HBA-SEB C.S.H.B. 3696 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3696 By: Hawley Energy Resources 4/22/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, a state fee lease may be transferred at any time by a lessee. Additionally, every transferee is required to succeed to all rights and be subject to all obligations, liabilities, and penalties owed to the state by the original lessee or any prior transferee of the lease. As it stands, current bonding programs in place at the Railroad Commission of Texas may not be adequate to ensure that wells on state-owned submerged lands or any other lands are properly plugged and abandoned. C.S.H.B. 3696 authorizes a lessee to transfer a lease with the consent of the Commissioner of the General Land Office (commissioner). Existing law does not require the commissioner's consent. This bill authorizes the commissioner to require the transferee to demonstrate that it has the financial responsibility to discharge its obligations under the lease, including the obligations to properly plug abandoned wells, remove platforms or pipelines, or remediate contamination at drill sites. C.S.H.B. 3696 also authorizes the commissioner to require the transferee to post a bond or provide other security to secure those obligations if the transferee is unable to demonstrate such financial responsibility to the commissioner's satisfaction. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 52.026, Natural Resources Code, by amending Subsection (a) and adding Subsection (e), as follows: (a) Authorizes a lessee of an area under this subchapter (Lease of Public School and Gulf Land) to transfer the lease at any time with the prior written consent of the Commissioner of the General Land Office (commissioner). Prohibits the commissioner from withholding the consent unreasonably. Authorizes the commissioner to require the transferee to demonstrate that it has the financial responsibility to discharge its obligations under the lease, including the obligations to properly plug abandoned wells, remove platforms or pipelines, or remediate contamination at drill sites. Authorizes the commissioner to require the transferee to post a bond or provide other security to secure those obligations if the transferee is unable to demonstrate such financial responsibility to the commissioner's satisfaction. (e) Provides that this section (Lease Transfer) does not relieve a person from the duty to comply with a rule adopted or order issued by the Railroad Commission of Texas under another provision of this code. SECTION 2. Effective date: September 1, 1999. SECTION 3. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The substitute modifies the original to conform to Legislative Council format. The substitute makes a conforming change in the caption. The substitute modifies the original in SECTION 1 by amending Section 52.026(a), Natural Resources Code, to refer to a person to whom a lease is transferred as the transferee, rather than the assignee. The substitute authorizes a lessee to transfer a lease with prior consent of the Commissioner of the General Land Office (commissioner) and prohibits the commissioner from unreasonably withholding consent. The original would have required the commissioner's consent for liability to pass to an assignee. The substitute authorizes the transferee to demonstrate that it has the financial responsibility, rather than ability, to properly discharge its obligations under the lease, including the obligations to properly plug abandoned wells, remove platforms or pipelines, or remediate contamination at drill sites. The substitute authorizes the commissioner to require the transferee to post a bond or provide other security to secure those obligations if the transferee is unable to demonstrate such financial responsibility to the commissioner's satisfaction, rather than if the commissioner determines it to be in the best interest of the permanent school fund. The substitute modifies SECTION 1 by adding Section 52.026(e), Natural Resources Code, which provides that Section 52.026 (Lease Transfer) does not relieve a person from the duty to comply with a rule adopted or order issued by the Railroad Commission of Texas under another provision of the Natural Resources Code. The substitute deletes the text of SECTIONS 2 and 3 of the original. SECTION 2 of the original would have amended Section 52.172, Natural Resources Code, to require all leases and sales to be assignable with prior written consent of the owner. SECTION 3 of the original would have amended Section 52.032, Natural Resources Code, to authorize the commissioner to require the posting of a bond or other security to secure obligations if the commissioner decided that an assignee was financially incapable of properly plugging and abandoning wells, removing platforms and pipelines, or remediating any contamination at the drill site. The substitute adds an effective date in SECTION 2 of the original and redesignates SECTION 4 of the original (emergency clause) to SECTION 3 of the substitute.