1-1 By: Brown S.B. No. 1354
1-2 (In the Senate - Filed March 13, 1997; March 18, 1997, read
1-3 first time and referred to Committee on Natural Resources;
1-4 April 14, 1997, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 9, Nays 0; April 14, 1997,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1354 By: Brown
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the Board for Lease of University Lands, the leasing,
1-11 management, and administration of certain public lands, and related
1-12 fees and penalties.
1-13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-14 SECTION 1. Subchapter D, Chapter 66, Education Code, is
1-15 amended to read as follows:
1-16 SUBCHAPTER D. BOARD FOR LEASE OF UNIVERSITY LANDS
1-17 Sec. 66.61. DEFINITIONS. In this subchapter:
1-18 (1) "Affiliate" includes the parent company or a
1-19 subsidiary company, a corporation having common ownership with
1-20 another of 10 percent or greater, a partner or joint venturer with
1-21 a company with respect to a business subject to this subchapter, or
1-22 a relative within the second degree of consanguinity or affinity.
1-23 Affiliates of a common entity are also affiliates of each other.
1-24 (2) "Board" means the Board for Lease of University
1-25 Lands.
1-26 (3) "Board of regents" means the board of regents of
1-27 The University of Texas System, except where otherwise specified.
1-28 (4) "Commissioner" means the Commissioner of the
1-29 General Land Office.
1-30 (5) "Lessee" means a person who holds a leasehold
1-31 interest, legal or equitable, under a lease issued pursuant to this
1-32 subchapter, or the operator of oil and gas exploration, production,
1-33 and marketing activities on the leased premises, whether or not the
1-34 operator holds an interest in the lease.
1-35 (6) "Oil and gas" means crude oil, natural gas, and
1-36 all substances, including other hydrocarbons, produced in
1-37 association with crude oil and natural gas.
1-38 (7) "University lands" means land dedicated to the
1-39 permanent university fund.
1-40 (8) "Well" means an oil or gas well that has been
1-41 assigned a well number by the state agency having regulatory
1-42 jurisdiction over the production of oil and gas. A single wellbore
1-43 may contain more than one well.
1-44 Sec. 66.62. BOARD FOR LEASE OF UNIVERSITY LANDS. (a) The
1-45 board is composed of the commissioner, two members of the board of
1-46 regents selected by that board, and one member of the board of
1-47 regents of The Texas A&M University System selected by that board.
1-48 If a regent member is unable to attend a meeting of the board, the
1-49 presiding officer of the board of regents of the applicable system
1-50 may appoint another member of that board of regents as a substitute
1-51 member of the board to attend the meeting that the regular regent
1-52 member is unable to attend. The substitute regent member shall
1-53 exercise all the powers, duties, and responsibilities of the absent
1-54 regent member during the conduct of the meeting for which he was
1-55 appointed. A substitute regent member is subject to the provisions
1-56 of this subchapter.
1-57 (b) Members of the board, other than the commissioner, serve
1-58 two-year terms expiring February 1 of each odd-numbered year.
1-59 Regent members continue to serve until a successor is appointed and
1-60 qualified.
1-61 (c) The commissioner is chairman of the board.
1-62 (d) A person who is directly or indirectly employed by, or
1-63 is an officer or employee of a person or entity actively engaged in
1-64 the exploration for or production of oil and gas, other than as a
2-1 landowner or royalty owner, may not be a regent member.
2-2 (e) An officer, employee, or paid consultant of a trade
2-3 association in the oil and gas industry may not be a regent member
2-4 or employee of the board, nor may a person who cohabits with or is
2-5 the spouse of an officer, managerial employee, or paid consultant
2-6 of a trade association in the oil and gas industry be a regent
2-7 member of the board or a non-classified employee of the board.
2-8 (f) A person who is required to register as a lobbyist under
2-9 Chapter 305, Government Code, by virtue of his activities for
2-10 compensation in or on behalf of a profession related to the
2-11 operation of the board, may not serve as a regent member of the
2-12 board or act as the general counsel to the board.
2-13 (g) The board of regents of the university system appointing
2-14 a regent member may remove the regent member from the board if that
2-15 member:
2-16 (1) does not have at the time of appointment the
2-17 qualifications required by this section for appointment to the
2-18 board;
2-19 (2) does not maintain during the service on the board
2-20 the qualifications required by this section for appointment to the
2-21 board;
2-22 (3) violates a prohibition established by Subsection
2-23 (d), (e), or (f);
2-24 (4) is unable to discharge his duties for a
2-25 substantial portion of the term for which he was appointed because
2-26 of illness or disability; or
2-27 (5) is absent from more than one-half of the regularly
2-28 scheduled board meetings which the member is eligible to attend
2-29 during a calendar year, except when the absence is excused by
2-30 majority vote of the board.
2-31 (h) The board is exempt from the provisions of Chapter 2001,
2-32 Government Code.
2-33 Sec. 66.63. CERTAIN BOARD ACTIONS. (a) A majority of the
2-34 members of the board have the power to act for the board on a
2-35 matter before the board. Two members of the board have the power
2-36 to award leases issued on a form of lease previously approved by a
2-37 majority of the board.
2-38 (b) The validity of an action of the board is not affected
2-39 because it was taken when a ground for removal of a regent member
2-40 of the board existed. A regent member continues to serve until
2-41 removed under Section 66.62(g).
2-42 Sec. 66.64. POWERS AND DUTIES OF THE BOARD. (a) The board
2-43 shall in a manner consistent with this subchapter:
2-44 (1) lease university lands for oil and gas exploration
2-45 and development on terms, at times, and in the manner it may
2-46 determine;
2-47 (2) contract for the sale or other disposition of oil
2-48 and gas royalties taken in kind;
2-49 (3) adopt rules and policies for the administration
2-50 and enforcement of this subchapter and leases issued under this
2-51 subchapter;
2-52 (4) set fees and penalties for the administration and
2-53 enforcement of this subchapter;
2-54 (5) set the terms of a contract for the development of
2-55 university lands for oil and gas;
2-56 (6) approve agreements that commit the royalty
2-57 interest in university lands on terms acceptable to the board; and
2-58 (7) exercise other powers and authority and perform
2-59 other duties as may be reasonably necessary to administer and
2-60 enforce the provisions of this subchapter.
2-61 (b) The board shall hold meetings and keep records of its
2-62 proceedings in a manner consistent with the requirements of Chapter
2-63 551, Government Code. The board shall develop and implement
2-64 policies which provide the public with a reasonable opportunity to
2-65 appear before the board, to speak on an issue under the board's
2-66 jurisdiction, or be heard with respect to a declaration of
2-67 forfeiture.
2-68 (c) Except as otherwise provided in this subchapter, the
2-69 records of the board are subject to the requirements of Chapter
3-1 552, Government Code.
3-2 (d) The financial transactions of the board are subject to
3-3 audit by the state auditor in accordance with Chapter 321,
3-4 Government Code.
3-5 (e) The board may delegate to the staff provided to it by
3-6 the board of regents any duty except as prohibited by law.
3-7 (f) The board shall appoint a secretary.
3-8 Sec. 66.65. BOARD STAFF; EXCHANGE OF INFORMATION WITH STATE
3-9 AGENCIES. (a) The board of regents shall employ and compensate
3-10 personnel to assist the board in the performance of its powers and
3-11 duties under this subchapter or may assign employees of The
3-12 University of Texas System to those duties.
3-13 (b) The members of the board, personnel and counsel employed
3-14 or assigned to assist the board, the board of regents, staff of The
3-15 University of Texas System, the commissioner and staff of the
3-16 General Land Office, the board of regents and staff of The Texas
3-17 A&M University System, the office of the comptroller, the office of
3-18 the attorney general, and any other agency or official of the state
3-19 with a reasonable business interest in state or university lands,
3-20 minerals, or resources may consult with each other and exchange
3-21 information related to the administration of leases, collection and
3-22 disposition of royalties, whether in cash or in kind, and any other
3-23 matter related to the lease, sale, or production of, or the
3-24 exploration for, oil, gas, or any other mineral or resource,
3-25 including geothermal, wind, and solar energy on state or university
3-26 lands. The information so exchanged and consultations and related
3-27 communications shall be or shall remain confidential and shall be
3-28 privileged from discovery in the same manner and to the same extent
3-29 as if the persons consulted, which includes counsel, were members
3-30 of the same agency. Sections 52.134 and 52.140, Natural Resources
3-31 Code, shall not prohibit the consultations or exchange of
3-32 information provided for by this section; however, each agency
3-33 receiving such confidential information is required to keep the
3-34 information confidential under Sections 52.134 and 52.140, Natural
3-35 Resources Code, as appropriate, and to take all reasonable actions
3-36 necessary to protect the confidential and privileged nature of the
3-37 information.
3-38 Sec. 66.66. LEASE SALES. (a) Oil and gas leases shall be
3-39 offered at public auction or by sealed bid, or through a
3-40 combination of public auction and sealed bid, as the board elects.
3-41 Contracts for development may be awarded in the same manner.
3-42 (b) The board shall publish notice that the board will
3-43 receive bids for oil and gas leases or contracts for development of
3-44 oil and gas in two or more daily newspapers in this state and in
3-45 other publications as the board may choose.
3-46 (c) The notice shall be published at least 30 days before
3-47 the date the bids will be opened.
3-48 (d) The notice shall state that land is to be offered for
3-49 lease or a contract for development and that a person may obtain a
3-50 publication from The University of Texas System offices that
3-51 describes the land offered and the minimum terms.
3-52 (e) The board of regents may solicit and include advertising
3-53 in the publication describing a lease sale. Fees paid for
3-54 advertising shall be deposited into the special fee account
3-55 established by Subsection (g) and are available for the same
3-56 purposes as described in that subsection.
3-57 (f) The board may withdraw any lands advertised for lease
3-58 before the hour set for receiving bids.
3-59 (g) Each bid is subject to the payment of a special fee
3-60 equal to one and one-half percent of the total bonus whether
3-61 stipulated or bid, which special payment shall constitute a special
3-62 fund from which the board of regents shall defray the expenses of
3-63 the sale, including the payment of the general operating expenses
3-64 for geology, engineering, field inspection, and auditing oil and
3-65 gas production of university lands and including salaries and
3-66 traveling expenses of persons employed by the board of regents for
3-67 those purposes.
3-68 (h) The board of regents may direct the comptroller of The
3-69 University of Texas System to transmit to the state comptroller for
4-1 deposit to the credit of the permanent university fund unexpended
4-2 balances remaining in the special fee account after reserving a
4-3 sufficient amount in it for the payment of current expenses as set
4-4 out in Subsection (g).
4-5 Sec. 66.67. LEASE TERMS. (a) The oil and gas lease for
4-6 each tract shall be offered for a bonus to be determined by high
4-7 bid in addition to the stipulated royalty or for a stipulated bonus
4-8 and a royalty to be determined by high bid. Each tract shall be
4-9 offered separately and the minimum bonus or royalty, depending on
4-10 the basis for the bid, and the length of the primary term for each
4-11 tract shall be set out in the official publication describing the
4-12 tracts and terms.
4-13 (b) Except as otherwise provided by law, the minimum royalty
4-14 rate shall be one-eighth of the oil or gas produced or the value
4-15 thereof.
4-16 (c) The primary term of a lease shall not exceed 10 years.
4-17 (d) Each lease shall be subject to the provisions of this
4-18 subchapter and rules promulgated by the board.
4-19 (e) The successful bidder shall pay to the board of regents
4-20 on the day the bid is accepted the full amount of bonus, whether
4-21 stipulated or bid, and the special fee in the form of payment
4-22 specified by the board.
4-23 Sec. 66.68. MARGINAL PROPERTY ROYALTY RATES. (a) In this
4-24 section:
4-25 (1) "Barrel of oil equivalent" means 6,000 cubic feet
4-26 of natural gas per 42-gallon barrel of crude oil or a volume of gas
4-27 with a minimum heating value of 6,000,000 British thermal units
4-28 (6,000 Mbtu), whichever is greater.
4-29 (2) "Lease" or "leases" means an oil and gas lease
4-30 issued or approved by the board that is valid and in force on or
4-31 after the effective date of this section.
4-32 (3) "Qualifying property" means land subject to a
4-33 lease issued under this subchapter.
4-34 (4) "Qualifying reservoir" means a reservoir having an
4-35 average daily per well production equal to or less than 15 barrels
4-36 of oil equivalent during a period established by the board by rule
4-37 and underlying either:
4-38 (A) a qualifying property; or
4-39 (B) a pooled unit including a qualifying
4-40 property.
4-41 (5) "Reservoir" has the same meaning as "common
4-42 reservoir" as defined by Section 86.002, Natural Resources Code.
4-43 (b) The board may provide by rule that the royalty rate for
4-44 qualifying reservoirs may be reduced to not less than one-sixteenth
4-45 (6.25 percent). In determining whether to grant a reduction in the
4-46 royalty rate, the board may consider whether the qualifying
4-47 property is being operated efficiently, including whether the
4-48 property is pooled or has reasonable potential for the application
4-49 of secondary or tertiary recovery techniques.
4-50 (c) If a qualifying reservoir for which royalty rate
4-51 reduction is sought under this section is included in a unit
4-52 subject to the authority of the board, the board may modify the
4-53 terms and conditions of the unit as a condition of approving a
4-54 reduction in the royalty rate.
4-55 Sec. 66.69. AWARD OF LEASE. (a) Except as otherwise
4-56 provided in this subchapter, the board shall award a lease for each
4-57 tract to the person offering the highest bid that includes the
4-58 terms adopted by the board and consistent with this subchapter.
4-59 (b) The board may reject all bids for one or more tracts.
4-60 (c) The commissioner shall execute a lease awarded by the
4-61 board in conformance with this subchapter.
4-62 Sec. 66.70. ADDITIONAL LEASE PROVISIONS. An oil and gas
4-63 lease issued under this subchapter shall include the provisions
4-64 required by this subchapter and additional provisions not
4-65 inconsistent herewith that the board may adopt to preserve the
4-66 interests of the state. On submission of an application by all
4-67 lessees under the lease in the form required by the board and
4-68 payment of any applicable fee set by the board, the board may amend
4-69 a lease that does not include provisions required by Sections
5-1 66.71, 66.72, and 66.73 to include those provisions in the form
5-2 adopted by the board at the time the lease is amended.
5-3 Sec. 66.71. LEASE PROVISIONS. (a) An oil and gas lease
5-4 issued by the board shall provide for payment of a delay rental.
5-5 During the primary term of the lease, the lease shall terminate on
5-6 the anniversary date of the lease unless:
5-7 (1) oil or gas is being produced in paying quantities
5-8 from the leased premises;
5-9 (2) drilling operations are being conducted on the
5-10 leased premises; or
5-11 (3) the lessee pays timely in the manner provided in
5-12 the lease the amount of delay rental stated in the lease.
5-13 (b) An oil and gas lease issued by the board shall provide
5-14 that if oil or gas is being produced in paying quantities from the
5-15 leased premises at the end of the primary term, the lease shall not
5-16 terminate but shall continue in force and effect as long as oil or
5-17 gas is produced in paying quantities. The board may adopt rules
5-18 specifying when a lease will be considered to be producing in
5-19 paying quantities.
5-20 (c) An oil and gas lease issued by the board shall provide
5-21 that royalty may be taken in kind at any time and from time to time
5-22 at the discretion of the board in the manner provided in this
5-23 subchapter.
5-24 Sec. 66.72. CESSATION OF PRODUCTION; DRILLING AND REWORKING.
5-25 An oil and gas lease issued under this subchapter shall provide
5-26 that the term of the lease may be extended by drilling and
5-27 reworking operations in the event of the cessation of production,
5-28 on terms as the board may adopt.
5-29 Sec. 66.73. SHUT-IN ROYALTY. An oil and gas lease issued
5-30 under this subchapter shall provide for the extension of the lease
5-31 by the payment of shut-in royalties on terms as the board may
5-32 adopt.
5-33 Sec. 66.74. LEASE EXTENSION OR SUSPENSION. (a) At the
5-34 expiration of the primary term of a lease, if production of oil or
5-35 gas has not been obtained on the leased premises, but drilling
5-36 operations are being conducted in good faith and in a good and
5-37 workmanlike manner, the lessee may apply in writing to extend the
5-38 lease for a period of 30 days. The application shall be filed with
5-39 the board of regents on or before the expiration of the primary
5-40 term.
5-41 (b) The applicant shall submit with the application a fee in
5-42 an amount set by the board of not less than $7.50 for each acre in
5-43 the lease requested to be extended.
5-44 (c) If the commissioner determines that the conditions of
5-45 this section have been met, the commissioner, or a designee
5-46 appointed by the commissioner, shall execute a written extension as
5-47 provided by this section.
5-48 (d) As long as drilling operations are being conducted in
5-49 good faith and in a good and workmanlike manner, additional
5-50 extensions of 30 days each may be granted up to an aggregate of 360
5-51 days. The lessee must submit a written application and payment on
5-52 or before the last day of the extended primary term. The payment
5-53 for each additional 30-day extension shall be in an amount set by
5-54 the board of not less than $7.50 for each acre in the lease.
5-55 (e) The board may elect to suspend a lease and all of the
5-56 conditions and covenants contained in the lease if there is a
5-57 legitimate dispute regarding the validity of the lease. The board
5-58 may rescind the suspension at any time, in which event the lease
5-59 shall resume as of the date the suspension is rescinded and shall
5-60 continue for the remainder of the period specified in the lease as
5-61 the primary term, or, if the primary term ended prior to the
5-62 suspension, the lessee shall have 60 days to commence production or
5-63 drilling and reworking operations.
5-64 Sec. 66.75. PROTECTION FROM DRAINAGE; COMPENSATORY
5-65 ROYALTIES. (a) The lessee shall protect the leased premises from
5-66 drainage. The lease may contain express terms regarding drainage
5-67 as the board may adopt.
5-68 (b) Subject to the provisions of this section, the
5-69 commissioner may execute agreements that provide for the payment of
6-1 compensatory royalty in lieu of drilling offset wells that may be
6-2 required to protect the leased premises from drainage from a well
6-3 or wells located on non-university lands, or university lands
6-4 leased at a lesser royalty, situated within 1,000 feet of or
6-5 draining the leased premises.
6-6 (c) Agreements providing for the payment of compensatory
6-7 royalty must be approved by the board.
6-8 (d) Agreements providing for the payment of compensatory
6-9 royalty must be found by the commissioner and the board to be in
6-10 the best interest of the state.
6-11 (e) Nothing in an agreement for the payment of compensatory
6-12 royalty shall relieve the lessee of the obligation of reasonable
6-13 development or of the obligation to drill offset wells, obtain
6-14 suitable regulatory relief, propose appropriate pooling or
6-15 unitization arrangements, or conduct other activities to protect
6-16 the leased premises from drainage as to other producing horizons.
6-17 (f) An agreement for the payment of compensatory royalty
6-18 shall provide that compensatory royalty be paid at the royalty rate
6-19 provided in the lease and shall provide that compensatory royalty
6-20 be paid on the market value of production from the well located on
6-21 non-university lands or university lands leased at a lesser royalty
6-22 situated within 1,000 feet of or draining the leased premises.
6-23 Sec. 66.76. ASSIGNMENT; RELINQUISHMENT. (a) Rights
6-24 acquired in a lease or contract for development issued under this
6-25 subchapter may be assigned; provided, however, for an assignment to
6-26 be valid and effective, the assignment must be filed in the county
6-27 or counties in which the leased premises are situated and a legible
6-28 copy of the recorded assignment must be filed with the board of
6-29 regents within the time set by the board, accompanied by a filing
6-30 fee and any applicable penalty for late filing set by the board for
6-31 each lease assigned and a summary in the form adopted by the board
6-32 of regents.
6-33 (b) Rights to a lease or to an assigned portion thereof may
6-34 be relinquished at any time by having an instrument of
6-35 relinquishment or release recorded in the county or counties in
6-36 which the area relinquished is situated and a legible copy of the
6-37 recorded instrument filed with the board of regents, accompanied by
6-38 a filing fee set by the board.
6-39 (c) An assignment or relinquishment of a lease or a portion
6-40 thereof or an interest in a lease shall not relieve the lessee of
6-41 accrued obligations, including the payment of royalty, penalty, or
6-42 interest, and the lessee shall remain liable therefor. All
6-43 successors in interest, whether acquiring a lease or an interest in
6-44 a lease by assignment or otherwise, shall take the lease or
6-45 interest subject to all outstanding obligations and shall be liable
6-46 for those obligations.
6-47 (d) In the enforcement of lease obligations, the board and
6-48 the board of regents shall be entitled to rely on the state of
6-49 title reflected by the records of the board of regents.
6-50 Sec. 66.77. ROYALTY PAYMENTS AND REPORTS. (a) Royalty as
6-51 stipulated in the lease and all other amounts due under this
6-52 subchapter shall be paid to the board of regents at Austin, Travis
6-53 County, Texas. The lessee of record in the records of the board of
6-54 regents shall be responsible for making or causing to be made all
6-55 payments required by this subchapter at the required times and in
6-56 the form and manner determined by the board of regents or otherwise
6-57 required by law.
6-58 (b) The board shall set by rule the date for making royalty
6-59 payments and for filing any reports, documents, or other records
6-60 required to be filed by this section. The date set by the board
6-61 must be on or after the fifth day of the second month succeeding
6-62 the month of production of oil and on or after the 15th day of the
6-63 second month succeeding the month of production of gas.
6-64 (c) A royalty payment is timely made if the payment is
6-65 deposited in a postpaid, properly addressed wrapper, with a post
6-66 office or official depository under the care and custody of, and
6-67 postmarked by, the United States Postal Service before the
6-68 applicable due date.
6-69 (d) The lessee shall provide to the board of regents with
7-1 each royalty payment:
7-2 (1) an affidavit of the owner, manager, or other
7-3 authorized agent completed in the form and manner required by the
7-4 board of regents and showing the gross amount and disposition of
7-5 all oil and gas produced and the market value of the oil and gas,
7-6 the number assigned by the Railroad Commission of Texas, and other
7-7 information as may be required by the board of regents;
7-8 (2) a purchase statement or other document showing the
7-9 price at which the oil and gas was sold;
7-10 (3) a check stub, schedule, summary, or other
7-11 remittance advice showing by the assigned lease number the amount
7-12 of royalty being paid on each lease; and
7-13 (4) other reports or records that the board of regents
7-14 may require to identify the well and lease and verify the gross
7-15 production, disposition, and market value.
7-16 (e) The board of regents may require the lessee and a person
7-17 with whom the lessee deals, including an affiliate, in connection
7-18 with the production, transportation, marketing, treatment,
7-19 processing, or sale of the oil and gas, to provide reports or other
7-20 information as the board of regents may consider necessary to
7-21 determine that royalty has been correctly paid.
7-22 (f) The board of regents may implement such practices and
7-23 procedures with regard to accounting for royalty payments as it may
7-24 determine to be in the best interest of the state.
7-25 Sec. 66.78. INTEREST AND PENALTIES. (a) If royalty is not
7-26 paid when due, a penalty of one percent shall be added to the
7-27 unpaid amount due. If the royalty is not paid within seven days
7-28 after the due date, a penalty of an additional four percent of the
7-29 royalty due is imposed. If the royalty is not paid within 30 days
7-30 after the due date, a penalty of an additional five percent is
7-31 imposed. The minimum penalty under this subsection is $25 or the
7-32 minimum penalty in excess thereof set by the board. The board
7-33 shall not add a penalty under this subsection in cases of title
7-34 dispute as to the state's portion of the royalty or to that portion
7-35 of the royalty in dispute as to fair market value.
7-36 (b) Interest shall accrue on delinquent royalties beginning
7-37 on the 61st day after the due date. The annual interest rate on
7-38 delinquent royalties is 12 percent. Interest accrued under this
7-39 subsection shall be in addition to any delinquency penalty due
7-40 under this section.
7-41 (c) The board of regents shall add a penalty of 25 percent
7-42 to delinquent sums due under this subchapter if the board
7-43 determines that the delinquency is due to fraud or an intent to
7-44 evade the provisions of this subchapter on the part of the lessee
7-45 or the lessee's agents, employees, or assignees.
7-46 (d) If a report, affidavit, supporting document, or other
7-47 instrument required to be filed under Section 66.77 or Section
7-48 66.80 is not filed when due, a penalty accrues in the amount set by
7-49 the board but not less than $10 per document for each 30-day period
7-50 of delinquency or fractional part thereof.
7-51 (e) Collection of penalty and interest charges under this
7-52 section are in addition to any rights, including forfeiture, that
7-53 the board or the board of regents may exercise for failure to pay a
7-54 royalty or to submit a report or other instrument when due.
7-55 (f) The board may provide by rule procedures and standards
7-56 for reduction of interest charged or penalties assessed under this
7-57 subchapter or other interest or penalties assessed relating to
7-58 unpaid or delinquent royalties or other amounts due.
7-59 Sec. 66.79. PAYMENT OF ROYALTY IN KIND. (a) An oil or gas
7-60 royalty due under a lease on university lands shall be paid in kind
7-61 at the discretion of the board.
7-62 (b) The option to take royalty in kind or to take cash
7-63 royalties may be exercised by the board at any time or from time to
7-64 time on not less than 60 days' notice to the lessee.
7-65 (c) The board shall enter into contracts or other
7-66 instruments or agreements to dispose of the portion of the royalty
7-67 taken in kind, which may include contracts for sale,
7-68 transportation, or storage of the oil or gas. The commissioner
7-69 shall execute contracts approved by the board under this section
8-1 that are consistent with applicable law.
8-2 (d) The board of regents may enter into insurance contracts
8-3 or other agreements to secure or guarantee payment of contracts or
8-4 other instruments or agreements to dispose of the portion of the
8-5 royalty taken in kind, including contracts for sale,
8-6 transportation, and storage.
8-7 (e) If the board has elected to take royalty in kind, then
8-8 delivery of the correct amount of oil or gas by the lessee shall
8-9 satisfy the lessee's obligation for payment of the royalty due
8-10 under the lease. This section shall not be construed to surrender
8-11 or in any way affect the right of the board of regents under
8-12 existing or future leases to receive royalty on the basis of market
8-13 value of production not taken in kind.
8-14 Sec. 66.80. RECORDS. (a) The lessee shall provide to the
8-15 board of regents a copy of every contract for the sale or
8-16 processing of oil or gas and any subsequent agreement and amendment
8-17 thereto, together with a summary in the form adopted by the board
8-18 of regents, within 30 days after the contract, agreement, or
8-19 amendment is made.
8-20 (b) The books and accounts, receipts, and discharges of all
8-21 wells, tanks, pools, meters, and pipelines, and all contracts and
8-22 other records pertaining directly or indirectly to the production,
8-23 transportation, sale, treatment, processing, or marketing of oil
8-24 and gas produced from university lands, or relevant to establishing
8-25 the volume or value of the production, whether the records are held
8-26 by or are in the possession of the lessee or a third party dealing
8-27 with the lessee, shall at all times be subject to inspection and
8-28 copying by the commissioner, the board, the board of regents, the
8-29 attorney general, the comptroller, the governor, or the
8-30 representative of any of them. The board or the board of regents
8-31 may, if necessary, compel the production of these records by
8-32 subpoena enforceable throughout the state.
8-33 Sec. 66.81. AUDIT INFORMATION CONFIDENTIAL. (a) All
8-34 documents and information secured, derived, or obtained during the
8-35 course of an inspection or examination of books, accounts, reports,
8-36 or other records of the lessee or a third party, as provided by
8-37 this subchapter, and contracts, agreements, or amendments provided
8-38 to the board of regents under Section 66.80(a) are confidential and
8-39 may not be used publicly, opened for public inspection, or
8-40 disclosed, except for information set forth in a lien filed under
8-41 this chapter and except as permitted under Subsections (c) and (d).
8-42 This section shall not apply to records or information provided by
8-43 the lessee under Section 66.77.
8-44 (b) Documents and information made confidential in this
8-45 section shall not be subject to subpoena directed to the board, the
8-46 board of regents, the commissioner, the attorney general, or the
8-47 governor except in a judicial or administrative proceeding in which
8-48 the state and a person with an equitable or legal interest in the
8-49 lease or land to which the information relates are parties.
8-50 (c) The board, the board of regents, or the attorney general
8-51 may use documents and information made confidential by the
8-52 provisions of this section and contracts made confidential by this
8-53 subchapter to enforce the provisions of this subchapter or may
8-54 authorize their use in judicial or administrative proceedings in
8-55 which this state is a party or may authorize their examination by
8-56 employees, agents, or contractors of the board of regents or the
8-57 state auditor for audit purposes.
8-58 (d) This section does not prohibit:
8-59 (1) the delivery of documents and information made
8-60 confidential by this section to the lessee or its successor,
8-61 receiver, executor, guarantor, administrator, assignee, or
8-62 representative;
8-63 (2) the publication of statistics classified to
8-64 prevent the identification of a particular audit or items in a
8-65 particular audit;
8-66 (3) the release of documents or information otherwise
8-67 available to the public;
8-68 (4) the release of documents or information concerning
8-69 the amount of royalty assessed as a result of an examination
9-1 conducted under this subchapter or the release of other information
9-2 which would have been properly included in reports required under
9-3 Section 66.77;
9-4 (5) sharing of documents or information among state
9-5 agencies pursuant to Section 66.65. Shared documents or
9-6 information will remain confidential under this section; or
9-7 (6) the release of documents or information authorized
9-8 by the lessee.
9-9 Sec. 66.82. FORFEITURE; OTHER REMEDIES. (a) If a lessee
9-10 fails or refuses to perform a material requirement of this
9-11 subchapter or the lease, the board may, after notice to the lessee
9-12 and an opportunity to be heard, declare a forfeiture of the lease
9-13 or an interest in the lease. Material requirements include but are
9-14 not limited to:
9-15 (1) failure or refusal to pay a sum due, including
9-16 penalty and interest, within 30 days after the sum becomes due;
9-17 (2) failure or refusal to tender oil or gas for
9-18 delivery as in-kind royalty;
9-19 (3) making a false report concerning exploration,
9-20 production, or royalty;
9-21 (4) failure or refusal to file an assignment as
9-22 required by this subchapter;
9-23 (5) failure or refusal, after demand, to file or make
9-24 available for inspection and copying a record or document required
9-25 to be filed or made available for inspection or copying under this
9-26 subchapter or rules promulgated thereunder;
9-27 (6) failure or refusal, after demand, to protect the
9-28 leased premises from drainage; or
9-29 (7) the breach of an obligation under the lease or
9-30 this subchapter.
9-31 (b) Forfeiture is not the exclusive remedy. The attorney
9-32 general, at the request of the board of regents, may bring suit for
9-33 damages or specific performance, or both, or other remedy, at law
9-34 or in equity.
9-35 Sec. 66.83. LIEN; ABANDONED PERSONAL PROPERTY. (a) The
9-36 board of regents shall have a statutory first lien on oil and gas
9-37 produced from the area covered by the lease to secure payment of
9-38 all unpaid royalty and other sums of money that may become due
9-39 under the lease or this subchapter.
9-40 (b) By acceptance of the lease, the lessee grants to the
9-41 board of regents an express contractual lien on and security
9-42 interest in all oil and gas in and extracted from the area covered
9-43 by the lease, all proceeds which may accrue to the lessee from the
9-44 sale of the oil and gas, whether the proceeds are held by the
9-45 lessee or another person, and all fixtures on and improvements to
9-46 the area covered by the lease used in connection with the
9-47 production or processing of the oil and gas to secure the payment
9-48 of royalties and other amounts due or to become due under the lease
9-49 or this subchapter and to secure payment of damages or loss that
9-50 the state may suffer by reason of the lessee's breach of a covenant
9-51 or condition of the lease, whether express or implied.
9-52 (c) The statutory and contractual liens and security
9-53 interest described in this section may be foreclosed with or
9-54 without court proceedings in the manner provided under Chapter 9,
9-55 Business & Commerce Code. The board of regents may require the
9-56 lessee to execute and record instruments reasonably necessary to
9-57 acknowledge, attach, or perfect the liens.
9-58 (d) Personal property, including casing, equipment, and
9-59 fixtures remaining on lands covered by the lease more than one year
9-60 after the expiration or other termination of the lease shall be
9-61 considered to be abandoned. The board of regents may take title to
9-62 abandoned personal property in any manner and keep or use the
9-63 proceeds for any purpose allowed by law. The lessee shall pay to
9-64 the board of regents on demand the positive difference between the
9-65 cost of disposing of abandoned personal property and the proceeds,
9-66 if any, from the disposition.
9-67 Sec. 66.84. PAYMENTS; DISPOSITION. Payments under this
9-68 subchapter shall be made to the board of regents, which shall:
9-69 (1) transmit to the state comptroller for deposit to
10-1 the credit of the permanent university fund all bonus, rental, and
10-2 royalty payments;
10-3 (2) transmit to the state comptroller for deposit to
10-4 the credit of the available university fund all filing, assignment,
10-5 and relinquishment fees and all other payments except those
10-6 described in Subdivision (3); and
10-7 (3) retain the one and one-half percent special fee
10-8 provided for by this subchapter for disbursement by the comptroller
10-9 of The University of Texas System for the purposes authorized by
10-10 this subchapter.
10-11 [Sec. 66.61. DEFINITION. As used in this subchapter,
10-12 "board" means the Board for Lease of University Lands.]
10-13 [Sec. 66.62. BOARD FOR LEASE. (a) The Board for Lease of
10-14 University Lands is composed of the commissioner of the general
10-15 land office, two members of the board of regents of The University
10-16 of Texas System selected by the board of regents of that system,
10-17 and one member of the board of regents of The Texas A & M
10-18 University System selected by the board of regents of that system.
10-19 In the event that a regent member of the Board for Lease of
10-20 University Lands is unable to attend any meeting of that board, the
10-21 chairman of the board of regents of the applicable system shall
10-22 appoint another member of the board of regents as a substitute
10-23 member of the Board for Lease of University Lands to attend the
10-24 meeting that the regular regent member is unable to attend. The
10-25 substitute regent member of the Board for Lease of University Lands
10-26 shall exercise all the powers, duties, and responsibilities of the
10-27 absent regent member during the conduct of the meeting for which he
10-28 was appointed. Any substitute regent member of the Board for Lease
10-29 of University Lands is subject to the provisions of this
10-30 subchapter.]
10-31 [(b) A regent member may not be directly or indirectly
10-32 employed by, or be an officer of or an attorney for, an oil or gas
10-33 company.]
10-34 [(c) An officer, employee, or paid consultant of a trade
10-35 association in the oil and gas industry may not be a member or
10-36 employee of the board, nor may a person who cohabits with or is the
10-37 spouse of an officer, managerial employee, or paid consultant of a
10-38 trade association in the oil and gas industry be a member of the
10-39 board or an employee of the board grade 17 or over, including
10-40 exempt employees, according to the position classification schedule
10-41 under the General Appropriations Act.]
10-42 [(d) A person who is required to register as a lobbyist
10-43 under Chapter 305, Government Code, by virtue of his activities for
10-44 compensation in or on behalf of a profession related to the
10-45 operation of the board, may not serve as a member of the board or
10-46 act as the general counsel to the board.]
10-47 [(e) Members of the board, other than the Commissioner of
10-48 the General Land Office, serve two-year terms expiring February 1
10-49 of each odd-numbered year.]
10-50 [(f) The Commissioner of the General Land Office serves as
10-51 chairman of the board.]
10-52 [(g) Unless the action relates to the final approval of the
10-53 award of a lease on a form approved by a majority of the board in
10-54 accordance with procedures for awarding leases that have been
10-55 previously approved by a majority of the board, a majority of the
10-56 board members has the power to act for the board. If the action
10-57 relates to the final approval of the award of a lease on a form
10-58 approved by a majority of the board in accordance with procedures
10-59 for awarding leases that have been previously approved by a
10-60 majority of the board, two board members present at a meeting have
10-61 the power to act for the board.]
10-62 [(h) The board shall perform the duties prescribed by
10-63 this subchapter and shall keep a public record of all its
10-64 proceedings.]
10-65 [(i) It is a ground for removal from the board if a member:]
10-66 [(1) does not have at the time of appointment the
10-67 qualifications required by Subsection (a) of this section for
10-68 appointment to the board;]
10-69 [(2) does not maintain during the service on the board
11-1 the qualifications required by Subsection (a) of this section for
11-2 appointment to the board;]
11-3 [(3) violates a prohibition established by Subsection
11-4 (c) or (d) of this section;]
11-5 [(4) is unable to discharge his duties for a
11-6 substantial portion of the term for which he was appointed because
11-7 of illness or disability; or]
11-8 [(5) is absent from more than one-half of the
11-9 regularly scheduled board meetings which the member is eligible to
11-10 attend during each calendar year, except when the absence is
11-11 excused by majority vote of the board.]
11-12 [(j) The validity of an action of the board is not affected
11-13 by the fact that it was taken when a ground for removal of a member
11-14 of the board existed.]
11-15 [(k) If the agency head has knowledge that a potential
11-16 ground for removal exists, he shall notify the chairman of the
11-17 board of such ground. The chairman of the board shall then notify
11-18 the governor that a potential ground for removal exists.]
11-19 [Sec. 66.63. OIL AND GAS SUBJECT TO SALE. The oil and gas
11-20 in the university lands are subject to sale under the regulations,
11-21 at the times, and on the terms provided in this subchapter, and
11-22 under the rules and regulations adopted by the board as authorized
11-23 by this subchapter, not inconsistent with the provisions of this
11-24 subchapter.]
11-25 [Sec. 66.64. PLACING OIL AND GAS ON MARKET; PUBLIC AUCTION;
11-26 ADVERTISEMENT. (a) Whenever there is a demand for the purchase of
11-27 oil and gas in any university land that will reasonably insure that
11-28 the oil and gas may be sold advantageously, the board shall place
11-29 the oil and gas in the land on the market in separate tracts of
11-30 such area and extent as the board may determine most suitable for
11-31 profitable marketing; but in no event shall any tract in which
11-32 oil and gas is offered for as a unit exceed in area of 6,000
11-33 acres.]
11-34 [(b) The sale of the oil and gas shall be made at public
11-35 auction or by sealed bid, or through a combination of public
11-36 auction and sealed bid, as the board elects. The sales shall be
11-37 held in Austin, or any other location designated by the board, at
11-38 any hour between 10 a.m. and 5 p.m.]
11-39 [(c) The board shall cause an advertisement to be made of
11-40 the sale in two or more newspapers of general circulation in this
11-41 state. The advertisement shall state the method, time, and place
11-42 of sale; the primary term of the lease proposed to be executed
11-43 covering any sale; the bonus or royalty to be paid; that lists
11-44 describing the land to be sold may be obtained from the board; and
11-45 other matters that in the judgment of the board are deemed
11-46 advisable. In addition to the foregoing mandatory provisions, the
11-47 board may cause the advertisement to be placed in oil and gas
11-48 journals in and out of the state and to be mailed generally to
11-49 persons it thinks might be interested.]
11-50 [Sec. 66.65. ROYALTY; BONUS; ANNUAL RENTAL; SPECIAL FEE.
11-51 (a) The oil and gas in each tract shall be offered for sale for a
11-52 bonus to be determined by high bid in addition to the stipulated
11-53 royalty or for a stipulated bonus and a royalty to be determined by
11-54 high bid. Each tract shall be offered separately.]
11-55 [(b) Each bid is subject to the royalty or bonus specified
11-56 in the official advertisement preceding the sale, but in no event
11-57 shall the royalty be less than one-eighth of the gross production
11-58 of oil and gas in the land; and shall further be subject to the
11-59 payment of an annual rental after the first year of not less than
11-60 10 cents per acre, payable each year in advance, unless the
11-61 royalties received from the land during the preceding year equal or
11-62 exceed the amount of the annual rental payment.]
11-63 [(c) Each bid is also subject to the payment of a special
11-64 fee equal to one percent of the total bonus whether stipulated or
11-65 bid, which special payment shall constitute a special fund from
11-66 which the Board of Regents of The University of Texas System shall
11-67 defray the expenses of the sale, including the payment for the
11-68 services of the auctioneer crying the sale and the payment of the
11-69 general operating expenses in geologizing, oil field supervision,
12-1 and auditing oil and gas production of university lands, including
12-2 salaries and traveling expenses of persons employed by the board of
12-3 regents for those purposes, and for the purpose of acquiring,
12-4 constructing, and equipping a building in the city of Midland or
12-5 adjacent area to house the administrative staff of the offices of
12-6 University Lands, Geology and Land Agent, and such other related
12-7 agencies necessary for the management and development of university
12-8 lands in West Texas.]
12-9 [(d) The Board of Regents of The University of Texas System
12-10 may also direct the comptroller of The University of Texas System
12-11 to transmit to the state treasurer for deposit to the credit of the
12-12 permanent university fund any unexpended balances remaining in the
12-13 special fund after reserving a sufficient amount in it for the
12-14 payment of current expenses as set out in Subsection (c) of this
12-15 section.]
12-16 [(e) The highest successful bidder shall pay to the Board of
12-17 Regents of The University of Texas System on the day the bid is
12-18 accepted the full amount of bonus whether stipulated or bid and the
12-19 special fee.]
12-20 [Sec. 66.66. WITHDRAWAL OF LANDS BEFORE BIDS RECEIVED. The
12-21 board may withdraw any lands advertised for lease before the hour
12-22 set for receiving bids.]
12-23 [Sec. 66.67. AWARD OF LEASE. (a) If any one of the bidders
12-24 at the sale at public auction has offered a reasonable and proper
12-25 price for any tract offered, not less than the price fixed by the
12-26 board, the land advertised may be leased for oil and gas purposes
12-27 under the terms of this subchapter and any regulations the board
12-28 may prescribe, not inconsistent with the provisions of this
12-29 subchapter. All bids may be rejected by the board.]
12-30 [(b) If the board determines that a satisfactory bid has
12-31 been offered for the oil and gas, it shall make an award to the
12-32 bidder offering the highest price, and a lease shall be executed by
12-33 the commissioner of the general land office. A duplicate copy of
12-34 the lease shall be filed in the general land office.]
12-35 [Sec. 66.68. PROVISIONS OF LEASE. (a) Each lease executed
12-36 under this subchapter shall contain, and each valid and subsisting
12-37 oil and gas lease previously executed by the commissioner under the
12-38 source statute for this subchapter, on the application of the
12-39 lessee and payment of a sum of money equal to one year's annual
12-40 rental under the lease, shall be amended by written instrument to
12-41 contain, the provisions prescribed by this section.]
12-42 [(b) Each lease shall provide that the primary term of the
12-43 lease, as determined by the board prior to the promulgation of the
12-44 advertisement, shall in no case exceed 10 years.]
12-45 [(c) Each lease shall provide that if oil and/or gas is
12-46 being produced in paying quantities from the leased premises before
12-47 the termination of the primary term, such lease shall not terminate
12-48 but shall continue in force and effect as long as oil and/or gas is
12-49 being so produced.]
12-50 [(d) Each lease shall provide that in the event production
12-51 of oil or gas on the leased premises, after once obtained, shall
12-52 cease for any cause within 60 days before the expiration of the
12-53 primary term of such lease or at any time or times thereafter, such
12-54 lease shall not terminate, if the lessee commences additional
12-55 drilling or reworking operations within 60 days thereafter, and
12-56 such lease shall remain in full force and effect so long as such
12-57 operations continue in good faith and in workmanlike manner,
12-58 without interruptions, totaling more than 60 days during any one
12-59 such operation; and if such drilling or reworking operations result
12-60 in the production of oil and/or gas, such lease shall remain in
12-61 full force and effect so long as oil or gas is produced therefrom
12-62 in paying quantities or payment of shut-in gas well royalty or
12-63 compensatory royalties is made as hereinafter provided in this
12-64 subchapter.]
12-65 [(e) Each lease shall provide that if at the expiration of
12-66 the primary term or at any time thereafter there is located on the
12-67 leased premises a well or wells capable of producing oil or gas in
12-68 paying quantities and such oil or gas is not produced for lack of
12-69 suitable production facilities or a suitable market and such lease
13-1 is not being otherwise maintained in force and effect, the lessee
13-2 may pay as royalty $1,200 per annum for each well on the lease
13-3 capable of producing oil or gas in paying quantities, such payment
13-4 to be made to the Board of Regents of The University of Texas
13-5 System at Austin, Texas. Any shut-in oil or gas royalty must be
13-6 paid on or before: (1) the expiration of the primary term of the
13-7 lease, (2) 60 days after lessee ceases to produce oil or gas from
13-8 the leased premises, or (3) 60 days after lessee completes a
13-9 drilling and reworking operation in accordance with the lease
13-10 provisions, whichever date is later. If such payment is made, the
13-11 lease shall be considered to be a producing lease and such shut-in
13-12 royalty payment shall extend the term of the lease for a period of
13-13 one year from the end of the primary term or from the first day of
13-14 the month next succeeding the month in which production ceased; and
13-15 thereafter if no suitable production facilities or suitable market
13-16 for such oil or gas exists, the lessee may extend the lease for
13-17 four additional and successive periods of one year each by the
13-18 payment of a like sum of money each year on or before the
13-19 expiration of the extended term. Provided, however, that if, while
13-20 such lease is being maintained in force and effect by payment of
13-21 such shut-in royalty, oil or gas should be sold and delivered in
13-22 paying quantities from a well situated within 1,000 feet of the
13-23 leased premises and completed in the same producing reservoir or in
13-24 any case where drainage is occurring, the right to further extend
13-25 the lease by such shut-in royalty payments shall cease, but such
13-26 lease shall remain in force and effect for the remainder of the
13-27 current one year period for which the shut-in royalty has been
13-28 paid, and for four additional and successive periods of one year
13-29 each by the payment by the lessee of compensatory royalty, at the
13-30 royalty rate provided for in such university lease of the value at
13-31 the well of production from the well which is causing the drainage
13-32 or which is completed in the same producing reservoir and within
13-33 1,000 feet of the leased premises; such compensatory royalty to be
13-34 paid monthly to the Board of Regents of The University of Texas
13-35 System at Austin, Texas, beginning on or before the last day of the
13-36 month next succeeding the month in which such oil or gas is sold
13-37 and delivered from the well situated within 1,000 feet of, or
13-38 draining, the leased premises and completed in the same producing
13-39 reservoir; provided further, that in the event such compensatory
13-40 royalties paid in any 12-month period are in a sum less than the
13-41 annual shut-in gas well royalties provided for in this section, the
13-42 lessee shall pay an additional sum equal to the difference within
13-43 30 days from the end of such 12-month period; provided further,
13-44 that nothing herein shall relieve the lessee of the obligation of
13-45 reasonable development, nor of the obligation to drill offset wells
13-46 required by Section 66.75 of this code.]
13-47 [(f) Each lease shall provide that if, at the expiration of
13-48 the primary term, production of oil and/or gas has not been
13-49 obtained in paying quantities on the leased premises but drilling
13-50 operations are being conducted thereon in good faith and in good
13-51 and workmanlike manner, the lessee may, on or before the expiration
13-52 of the primary term, file with the Board of Regents of The
13-53 University of Texas System a written application for a 30-day
13-54 extension of such lease, such application to be accompanied by a
13-55 payment to the Board of Regents of The University of Texas System
13-56 of $7.50 per acre for each acre in the lease, and the Chairman of
13-57 the Board of Regents of The University of Texas System or a
13-58 designee appointed by the Chairman shall, in writing, extend such
13-59 lease for a 30-day period from and after the expiration of the
13-60 primary term and so long thereafter as oil or gas is produced in
13-61 paying quantities from the premises; provided further, that the
13-62 lessee may, so long as such drilling operations are being conducted
13-63 in good faith, make like application and payment during any 30-day
13-64 extended period for an additional extension of 30 days not to
13-65 exceed a combined total of 180 days; provided, however, lessee may,
13-66 so long as such drilling operations are being conducted in good
13-67 faith, make written application to the Board of Regents of The
13-68 University of Texas System on or before the expiration of the
13-69 initial extended period of 180 days for an additional extension of
14-1 180 days, such application to be accompanied by a payment to the
14-2 Board of Regents of The University of Texas System of $50 per acre
14-3 for each acre in the lease, and the Chairman of the Board of
14-4 Regents of The University of Texas System or a designee appointed
14-5 by the Chairman shall, in writing, extend such lease for an
14-6 additional 180-day period from and after the expiration of the
14-7 initial extended period of 180 days, and so long thereafter as oil
14-8 or gas is produced in paying quantities from the premises;
14-9 provided, that no lease shall be extended under the provisions of
14-10 this section for more than a total of 360 days from and after the
14-11 expiration of the primary term unless production in paying
14-12 quantities has been obtained.]
14-13 [(g) Each lease shall contain a provision enabling the
14-14 board, at its election, to require that payment of royalty as
14-15 stipulated in the lease be in kind. Such option may be exercised
14-16 from time to time at the discretion of the board upon not less than
14-17 six months' notice to the lessee. The board shall have all powers
14-18 necessary to negotiate and execute sales contracts or any other
14-19 instruments necessary for the disposition of any royalty taken in
14-20 kind. Such other reasonable provisions, not inconsistent with this
14-21 subchapter, as will facilitate the efficient and equitable payment
14-22 of royalty in kind may be included in this lease by the board.]
14-23 [Sec. 66.69. LEASE: ADDITIONAL PROVISIONS. Each oil and
14-24 gas lease issued on university lands under this subchapter shall
14-25 include any additional provisions and regulations, not inconsistent
14-26 with the provisions of this subchapter, that the board may
14-27 prescribe to preserve the interest of the state and safeguard the
14-28 university funds.]
14-29 [Sec. 66.70. COMPENSATORY ROYALTIES IN LIEU OF OFFSET WELLS.
14-30 (a) Subject to the provisions of this section, the commissioner of
14-31 the general land office may execute agreements on behalf of the
14-32 permanent university fund that provide for the payment by
14-33 university land oil and gas lessees of compensatory royalty in lieu
14-34 of drilling offset wells that may be required to protect a
14-35 university oil and gas lease from drainage from a well or wells
14-36 located on non-university lands or university lands leased at a
14-37 lesser royalty situated within 1,000 feet of or draining the
14-38 university-leased premises.]
14-39 [(b) Agreements providing for the payment of compensatory
14-40 royalty must be approved by the board for lease of university
14-41 lands.]
14-42 [(c) Any such agreement must be found by the commissioner
14-43 and the board for lease to be in the best interest of the state and
14-44 necessary to prevent economic waste.]
14-45 [(d) Nothing in an agreement shall relieve the lessee of the
14-46 obligation of reasonable development or of the obligation to drill
14-47 offset wells as required by Section 66.75 of this code as to other
14-48 producing horizons.]
14-49 [(e) Beginning on the date fixed in the agreement, the
14-50 lessee shall pay the compensatory royalty monthly to the Board of
14-51 Regents of The University of Texas System in Austin, Texas.]
14-52 [(f) The agreement with respect to the interest of the state
14-53 shall remain in force and effect as long as oil and gas, or either
14-54 of them, is produced from a well located on university or
14-55 non-university acreage and draining the university-leased premises.]
14-56 [(g) The agreement may contain other provisions the
14-57 commissioner and the board for lease deem necessary to protect the
14-58 interests of the permanent university fund.]
14-59 [(h) The agreement shall provide that compensatory royalty
14-60 be paid at the royalty rate provided by the university lease and
14-61 shall provide that compensatory royalty be paid on the market value
14-62 at the well of production from the well located on non-university
14-63 lands or university lands leased at a lesser royalty situated
14-64 within 1,000 feet of or draining the university leased premises.]
14-65 [Sec. 66.71. PRORATED OR REDUCED PRODUCTION CONTRACTS.
14-66 Whenever in the discretion of the board it is to the best interest
14-67 of the university and its permanent fund that production from any
14-68 lease for a limited period of time should be prorated or reduced,
14-69 the board may execute the necessary contract or contracts with the
15-1 lessee or lessees and their assignees to effectuate the same and to
15-2 carry out the intention of this subchapter.]
15-3 [Sec. 66.72. EXTENSION OF PRODUCING LEASE. If oil or gas is
15-4 discovered in paying quantities on any tract covered by a lease,
15-5 then the lease as to that tract shall remain in force as long as
15-6 oil and gas is produced in paying quantities from the tract,
15-7 provided that the other provisions of this subchapter are complied
15-8 with by the lessee.]
15-9 [Sec. 66.73. ASSIGNMENT; RELINQUISHMENT. (a) Any rights
15-10 acquired may be assigned; provided, however, in order for an
15-11 assignment to be valid and effective, the assignment must be filed
15-12 in the county or counties in which the area is situated, and a
15-13 legible copy of the recorded assignment must be filed with the
15-14 Board of Regents of The University of Texas System, accompanied by
15-15 a filing fee of $30 for each lease assigned. If the copy of the
15-16 recorded assignment is filed with the Board of Regents of The
15-17 University of Texas System after the 90th day after the date on
15-18 which the assignment is recorded, the copy must be accompanied by
15-19 the filing fee set by the board and by a late fee equal to the
15-20 amount of the filing fee.]
15-21 [(b) Any rights to any lease and to any assigned portion
15-22 thereof may be relinquished to the state at any time by having an
15-23 instrument of relinquishment recorded in the county or counties in
15-24 which the area relinquished is situated and an original certified
15-25 copy filed with the Board of Regents of The University of Texas
15-26 System, accompanied by $1 for each area relinquished and a filing
15-27 fee of $5 for each lease involved in the relinquishment.]
15-28 [(c) Such an assignment or relinquishment shall not relieve
15-29 the lease owner of any past due obligation theretofore accrued
15-30 thereon.]
15-31 [Sec. 66.74. ROYALTY PAYMENTS; INSPECTION OF RECORDS.
15-32 (a) Royalty as stipulated in the sale shall be paid to the Board
15-33 of Regents of The University of Texas System at Austin, Texas, for
15-34 the benefit of the university permanent fund as provided in this
15-35 section.]
15-36 [(1) The board shall set by rule the date for making
15-37 royalty payments and for filing any reports, documents or other
15-38 records required to be filed by this section. However, the board
15-39 may not set the due date for royalty on oil before the fifth day of
15-40 the second month succeeding the month of production, and may not
15-41 set the due date for royalty on gas before the 15th day of the
15-42 second month succeeding the month of production.]
15-43 [(2) Royalty payments shall be accompanied by:]
15-44 [(a) an affidavit of the owner, manager, or
15-45 other authorized agent completed in the form and manner required by
15-46 the Board of Regents of The University of Texas System and showing
15-47 the gross amount and disposition of all oil and gas produced and
15-48 the market value of the oil and gas;]
15-49 [(b) a copy of all documents, records, or
15-50 reports confirming the gross production, disposition, and market
15-51 value, including gas meter readings, pipeline receipts, gas line
15-52 receipts, and other checks or memoranda of amount produced and put
15-53 into pipelines, tanks, pools, and gas lines or gas storage;]
15-54 [(c) a check stub, schedule, summary, or other
15-55 remittance advice showing by the assigned general land office lease
15-56 number the amount of royalty being paid on each lease; and]
15-57 [(d) other reports or records that the Board of
15-58 Regents of The University of Texas System may require to verify the
15-59 gross production, disposition, and market value.]
15-60 [(3) The lessee has the responsibility for paying
15-61 royalties or having royalties paid by the date provided for payment
15-62 in this section.]
15-63 [(4) If any royalty is not paid when due, a penalty of
15-64 one percent shall be added to the unpaid amount due. If the
15-65 royalty is not paid within seven days after the due date, a penalty
15-66 of an additional four percent of the royalty due is imposed. If
15-67 the royalty is not paid within 30 days after the due date, a
15-68 penalty of an additional five percent is imposed. The minimum
15-69 penalty under this subdivision is $25. Penalty under this
16-1 subdivision may not be added in cases of title dispute as to the
16-2 state's portion of the royalty or to that portion of the royalty in
16-3 dispute as to fair market value. Except as provided in Subsection
16-4 (g), Section 66.68 of this code, royalty payments shall be made in
16-5 cash, by a bank draft drawn on a state or national bank in Texas,
16-6 by a post-office or express money order, or in any other form that
16-7 the law may provide for making payments to the State Treasury and
16-8 are payable to the Board of Regents of The University of Texas
16-9 System.]
16-10 [(5) Copies of contracts for the sale or processing of
16-11 gas and subsequent agreements and amendments to those contracts
16-12 shall be filed with the Board of Regents of The University of Texas
16-13 System within 30 days after the contracts, agreements, or
16-14 amendments are made. These contracts and agreements received by
16-15 the Board of Regents of The University of Texas System shall be
16-16 held in confidence by the Board of Regents of The University of
16-17 Texas System unless otherwise authorized by the lessee.]
16-18 [(6) Interest shall accrue on delinquent royalties
16-19 beginning 60 days after the due date. The annual interest rate on
16-20 delinquent royalties is 12 percent. Interest accrued under this
16-21 subdivision shall be in addition to any delinquency penalty accrued
16-22 under Subdivision (4) of this subsection.]
16-23 [(7) The Board of Regents of The University of Texas
16-24 shall add a penalty of 25 percent to any delinquent royalties if
16-25 the delinquency is due to fraud or an intent to evade the
16-26 provisions of this subchapter on the part of the lessee or his
16-27 agents, employees, or assignees.]
16-28 [(8) If any report, affidavit, supporting document, or
16-29 any other instrument required to be filed under this subsection is
16-30 not filed when due, a penalty accrues in the amount of $10 per
16-31 document or a higher amount established by the Board of Regents of
16-32 The University of Texas, for each 30-day period of delinquency or
16-33 fractional part of that period.]
16-34 [(9) Collection of penalty and interest charges under
16-35 this subsection are in addition to any rights, including
16-36 forfeiture, that the board may exercise for failure to pay a
16-37 royalty or to submit a report or other instrument when due.]
16-38 [(b) The books and accounts, receipt and discharges of all
16-39 wells, tanks, pools, meters, pipelines, and all contracts and other
16-40 records pertaining to the production, transportation, sale, and
16-41 marketing of the oil and gas shall at all times be subject to
16-42 inspection and examination by the commissioner of the general land
16-43 office, the attorney general, the governor, or any member of the
16-44 board of regents, or the representative of either.]
16-45 [(c) For purposes of Section 66.74(a)(3) of this code, a
16-46 royalty payment is timely made if, before the applicable due date,
16-47 the payment is deposited in a postpaid, properly addressed wrapper,
16-48 with a post office or official depository under the care and
16-49 custody of the United States Postal Service.]
16-50 [Sec. 66.75. PROTECTION FROM DRAINAGE. In every case where
16-51 the area in which the oil and gas sold shall be contiguous or
16-52 adjacent to land not university land, the acceptance of the bid and
16-53 the sale made thereby shall constitute an obligation on the lessee
16-54 to adequately protect the land leased from drainage from adjacent
16-55 lands. In cases where the area in which the oil and gas is sold is
16-56 contiguous to other university lands leased or sold, at a lesser
16-57 royalty, the lessee shall likewise protect the state from drainage
16-58 from the land so leased or sold for a lesser royalty. On failure
16-59 to protect the land from drainage, the sale and all rights
16-60 thereunder may be forfeited by the board in the manner provided in
16-61 this subchapter for forfeitures.]
16-62 [Sec. 66.76. FORFEITURE; OTHER REMEDIES; LIEN. (a) If the
16-63 owner of the rights acquired under this subchapter fails or refuses
16-64 to make the payment of any sum due thereon, either as rental or
16-65 royalty on the production, within 30 days after same becomes due,
16-66 or if the owner or his authorized agent makes any false return or
16-67 false report concerning production, royalty, or drilling, or if the
16-68 owner fails or refuses to drill any offset well or wells in good
16-69 faith, as required by his lease, or if the owner or his agent
17-1 refuses the proper authority access to the records and other data
17-2 pertaining to the operations under this subchapter, or if the owner
17-3 or his authorized agent fails or refuses to give correct
17-4 information to the proper authorities, or fails or refuses to
17-5 furnish the log of any well within 30 days after production is
17-6 found in paying quantities, or if any of the material terms of the
17-7 lease are violated, the lease is subject to forfeiture by the board
17-8 by an order entered upon the minutes of the board reciting the
17-9 facts constituting the default and declaring the forfeiture.]
17-10 [(b) The board may have suit instituted for forfeiture
17-11 through the attorney general.]
17-12 [(c) On proper showing by the forfeiting owner, within 30
17-13 days after the declaration of forfeiture, the lease may, at the
17-14 discretion of the board and on such terms as it may prescribe, be
17-15 reinstated.]
17-16 [(d) In case of violation by the owner of the lease
17-17 contract, the remedy of the state by forfeiture is not the
17-18 exclusive remedy, but suit for damages or specific performance, or
17-19 both, may be instituted.]
17-20 [(e) The state shall have a first lien upon all oil and gas
17-21 produced upon the leased area and upon all rigs, tanks, pipeline,
17-22 telephone lines, and machinery and appliances used in the
17-23 production and handling of oil and gas produced thereon, to secure
17-24 any amount due from the owner of the lease.]
17-25 [Sec. 66.77. FILING OF RECORDS. All surveys, files,
17-26 records, copies of lease contracts, and all other records
17-27 pertaining to the leases hereby authorized, shall be filed in the
17-28 general land office and constitute archives thereof and copies of
17-29 any such documents shall also be filed with the Board of Regents of
17-30 The University of Texas System. All existing documents now on file
17-31 in the general land office shall be transferred by copies to the
17-32 Board of Regents of The University of Texas System.]
17-33 [Sec. 66.78. PAYMENTS; DISPOSITION. Payments under this
17-34 subchapter shall be made to the Board of Regents of The University
17-35 of Texas System at Austin, Texas, who shall:]
17-36 [(1) transmit to the state treasurer for deposit to
17-37 the credit of the permanent university fund all bonus, rental, and
17-38 royalty payments;]
17-39 [(2) transmit to the state treasurer for deposit to
17-40 the credit of the available university fund all filing, assignment,
17-41 and relinquishment fees, and all other payments except those
17-42 described in Subdivision (3) of this section; and]
17-43 [(3) retain the one percent fee payment prescribed by
17-44 Section 66.65(c) of this code, for disbursement by the comptroller
17-45 of The University of Texas System for the purposes authorized by
17-46 Section 66.65(c) of this code.]
17-47 [Sec. 66.79. FORMS; CONTRACTS; REGULATIONS. The board shall
17-48 adopt forms and contracts and shall promulgate rules and
17-49 regulations, not inconsistent with the terms of this subchapter,
17-50 that in its judgment will best effectuate the purpose of this
17-51 subchapter and will best protect the university, its lands, and the
17-52 income from the lands.]
17-53 [Sec. 66.80. EXPENSES OF EXECUTING THIS SUBCHAPTER. The
17-54 expenses of executing the provisions of this subchapter shall be
17-55 paid monthly by warrants drawn by the comptroller on the state
17-56 treasury.]
17-57 [Sec. 66.81. FINANCIAL REPORT REQUIRED. The board shall
17-58 file annually with the governor and the presiding officer of each
17-59 house of the legislature a complete and detailed written report
17-60 accounting for all funds received and disbursed by the board during
17-61 the preceding year. The form of the annual report shall be that
17-62 provided in the General Appropriations Act. The report shall be
17-63 distributed with the report required by Section 66.05 of this code.]
17-64 [Sec. 66.82. AUDIT. The financial transactions of the board
17-65 are subject to audit by the state auditor in accordance with
17-66 Chapter 321, Government Code.]
17-67 [Sec. 66.83. POLICIES ON PUBLIC HEARINGS. The board shall
17-68 develop and implement policies which will provide the public with a
17-69 reasonable opportunity to appear before the board and to speak on
18-1 any issue under the jurisdiction of the board.]
18-2 [Sec. 66.84. MARGINAL PROPERTY ROYALTY RATES. (a) In this
18-3 section:]
18-4 [(1) "Barrel of oil equivalent" means 6,000 cubic feet
18-5 of natural gas per 42-gallon barrel of crude oil or a volume of gas
18-6 with a minimum heating value of 6,000,000 British thermal units
18-7 (6,000 Mbtu), whichever is greater.]
18-8 [(2) "Lease" or "leases" means an oil and gas lease
18-9 issued or approved by the state that is valid and in force on or
18-10 after the effective date of this section.]
18-11 [(3) "Qualifying property" means land subject to a
18-12 lease issued under this subchapter.]
18-13 [(4) "Qualifying reservoir" means a reservoir having
18-14 an average daily per well production equal to or less than 15
18-15 barrels of oil equivalent during a period established by the board
18-16 by rule and underlying either:]
18-17 [(A) a qualifying property; or]
18-18 [(B) a pooled unit including a qualifying
18-19 property.]
18-20 [(5) "Reservoir" has the same meaning as "common
18-21 reservoir" as defined in Section 86.002, Natural Resources Code.]
18-22 [(b) The board may provide by rule that the royalty rate for
18-23 qualifying reservoirs may be reduced to not less than one-sixteenth
18-24 (6.25 percent). In determining whether to grant a reduction in the
18-25 royalty rate, the board may consider whether the qualifying
18-26 property is being operated efficiently, including whether the
18-27 property is pooled or has reasonable potential for the application
18-28 of secondary or tertiary recovery techniques.]
18-29 [(c) If a qualifying reservoir for which royalty rate
18-30 reduction is sought under this section is included in a unit
18-31 subject to the authority of the board, the board may modify the
18-32 terms and conditions of the unit as a condition of approving a
18-33 reduction in the royalty rate.]
18-34 SECTION 2. Subsection (d), Section 52.131, Natural Resources
18-35 Code, is amended to read as follows:
18-36 (d) The lessee has the responsibility for paying royalties
18-37 or having royalties paid by the date provided for payment in this
18-38 section. The commissioner may require the lessee and a person with
18-39 whom the lessee deals, including an affiliate, in connection with
18-40 the production, transportation, marketing, treatment, processing,
18-41 or sale of oil and gas, to provide reports or other information as
18-42 the commissioner may consider necessary to determine that royalty
18-43 has been correctly paid. For purposes of this subsection,
18-44 "affiliate" includes the parent company or a subsidiary company, a
18-45 corporation having common ownership with another of 10 percent or
18-46 greater, a partner or joint venturer with a company with respect to
18-47 a business subject to this subchapter, or a relative within the
18-48 second degree of consanguinity or affinity. For purposes of this
18-49 subsection, affiliates of a common entity are also affiliates of
18-50 each other.
18-51 SECTION 3. Subsection (a), Section 52.135, Natural Resources
18-52 Code, is amended to read as follows:
18-53 (a) The books and accounts, receipts, and discharges of all
18-54 wells [lines], tanks, pools, [and] meters, and pipelines, and all
18-55 contracts and other records pertaining directly or indirectly
18-56 [relating] to the production, transportation, sale, treatment,
18-57 processing, or [and] marketing of [the] oil and gas from lands
18-58 subject to this chapter, or relevant to establishing the volume or
18-59 value of such production, whether such records are held by or are
18-60 in the possession of the lessee or a third party dealing with the
18-61 lessee, shall at all times be [are] subject [at any time] to
18-62 inspection and copying [examination] by the commissioner, [and] the
18-63 attorney general, the [and] governor, or the representative of any
18-64 of them. The commissioner may, if necessary, compel the production
18-65 of such records by subpoena enforceable throughout the state [their
18-66 representatives].
18-67 SECTION 4. Section 52.136, Natural Resources Code, is
18-68 amended to read as follows:
18-69 Sec. 52.136. LIEN. (a) The state has a statutory first
19-1 lien on all oil and gas produced on any lease area to secure
19-2 payment of unpaid royalty and other amounts due.
19-3 (b) By acceptance of a lease, the lessee grants to the state
19-4 an express contractual lien on and security interest in all oil and
19-5 gas in and extracted from the area covered by the lease, all
19-6 proceeds which may accrue to the lessee from the sale of the oil
19-7 and gas, whether the proceeds are held by the lessee or another
19-8 person, and all fixtures on and improvements to the area covered by
19-9 the lease used in connection with the production or processing of
19-10 the oil and gas, to secure the payment of royalties and other
19-11 amounts due or to become due under the lease or this subchapter and
19-12 to secure payment of damages or loss that the state may suffer by
19-13 reason of the lessee's breach of a covenant or condition of the
19-14 lease, whether express or implied.
19-15 (c) The statutory and contractual liens and security
19-16 interests described in this section may be foreclosed with or
19-17 without court proceedings in the manner provided under Chapter 9,
19-18 Business & Commerce Code. The state may require the lessee to
19-19 execute and record instruments reasonably necessary to acknowledge,
19-20 attach, or perfect the liens.
19-21 SECTION 5. Changes made by this Act to Sections 52.131(d),
19-22 52.135(a), and 52.136, Natural Resources Code, relate to the
19-23 administration of leases and, to the extent these changes do not
19-24 conflict with existing contractual rights, these changes in law
19-25 will apply to existing and future leases.
19-26 SECTION 6. Sections 52.291, 52.292, 52.293, 52.294, 52.295,
19-27 and 52.296, Natural Resources Code, are repealed.
19-28 SECTION 7. The terms of any oil and gas lease executed
19-29 before the effective date of this Act that impose the requirements
19-30 of Sections 52.291 through 52.296, Natural Resources Code, are of
19-31 no force and effect.
19-32 SECTION 8. The changes in law made by this Act to Sections
19-33 66.66, 66.67, 66.69, 66.71, 66.72, 66.73, and 66.76(c), Education
19-34 Code, apply only to leases awarded on or after January 1, 1998,
19-35 except as provided by Section 66.70, Education Code. Leases
19-36 awarded prior to that date shall be governed by the law in effect
19-37 when the lease was issued and the former law is continued in effect
19-38 for that purpose. Changes in law made by this Act to Sections
19-39 66.65, 66.70, 66.74, 66.75, 66.76(a), (b), and (d), 66.77, 66.78,
19-40 66.79, 66.80, 66.81, 66.82, and 66.83, Education Code, relate to
19-41 the administration of leases and, to the extent that these changes
19-42 do not conflict with existing contractual rights, these changes in
19-43 law will apply to existing and future leases.
19-44 SECTION 9. This Act takes effect January 1, 1998.
19-45 SECTION 10. The importance of this legislation and the
19-46 crowded condition of the calendars in both houses create an
19-47 emergency and an imperative public necessity that the
19-48 constitutional rule requiring bills to be read on three several
19-49 days in each house be suspended, and this rule is hereby suspended.
19-50 * * * * *