By Brown S.B. No. 1354
75R9176 T
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the Board for Lease of University Lands, the leasing,
1-3 management, and administration of certain public lands, and related
1-4 fees and penalties.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Subchapter D, Chapter 66, Education Code is
1-7 amended to read as follows:
1-8 Sec. 66.61. DEFINITIONS. In this subchapter:
1-9 (1) "Affiliate" includes the parent company or a
1-10 subsidiary company, a corporation having common ownership with
1-11 another of ten percent or greater, a partner or joint venturer with
1-12 a company with respect to a business subject to this subchapter, or
1-13 a relative within the second degree of consanguinity or affinity.
1-14 Affiliates of a common entity are also affiliates of each other.
1-15 (2) "Board" means the Board for Lease of University
1-16 Lands.
1-17 (3) "Board of regents" means the board of regents of
1-18 The University of Texas System, except where otherwise specified.
1-19 (4) "Commissioner" means the commissioner of the
1-20 general land office.
1-21 (5) "Lessee" means a person who holds a leasehold
1-22 interest, legal or equitable, under a lease issued pursuant to this
1-23 subchapter, or the operator of oil and gas exploration, production,
1-24 and marketing activities on the leased premises, whether or not the
2-1 operator holds an interest in the lease.
2-2 (6) "Oil and gas" means crude oil, natural gas, and
2-3 all substances, including other hydrocarbons, produced in
2-4 association with crude oil and natural gas.
2-5 (7) "University lands" means land dedicated to the
2-6 permanent university fund.
2-7 (8) "Well" means an oil or gas well that has been
2-8 assigned a well number by the state agency having regulatory
2-9 jurisdiction over the production of oil and gas. A single wellbore
2-10 may contain more than one well.
2-11 Sec. 66.62. BOARD FOR LEASE OF UNIVERSITY LANDS. (a) The
2-12 board is composed of the commissioner, two members of the board of
2-13 regents selected by that board, and one member of the board of
2-14 regents of The Texas A & M University System selected by that
2-15 board. If a regent member is unable to attend a meeting of the
2-16 board, the presiding officer of the board of regents of the
2-17 applicable system may appoint another member of that board of
2-18 regents as a substitute member of the board to attend the meeting
2-19 that the regular regent member is unable to attend. The substitute
2-20 regent member shall exercise all the powers, duties, and
2-21 responsibilities of the absent regent member during the conduct of
2-22 the meeting for which he was appointed. A substitute regent member
2-23 is subject to the provisions of this subchapter.
2-24 (b) Members of the board, other than the commissioner, serve
2-25 two-year terms expiring February 1 of each odd-numbered year.
2-26 Regent members continue to serve until a successor is appointed and
2-27 qualified.
3-1 (c) The commissioner is chairman of the board.
3-2 (d) A person who is directly or indirectly employed by, or
3-3 is an officer or employee of a person or entity actively engaged in
3-4 the exploration for or production of oil and gas, other than as a
3-5 landowner or royalty owner, may not be a regent member.
3-6 (e) An officer, employee, or paid consultant of a trade
3-7 association in the oil and gas industry may not be a regent member
3-8 or employee of the board, nor may a person who cohabits with or is
3-9 the spouse of an officer, managerial employee, or paid consultant
3-10 of a trade association in the oil and gas industry be a regent
3-11 member of the board or a non-classified employee of the board.
3-12 (f) A person who is required to register as a lobbyist under
3-13 Chapter 305, Government Code, by virtue of his activities for
3-14 compensation in or on behalf of a profession related to the
3-15 operation of the board, may not serve as a regent member of the
3-16 board or act as the general counsel to the board.
3-17 (g) The board of regents of the university system appointing
3-18 a regent member may remove the regent member from the board if that
3-19 member:
3-20 (1) does not have at the time of appointment the
3-21 qualifications required by Subsection (a) of this section for
3-22 appointment to the board;
3-23 (2) does not maintain during the service on the board
3-24 the qualifications required by Subsection (a) of this section for
3-25 appointment to the board;
3-26 (3) violates a prohibition established by Subsection
3-27 (d), (e) or (f) of this section;
4-1 (4) is unable to discharge his duties for a
4-2 substantial portion of the term for which he was appointed because
4-3 of illness or disability; or
4-4 (5) is absent from more than one-half of the regularly
4-5 scheduled board meetings which the member is eligible to attend
4-6 during a calendar year, except when the absence is excused by
4-7 majority vote of the board.
4-8 (h) The board is exempt from the provisions of Chapter 2001,
4-9 Government Code.
4-10 Sec. 66.63. CERTAIN BOARD ACTIONS. (a) A majority of the
4-11 members of the board have the power to act for the board on a
4-12 matter before the board. Two members of the board have the power to
4-13 award leases issued on a form of lease previously approved by a
4-14 majority of the board.
4-15 (b) The validity of an action of the board is not affected
4-16 because it was taken when a ground for removal of a regent member
4-17 of the board existed. A regent member continues to serve until
4-18 removed pursuant to Section 66.62(g) of this subchapter.
4-19 Sec. 66.64. POWERS AND DUTIES OF THE BOARD. (a) The board
4-20 shall in a manner consistent with this subchapter:
4-21 (1) lease university lands for oil and gas exploration
4-22 and development on terms, at times, and in the manner it may
4-23 determine;
4-24 (2) contract for the sale or other disposition of oil
4-25 and gas royalties taken in-kind;
4-26 (3) adopt rules and policies for the administration
4-27 and enforcement of this subchapter and leases issued pursuant
5-1 thereto;
5-2 (4) set fees and penalties for the administration and
5-3 enforcement of this subchapter;
5-4 (5) set the terms of a contract for the development of
5-5 university lands for oil and gas;
5-6 (6) approve agreements that commit the royalty
5-7 interest in university lands on terms acceptable to the board; and
5-8 (7) exercise other powers and authority and perform
5-9 other duties as may be reasonably necessary to administer and
5-10 enforce the provisions of this subchapter.
5-11 (b) The board shall hold meetings and keep records of its
5-12 proceedings in a manner consistent with the requirements of the
5-13 Texas Open Meetings Act, Chapter 551, Government Code. The board
5-14 shall develop and implement policies which provide the public with
5-15 a reasonable opportunity to appear before the board, to speak on an
5-16 issue under the board's jurisdiction, or be heard with respect to a
5-17 declaration of forfeiture.
5-18 (c) Except as otherwise provided in this subchapter, the
5-19 records of the board are subject to the requirements of the Texas
5-20 Public Information Act, Chapter 552, Government Code.
5-21 (d) The financial transactions of the board are subject to
5-22 audit by the state auditor in accordance with Chapter 321,
5-23 Government Code.
5-24 (e) The board may delegate to the staff provided to it by
5-25 the board of regents any duty except as prohibited by law.
5-26 (f) The board shall appoint a secretary.
5-27 Sec. 66.65. BOARD STAFF; EXCHANGE OF INFORMATION WITH STATE
6-1 AGENCIES. (a) The board of regents shall employ and compensate
6-2 personnel to assist the board in the performance of its powers and
6-3 duties under this subchapter or may assign employees of The
6-4 University of Texas System to those duties.
6-5 (b) The members of the board, personnel and counsel employed
6-6 or assigned to assist the board, the board of regents, staff of The
6-7 University of Texas System, the commissioner and staff of the
6-8 general land office, the board of regents and staff of The Texas
6-9 A&M University System, the office of the comptroller, the office of
6-10 the attorney general, and any other agency or official of the state
6-11 with a reasonable business interest in state or university lands,
6-12 minerals, or resources may consult with each other and exchange
6-13 information related to the administration of leases, collection and
6-14 disposition of royalties, whether in cash or in-kind, and any other
6-15 matter related to the lease, sale, production of, or exploration
6-16 for oil, gas, or any other mineral or resource, including
6-17 geothermal, wind, and solar energy on state or university lands.
6-18 The information so exchanged and consultations and related
6-19 communications shall be or shall remain confidential and shall be
6-20 privileged from discovery in the same manner and to the same extent
6-21 as if the persons consulted, which includes counsel, were members
6-22 of the same agency. Sections 52.134 and 52.140, Natural Resources
6-23 Code, shall not prohibit the consultations or exchange of
6-24 information provided for by this section; however each agency
6-25 receiving such confidential information is required to keep the
6-26 information confidential under Sections 52.134 and 52.140, Natural
6-27 Resources Code, as appropriate, and to take all reasonable actions
7-1 necessary to protect the confidential and privileged nature of the
7-2 information.
7-3 Sec. 66.66. LEASE SALES. (a) Oil and gas leases shall be
7-4 offered at public auction or by sealed bid, or through a
7-5 combination of public auction and sealed bid, as the board elects.
7-6 Contracts for development may be awarded in the same manner.
7-7 (b) The board shall publish notice that the board will
7-8 receive bids for oil and gas leases or contracts for development of
7-9 oil and gas in two or more daily newspapers in this state and in
7-10 other publications as the board may choose.
7-11 (c) The notice shall be published at least 30 days before
7-12 the date the bids will be opened.
7-13 (d) The notice shall state that land is to be offered for
7-14 lease or a contract for development and that a person may obtain a
7-15 publication from The University of Texas System offices that
7-16 describes the land offered and the minimum terms.
7-17 (e) The board of regents may solicit and include advertising
7-18 in the publication describing a lease sale. Fees paid for
7-19 advertising shall be deposited into the special fee account
7-20 established by Subsection (g) of this section, and are available
7-21 for the same purposes as described in that subsection.
7-22 (f) The board may withdraw any lands advertised for lease
7-23 before the hour set for receiving bids.
7-24 (g) Each bid is subject to the payment of a special fee
7-25 equal to one and one-half percent of the total bonus whether
7-26 stipulated or bid, which special payment shall constitute a special
7-27 fund from which the board of regents shall defray the expenses of
8-1 the sale, including the payment of the general operating expenses
8-2 for geology, engineering, field inspection, and auditing oil and
8-3 gas production of university lands, including salaries and
8-4 traveling expenses of persons employed by the board of regents for
8-5 those purposes.
8-6 (h) The board of regents may direct the comptroller of The
8-7 University of Texas System to transmit to the state comptroller for
8-8 deposit to the credit of the permanent university fund unexpended
8-9 balances remaining in the special fee account after reserving a
8-10 sufficient amount in it for the payment of current expenses as set
8-11 out in Subsection (g) of this section.
8-12 Sec. 66.67. LEASE TERMS. (a) The oil and gas lease for
8-13 each tract shall be offered for a bonus to be determined by high
8-14 bid in addition to the stipulated royalty or for a stipulated bonus
8-15 and a royalty to be determined by high bid. Each tract shall be
8-16 offered separately and the minimum bonus or royalty, depending on
8-17 the basis for the bid, and the length of the primary term for each
8-18 tract shall be set out in the official publication describing the
8-19 tracts and terms.
8-20 (b) Except as otherwise provided by law, the minimum royalty
8-21 rate shall be one-eighth of the oil or gas produced or the value
8-22 thereof.
8-23 (c) The primary term of a lease shall not exceed ten years.
8-24 (d) Each lease shall be subject to the provisions of this
8-25 subchapter and rules promulgated by the board.
8-26 (e) The successful bidder shall pay to the board of regents
8-27 on the day the bid is accepted the full amount of bonus, whether
9-1 stipulated or bid, and the special fee in the form of payment
9-2 specified by the board.
9-3 Sec. 66.68. MARGINAL PROPERTY ROYALTY RATES. (a) In this
9-4 section:
9-5 (1) "Barrel of oil equivalent" means 6,000 cubic feet
9-6 of natural gas per 42-gallon barrel of crude oil or a volume of gas
9-7 with a minimum heating value of 6,000,000 British thermal units
9-8 (6,000 Mbtu), whichever is greater.
9-9 (2) "Lease" or "leases" means an oil and gas lease
9-10 issued or approved by the board that is valid and in force on or
9-11 after the effective date of this section.
9-12 (3) "Qualifying property" means land subject to a
9-13 lease issued under this subchapter.
9-14 (4) "Qualifying reservoir" means a reservoir having an
9-15 average daily per well production equal to or less than 15 barrels
9-16 of oil equivalent during a period established by the board by rule
9-17 and underlying either:
9-18 (A) a qualifying property; or
9-19 (B) a pooled unit including a qualifying
9-20 property.
9-21 (5) "Reservoir" has the same meaning as "common
9-22 reservoir" as defined by Section 86.002, Natural Resources Code.
9-23 (b) The board may provide by rule that the royalty rate for
9-24 qualifying reservoirs may be reduced to not less than one-sixteenth
9-25 (6.25 percent). In determining whether to grant a reduction in the
9-26 royalty rate, the board may consider whether the qualifying
9-27 property is being operated efficiently, including whether the
10-1 property is pooled or has reasonable potential for the application
10-2 of secondary or tertiary recovery techniques.
10-3 (c) If a qualifying reservoir for which royalty rate
10-4 reduction is sought under this section is included in a unit
10-5 subject to the authority of the board, the board may modify the
10-6 terms and conditions of the unit as a condition of approving a
10-7 reduction in the royalty rate.
10-8 Sec. 66.69. AWARD OF LEASE. (a) Except as otherwise
10-9 provided in this subchapter, the board shall award a lease for each
10-10 tract to the person offering the highest bid that includes the
10-11 terms adopted by the board and consistent with this subchapter.
10-12 (b) The board may reject all bids for one or more tracts.
10-13 (c) The commissioner shall execute a lease awarded by the
10-14 board in conformance with this subchapter.
10-15 Sec. 66.70. ADDITIONAL LEASE PROVISIONS. An oil and gas
10-16 lease issued under this subchapter shall include the provisions
10-17 required by this subchapter and additional provisions not
10-18 inconsistent herewith that the board may adopt to preserve the
10-19 interests of the state. Upon submission of an application by all
10-20 lessees under the lease in the form required by the board and
10-21 payment of any applicable fee set by the board, the board may amend
10-22 a lease that does not include provisions required by Sections
10-23 66.71, 66.72, and 66.73 of this subchapter to include those
10-24 provisions in the form adopted by the board at the time the lease
10-25 is amended.
10-26 Sec. 66.71. LEASE PROVISIONS. An oil and gas lease issued
10-27 under this subchapter shall provide that:
11-1 (1) If, on the anniversary date of the lease, oil or
11-2 gas is not being produced in paying quantities from the leased
11-3 premises, or drilling operations are not being conducted thereon,
11-4 the lease shall terminate, unless lessee shall pay timely in the
11-5 manner provided in the lease the amount of delay rental stated in
11-6 the lease.
11-7 (2) If oil or gas is being produced in paying
11-8 quantities from the leased premises at the end of the primary term,
11-9 the lease shall not terminate but shall continue in force and
11-10 effect as long as oil or gas is being so produced.
11-11 (3) Royalty may be taken in-kind at any time and from
11-12 time to time at the discretion of the board in the manner provided
11-13 in this subchapter.
11-14 Sec. 66.72. CESSATION OF PRODUCTION; DRILLING AND REWORKING.
11-15 An oil and gas lease issued under this subchapter shall provide
11-16 that the term of the lease may be extended by drilling and
11-17 reworking operations in the event of the cessation of production,
11-18 upon terms as the board may adopt.
11-19 Sec. 66.73. SHUT-IN ROYALTY. An oil and gas lease issued
11-20 under this subchapter shall provide for the extension of the lease
11-21 by the payment of shut-in royalties upon terms as the board may
11-22 adopt.
11-23 Sec. 66.74. LEASE EXTENSION OR SUSPENSION. (a) At the
11-24 expiration of the primary term of a lease, if production of oil or
11-25 gas has not been obtained on the leased premises, but drilling
11-26 operations are being conducted in good faith and a good and
11-27 workmanlike manner, the lessee may apply in writing to extend the
12-1 lease for a period of 30 days. The application shall be filed with
12-2 the board of regents on or before the expiration of the primary
12-3 term.
12-4 (b) The applicant shall submit with the application a fee
12-5 in an amount set by the board of not less than $7.50 for each acre
12-6 in the lease requested to be extended.
12-7 (c) If he determines that the conditions of this section
12-8 have been met, the commissioner, or a designee appointed by the
12-9 commissioner, shall execute a written extension as provided by this
12-10 section.
12-11 (d) As long as drilling operations are being conducted in
12-12 good faith and a good and workmanlike manner, additional extensions
12-13 of 30 days each may be granted up to an aggregate of 360 days. The
12-14 lessee must submit a written application and payment on or before
12-15 the last day of the extended primary term. The payment for each
12-16 additional 30-day extension shall be in an amount set by the board
12-17 of not less than $7.50 for each acre in the lease.
12-18 (e) The board may elect to suspend a lease and all of the
12-19 conditions and covenants contained in the lease if there is a
12-20 legitimate dispute regarding the validity of the lease. The board
12-21 may rescind the suspension at any time, in which event the lease
12-22 shall resume as of the date the suspension is rescinded and shall
12-23 continue for the remainder of the period specified in the lease as
12-24 the primary term, or, if the primary term ended prior the
12-25 suspension, the lessee shall have 60 days to commence production or
12-26 drilling and reworking operations.
12-27 Sec. 66.75. PROTECTION FROM DRAINAGE; COMPENSATORY
13-1 ROYALTIES. (a) The lessee shall protect the leased premises from
13-2 drainage. The lease may contain express terms regarding drainage
13-3 as the board may adopt.
13-4 (b) Subject to the provisions of this section, the
13-5 commissioner may execute agreements that provide for the payment of
13-6 compensatory royalty in lieu of drilling offset wells that may be
13-7 required to protect the leased premises from drainage from a well
13-8 or wells located on non-university lands, or university lands
13-9 leased at a lesser royalty, situated within 1,000 feet of or
13-10 draining the leased premises.
13-11 (c) Agreements providing for the payment of compensatory
13-12 royalty must be approved by the board.
13-13 (d) Agreements providing for the payment of compensatory
13-14 royalty must be found by the commissioner and the board to be in
13-15 the best interest of the state and necessary to prevent economic
13-16 waste.
13-17 (e) Nothing in an agreement for the payment of compensatory
13-18 royalty shall relieve the lessee of the obligation of reasonable
13-19 development or of the obligation to drill offset wells, obtain
13-20 suitable regulatory relief, propose appropriate pooling or
13-21 unitization arrangements, or conduct other activities to protect
13-22 the leased premises from drainage as to other producing horizons.
13-23 (f) An agreement for the payment of compensatory royalty
13-24 with respect to the interest of the state shall remain in force and
13-25 effect as long as oil and gas, or either of them, is produced from
13-26 a well located on university or non-university acreage and draining
13-27 the leased premises.
14-1 (g) An agreement for the payment of compensatory royalty
14-2 shall provide that compensatory royalty be paid at the royalty rate
14-3 provided in the lease and shall provide that compensatory royalty
14-4 be paid on the market value of production from the well located on
14-5 non-university lands or university lands leased at a lesser royalty
14-6 situated within 1,000 feet of or draining the leased premises.
14-7 Sec. 66.76. ASSIGNMENT; RELINQUISHMENT. (a) Rights
14-8 acquired in a lease or contract for development issued under this
14-9 subchapter may be assigned; provided, however, for an assignment to
14-10 be valid and effective, the assignment must be filed in the county
14-11 or counties in which the leased premises are situated and a legible
14-12 copy of the recorded assignment must be filed with the board of
14-13 regents within the time set by the board, accompanied by a filing
14-14 fee and any applicable penalty for late filing set by the board for
14-15 each lease assigned and a summary in the form adopted by the board
14-16 of regents.
14-17 (b) Rights to a lease or to an assigned portion thereof may
14-18 be relinquished at any time by having an instrument of
14-19 relinquishment or release recorded in the county or counties in
14-20 which the area relinquished is situated and a legible copy of the
14-21 recorded instrument filed with the board of regents, accompanied by
14-22 a filing fee set by the board.
14-23 (c) An assignment or relinquishment of a lease or a portion
14-24 thereof or an interest in a lease shall not relieve the lessee of
14-25 accrued obligations, including the payment of royalty, penalty, or
14-26 interest, and the lessee shall remain liable therefor. All
14-27 successors in interest, whether acquiring a lease or an interest in
15-1 a lease by assignment or otherwise, shall take the lease or
15-2 interest subject to all outstanding obligations and shall be liable
15-3 for those obligations. All holders of undivided working interests,
15-4 or an interest imposing an obligation to pay expenses of the lease,
15-5 in a lease shall be jointly and severally liable for all
15-6 obligations accruing under the lease.
15-7 (d) In the enforcement of lease obligations, the board and
15-8 the board of regents shall be entitled to rely upon the state of
15-9 title reflected by the records of the board of regents.
15-10 Sec. 66.77. ROYALTY PAYMENTS AND REPORTS. (a) Royalty as
15-11 stipulated in the lease and all other amounts due under this
15-12 subchapter shall be paid to the board of regents at Austin, Travis
15-13 County, Texas. The lessee of record in the records of the board of
15-14 regents shall be responsible for making or causing to be made all
15-15 payments required by this subchapter at the required times and in
15-16 the form and manner determined by the board of regents or otherwise
15-17 required by law.
15-18 (b) The board shall set by rule the date for making royalty
15-19 payments and for filing any reports, documents or other records
15-20 required to be filed by this section. The date set by the board
15-21 must be on or after the fifth day of the second month succeeding
15-22 the month of production of oil, and on or after the l5th day of the
15-23 second month succeeding the month of production of gas.
15-24 (c) A royalty payment is timely made if the payment is
15-25 deposited in a postpaid, properly addressed wrapper, with a post
15-26 office or official depository under the care and custody of, and
15-27 postmarked by, the United States Postal Service before the
16-1 applicable due date.
16-2 (d) The lessee shall provide to the board of regents with
16-3 each royalty payment:
16-4 (1) an affidavit of the owner, manager, or other
16-5 authorized agent completed in the form and manner required by the
16-6 board of regents and showing the gross amount and disposition of
16-7 all oil and gas produced and the market value of the oil and gas,
16-8 the number assigned by the Texas Railroad Commission, and other
16-9 information as may be required by the board of regents;
16-10 (2) a purchase statement or other document showing the
16-11 price at which the oil and gas was sold;
16-12 (3) a check stub, schedule, summary, or other
16-13 remittance advice showing by the assigned lease number the amount
16-14 of royalty being paid on each lease; and
16-15 (4) other reports or records that the board of regents
16-16 may require to identify the well and lease and verify the gross
16-17 production, disposition, and market value.
16-18 (e) The board of regents may require the lessee and a person
16-19 with whom the lessee deals, including an affiliate, in connection
16-20 with the production, transportation, marketing, treatment,
16-21 processing, or sale of the oil and gas, to provide reports or other
16-22 information as the board of regents may consider necessary to
16-23 determine that royalty has been correctly paid.
16-24 (f) The board of regents may implement such practices and
16-25 procedures with regard to accounting for royalty payments as it may
16-26 determine to be in the best interest of the state.
16-27 Sec. 66.78. INTEREST AND PENALTIES. (a) If royalty is not
17-1 paid when due, a penalty of one percent shall be added to the
17-2 unpaid amount due. If the royalty is not paid within seven days
17-3 after the due date, a penalty of an additional four percent of the
17-4 royalty due is imposed. If the royalty is not paid within 30 days
17-5 after the due date, a penalty of an additional five percent is
17-6 imposed. The minimum penalty under this subsection is $25, or the
17-7 minimum penalty in excess thereof set by the board. The board
17-8 shall not add a penalty under this subsection in cases of title
17-9 dispute as to the state's portion of the royalty or to that portion
17-10 of the royalty in dispute as to fair market value.
17-11 (b) Interest shall accrue on delinquent royalties beginning
17-12 on the 61st day after the due date. The annual interest rate on
17-13 delinquent royalties is 12 percent. Interest accrued under this
17-14 subsection shall be in addition to any delinquency penalty due
17-15 under this section.
17-16 (c) The board of regents shall add a penalty of 25 percent
17-17 to delinquent sums due under this subchapter if the board
17-18 determines that the delinquency is due to fraud or an intent to
17-19 evade the provisions of this subchapter on the part of the lessee
17-20 or his agents, employees, or assignees.
17-21 (d) If a report, affidavit, supporting document, or other
17-22 instrument required to be filed under Section 66.77 or Section
17-23 66.80 of this subchapter is not filed when due, a penalty accrues
17-24 in the amount set by the board but not less than $10 per document
17-25 for each 30-day period of delinquency or fractional part thereof.
17-26 (e) Collection of penalty and interest charges under this
17-27 section are in addition to any rights, including forfeiture, that
18-1 the board or the board of regents may exercise for failure to pay a
18-2 royalty or to submit a report or other instrument when due.
18-3 (f) The board may provide by rule procedures and standards
18-4 for reduction of interest charged or penalties assessed under this
18-5 subchapter or other interest or penalties assessed relating to
18-6 unpaid or delinquent royalties or other amounts due.
18-7 Sec. 66.79. PAYMENT OF ROYALTY IN KIND. (a) Oil or gas
18-8 royalty due under a lease on university lands shall be paid in kind
18-9 at the discretion of the board.
18-10 (b) The option to take royalty in kind or to take cash
18-11 royalties may be exercised by the board at any time or from time to
18-12 time on not less than 60 days' notice to the lessee.
18-13 (c) The board shall enter into contracts or other
18-14 instruments or agreements to dispose of the portion of the royalty
18-15 taken in kind, which may include contracts for sale,
18-16 transportation, or storage of the oil or gas. The commissioner
18-17 shall execute contracts approved by the board under this section
18-18 that are consistent with applicable law.
18-19 (d) The board of regents may enter into insurance contracts
18-20 or other agreements to secure or guarantee payment of contracts or
18-21 other instruments or agreements to dispose of the portion of the
18-22 royalty taken in kind, including contracts for sale,
18-23 transportation, and storage.
18-24 (e) Delivery of the correct amount of oil or gas by the
18-25 lessee shall satisfy lessee's obligation for payment of the royalty
18-26 due under lease. This section shall not be construed to surrender
18-27 or in any way affect the right of the board of regents under
19-1 existing or future leases to receive royalty on the basis of market
19-2 value of production not taken in kind.
19-3 Sec. 66.80. RECORDS. (a) The lessee shall provide to the
19-4 board of regents a copy of every contract for the sale or
19-5 processing of gas and any subsequent agreement and amendment
19-6 thereto, together with a summary in the form adopted by the board
19-7 of regents, within 30 days after the contract, agreement, or
19-8 amendment is made.
19-9 (b) The books and accounts, receipts and discharges of all
19-10 wells, tanks, pools, meters, pipelines, and all contracts and other
19-11 records pertaining directly or indirectly to the production,
19-12 transportation, sale, treatment, processing, or marketing of oil
19-13 and gas produced from University lands, or relevant to establishing
19-14 the volume or value of the production, whether the records are held
19-15 by or are in the possession of the lessee or a third party dealing
19-16 with the lessee, shall at all times be subject to inspection and
19-17 copying by the commissioner, the board, the board of regents, the
19-18 attorney general, the comptroller, the governor, or the
19-19 representative of any of them. The board or the board of regents
19-20 may, if necessary, compel the production of these records by
19-21 subpoena enforceable throughout the state.
19-22 (c) Upon request of the board or board of regents, the
19-23 lessee shall provide accurate reserve information.
19-24 Sec. 66.81. AUDIT INFORMATION CONFIDENTIAL. (a) All
19-25 documents and information secured, derived, or obtained during the
19-26 course of an inspection or examination of books, accounts, reports,
19-27 or other records of the lessee or a third party, as provided by
20-1 this subchapter, and contracts, agreements or amendments provided
20-2 to the board of regents under Section 66.80(a) of this subchapter,
20-3 are confidential and may not be used publicly, opened for public
20-4 inspection, or disclosed, except for information set forth in a
20-5 lien filed under this chapter and except as permitted under
20-6 Subsections (c) and (d) of this section. This section shall not
20-7 apply to records or information provided by the lessee under
20-8 Section 66.77 of this subchapter.
20-9 (b) All documents and information made confidential in this
20-10 section shall not be subject to subpoena directed to the board, the
20-11 board of regents, the commissioner, the attorney general, or the
20-12 governor except in a judicial or administrative proceeding in which
20-13 the state and a person with an equitable or legal interest in the
20-14 lease or land to which the information relates are parties.
20-15 (c) The board, the board of regents, or the attorney
20-16 general, may use documents and information made confidential by the
20-17 provisions of this section and contracts made confidential by this
20-18 subchapter to enforce the provisions of this subchapter or may
20-19 authorize their use in judicial or administrative proceedings in
20-20 which this state is a party or may authorize their examination by
20-21 employees, agents, or contractors of the board of regents or the
20-22 state auditor for audit purposes.
20-23 (d) This section does not prohibit:
20-24 (1) the delivery of documents and information made
20-25 confidential by this section to the lessee or its successor,
20-26 receiver, executor, guarantor, administrator, assignee, or
20-27 representative;
21-1 (2) the publication of statistics classified to
21-2 prevent the identification of a particular audit or items in a
21-3 particular audit;
21-4 (3) the release of documents or information otherwise
21-5 available to the public;
21-6 (4) the release of documents or information concerning
21-7 the amount of royalty assessed as a result of an examination
21-8 conducted under this subchapter or the release of other information
21-9 which would have been properly included in reports required under
21-10 Section 66.77 of this subchapter;
21-11 (5) sharing of documents or information among state
21-12 agencies pursuant to Section 66.65 of this subchapter. Shared
21-13 documents or information will remain confidential under this
21-14 section; or
21-15 (6) the release of documents or information authorized
21-16 by the lessee.
21-17 Sec. 66.82. FORFEITURE; OTHER REMEDIES. (a) If a lessee
21-18 fails or refuses to perform a material requirement of this
21-19 subchapter or the lease, the board may, after notice to the lessee
21-20 and an opportunity to be heard, declare a forfeiture of the lease
21-21 or an interest in the lease. Material requirements include, but
21-22 are not limited to:
21-23 (1) failure or refusal to pay a sum due, including
21-24 penalty and interest, within 30 days after the sum becomes due;
21-25 (2) failure or refusal to tender oil or gas for
21-26 delivery as in-kind royalty;
21-27 (3) making a false report concerning exploration,
22-1 production, or royalty;
22-2 (4) failure or refusal to file an assignment as
22-3 required by this subchapter;
22-4 (5) failure or refusal, after demand, to file or make
22-5 available for inspection and copying a record or document required
22-6 to be filed or made available for inspection or copying under this
22-7 subchapter or rules promulgated thereunder;
22-8 (6) failure or refusal, after demand, to protect the
22-9 leased premises from drainage; or
22-10 (7) the breach of an obligation under the lease or
22-11 this subchapter.
22-12 (b) A declaration of forfeiture may be appealed to the
22-13 district court of Travis County. The standard for review shall be
22-14 substantial evidence and not de novo.
22-15 (c) The board, in its sole discretion, may authorize
22-16 reinstatement of a forfeited lease on terms the board may determine
22-17 at the time of the declaration of forfeiture.
22-18 (d) Forfeiture is not the exclusive remedy. The attorney
22-19 general, at the request of the board of regents, may bring suit for
22-20 damages or specific performance, or both, or other remedy, at law
22-21 or in equity.
22-22 Sec. 66.83. LIEN. The board of regents shall have a first
22-23 lien on all oil and gas produced from the area covered by the lease
22-24 to secure payment of all unpaid royalty and other sums of money
22-25 that may become due under the lease or this subchapter. By
22-26 acceptance of the lease, the lessee grants the board of regents an
22-27 express contractual lien on and security interest in all leased
23-1 minerals in and extracted from the area covered by the lease, all
23-2 proceeds which may accrue to the lessee from the sale of the
23-3 minerals, whether the proceeds are held by the lessee or another
23-4 party, and all fixtures on and improvements to the area covered by
23-5 the lease used in connection with the production or processing of
23-6 the leased minerals to secure the payment of royalties and other
23-7 amounts due or to become due under the lease or this subchapter and
23-8 to secure payment of damages or loss that the state may suffer by
23-9 reason of the lessee's breach of a covenant or condition of the
23-10 lease, whether express or implied. The lien and security interest
23-11 may be foreclosed with or without court proceedings in the manner
23-12 provided in the Title 1, Chapter 9 of the Texas Business and
23-13 Commerce Code. The board of regents may require the lessee to
23-14 execute and record instruments reasonably necessary to acknowledge,
23-15 attach, or perfect the lien.
23-16 Sec. 66.84. PAYMENTS; DISPOSITION. Payments under this
23-17 subchapter shall be made to the board of regents which shall:
23-18 (1) transmit to the state comptroller for deposit to
23-19 the credit of the permanent university fund all bonus, rental, and
23-20 royalty payments;
23-21 (2) transmit to the state comptroller for deposit to
23-22 the credit of the available university fund all filing, assignment,
23-23 and relinquishment fees, and all other payments except those
23-24 described in subdivision (3) of this section; and
23-25 (3) retain the one and one-half percent special fee
23-26 provided for by this subchapter for disbursement by the comptroller
23-27 of The University of Texas System for the purposes authorized by
24-1 this subchapter.
24-2 [Sec. 66.61. DEFINITION. As used in this subchapter,
24-3 "board" means the Board for Lease of University Lands.]
24-4 [Sec. 66.62. BOARD FOR LEASE. (a) The Board for Lease of
24-5 University Lands is composed of the commissioner of the general
24-6 land office, two members of the board of regents of The University
24-7 of Texas System selected by the board of regents of that system,
24-8 and one member of the board of regents of The Texas A & M
24-9 University System selected by the board of regents of that system.
24-10 In the event that a regent member of the Board for Lease of
24-11 University Lands is unable to attend meeting of that board, the
24-12 chairman of the board of regents of the applicable system shall
24-13 appoint another member of the board of regents as a substitute
24-14 member of the Board for Lease of University Lands to attend the
24-15 meeting that the regular regent member is unable to attend. The
24-16 substitute regent member of the Board for Lease of University Lands
24-17 shall exercise all the powers, duties, and responsibilities of the
24-18 absent regent member during the conduct of the meeting for which he
24-19 was appointed. substitute regent member of the Board for Lease of
24-20 University Lands is subject to the provisions of this subchapter.]
24-21 [(b) A regent member may not be directly or indirectly
24-22 employed by, or be an officer of or an attorney for, an oil or gas
24-23 comp.]
24-24 [(c) An officer, employee, or paid consultant of a trade
24-25 association in the oil and gas industry may not be a member or
24-26 employee of the board, nor may a person who cohabits with or is the
24-27 spouse of an officer, managerial employee, or paid consultant of a
25-1 trade association in the oil and gas industry be a member of the
25-2 board or an employee of the board grade 17 or over, including
25-3 exempt employees, according to the position classification schedule
25-4 under the General Appropriations Act.]
25-5 [(d) A person who is required to register as a lobbyist
25-6 under Chapter 305, Government Code, by virtue of his activities for
25-7 compensation in or on behalf of a profession related to the
25-8 operation of the board, may not serve as a member of the board or
25-9 act as the general counsel to the board.]
25-10 [(e) Members of the board, other than the Commissioner of
25-11 the General Land Office, serve two-year terms expiring February 1
25-12 of each odd-numbered year.]
25-13 [(f) The Commissioner of the General Land Office serves as
25-14 chairman of the board.]
25-15 [(g) Unless the action relates to the final approval of the
25-16 award of a lease on a form approved by a majority of the board in
25-17 accordance with procedures for awarding leases that have been
25-18 previously approved by a majority of the board, a majority of the
25-19 board members has the power to act for the board. If the action
25-20 relates to the final approval of the award of a lease on a form
25-21 approved by a majority of the board in accordance with procedures
25-22 for awarding leases that have been previously approved by a
25-23 majority of the board, two board members present at a meeting have
25-24 the power to act for the board.]
25-25 [(h) The board shall perform the duties prescribed by this
25-26 subchapter and shall keep a public record of all its proceedings.]
25-27 [(i) It is a ground for removal from the board if a member:]
26-1 [(1) does not have at the time of appointment the
26-2 qualifications required by Subsection (a) of this section for
26-3 appointment to the board;]
26-4 [(2) does not maintain during the service on the board
26-5 the qualifications required by Subsection (a) of this section for
26-6 appointment to the board;]
26-7 [(3) violates a prohibition established by Subsection
26-8 (c) or (d) of this section;]
26-9 [(4) is unable to discharge his duties for a
26-10 substantial portion of the term for which he was appointed because
26-11 of illness or disability; or]
26-12 [(5) is absent from more than one-half of the
26-13 regularly scheduled board meetings which the member is eligible to
26-14 attend during each calendar year, except when the absence is
26-15 excused by majority vote of the board.]
26-16 [(j) The validity of an action of the board is not affected
26-17 by the fact that it was taken when a ground for removal of a member
26-18 of the board existed.]
26-19 [(k) If the agency head has knowledge that a potential
26-20 ground for removal exists, he shall notify the chairman of the
26-21 board of such ground. The chairman of the board shall then notify
26-22 the governor that a potential ground for removal exists.]
26-23 [Sec. 66.63. OIL AND GAS SUBJECT TO SALE. The oil and gas
26-24 in the university lands are subject to sale under the regulations,
26-25 at the times, and on the terms provided in this subchapter, and
26-26 under the rules and regulations adopted by the board as authorized
26-27 by this subchapter, not inconsistent with the provisions of this
27-1 subchapter.]
27-2 [Sec. 66.64. PLACING OIL AND GAS ON MARKET; PUBLIC AUCTION;
27-3 ADVERTISEMENT. (a) Whenever there is a demand for the purchase of
27-4 oil and gas in university land that will reasonably insure that the
27-5 oil and gas may be sold advantageously, the board shall place the
27-6 oil and gas in the land on the market in separate tracts of such
27-7 area and extent as the board may determine most suitable for
27-8 profitable marketing; but in no event shall tract in which oil and
27-9 gas is offered for as a unit exceed in area of 6,000 acres.]
27-10 [(b) The sale of the oil and gas shall be made at public
27-11 auction or by sealed bid, or through a combination of public
27-12 auction and sealed bid, as the board elects. The sales shall be
27-13 held in Austin, or other location designated by the board, at
27-14 hour between 10 a.m. and 5 p.m.]
27-15 [(c) The board shall cause an advertisement to be made of
27-16 the sale in two or more newspapers of general circulation in this
27-17 state. The advertisement shall state the method, time, and place
27-18 of sale; the primary term of the lease proposed to be executed
27-19 covering sale; the bonus or royalty to be paid; that lists
27-20 describing the land to be sold may be obtained from the board; and
27-21 other matters that in the judgment of the board are deemed
27-22 advisable. In addition to the foregoing mandatory provisions, the
27-23 board may cause the advertisement to be placed in oil and gas
27-24 journals in and out of the state and to be mailed generally to
27-25 persons it thinks might be interested.]
27-26 [Sec. 66.65. ROYALTY; BONUS; ANNUAL RENTAL; SPECIAL FEE.
27-27 (a) The oil and gas in each tract shall be offered for sale for a
28-1 bonus to be determined by high bid in addition to the stipulated
28-2 royalty or for a stipulated bonus and a royalty to be determined by
28-3 high bid. Each tract shall be offered separately.]
28-4 [(b) Each bid is subject to the royalty or bonus specified
28-5 in the official advertisement preceding the sale, but in no event
28-6 shall the royalty be less than one-eighth of the gross production
28-7 of oil and gas in the land; and shall further be subject to the
28-8 payment of an annual rental after the first year of not less than
28-9 10 cents per acre, payable each year in advance, unless the
28-10 royalties received from the land during the preceding year equal or
28-11 exceed the amount of the annual rental payment.]
28-12 [(c) Each bid is also subject to the payment of a special
28-13 fee equal to one percent of the total bonus whether stipulated or
28-14 bid, which special payment shall constitute a special fund from
28-15 which the Board of Regents of The University of Texas System shall
28-16 defray the expenses of the sale, including the payment for the
28-17 services of the auctioneer crying the sale and the payment of the
28-18 general operating expenses in geologizing, oil field supervision,
28-19 and auditing oil and gas production of university lands, including
28-20 salaries and traveling expenses of persons employed by the board of
28-21 regents for those purposes, and for the purpose of acquiring,
28-22 constructing, and equipping a building in the city of Midland or
28-23 adjacent area to house the administrative staff of the offices of
28-24 University Lands, Geology and Land Agent, and such other related
28-25 agencies necessary for the management and development of university
28-26 lands in West Texas.]
28-27 [(d) The Board of Regents of The University of Texas System
29-1 may also direct the comptroller of The University of Texas System
29-2 to transmit to the state treasurer for deposit to the credit of the
29-3 permanent university fund unexpended balances remaining in the
29-4 special fund after reserving a sufficient amount in it for the
29-5 payment of current expenses as set out in Subsection (c) of this
29-6 section.]
29-7 [(e) The highest successful bidder shall pay to the Board of
29-8 Regents of The University of Texas System on the day the bid is
29-9 accepted the full amount of bonus whether stipulated or bid and the
29-10 special fee.]
29-11 [Sec. 66.66. WITHDRAWAL OF LANDS BEFORE BIDS RECEIVED. The
29-12 board may withdraw lands advertised for lease before the hour set
29-13 for receiving bids.]
29-14 [Sec. 66.67. AWARD OF LEASE. (a) If one of the bidders at
29-15 the sale at public auction has offered a reasonable and proper
29-16 price for tract offered, not less than the price fixed by the
29-17 board, the land advertised may be leased for oil and gas purposes
29-18 under the terms of this subchapter and regulations the board may
29-19 prescribe, not inconsistent with the provisions of this subchapter.
29-20 All bids may be rejected by the board.]
29-21 [(b) If the board determines that a satisfactory bid has
29-22 been offered for the oil and gas, it shall make an award to the
29-23 bidder offering the highest price, and a lease shall be executed by
29-24 the commissioner of the general land office. A duplicate copy of
29-25 the lease shall be filed in the general land office.]
29-26 [Sec. 66.68. PROVISIONS OF LEASE. (a) Each lease executed
29-27 under this subchapter shall contain, and each valid and subsisting
30-1 oil and gas lease previously executed by the commissioner under the
30-2 source statute for this subchapter, on the application of the
30-3 lessee and payment of a sum of money equal to one year's annual
30-4 rental under the lease, shall be amended by written instrument to
30-5 contain, the provisions prescribed by this section.]
30-6 [(b) Each lease shall provide that the primary term of the
30-7 lease, as determined by the board prior to the promulgation of the
30-8 advertisement, shall in no case exceed 10 years.]
30-9 [(c) Each lease shall provide that if oil and/or gas is
30-10 being produced in paying quantities from the leased premises before
30-11 the termination of the primary term, such lease shall not terminate
30-12 but shall continue in force and effect as long as oil and/or gas is
30-13 being so produced.]
30-14 [(d) Each lease shall provide that in the event production
30-15 of oil or gas on the leased premises, after once obtained, shall
30-16 cease for cause within 60 days before the expiration of the primary
30-17 term of such lease or at time or times thereafter, such lease shall
30-18 not terminate, if the lessee commences additional drilling or
30-19 reworking operations within 60 days thereafter, and such lease
30-20 shall remain in full force and effect so long as such operations
30-21 continue in good faith and in workmanlike manner, without
30-22 interruptions, totaling more than 60 days during one such
30-23 operation; and if such drilling or reworking operations result in
30-24 the production of oil and/or gas, such lease shall remain in full
30-25 force and effect so long as oil or gas is produced therefrom in
30-26 paying quantities or payment of shut-in gas well royalty or
30-27 compensatory royalties is made as hereinafter provided in this
31-1 subchapter.]
31-2 [(e) Each lease shall provide that if at the expiration of
31-3 the primary term or at time thereafter there is located on the
31-4 leased premises a well or wells capable of producing oil or gas in
31-5 paying quantities and such oil or gas is not produced for lack of
31-6 suitable production facilities or a suitable market and such lease
31-7 is not being otherwise maintained in force and effect, the lessee
31-8 may pay as royalty $1,200 per annum for each well on the lease
31-9 capable of producing oil or gas in paying quantities, such payment
31-10 to be made to the Board of Regents of The University of Texas
31-11 System at Austin, Texas. Shut-in oil or gas royalty must be paid
31-12 on or before: (1) the expiration of the primary term of the lease,
31-13 (2) 60 days after lessee ceases to produce oil or gas from the
31-14 leased premises, or (3) 60 days after lessee completes a drilling
31-15 and reworking operation in accordance with the lease provisions,
31-16 whichever date is later. If such payment is made, the lease shall
31-17 be considered to be a producing lease and such shut-in royalty
31-18 payment shall extend the term of the lease for a period of one year
31-19 from the end of the primary term or from the first day of the month
31-20 next succeeding the month in which production ceased; and
31-21 thereafter if no suitable production facilities or suitable market
31-22 for such oil or gas exists, the lessee may extend the lease for
31-23 four additional and successive periods of one year each by the
31-24 payment of a like sum of money each year on or before the
31-25 expiration of the extended term. Provided, however, that if, while
31-26 such lease is being maintained in force and effect by payment of
31-27 such shut-in royalty, oil or gas should be sold and delivered in
32-1 paying quantities from a well situated within 1,000 feet of the
32-2 leased premises and completed in the same producing reservoir or in
32-3 case where drainage is occurring, the right to further extend the
32-4 lease by such shut-in royalty payments shall cease, but such lease
32-5 shall remain in force and effect for the remainder of the current
32-6 one year period for which the shut-in royalty has been paid, and
32-7 for four additional and successive periods of one year each by the
32-8 payment by the lessee of compensatory royalty, at the royalty rate
32-9 provided for in such university lease of the value at the well of
32-10 production from the well which is causing the drainage or which is
32-11 completed in the same producing reservoir and within 1,000 feet of
32-12 the leased premises; such compensatory royalty to be paid monthly
32-13 to the Board of Regents of The University of Texas System at
32-14 Austin, Texas, beginning on or before the last day of the month
32-15 next succeeding the month in which such oil or gas is sold and
32-16 delivered from the well situated within 1,000 feet of, or draining,
32-17 the leased premises and completed in the same producing reservoir;
32-18 provided further, that in the event such compensatory royalties
32-19 paid in 12-month period are in a sum less than the annual shut-in
32-20 gas well royalties provided for in this section, the lessee shall
32-21 pay an additional sum equal to the difference within 30 days from
32-22 the end of such 12-month period; provided further, that nothing
32-23 herein shall relieve the lessee of the obligation of reasonable
32-24 development, nor of the obligation to drill offset wells required
32-25 by Section 66.75 of this code.]
32-26 [(f) Each lease shall provide that if, at the expiration of
32-27 the primary term, production of oil and/or gas has not been
33-1 obtained in paying quantities on the leased premises but drilling
33-2 operations are being conducted thereon in good faith and in good
33-3 and workmanlike manner, the lessee may, on or before the expiration
33-4 of the primary term, file with the Board of Regents of The
33-5 University of Texas System a written application for a 30-day
33-6 extension of such lease, such application to be accompanied by a
33-7 payment to the Board of Regents of The University of Texas System
33-8 of $7.50 per acre for each acre in the lease, and the Chairman of
33-9 the Board of Regents of The University of Texas System or a
33-10 designee appointed by the Chairman shall, in writing, extend such
33-11 lease for a 30-day period from and after the expiration of the
33-12 primary term and so long thereafter as oil or gas is produced in
33-13 paying quantities from the premises; provided further, that the
33-14 lessee may, so long as such drilling operations are being conducted
33-15 in good faith, make like application and payment during 30-day
33-16 extended period for an additional extension of 30 days not to
33-17 exceed a combined total of 180 days; provided, however, lessee may,
33-18 so long as such drilling operations are being conducted in good
33-19 faith, make written application to the Board of Regents of The
33-20 University of Texas System on or before the expiration of the
33-21 initial extended period of 180 days for an additional extension of
33-22 180 days, such application to be accompanied by a payment to the
33-23 Board of Regents of The University of Texas System of $50 per acre
33-24 for each acre in the lease, and the Chairman of the Board of
33-25 Regents of The University of Texas System or a designee appointed
33-26 by the Chairman shall, in writing, extend such lease for an
33-27 additional 180-day period from and after the expiration of the
34-1 initial extended period of 180 days, and so long thereafter as oil
34-2 or gas is produced in paying quantities from the premises;
34-3 provided, that no lease shall be extended under the provisions of
34-4 this section for more than a total of 360 days from and after the
34-5 expiration of the primary term unless production in paying
34-6 quantities has been obtained.]
34-7 [(g) Each lease shall contain a provision enabling the
34-8 board, at its election, to require that payment of royalty as
34-9 stipulated in the lease be in kind. Such option may be exercised
34-10 from time to time at the discretion of the board upon not less than
34-11 six months' notice to the lessee. The board shall have all powers
34-12 necessary to negotiate and execute sales contracts or other
34-13 instruments necessary for the disposition of royalty taken in
34-14 kind. Such other reasonable provisions, not inconsistent with this
34-15 subchapter, as will facilitate the efficient and equitable payment
34-16 of royalty in kind may be included in this lease by the board.]
34-17 [Sec. 66.69. LEASE: ADDITIONAL PROVISIONS. Each oil and
34-18 gas lease issued on university lands under this subchapter shall
34-19 include additional provisions and regulations, not inconsistent
34-20 with the provisions of this subchapter, that the board may
34-21 prescribe to preserve the interest of the state and safeguard the
34-22 university funds.]
34-23 [Sec. 66.70. COMPENSATORY ROYALTIES IN LIEU OF OFFSET WELLS.
34-24 (a) Subject to the provisions of this section, the commissioner of
34-25 the general land office may execute agreements on behalf of the
34-26 permanent university fund that provide for the payment by
34-27 university land oil and gas lessees of compensatory royalty in lieu
35-1 of drilling offset wells that may be required to protect a
35-2 university oil and gas lease from drainage from a well or wells
35-3 located on non-university lands or university lands leased at a
35-4 lesser royalty situated within 1,000 feet of or draining the
35-5 university-leased premises.]
35-6 [(b) Agreements providing for the payment of compensatory
35-7 royalty must be approved by the board for lease of university
35-8 lands.]
35-9 [(c) such agreement must be found by the commissioner and
35-10 the board for lease to be in the best interest of the state and
35-11 necessary to prevent economic waste.]
35-12 [(d) Nothing in an agreement shall relieve the lessee of the
35-13 obligation of reasonable development or of the obligation to drill
35-14 offset wells as required by Section 66.75 of this code as to other
35-15 producing horizons.]
35-16 [(e) Beginning on the date fixed in the agreement, the
35-17 lessee shall pay the compensatory royalty monthly to the Board of
35-18 Regents of The University of Texas System in Austin, Texas.]
35-19 [(f) The agreement with respect to the interest of the state
35-20 shall remain in force and effect as long as oil and gas, or either
35-21 of them, is produced from a well located on university or
35-22 non-university acreage and draining the university-leased premises.]
35-23 [(g) The agreement may contain other provisions the
35-24 commissioner and the board for lease deem necessary to protect the
35-25 interests of the permanent university fund.]
35-26 [(h) The agreement shall provide that compensatory royalty
35-27 be paid at the royalty rate provided by the university lease and
36-1 shall provide that compensatory royalty be paid on the market value
36-2 at the well of production from the well located on non-university
36-3 lands or university lands leased at a lesser royalty situated
36-4 within 1,000 feet of or draining the university leased premises.]
36-5 [Sec. 66.71. PRORATED OR REDUCED PRODUCTION CONTRACTS.
36-6 Whenever in the discretion of the board it is to the best interest
36-7 of the university and its permanent fund that production from
36-8 lease for a limited period of time should be prorated or reduced,
36-9 the board may execute the necessary contract or contracts with the
36-10 lessee or lessees and their assignees to effectuate the same and to
36-11 carry out the intention of this subchapter.]
36-12 [Sec. 66.72. EXTENSION OF PRODUCING LEASE. If oil or gas is
36-13 discovered in paying quantities on tract covered by a lease, then
36-14 the lease as to that tract shall remain in force as long as oil and
36-15 gas is produced in paying quantities from the tract, provided that
36-16 the other provisions of this subchapter are complied with by the
36-17 lessee.]
36-18 [Sec. 66.73. ASSIGNMENT; RELINQUISHMENT. (a) rights
36-19 acquired may be assigned; provided, however, in order for an
36-20 assignment to be valid and effective, the assignment must be filed
36-21 in the county or counties in which the area is situated, and a
36-22 legible copy of the recorded assignment must be filed with the
36-23 Board of Regents of The University of Texas System, accompanied by
36-24 a filing fee of $30 for each lease assigned. If the copy of the
36-25 recorded assignment is filed with the Board of Regents of The
36-26 University of Texas System after the 90th day after the date on
36-27 which the assignment is recorded, the copy must be accompanied by
37-1 the filing fee set by the board and by a late fee equal to the
37-2 amount of the filing fee.]
37-3 [(b) rights to lease and to assigned portion thereof may
37-4 be relinquished to the state at time by having an instrument of
37-5 relinquishment recorded in the county or counties in which the area
37-6 relinquished is situated and an original certified copy filed with
37-7 the Board of Regents of The University of Texas System, accompanied
37-8 by $1 for each area relinquished and a filing fee of $5 for each
37-9 lease involved in the relinquishment.]
37-10 [(c) Such an assignment or relinquishment shall not relieve
37-11 the lease owner of past due obligation theretofore accrued thereon.]
37-12 [Sec. 66.74. ROYALTY PAYMENTS; INSPECTION OF RECORDS. (a)
37-13 Royalty as stipulated in the sale shall be paid to the Board of
37-14 Regents of The University of Texas System at Austin, Texas, for the
37-15 benefit of the university permanent fund as provided in this
37-16 section.]
37-17 [(1) The board shall set by rule the date for making
37-18 royalty payments and for filing reports, documents or other
37-19 records required to be filed by this section. However, the board
37-20 may not set the due date for royalty on oil before the fifth day of
37-21 the second month succeeding the month of production, and may not
37-22 set the due date for royalty on gas before the 15th day of the
37-23 second month succeeding the month of production.]
37-24 [(2) Royalty payments shall be accompanied by:]
37-25 [(A) an affidavit of the owner, manager, or
37-26 other authorized agent completed in the form and manner required by
37-27 the Board of Regents of The University of Texas System and showing
38-1 the gross amount and disposition of all oil and gas produced and
38-2 the market value of the oil and gas;]
38-3 [(B) a copy of all documents, records, or
38-4 reports confirming the gross production, disposition, and market
38-5 value, including gas meter readings, pipeline receipts, gas line
38-6 receipts, and other checks or memoranda of amount produced and put
38-7 into pipelines, tanks, pools, and gas lines or gas storage;]
38-8 [(C) a check stub, schedule, summary, or other
38-9 remittance advice showing by the assigned general land office lease
38-10 number the amount of royalty being paid on each lease; and]
38-11 [(D) other reports or records that the Board of
38-12 Regents of The University of Texas System may require to verify the
38-13 gross production, disposition, and market value.]
38-14 [(3) The lessee has the responsibility for paying
38-15 royalties or having royalties paid by the date provided for payment
38-16 in this section.]
38-17 [(4) If royalty is not paid when due, a penalty of one
38-18 percent shall be added to the unpaid amount due. If the royalty is
38-19 not paid within seven days after the due date, a penalty of an
38-20 additional four percent of the royalty due is imposed. If the
38-21 royalty is not paid within 30 days after the due date, a penalty of
38-22 an additional five percent is imposed. The minimum penalty under
38-23 this subdivision is $25. Penalty under this subdivision may not be
38-24 added in cases of title dispute as to the state's portion of the
38-25 royalty or to that portion of the royalty in dispute as to fair
38-26 market value. Except as provided in Subsection (g), Section 66.68
38-27 of this code, royalty payments shall be made in cash, by a bank
39-1 draft drawn on a state or national bank in Texas, by a post-office
39-2 or express money order, or in other form that the law may provide
39-3 for making payments to the State Treasury and are payable to the
39-4 Board of Regents of The University of Texas System.]
39-5 [(5) Copies of contracts for the sale or processing of
39-6 gas and subsequent agreements and amendments to those contracts
39-7 shall be filed with the Board of Regents of The University of Texas
39-8 System within 30 days after the contracts, agreements, or
39-9 amendments are made. These contracts and agreements received by
39-10 the Board of Regents of The University of Texas System shall be
39-11 held in confidence by the Board of Regents of The University of
39-12 Texas System unless otherwise authorized by the lessee.]
39-13 [(6) Interest shall accrue on delinquent royalties
39-14 beginning 60 days after the due date. The annual interest rate on
39-15 delinquent royalties is 12 percent. Interest accrued under this
39-16 subdivision shall be in addition to delinquency penalty accrued
39-17 under Subdivision (4) of this subsection.]
39-18 [(7) The Board of Regents of The University of Texas
39-19 shall add a penalty of 25 percent to delinquent royalties if the
39-20 delinquency is due to fraud or an intent to evade the provisions of
39-21 this subchapter on the part of the lessee or his agents, employees,
39-22 or assignees.]
39-23 [(8) If report, affidavit, supporting document, or
39-24 other instrument required to be filed under this subsection is not
39-25 filed when due, a penalty accrues in the amount of $10 per document
39-26 or a higher amount established by the Board of Regents of The
39-27 University of Texas, for each 30-day period of delinquency or
40-1 fractional part of that period.]
40-2 [(9) Collection of penalty and interest charges under
40-3 this subsection are in addition to rights, including forfeiture,
40-4 that the board may exercise for failure to pay a royalty or to
40-5 submit a report or other instrument when due.]
40-6 [(b) The books and accounts, receipt and discharges of all
40-7 wells, tanks, pools, meters, pipelines, and all contracts and other
40-8 records pertaining to the production, transportation, sale, and
40-9 marketing of the oil and gas shall at all times be subject to
40-10 inspection and examination by the commissioner of the general land
40-11 office, the attorney general, the governor, or member of the board
40-12 of regents, or the representative of either.]
40-13 [(c) For purposes of Section 66.74(a)(3) of this code, a
40-14 royalty payment is timely made if, before the applicable due date,
40-15 the payment is deposited in a postpaid, properly addressed wrapper,
40-16 with a post office or official depository under the care and
40-17 custody of the United States Postal Service.]
40-18 [Sec. 66.75. PROTECTION FROM DRAINAGE. In every case where
40-19 the area in which the oil and gas sold shall be contiguous or
40-20 adjacent to land not university land, the acceptance of the bid and
40-21 the sale made thereby shall constitute an obligation on the lessee
40-22 to adequately protect the land leased from drainage from adjacent
40-23 lands. In cases where the area in which the oil and gas is sold is
40-24 contiguous to other university lands leased or sold, at a lesser
40-25 royalty, the lessee shall likewise protect the state from drainage
40-26 from the land so leased or sold for a lesser royalty. On failure
40-27 to protect the land from drainage, the sale and all rights
41-1 thereunder may be forfeited by the board in the manner provided in
41-2 this subchapter for forfeitures.]
41-3 [Sec. 66.76. FORFEITURE; OTHER REMEDIES; LIEN. (a) If the
41-4 owner of the rights acquired under this subchapter fails or refuses
41-5 to make the payment of sum due thereon, either as rental or
41-6 royalty on the production, within 30 days after same becomes due,
41-7 or if the owner or his authorized agent makes false return or
41-8 false report concerning production, royalty, or drilling, or if the
41-9 owner fails or refuses to drill offset well or wells in good
41-10 faith, as required by his lease, or if the owner or his agent
41-11 refuses the proper authority access to the records and other data
41-12 pertaining to the operations under this subchapter, or if the owner
41-13 or his authorized agent fails or refuses to give correct
41-14 information to the proper authorities, or fails or refuses to
41-15 furnish the log of well within 30 days after production is found
41-16 in paying quantities, or if of the material terms of the lease are
41-17 violated, the lease is subject to forfeiture by the board by an
41-18 order entered upon the minutes of the board reciting the facts
41-19 constituting the default and declaring the forfeiture.]
41-20 [(b) The board may have suit instituted for forfeiture
41-21 through the attorney general.]
41-22 [(c) On proper showing by the forfeiting owner, within 30
41-23 days after the declaration of forfeiture, the lease may, at the
41-24 discretion of the board and on such terms as it may prescribe, be
41-25 reinstated.]
41-26 [(d) In case of violation by the owner of the lease
41-27 contract, the remedy of the state by forfeiture is not the
42-1 exclusive remedy, but suit for damages or specific performance, or
42-2 both, may be instituted.]
42-3 [(e) The state shall have a first lien upon all oil and gas
42-4 produced upon the leased area and upon all rigs, tanks, pipeline,
42-5 telephone lines, and machinery and appliances used in the
42-6 production and handling of oil and gas produced thereon, to secure
42-7 amount due from the owner of the lease.]
42-8 [Sec. 66.77. FILING OF RECORDS. All surveys, files,
42-9 records, copies of lease contracts, and all other records
42-10 pertaining to the leases hereby authorized, shall be filed in the
42-11 general land office and constitute archives thereof and copies of
42-12 such documents shall also be filed with the Board of Regents of The
42-13 University of Texas System. All existing documents now
42-14 on file in the general land office shall be transferred by copies
42-15 to the Board of Regents of The University of Texas System.]
42-16 [Sec. 66.78. PAYMENTS; DISPOSITION. Payments under this
42-17 subchapter shall be made to the Board of Regents of The University
42-18 of Texas System at Austin, Texas, who shall:]
42-19 [(1) transmit to the state treasurer for deposit to
42-20 the credit of the permanent university fund all bonus, rental, and
42-21 royalty payments;]
42-22 [(2) transmit to the state treasurer for deposit to
42-23 the credit of the available university fund all filing, assignment,
42-24 and relinquishment fees, and all other payments except those
42-25 described in Subdivision (3) of this section; and]
42-26 [(3) retain the one percent fee payment prescribed by
42-27 Section 66.65(c) of this code, for disbursement by the comptroller
43-1 of The University of Texas System for the purposes authorized by
43-2 Section 66.65(c) of this code.]
43-3 [Sec. 66.79. FORMS; CONTRACTS; REGULATIONS. The board shall
43-4 adopt forms and contracts and shall promulgate rules and
43-5 regulations, not inconsistent with the terms of this subchapter,
43-6 that in its judgment will best effectuate the purpose of this
43-7 subchapter and will best protect the university, its lands, and the
43-8 income from the lands.]
43-9 [Sec. 66.80. EXPENSES OF EXECUTING THIS SUBCHAPTER. The
43-10 expenses of executing the provisions of this subchapter shall be
43-11 paid monthly by warrants drawn by the comptroller on the state
43-12 treasury.]
43-13 [Sec. 66.81. FINANCIAL REPORT REQUIRED. The board shall
43-14 file annually with the governor and the presiding officer of each
43-15 house of the legislature a complete and detailed written report
43-16 accounting for all funds received and disbursed by the board during
43-17 the preceding year. The form of the annual report shall be that
43-18 provided in the General Appropriations Act. The report shall be
43-19 distributed with the report required by Section 66.05 of this code.]
43-20 [Sec. 66.82. AUDIT. The financial transactions of the board
43-21 are subject to audit by the state auditor in accordance with
43-22 Chapter 321, Government Code.]
43-23 [Sec. 66.83. POLICIES ON PUBLIC HEARINGS. The board shall
43-24 develop and implement policies which will provide the public with a
43-25 reasonable opportunity to appear before the board and to speak on
43-26 issue under the jurisdiction of the board.]
43-27 [Sec. 66.84. MARGINAL PROPERTY ROYALTY RATES. (a) In this
44-1 section:]
44-2 [(1) "Barrel of oil equivalent" means 6,000 cubic feet
44-3 of natural gas per 42-gallon barrel of crude oil or a volume of gas
44-4 with a minimum heating value of 6,000,000 British thermal units
44-5 (6,000 Mbtu), whichever is greater.]
44-6 [(2) "Lease" or "leases" means an oil and gas lease
44-7 issued or approved by the state that is valid and in force on or
44-8 after the effective date of this section.]
44-9 [(3) "Qualifying property" means land subject to a
44-10 lease issued under this subchapter.]
44-11 [(4) "Qualifying reservoir" means a reservoir having
44-12 an average daily per well production equal to or less than 15
44-13 barrels of oil equivalent during a period established by the board
44-14 by rule and underlying either:]
44-15 [(A) a qualifying property; or]
44-16 [(B) a pooled unit including a qualifying
44-17 property.]
44-18 [(5) "Reservoir" has the same meaning as "common
44-19 reservoir" as defined in Section 86.002, Natural Resources Code.]
44-20 [(b) The board may provide by rule that the royalty rate for
44-21 qualifying reservoirs may be reduced to not less than one-sixteenth
44-22 (6.25 percent). In determining whether to grant a reduction in the
44-23 royalty rate, the board may consider whether the qualifying
44-24 property is being operated efficiently, including whether the
44-25 property is pooled or has reasonable potential for the application
44-26 of secondary or tertiary recovery techniques.]
44-27 [(c) If a qualifying reservoir for which royalty rate
45-1 reduction is sought under this section is included in a unit
45-2 subject to the authority of the board, the board may modify the
45-3 terms and conditions of the unit as a condition of approving a
45-4 reduction in the royalty rate.]
45-5 SECTION 2. Sections 52.291, 52.292, 52.293, 52.294 and
45-6 52.295, Natural Resources Code, are repealed.
45-7 SECTION 3. The changes in law made by this Act in Sections
45-8 66.66, 66.67, 66.69, 66.71, 66.72, 66.73, and 66.76, Education
45-9 Code, apply only to leases awarded on and after January 1, 1998,
45-10 except as provided by Section 66.70. Leases awarded prior to that
45-11 date shall be governed by the law in effect when the lease was
45-12 issued and the former law is continued in effect for this purpose
45-13 only.
45-14 SECTION 4. This Act takes effect January 1, 1998.
45-15 SECTION 5. EMERGENCY. The importance of this legislation
45-16 and the crowded condition of the calendars in both houses create an
45-17 emergency and an imperative public necessity that the
45-18 constitutional rule requiring bills to be read on three several
45-19 days in each house be suspended, and this rule is hereby suspended.