease
14-5 shall resume as of the date the suspension is rescinded and shall
14-6 continue for the remainder of the period specified in the lease as
14-7 the primary term, or, if the primary term ended prior to the
14-8 suspension, the lessee shall have 60 days to commence production or
14-9 drilling and reworking operations.
14-10 Sec. 66.75. PROTECTION FROM DRAINAGE; COMPENSATORY
14-11 ROYALTIES. (a) The lessee shall protect the leased premises from
14-12 drainage. The lease may contain express terms regarding drainage
14-13 as the board may adopt.
14-14 (b) Subject to the provisions of this section, the
14-15 commissioner may execute agreements that provide for the payment of
14-16 compensatory royalty in lieu of drilling offset wells that may be
14-17 required to protect the leased premises from drainage from a well
14-18 or wells located on non-university lands, or university lands
14-19 leased at a lesser royalty, situated within 1,000 feet of or
14-20 draining the leased premises.
14-21 (c) Agreements providing for the payment of compensatory
14-22 royalty must be approved by the board.
14-23 (d) Agreements providing for the payment of compensatory
14-24 royalty must be found by the commissioner and the board to be in
14-25 the best interest of the state.
15-1 (e) Nothing in an agreement for the payment of compensatory
15-2 royalty shall relieve the lessee of the obligation of reasonable
15-3 development or of the obligation to drill offset wells, obtain
15-4 suitable regulatory relief, propose appropriate pooling or
15-5 unitization arrangements, or conduct other activities to protect
15-6 the leased premises from drainage as to other producing horizons.
15-7 (f) An agreement for the payment of compensatory royalty
15-8 shall provide that compensatory royalty be paid at the royalty rate
15-9 provided in the lease and shall provide that compensatory royalty
15-10 be paid on the market value of production from the well located on
15-11 non-university lands or university lands leased at a lesser royalty
15-12 situated within 1,000 feet of or draining the leased premises.
15-13 Sec. 66.76. ASSIGNMENT; RELINQUISHMENT. (a) Rights
15-14 acquired in a lease or contract for development issued under this
15-15 subchapter may be assigned; provided, however, for an assignment to
15-16 be valid and effective, the assignment must be filed in the county
15-17 or counties in which the leased premises are situated and a legible
15-18 copy of the recorded assignment must be filed with the board of
15-19 regents within the time set by the board, accompanied by a filing
15-20 fee and any applicable penalty for late filing set by the board for
15-21 each lease assigned and a summary in the form adopted by the board
15-22 of regents.
15-23 (b) Rights to a lease or to an assigned portion thereof may
15-24 be relinquished at any time by having an instrument of
15-25 relinquishment or release recorded in the county or counties in
16-1 which the area relinquished is situated and a legible copy of the
16-2 recorded instrument filed with the board of regents, accompanied by
16-3 a filing fee set by the board.
16-4 (c) An assignment or relinquishment of a lease or a portion
16-5 thereof or an interest in a lease shall not relieve the lessee of
16-6 accrued obligations, including the payment of royalty, penalty, or
16-7 interest, and the lessee shall remain liable therefor.
16-8 (d) In the enforcement of lease obligations, the board and
16-9 the board of regents shall be entitled to rely on the state of
16-10 title reflected by the records of the board of regents.
16-11 Sec. 66.77. ROYALTY PAYMENTS AND REPORTS. (a) Royalty as
16-12 stipulated in the lease and all other amounts due under this
16-13 subchapter shall be paid to the board of regents at Austin, Travis
16-14 County, Texas. The lessee of record in the records of the board of
16-15 regents shall be responsible for making or causing to be made all
16-16 payments required by this subchapter at the required times and in
16-17 the form and manner determined by the board of regents or otherwise
16-18 required by law.
16-19 (b) The board shall set by rule the date for making royalty
16-20 payments and for filing any reports, documents, or other records
16-21 required to be filed by this section. The date set by the board
16-22 must be on or after the fifth day of the second month succeeding
16-23 the month of production of oil and on or after the 15th day of the
16-24 second month succeeding the month of production of gas.
16-25 (c) A royalty payment is timely made if the payment is
17-1 deposited in a postpaid, properly addressed wrapper, with a post
17-2 office or official depository under the care and custody of, and
17-3 postmarked by, the United States Postal Service before the
17-4 applicable due date.
17-5 (d) The lessee shall provide to the board of regents with
17-6 each royalty payment:
17-7 (1) an affidavit of the owner, manager, or other
17-8 authorized agent completed in the form and manner required by the
17-9 board of regents and showing the gross amount and disposition of
17-10 all oil and gas produced and the market value of the oil and gas,
17-11 the number assigned by the Railroad Commission of Texas, and
17-12 university lease numbers;
17-13 (2) a purchase statement or other document showing the
17-14 price at which the oil and gas was sold;
17-15 (3) a check stub, schedule, summary, or other
17-16 remittance advice showing by the assigned lease number the amount
17-17 of royalty being paid on each lease; and
17-18 (4) other reports or records that the board of regents
17-19 may require to identify the well and lease and verify the gross
17-20 production, disposition, and market value.
17-21 (e) The board of regents may implement such practices and
17-22 procedures with regard to accounting for royalty payments as it may
17-23 determine to be in the best interest of the state.
17-24 Sec. 66.78. INTEREST AND PENALTIES. (a) If royalty is not
17-25 paid when due, a penalty of one percent shall be added to the
18-1 unpaid amount due. If the royalty is not paid within seven days
18-2 after the due date, a penalty of an additional four percent of the
18-3 royalty due is imposed. If the royalty is not paid within 30 days
18-4 after the due date, a penalty of an additional five percent is
18-5 imposed. The minimum penalty under this subsection is $25 or the
18-6 minimum penalty in excess thereof set by the board. The board
18-7 shall not add a penalty under this subsection in cases of title
18-8 dispute as to the state's portion of the royalty or to that portion
18-9 of the royalty in dispute as to fair market value.
18-10 (b) Interest shall accrue on delinquent royalties beginning
18-11 on the 61st day after the due date. The annual interest rate on
18-12 delinquent royalties is 12 percent. Interest accrued under this
18-13 subsection shall be in addition to any delinquency penalty due
18-14 under this section.
18-15 (c) The board of regents shall add a penalty of 25 percent
18-16 to delinquent sums due under this subchapter if the board
18-17 determines that the delinquency is due to fraud or an intent to
18-18 evade the provisions of this subchapter on the part of the lessee
18-19 or the lessee's agents, employees, or assignees.
18-20 (d) If a report, affidavit, supporting document, or other
18-21 instrument required to be filed under Section 66.77 or Section
18-22 66.80 is not filed when due, a penalty accrues in the amount set by
18-23 the board but not less than $10 per document for each 30-day period
18-24 of delinquency or fractional part thereof.
18-25 (e) Collection of penalty and interest charges under this
19-1 section are in addition to any rights, including forfeiture, that
19-2 the board or the board of regents may exercise for failure to pay a
19-3 royalty or to submit a report or other instrument when due.
19-4 (f) The board may provide by rule procedures and standards
19-5 for reduction of interest charged or penalties assessed under this
19-6 subchapter or other interest or penalties assessed relating to
19-7 unpaid or delinquent royalties or other amounts due.
19-8 Sec. 66.79. PAYMENT OF ROYALTY IN KIND. (a) An oil or gas
19-9 royalty due under a lease on university lands shall be paid in kind
19-10 at the discretion of the board.
19-11 (b) The option to take royalty in kind or to take cash
19-12 royalties may be exercised by the board at any time or from time to
19-13 time on not less than 60 days' notice to the lessee.
19-14 (c) The board shall enter into contracts or other
19-15 instruments or agreements to dispose of the portion of the royalty
19-16 taken in kind, which may include contracts for sale,
19-17 transportation, or storage of the oil or gas. The commissioner
19-18 shall execute contracts approved by the board under this section
19-19 that are consistent with applicable law.
19-20 (d) The board of regents may enter into insurance contracts
19-21 or other agreements to secure or guarantee payment of contracts or
19-22 other instruments or agreements to dispose of the portion of the
19-23 royalty taken in kind, including contracts for sale,
19-24 transportation, and storage.
19-25 (e) If the board has elected to take royalty in kind, the
20-1 board may elect that delivery of the correct amount of oil or gas
20-2 shall be at the wellhead, at the oil and gas separator, into a
20-3 pipeline connected at the well, or at such other location as may be
20-4 specified in a royalty in kind provision in the lease or other
20-5 agreement. Such delivery by the lessee shall satisfy the lessee's
20-6 obligation for payment of the royalty due under the lease. This
20-7 section shall not be construed to surrender or in any way affect
20-8 the right of the board of regents under existing or future leases
20-9 to receive royalty on the basis of market value of production not
20-10 taken in kind.
20-11 Sec. 66.80. RECORDS. (a) The lessee shall provide to the
20-12 board of regents a copy of every contract for the sale or
20-13 processing of oil or gas and any subsequent agreement and amendment
20-14 thereto, together with a summary in the form adopted by the board
20-15 of regents, within 30 days after the contract, agreement, or
20-16 amendment is made.
20-17 (b) The books and accounts, receipts, and discharges of all
20-18 wells, tanks, pools, meters, and pipelines, and all contracts and
20-19 other records pertaining to the production, transportation, sale,
20-20 and marketing of the oil and gas, shall at all times be subject to
20-21 inspection, examination, and copying by the commissioner of the
20-22 General Land Office, the attorney general, the governor, the board
20-23 of regents, or the board, or the representative of any of them.
20-24 Sec. 66.81. AUDIT INFORMATION CONFIDENTIAL. (a) All
20-25 documents and information secured, derived, or obtained during the
21-1 course of an inspection or examination of books, accounts, reports,
21-2 or other records of the lessee or a third party, as provided by
21-3 this subchapter, and contracts, agreements, or amendments provided
21-4 to the board of regents under Section 66.80(a) are confidential and
21-5 may not be used publicly, opened for public inspection, or
21-6 disclosed, except for information set forth in a lien filed under
21-7 this chapter and except as permitted under Subsections (c) and (d).
21-8 This section shall not apply to records or information provided by
21-9 the lessee under Section 66.77.
21-10 (b) Documents and information made confidential in this
21-11 section shall not be subject to subpoena directed to the board, the
21-12 board of regents, the commissioner, the attorney general, or the
21-13 governor except in a judicial or administrative proceeding in which
21-14 the state and a person with an equitable or legal interest in the
21-15 lease or land to which the information relates are parties.
21-16 (c) The board, the board of regents, or the attorney general
21-17 may use documents and information made confidential by the
21-18 provisions of this section and contracts made confidential by this
21-19 subchapter to enforce the provisions of this subchapter or may
21-20 authorize their use in judicial or administrative proceedings in
21-21 which this state is a party or may authorize their examination by
21-22 employees, agents, or contractors of the board of regents or the
21-23 state auditor for audit purposes.
21-24 (d) This section does not prohibit:
21-25 (1) the delivery of documents and information made
22-1 confidential by this section to the lessee or its successor,
22-2 receiver, executor, guarantor, administrator, assignee, or
22-3 representative;
22-4 (2) the publication of statistics classified to
22-5 prevent the identification of a particular audit or items in a
22-6 particular audit;
22-7 (3) the release of documents or information otherwise
22-8 available to the public;
22-9 (4) the release of documents or information concerning
22-10 the amount of royalty assessed as a result of an examination
22-11 conducted under this subchapter or the release of other information
22-12 which would have been properly included in reports required under
22-13 Section 66.77;
22-14 (5) sharing of documents or information among state
22-15 agencies pursuant to Section 66.65. Shared documents or
22-16 information will remain confidential under this section; or
22-17 (6) the release of documents or information authorized
22-18 by the lessee.
22-19 Sec. 66.82. FORFEITURE; OTHER REMEDIES. (a) If a lessee
22-20 fails or refuses to perform a material requirement of this
22-21 subchapter or the lease, the board may, after notice to the lessee
22-22 and an opportunity to be heard, declare a forfeiture of the lease
22-23 or an interest in the lease. Material requirements include but are
22-24 not limited to:
22-25 (1) failure or refusal to pay a sum due, including
23-1 penalty and interest, within 30 days after the sum becomes due;
23-2 (2) failure or refusal to tender oil or gas for
23-3 delivery as in-kind royalty;
23-4 (3) making a false report concerning exploration,
23-5 production, or royalty;
23-6 (4) failure or refusal to file an assignment as
23-7 required by this subchapter;
23-8 (5) failure or refusal, after demand, to file or make
23-9 available for inspection and copying a record or document required
23-10 to be filed or made available for inspection or copying under this
23-11 subchapter or rules promulgated thereunder;
23-12 (6) failure or refusal, after demand, to protect the
23-13 leased premises from drainage; or
23-14 (7) the breach of an obligation under the lease or
23-15 this subchapter.
23-16 (b) Forfeiture is not the exclusive remedy. The attorney
23-17 general, at the request of the board of regents, may bring suit for
23-18 damages or specific performance, or both, or other remedy, at law
23-19 or in equity.
23-20 (c) The board, in its sole discretion, may authorize
23-21 reinstatement of a forfeited lease on terms the board may determine
23-22 at the time of the declaration of forfeiture.
23-23 Sec. 66.83. LIEN; ABANDONED PERSONAL PROPERTY. (a) The
23-24 board of regents shall have a statutory first lien on oil and gas
23-25 produced from the area covered by the lease to secure payment of
24-1 all unpaid royalty and other sums of money that may become due
24-2 under the lease or this subchapter.
24-3 (b) By acceptance of the lease, the lessee grants to the
24-4 board of regents an express contractual lien on and security
24-5 interest in all oil and gas in and extracted from the area covered
24-6 by the lease, all proceeds which may accrue to the lessee from the
24-7 sale of the oil and gas, whether the proceeds are held by the
24-8 lessee or another person, and all fixtures on and improvements to
24-9 the area covered by the lease used in connection with the
24-10 production or processing of the oil and gas to secure the payment
24-11 of royalties and other amounts due or to become due under the lease
24-12 or this subchapter and to secure payment of damages or loss that
24-13 the state may suffer by reason of the lessee's breach of a covenant
24-14 or condition of the lease, whether express or implied.
24-15 (c) The statutory and contractual liens and security
24-16 interest described in this section may be foreclosed with or
24-17 without court proceedings in the manner provided under Chapter 9,
24-18 Business & Commerce Code. The board of regents may require the
24-19 lessee to execute and record instruments reasonably necessary to
24-20 acknowledge, attach, or perfect the liens.
24-21 (d) Personal property, including casing, equipment, and
24-22 fixtures remaining on lands covered by the lease more than one year
24-23 after the expiration or other termination of the lease shall be
24-24 considered to be abandoned. The board of regents may take title to
24-25 abandoned personal property in any manner and keep or use the
25-1 proceeds for any purpose allowed by law. The lessee shall pay to
25-2 the board of regents on demand the positive difference between the
25-3 cost of disposing of abandoned personal property and the proceeds,
25-4 if any, from the disposition.
25-5 Sec. 66.84. PAYMENTS; DISPOSITION. Payments under this
25-6 subchapter shall be made to the board of regents, which shall:
25-7 (1) transmit to the state comptroller for deposit to
25-8 the credit of the permanent university fund all bonus, rental, and
25-9 royalty payments;
25-10 (2) transmit to the state comptroller for deposit to
25-11 the credit of the available university fund all filing, assignment,
25-12 and relinquishment fees and all other payments except those
25-13 described in Subdivision (3); and
25-14 (3) retain the one and one-half percent special fee
25-15 provided for by this subchapter for disbursement by the comptroller
25-16 of The University of Texas System for the purposes authorized by
25-17 this subchapter.
25-18 [Sec. 66.61. DEFINITION. As used in this subchapter,
25-19 "board" means the Board for Lease of University Lands.]
25-20 [Sec. 66.62. BOARD FOR LEASE. (a) The Board for Lease of
25-21 University Lands is composed of the commissioner of the general
25-22 land office, two members of the board of regents of The University
25-23 of Texas System selected by the board of regents of that system,
25-24 and one member of the board of regents of The Texas A & M
25-25 University System selected by the board of regents of that system.
26-1 In the event that a regent member of the Board for Lease of
26-2 University Lands is unable to attend any meeting of that board, the
26-3 chairman of the board of regents of the applicable system shall
26-4 appoint another member of the board of regents as a substitute
26-5 member of the Board for Lease of University Lands to attend the
26-6 meeting that the regular regent member is unable to attend. The
26-7 substitute regent member of the Board for Lease of University Lands
26-8 shall exercise all the powers, duties, and responsibilities of the
26-9 absent regent member during the conduct of the meeting for which he
26-10 was appointed. Any substitute regent member of the Board for Lease
26-11 of University Lands is subject to the provisions of this
26-12 subchapter.]
26-13 [(b) A regent member may not be directly or indirectly
26-14 employed by, or be an officer of or an attorney for, an oil or gas
26-15 company.]
26-16 [(c) An officer, employee, or paid consultant of a trade
26-17 association in the oil and gas industry may not be a member or
26-18 employee of the board, nor may a person who cohabits with or is the
26-19 spouse of an officer, managerial employee, or paid consultant of a
26-20 trade association in the oil and gas industry be a member of the
26-21 board or an employee of the board grade 17 or over, including
26-22 exempt employees, according to the position classification schedule
26-23 under the General Appropriations Act.]
26-24 [(d) A person who is required to register as a lobbyist
26-25 under Chapter 305, Government Code, by virtue of his activities for
27-1 compensation in or on behalf of a profession related to the
27-2 operation of the board, may not serve as a member of the board or
27-3 act as the general counsel to the board.]
27-4 [(e) Members of the board, other than the Commissioner of
27-5 the General Land Office, serve two-year terms expiring February 1
27-6 of each odd-numbered year.]
27-7 [(f) The Commissioner of the General Land Office serves as
27-8 chairman of the board.]
27-9 [(g) Unless the action relates to the final approval of the
27-10 award of a lease on a form approved by a majority of the board in
27-11 accordance with procedures for awarding leases that have been
27-12 previously approved by a majority of the board, a majority of the
27-13 board members has the power to act for the board. If the action
27-14 relates to the final approval of the award of a lease on a form
27-15 approved by a majority of the board in accordance with procedures
27-16 for awarding leases that have been previously approved by a
27-17 majority of the board, two board members present at a meeting have
27-18 the power to act for the board.]
27-19 [(h) The board shall perform the duties prescribed by
27-20 this subchapter and shall keep a public record of all its
27-21 proceedings.]
27-22 [(i) It is a ground for removal from the board if a member:]
27-23 [(1) does not have at the time of appointment the
27-24 qualifications required by Subsection (a) of this section for
27-25 appointment to the board;]
28-1 [(2) does not maintain during the service on the board
28-2 the qualifications required by Subsection (a) of this section for
28-3 appointment to the board;]
28-4 [(3) violates a prohibition established by Subsection
28-5 (c) or (d) of this section;]
28-6 [(4) is unable to discharge his duties for a
28-7 substantial portion of the term for which he was appointed because
28-8 of illness or disability; or]
28-9 [(5) is absent from more than one-half of the
28-10 regularly scheduled board meetings which the member is eligible to
28-11 attend during each calendar year, except when the absence is
28-12 excused by majority vote of the board.]
28-13 [(j) The validity of an action of the board is not affected
28-14 by the fact that it was taken when a ground for removal of a member
28-15 of the board existed.]
28-16 [(k) If the agency head has knowledge that a potential
28-17 ground for removal exists, he shall notify the chairman of the
28-18 board of such ground. The chairman of the board shall then notify
28-19 the governor that a potential ground for removal exists.]
28-20 [Sec. 66.63. OIL AND GAS SUBJECT TO SALE. The oil and gas
28-21 in the university lands are subject to sale under the regulations,
28-22 at the times, and on the terms provided in this subchapter, and
28-23 under the rules and regulations adopted by the board as authorized
28-24 by this subchapter, not inconsistent with the provisions of this
28-25 subchapter.]
29-1 [Sec. 66.64. PLACING OIL AND GAS ON MARKET; PUBLIC AUCTION;
29-2 ADVERTISEMENT. (a) Whenever there is a demand for the purchase of
29-3 oil and gas in any university land that will reasonably insure that
29-4 the oil and gas may be sold advantageously, the board shall place
29-5 the oil and gas in the land on the market in separate tracts of
29-6 such area and extent as the board may determine most suitable for
29-7 profitable marketing; but in no event shall any tract in which
29-8 oil and gas is offered for as a unit exceed in area of 6,000
29-9 acres.]
29-10 [(b) The sale of the oil and gas shall be made at public
29-11 auction or by sealed bid, or through a combination of public
29-12 auction and sealed bid, as the board elects. The sales shall be
29-13 held in Austin, or any other location designated by the board, at
29-14 any hour between 10 a.m. and 5 p.m.]
29-15 [(c) The board shall cause an advertisement to be made of
29-16 the sale in two or more newspapers of general circulation in this
29-17 state. The advertisement shall state the method, time, and place
29-18 of sale; the primary term of the lease proposed to be executed
29-19 covering any sale; the bonus or royalty to be paid; that lists
29-20 describing the land to be sold may be obtained from the board; and
29-21 other matters that in the judgment of the board are deemed
29-22 advisable. In addition to the foregoing mandatory provisions, the
29-23 board may cause the advertisement to be placed in oil and gas
29-24 journals in and out of the state and to be mailed generally to
29-25 persons it thinks might be interested.]
30-1 [Sec. 66.65. ROYALTY; BONUS; ANNUAL RENTAL; SPECIAL FEE.
30-2 (a) The oil and gas in each tract shall be offered for sale for a
30-3 bonus to be determined by high bid in addition to the stipulated
30-4 royalty or for a stipulated bonus and a royalty to be determined by
30-5 high bid. Each tract shall be offered separately.]
30-6 [(b) Each bid is subject to the royalty or bonus specified
30-7 in the official advertisement preceding the sale, but in no event
30-8 shall the royalty be less than one-eighth of the gross production
30-9 of oil and gas in the land; and shall further be subject to the
30-10 payment of an annual rental after the first year of not less than
30-11 10 cents per acre, payable each year in advance, unless the
30-12 royalties received from the land during the preceding year equal or
30-13 exceed the amount of the annual rental payment.]
30-14 [(c) Each bid is also subject to the payment of a special
30-15 fee equal to one percent of the total bonus whether stipulated or
30-16 bid, which special payment shall constitute a special fund from
30-17 which the Board of Regents of The University of Texas System shall
30-18 defray the expenses of the sale, including the payment for the
30-19 services of the auctioneer crying the sale and the payment of the
30-20 general operating expenses in geologizing, oil field supervision,
30-21 and auditing oil and gas production of university lands, including
30-22 salaries and traveling expenses of persons employed by the board of
30-23 regents for those purposes, and for the purpose of acquiring,
30-24 constructing, and equipping a building in the city of Midland or
30-25 adjacent area to house the administrative staff of the offices of
31-1 University Lands, Geology and Land Agent, and such other related
31-2 agencies necessary for the management and development of university
31-3 lands in West Texas.]
31-4 [(d) The Board of Regents of The University of Texas System
31-5 may also direct the comptroller of The University of Texas System
31-6 to transmit to the state treasurer for deposit to the credit of the
31-7 permanent university fund any unexpended balances remaining in the
31-8 special fund after reserving a sufficient amount in it for the
31-9 payment of current expenses as set out in Subsection (c) of this
31-10 section.]
31-11 [(e) The highest successful bidder shall pay to the Board of
31-12 Regents of The University of Texas System on the day the bid is
31-13 accepted the full amount of bonus whether stipulated or bid and the
31-14 special fee.]
31-15 [Sec. 66.66. WITHDRAWAL OF LANDS BEFORE BIDS RECEIVED. The
31-16 board may withdraw any lands advertised for lease before the hour
31-17 set for receiving bids.]
31-18 [Sec. 66.67. AWARD OF LEASE. (a) If any one of the bidders
31-19 at the sale at public auction has offered a reasonable and proper
31-20 price for any tract offered, not less than the price fixed by the
31-21 board, the land advertised may be leased for oil and gas purposes
31-22 under the terms of this subchapter and any regulations the board
31-23 may prescribe, not inconsistent with the provisions of this
31-24 subchapter. All bids may be rejected by the board.]
31-25 [(b) If the board determines that a satisfactory bid has
32-1 been offered for the oil and gas, it shall make an award to the
32-2 bidder offering the highest price, and a lease shall be executed by
32-3 the commissioner of the general land office. A duplicate copy of
32-4 the lease shall be filed in the general land office.]
32-5 [Sec. 66.68. PROVISIONS OF LEASE. (a) Each lease executed
32-6 under this subchapter shall contain, and each valid and subsisting
32-7 oil and gas lease previously executed by the commissioner under the
32-8 source statute for this subchapter, on the application of the
32-9 lessee and payment of a sum of money equal to one year's annual
32-10 rental under the lease, shall be amended by written instrument to
32-11 contain, the provisions prescribed by this section.]
32-12 [(b) Each lease shall provide that the primary term of the
32-13 lease, as determined by the board prior to the promulgation of the
32-14 advertisement, shall in no case exceed 10 years.]
32-15 [(c) Each lease shall provide that if oil and/or gas is
32-16 being produced in paying quantities from the leased premises before
32-17 the termination of the primary term, such lease shall not terminate
32-18 but shall continue in force and effect as long as oil and/or gas is
32-19 being so produced.]
32-20 [(d) Each lease shall provide that in the event production
32-21 of oil or gas on the leased premises, after once obtained, shall
32-22 cease for any cause within 60 days before the expiration of the
32-23 primary term of such lease or at any time or times thereafter, such
32-24 lease shall not terminate, if the lessee commences additional
32-25 drilling or reworking operations within 60 days thereafter, and
33-1 such lease shall remain in full force and effect so long as such
33-2 operations continue in good faith and in workmanlike manner,
33-3 without interruptions, totaling more than 60 days during any one
33-4 such operation; and if such drilling or reworking operations result
33-5 in the production of oil and/or gas, such lease shall remain in
33-6 full force and effect so long as oil or gas is produced therefrom
33-7 in paying quantities or payment of shut-in gas well royalty or
33-8 compensatory royalties is made as hereinafter provided in this
33-9 subchapter.]
33-10 [(e) Each lease shall provide that if at the expiration of
33-11 the primary term or at any time thereafter there is located on the
33-12 leased premises a well or wells capable of producing oil or gas in
33-13 paying quantities and such oil or gas is not produced for lack of
33-14 suitable production facilities or a suitable market and such lease
33-15 is not being otherwise maintained in force and effect, the lessee
33-16 may pay as royalty $1,200 per annum for each well on the lease
33-17 capable of producing oil or gas in paying quantities, such payment
33-18 to be made to the Board of Regents of The University of Texas
33-19 System at Austin, Texas. Any shut-in oil or gas royalty must be
33-20 paid on or before: (1) the expiration of the primary term of the
33-21 lease, (2) 60 days after lessee ceases to produce oil or gas from
33-22 the leased premises, or (3) 60 days after lessee completes a
33-23 drilling and reworking operation in accordance with the lease
33-24 provisions, whichever date is later. If such payment is made, the
33-25 lease shall be considered to be a producing lease and such shut-in
34-1 royalty payment shall extend the term of the lease for a period of
34-2 one year from the end of the primary term or from the first day of
34-3 the month next succeeding the month in which production ceased; and
34-4 thereafter if no suitable production facilities or suitable market
34-5 for such oil or gas exists, the lessee may extend the lease for
34-6 four additional and successive periods of one year each by the
34-7 payment of a like sum of money each year on or before the
34-8 expiration of the extended term. Provided, however, that if, while
34-9 such lease is being maintained in force and effect by payment of
34-10 such shut-in royalty, oil or gas should be sold and delivered in
34-11 paying quantities from a well situated within 1,000 feet of the
34-12 leased premises and completed in the same producing reservoir or in
34-13 any case where drainage is occurring, the right to further extend
34-14 the lease by such shut-in royalty payments shall cease, but such
34-15 lease shall remain in force and effect for the remainder of the
34-16 current one year period for which the shut-in royalty has been
34-17 paid, and for four additional and successive periods of one year
34-18 each by the payment by the lessee of compensatory royalty, at the
34-19 royalty rate provided for in such university lease of the value at
34-20 the well of production from the well which is causing the drainage
34-21 or which is completed in the same producing reservoir and within
34-22 1,000 feet of the leased premises; such compensatory royalty to be
34-23 paid monthly to the Board of Regents of The University of Texas
34-24 System at Austin, Texas, beginning on or before the last day of the
34-25 month next succeeding the month in which such oil or gas is sold
35-1 and delivered from the well situated within 1,000 feet of, or
35-2 draining, the leased premises and completed in the same producing
35-3 reservoir; provided further, that in the event such compensatory
35-4 royalties paid in any 12-month period are in a sum less than the
35-5 annual shut-in gas well royalties provided for in this section, the
35-6 lessee shall pay an additional sum equal to the difference within
35-7 30 days from the end of such 12-month period; provided further,
35-8 that nothing herein shall relieve the lessee of the obligation of
35-9 reasonable development, nor of the obligation to drill offset wells
35-10 required by Section 66.75 of this code.]
35-11 [(f) Each lease shall provide that if, at the expiration of
35-12 the primary term, production of oil and/or gas has not been
35-13 obtained in paying quantities on the leased premises but drilling
35-14 operations are being conducted thereon in good faith and in good
35-15 and workmanlike manner, the lessee may, on or before the expiration
35-16 of the primary term, file with the Board of Regents of The
35-17 University of Texas System a written application for a 30-day
35-18 extension of such lease, such application to be accompanied by a
35-19 payment to the Board of Regents of The University of Texas System
35-20 of $7.50 per acre for each acre in the lease, and the Chairman of
35-21 the Board of Regents of The University of Texas System or a
35-22 designee appointed by the Chairman shall, in writing, extend such
35-23 lease for a 30-day period from and after the expiration of the
35-24 primary term and so long thereafter as oil or gas is produced in
35-25 paying quantities from the premises; provided further, that the
36-1 lessee may, so long as such drilling operations are being conducted
36-2 in good faith, make like application and payment during any 30-day
36-3 extended period for an additional extension of 30 days not to
36-4 exceed a combined total of 180 days; provided, however, lessee may,
36-5 so long as such drilling operations are being conducted in good
36-6 faith, make written application to the Board of Regents of The
36-7 University of Texas System on or before the expiration of the
36-8 initial extended period of 180 days for an additional extension of
36-9 180 days, such application to be accompanied by a payment to the
36-10 Board of Regents of The University of Texas System of $50 per acre
36-11 for each acre in the lease, and the Chairman of the Board of
36-12 Regents of The University of Texas System or a designee appointed
36-13 by the Chairman shall, in writing, extend such lease for an
36-14 additional 180-day period from and after the expiration of the
36-15 initial extended period of 180 days, and so long thereafter as oil
36-16 or gas is produced in paying quantities from the premises;
36-17 provided, that no lease shall be extended under the provisions of
36-18 this section for more than a total of 360 days from and after the
36-19 expiration of the primary term unless production in paying
36-20 quantities has been obtained.]
36-21 [(g) Each lease shall contain a provision enabling the
36-22 board, at its election, to require that payment of royalty as
36-23 stipulated in the lease be in kind. Such option may be exercised
36-24 from time to time at the discretion of the board upon not less than
36-25 six months' notice to the lessee. The board shall have all powers
37-1 necessary to negotiate and execute sales contracts or any other
37-2 instruments necessary for the disposition of any royalty taken in
37-3 kind. Such other reasonable provisions, not inconsistent with this
37-4 subchapter, as will facilitate the efficient and equitable payment
37-5 of royalty in kind may be included in this lease by the board.]
37-6 [Sec. 66.69. LEASE: ADDITIONAL PROVISIONS. Each oil and
37-7 gas lease issued on university lands under this subchapter shall
37-8 include any additional provisions and regulations, not inconsistent
37-9 with the provisions of this subchapter, that the board may
37-10 prescribe to preserve the interest of the state and safeguard the
37-11 university funds.]
37-12 [Sec. 66.70. COMPENSATORY ROYALTIES IN LIEU OF OFFSET WELLS.
37-13 (a) Subject to the provisions of this section, the commissioner of
37-14 the general land office may execute agreements on behalf of the
37-15 permanent university fund that provide for the payment by
37-16 university land oil and gas lessees of compensatory royalty in lieu
37-17 of drilling offset wells that may be required to protect a
37-18 university oil and gas lease from drainage from a well or wells
37-19 located on non-university lands or university lands leased at a
37-20 lesser royalty situated within 1,000 feet of or draining the
37-21 university-leased premises.]
37-22 [(b) Agreements providing for the payment of compensatory
37-23 royalty must be approved by the board for lease of university
37-24 lands.]
37-25 [(c) Any such agreement must be found by the commissioner
38-1 and the board for lease to be in the best interest of the state and
38-2 necessary to prevent economic waste.]
38-3 [(d) Nothing in an agreement shall relieve the lessee of the
38-4 obligation of reasonable development or of the obligation to drill
38-5 offset wells as required by Section 66.75 of this code as to other
38-6 producing horizons.]
38-7 [(e) Beginning on the date fixed in the agreement, the
38-8 lessee shall pay the compensatory royalty monthly to the Board of
38-9 Regents of The University of Texas System in Austin, Texas.]
38-10 [(f) The agreement with respect to the interest of the state
38-11 shall remain in force and effect as long as oil and gas, or either
38-12 of them, is produced from a well located on university or
38-13 non-university acreage and draining the university-leased premises.]
38-14 [(g) The agreement may contain other provisions the
38-15 commissioner and the board for lease deem necessary to protect the
38-16 interests of the permanent university fund.]
38-17 [(h) The agreement shall provide that compensatory royalty
38-18 be paid at the royalty rate provided by the university lease and
38-19 shall provide that compensatory royalty be paid on the market value
38-20 at the well of production from the well located on non-university
38-21 lands or university lands leased at a lesser royalty situated
38-22 within 1,000 feet of or draining the university leased premises.]
38-23 [Sec. 66.71. PRORATED OR REDUCED PRODUCTION CONTRACTS.
38-24 Whenever in the discretion of the board it is to the best interest
38-25 of the university and its permanent fund that production from any
39-1 lease for a limited period of time should be prorated or reduced,
39-2 the board may execute the necessary contract or contracts with the
39-3 lessee or lessees and their assignees to effectuate the same and to
39-4 carry out the intention of this subchapter.]
39-5 [Sec. 66.72. EXTENSION OF PRODUCING LEASE. If oil or gas is
39-6 discovered in paying quantities on any tract covered by a lease,
39-7 then the lease as to that tract shall remain in force as long as
39-8 oil and gas is produced in paying quantities from the tract,
39-9 provided that the other provisions of this subchapter are complied
39-10 with by the lessee.]
39-11 [Sec. 66.73. ASSIGNMENT; RELINQUISHMENT. (a) Any rights
39-12 acquired may be assigned; provided, however, in order for an
39-13 assignment to be valid and effective, the assignment must be filed
39-14 in the county or counties in which the area is situated, and a
39-15 legible copy of the recorded assignment must be filed with the
39-16 Board of Regents of The University of Texas System, accompanied by
39-17 a filing fee of $30 for each lease assigned. If the copy of the
39-18 recorded assignment is filed with the Board of Regents of The
39-19 University of Texas System after the 90th day after the date on
39-20 which the assignment is recorded, the copy must be accompanied by
39-21 the filing fee set by the board and by a late fee equal to the
39-22 amount of the filing fee.]
39-23 [(b) Any rights to any lease and to any assigned portion
39-24 thereof may be relinquished to the state at any time by having an
39-25 instrument of relinquishment recorded in the county or counties in
40-1 which the area relinquished is situated and an original certified
40-2 copy filed with the Board of Regents of The University of Texas
40-3 System, accompanied by $1 for each area relinquished and a filing
40-4 fee of $5 for each lease involved in the relinquishment.]
40-5 [(c) Such an assignment or relinquishment shall not relieve
40-6 the lease owner of any past due obligation theretofore accrued
40-7 thereon.]
40-8 [Sec. 66.74. ROYALTY PAYMENTS; INSPECTION OF RECORDS.
40-9 (a) Royalty as stipulated in the sale shall be paid to the Board
40-10 of Regents of The University of Texas System at Austin, Texas, for
40-11 the benefit of the university permanent fund as provided in this
40-12 section.]
40-13 [(1) The board shall set by rule the date for making
40-14 royalty payments and for filing any reports, documents or other
40-15 records required to be filed by this section. However, the board
40-16 may not set the due date for royalty on oil before the fifth day of
40-17 the second month succeeding the month of production, and may not
40-18 set the due date for royalty on gas before the 15th day of the
40-19 second month succeeding the month of production.]
40-20 [(2) Royalty payments shall be accompanied by:]
40-21 [(a) an affidavit of the owner, manager, or
40-22 other authorized agent completed in the form and manner required by
40-23 the Board of Regents of The University of Texas System and showing
40-24 the gross amount and disposition of all oil and gas produced and
40-25 the market value of the oil and gas;]
41-1 [(b) a copy of all documents, records, or
41-2 reports confirming the gross production, disposition, and market
41-3 value, including gas meter readings, pipeline receipts, gas line
41-4 receipts, and other checks or memoranda of amount produced and put
41-5 into pipelines, tanks, pools, and gas lines or gas storage;]
41-6 [(c) a check stub, schedule, summary, or other
41-7 remittance advice showing by the assigned general land office lease
41-8 number the amount of royalty being paid on each lease; and]
41-9 [(d) other reports or records that the Board of
41-10 Regents of The University of Texas System may require to verify the
41-11 gross production, disposition, and market value.]
41-12 [(3) The lessee has the responsibility for paying
41-13 royalties or having royalties paid by the date provided for payment
41-14 in this section.]
41-15 [(4) If any royalty is not paid when due, a penalty of
41-16 one percent shall be added to the unpaid amount due. If the
41-17 royalty is not paid within seven days after the due date, a penalty
41-18 of an additional four percent of the royalty due is imposed. If
41-19 the royalty is not paid within 30 days after the due date, a
41-20 penalty of an additional five percent is imposed. The minimum
41-21 penalty under this subdivision is $25. Penalty under this
41-22 subdivision may not be added in cases of title dispute as to the
41-23 state's portion of the royalty or to that portion of the royalty in
41-24 dispute as to fair market value. Except as provided in Subsection
41-25 (g), Section 66.68 of this code, royalty payments shall be made in
42-1 cash, by a bank draft drawn on a state or national bank in Texas,
42-2 by a post-office or express money order, or in any other form that
42-3 the law may provide for making payments to the State Treasury and
42-4 are payable to the Board of Regents of The University of Texas
42-5 System.]
42-6 [(5) Copies of contracts for the sale or processing of
42-7 gas and subsequent agreements and amendments to those contracts
42-8 shall be filed with the Board of Regents of The University of Texas
42-9 System within 30 days after the contracts, agreements, or
42-10 amendments are made. These contracts and agreements received by
42-11 the Board of Regents of The University of Texas System shall be
42-12 held in confidence by the Board of Regents of The University of
42-13 Texas System unless otherwise authorized by the lessee.]
42-14 [(6) Interest shall accrue on delinquent royalties
42-15 beginning 60 days after the due date. The annual interest rate on
42-16 delinquent royalties is 12 percent. Interest accrued under this
42-17 subdivision shall be in addition to any delinquency penalty accrued
42-18 under Subdivision (4) of this subsection.]
42-19 [(7) The Board of Regents of The University of Texas
42-20 shall add a penalty of 25 percent to any delinquent royalties if
42-21 the delinquency is due to fraud or an intent to evade the
42-22 provisions of this subchapter on the part of the lessee or his
42-23 agents, employees, or assignees.]
42-24 [(8) If any report, affidavit, supporting document, or
42-25 any other instrument required to be filed under this subsection is
43-1 not filed when due, a penalty accrues in the amount of $10 per
43-2 document or a higher amount established by the Board of Regents of
43-3 The University of Texas, for each 30-day period of delinquency or
43-4 fractional part of that period.]
43-5 [(9) Collection of penalty and interest charges under
43-6 this subsection are in addition to any rights, including
43-7 forfeiture, that the board may exercise for failure to pay a
43-8 royalty or to submit a report or other instrument when due.]
43-9 [(b) The books and accounts, receipt and discharges of all
43-10 wells, tanks, pools, meters, pipelines, and all contracts and other
43-11 records pertaining to the production, transportation, sale, and
43-12 marketing of the oil and gas shall at all times be subject to
43-13 inspection and examination by the commissioner of the general land
43-14 office, the attorney general, the governor, or any member of the
43-15 board of regents, or the representative of either.]
43-16 [(c) For purposes of Section 66.74(a)(3) of this code, a
43-17 royalty payment is timely made if, before the applicable due date,
43-18 the payment is deposited in a postpaid, properly addressed wrapper,
43-19 with a post office or official depository under the care and
43-20 custody of the United States Postal Service.]
43-21 [Sec. 66.75. PROTECTION FROM DRAINAGE. In every case where
43-22 the area in which the oil and gas sold shall be contiguous or
43-23 adjacent to land not university land, the acceptance of the bid and
43-24 the sale made thereby shall constitute an obligation on the lessee
43-25 to adequately protect the land leased from drainage from adjacent
44-1 lands. In cases where the area in which the oil and gas is sold is
44-2 contiguous to other university lands leased or sold, at a lesser
44-3 royalty, the lessee shall likewise protect the state from drainage
44-4 from the land so leased or sold for a lesser royalty. On failure
44-5 to protect the land from drainage, the sale and all rights
44-6 thereunder may be forfeited by the board in the manner provided in
44-7 this subchapter for forfeitures.]
44-8 [Sec. 66.76. FORFEITURE; OTHER REMEDIES; LIEN. (a) If the
44-9 owner of the rights acquired under this subchapter fails or refuses
44-10 to make the payment of any sum due thereon, either as rental or
44-11 royalty on the production, within 30 days after same becomes due,
44-12 or if the owner or his authorized agent makes any false return or
44-13 false report concerning production, royalty, or drilling, or if the
44-14 owner fails or refuses to drill any offset well or wells in good
44-15 faith, as required by his lease, or if the owner or his agent
44-16 refuses the proper authority access to the records and other data
44-17 pertaining to the operations under this subchapter, or if the owner
44-18 or his authorized agent fails or refuses to give correct
44-19 information to the proper authorities, or fails or refuses to
44-20 furnish the log of any well within 30 days after production is
44-21 found in paying quantities, or if any of the material terms of the
44-22 lease are violated, the lease is subject to forfeiture by the board
44-23 by an order entered upon the minutes of the board reciting the
44-24 facts constituting the default and declaring the forfeiture.]
44-25 [(b) The board may have suit instituted for forfeiture
45-1 through the attorney general.]
45-2 [(c) On proper showing by the forfeiting owner, within 30
45-3 days after the declaration of forfeiture, the lease may, at the
45-4 discretion of the board and on such terms as it may prescribe, be
45-5 reinstated.]
45-6 [(d) In case of violation by the owner of the lease
45-7 contract, the remedy of the state by forfeiture is not the
45-8 exclusive remedy, but suit for damages or specific performance, or
45-9 both, may be instituted.]
45-10 [(e) The state shall have a first lien upon all oil and gas
45-11 produced upon the leased area and upon all rigs, tanks, pipeline,
45-12 telephone lines, and machinery and appliances used in the
45-13 production and handling of oil and gas produced thereon, to secure
45-14 any amount due from the owner of the lease.]
45-15 [Sec. 66.77. FILING OF RECORDS. All surveys, files,
45-16 records, copies of lease contracts, and all other records
45-17 pertaining to the leases hereby authorized, shall be filed in the
45-18 general land office and constitute archives thereof and copies of
45-19 any such documents shall also be filed with the Board of Regents of
45-20 The University of Texas System. All existing documents now on file
45-21 in the general land office shall be transferred by copies to the
45-22 Board of Regents of The University of Texas System.]
45-23 [Sec. 66.78. PAYMENTS; DISPOSITION. Payments under this
45-24 subchapter shall be made to the Board of Regents of The University
45-25 of Texas System at Austin, Texas, who shall:]
46-1 [(1) transmit to the state treasurer for deposit to
46-2 the credit of the permanent university fund all bonus, rental, and
46-3 royalty payments;]
46-4 [(2) transmit to the state treasurer for deposit to
46-5 the credit of the available university fund all filing, assignment,
46-6 and relinquishment fees, and all other payments except those
46-7 described in Subdivision (3) of this section; and]
46-8 [(3) retain the one percent fee payment prescribed by
46-9 Section 66.65(c) of this code, for disbursement by the comptroller
46-10 of The University of Texas System for the purposes authorized by
46-11 Section 66.65(c) of this code.]
46-12 [Sec. 66.79. FORMS; CONTRACTS; REGULATIONS. The board shall
46-13 adopt forms and contracts and shall promulgate rules and
46-14 regulations, not inconsistent with the terms of this subchapter,
46-15 that in its judgment will best effectuate the purpose of this
46-16 subchapter and will best protect the university, its lands, and the
46-17 income from the lands.]
46-18 [Sec. 66.80. EXPENSES OF EXECUTING THIS SUBCHAPTER. The
46-19 expenses of executing the provisions of this subchapter shall be
46-20 paid monthly by warrants drawn by the comptroller on the state
46-21 treasury.]
46-22 [Sec. 66.81. FINANCIAL REPORT REQUIRED. The board shall
46-23 file annually with the governor and the presiding officer of each
46-24 house of the legislature a complete and detailed written report
46-25 accounting for all funds received and disbursed by the board during
47-1 the preceding year. The form of the annual report shall be that
47-2 provided in the General Appropriations Act. The report shall be
47-3 distributed with the report required by Section 66.05 of this code.]
47-4 [Sec. 66.82. AUDIT. The financial transactions of the board
47-5 are subject to audit by the state auditor in accordance with
47-6 Chapter 321, Government Code.]
47-7 [Sec. 66.83. POLICIES ON PUBLIC HEARINGS. The board shall
47-8 develop and implement policies which will provide the public with a
47-9 reasonable opportunity to appear before the board and to speak on
47-10 any issue under the jurisdiction of the board.]
47-11 [Sec. 66.84. MARGINAL PROPERTY ROYALTY RATES. (a) In this
47-12 section:]
47-13 [(1) "Barrel of oil equivalent" means 6,000 cubic feet
47-14 of natural gas per 42-gallon barrel of crude oil or a volume of gas
47-15 with a minimum heating value of 6,000,000 British thermal units
47-16 (6,000 Mbtu), whichever is greater.]
47-17 [(2) "Lease" or "leases" means an oil and gas lease
47-18 issued or approved by the state that is valid and in force on or
47-19 after the effective date of this section.]
47-20 [(3) "Qualifying property" means land subject to a
47-21 lease issued under this subchapter.]
47-22 [(4) "Qualifying reservoir" means a reservoir having
47-23 an average daily per well production equal to or less than 15
47-24 barrels of oil equivalent during a period established by the board
47-25 by rule and underlying either:]
48-1 [(A) a qualifying property; or]
48-2 [(B) a pooled unit including a qualifying
48-3 property.]
48-4 [(5) "Reservoir" has the same meaning as "common
48-5 reservoir" as defined in Section 86.002, Natural Resources Code.]
48-6 [(b) The board may provide by rule that the royalty rate for
48-7 qualifying reservoirs may be reduced to not less than one-sixteenth
48-8 (6.25 percent). In determining whether to grant a reduction in the
48-9 royalty rate, the board may consider whether the qualifying
48-10 property is being operated efficiently, including whether the
48-11 property is pooled or has reasonable potential for the application
48-12 of secondary or tertiary recovery techniques.]
48-13 [(c) If a qualifying reservoir for which royalty rate
48-14 reduction is sought under this section is included in a unit
48-15 subject to the authority of the board, the board may modify the
48-16 terms and conditions of the unit as a condition of approving a
48-17 reduction in the royalty rate.]
48-18 SECTION 2. Section 52.136, Natural Resources Code, is
48-19 amended to read as follows:
48-20 Sec. 52.136. LIEN. (a) The state has a statutory first
48-21 lien on all oil and gas produced on any lease area to secure
48-22 payment of unpaid royalty and other amounts due.
48-23 (b) By acceptance of a lease, the lessee grants to the state
48-24 an express contractual lien on and security interest in all oil and
48-25 gas in and extracted from the area covered by the lease, all
49-1 proceeds which may accrue to the lessee from the sale of the oil
49-2 and gas, whether the proceeds are held by the lessee or another
49-3 person, and all fixtures on and improvements to the area covered by
49-4 the lease used in connection with the production or processing of
49-5 the oil and gas, to secure the payment of royalties and other
49-6 amounts due or to become due under the lease or this subchapter and
49-7 to secure payment of damages or loss that the state may suffer by
49-8 reason of the lessee's breach of a covenant or condition of the
49-9 lease, whether express or implied.
49-10 (c) The statutory and contractual liens and security
49-11 interests described in this section may be foreclosed with or
49-12 without court proceedings in the manner provided under Chapter 9,
49-13 Business & Commerce Code. The state may require the lessee to
49-14 execute and record instruments reasonably necessary to acknowledge,
49-15 attach, or perfect the liens.
49-16 SECTION 3. Changes made by this Act to Section 52.136,
49-17 Natural Resources Code, relate to the administration of leases and,
49-18 to the extent these changes do not conflict with existing
49-19 contractual rights, these changes in law will apply to existing and
49-20 future leases.
49-21 SECTION 4. Sections 52.291, 52.292, 52.293, 52.294, 52.295,
49-22 and 52.296, Natural Resources Code, are repealed.
49-23 SECTION 5. The terms of any oil and gas lease executed
49-24 before the effective date of this Act that impose the requirements
49-25 of Sections 52.291 through 52.296, Natural Resources Code, are of
50-1 no force and effect.
50-2 SECTION 6. The changes in law made by this Act to Sections
50-3 66.66, 66.67, 66.69, 66.71, 66.72, 66.73, and 66.76(c), Education
50-4 Code, apply only to leases awarded on or after January 1, 1998,
50-5 except as provided by Section 66.70, Education Code. Leases
50-6 awarded prior to that date shall be governed by the law in effect
50-7 when the lease was issued and the former law is continued in effect
50-8 for that purpose. Changes in law made by this Act to Sections
50-9 66.65, 66.70, 66.74, 66.75, 66.76(a), (b), and (d), 66.77, 66.78,
50-10 66.79, 66.80, 66.81, 66.82, and 66.83, Education Code, relate to
50-11 the administration of leases and, to the extent that these changes
50-12 do not conflict with existing contractual rights, these changes in
50-13 law will apply to existing and future leases.
50-14 SECTION 7. This Act takes effect January 1, 1998.
50-15 SECTION 8. The importance of this legislation and the
50-16 crowded condition of the calendars in both houses create an
50-17 emergency and an imperative public necessity that the
50-18 constitutional rule requiring bills to be read on three several
50-19 days in each house be suspended, and this rule is hereby suspended.
_______________________________ _______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 1354 passed the Senate on
April 24, 1997, by the following vote: Yeas 29, Nays 0; and that
the Senate concurred in House amendment on May 27, 1997, by a
viva-voce vote.
_______________________________
Secretary of the Senate
I hereby certify that S.B. No. 1354 passed the House, with
amendment, on May 21, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
Approved:
_______________________________
Date
_______________________________
Governor