By:  Ogden                                            S.B. No. 1545

         Line and page numbers may not match official copy.

         Bill not drafted by TLC or Senate E&E.

                                A BILL TO BE ENTITLED

                                       AN ACT

 1-1     relating to the payment for proceeds derived from the sale of oil

 1-2     or gas from an oil or gas well located in this state.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Section 91.401, Natural Resources Code in amended

 1-5     to read as follows:

 1-6           Sec. 91.401.  Definitions.  In this subchapter:

 1-7                 (1)  "Payee" means any person or persons legally

 1-8     entitled to payment from the proceeds derived from the sale of oil

 1-9     or gas from an oil or gas well located in this state.

1-10                 (2)  "Payor" means the party who undertakes to

1-11     distribute oil and gas proceeds to the payee, whether as the

1-12     purchaser of the production of oil or gas generating such proceeds

1-13     or as operator of the well from which such production was obtained

1-14     or as lessee under the lease on which royalty is due.  The payor is

1-15     the first purchaser of such production of oil or gas from an oil or

1-16     gas well, unless the owner of the right to produce under an oil or

1-17     gas lease or pooling order and the first purchaser have entered

1-18     into arrangements providing that the proceeds derived from the sale

1-19     of oil or gas are to be paid by the first purchaser to the owner of

1-20     the right to produce who is thereby deemed to be the payor having

1-21     the responsibility of paying those proceeds received from the first

 2-1     purchaser to the payee.

 2-2                 (3)  "Division order" means an agreement signed by the

 2-3     payee directing the distribution of proceeds from the sale of oil,

 2-4     gas, casinghead gas, or other related hydrocarbons.  The order

 2-5     directs and authorizes the payor to make payment for the products

 2-6     taken in accordance with the division order.  When used herein

 2-7     "division order" shall also include "transfer order".

 2-8                 (4)  "Transfer order" means an agreement signed by a

 2-9     payee and his transferee (new payee) directing the payor under the

2-10     division order to pay another person a share in the oil or gas

2-11     produced.

2-12                 (5)  "Proceeds" means all payment(s) received by an

2-13     operator, or an affiliated subsidiary in which the operator is a

2-14     50% or greater owner, for oil or gas production, whether

2-15     categorized as payment(s) for production, bonus or premium

2-16     payment(s), or otherwise, and whether received as one payment or

2-17     multiple payments from one or more purchasers.

2-18           SECTION 2.  This Act takes effect September 1, 1997.

2-19           SECTION 3.  The importance of this legislation and the

2-20     crowded condition of the calendars in both houses create an

2-21     emergency and an imperative public necessity that the

2-22     constitutional rule requiring bills to be read on three several

2-23     days in each house be suspended, and this rule is hereby suspended.