By Chisum H.B. No. 3070
77R2916 MI-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to authorizing plans for unit operations for oil or oil
1-3 and gas production.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subtitle C, Title 3, Natural Resources Code, is
1-6 amended by adding Chapter 104 to read as follows:
1-7 CHAPTER 104. UNITIZATION
1-8 SUBCHAPTER A. GENERAL PROVISIONS
1-9 Sec. 104.001. SHORT TITLE. This chapter may be cited as the
1-10 Texas Enhanced Recovery Unitization Act.
1-11 Sec. 104.002. DEFINITIONS. In this chapter:
1-12 (1) "Affiliate" means a corporation, partnership, or
1-13 other legal entity that owns, is owned by, or is under common
1-14 ownership with another corporation, partnership, or legal entity to
1-15 the extent of 50 percent or more or that otherwise controls or is
1-16 controlled by another corporation, partnership, or other legal
1-17 entity. Affiliates of a common entity are also affiliates of each
1-18 other.
1-19 (2) "Commission" means the Railroad Commission of
1-20 Texas.
1-21 (3) "Common source of supply" means:
1-22 (A) a common reservoir as defined by Section
1-23 86.002; or
1-24 (B) separate multiple stratigraphic or
2-1 lenticular accumulations of oil or gas or oil and gas that have
2-2 been recognized and regulated as a common reservoir by the
2-3 commission under Section 86.081(b).
2-4 (4) "Extraneous substances" are hydrocarbon or other
2-5 substances purchased or otherwise obtained from outside a unit area
2-6 for injection into the common source of supply during unit
2-7 operations.
2-8 (5) "Marketing" includes sales of production and
2-9 associated gathering, storage, treatment, and compression.
2-10 (6) "Oil and gas" means "oil" and "gas" as defined by
2-11 Section 85.001.
2-12 (7) "Plan of unitization" means a plan or agreement
2-13 that is consistent with the requirements of this chapter between
2-14 working interest owners and royalty owners in a common reservoir in
2-15 which unit operations may be conducted to enhance the production of
2-16 oil or oil and gas from the common reservoir above the volumes that
2-17 would otherwise be produced by primary recovery operations only.
2-18 (8) "Postunitized daily average primary production"
2-19 means the amount of production established by the commission under
2-20 Section 104.028(b).
2-21 (9) "Primary recovery" means the displacement of oil
2-22 or oil and gas from the earth into the well bore by means of the
2-23 natural pressure of the reservoir, including artificial lift.
2-24 (10) "Royalty interest" means the right to, or
2-25 interest in, oil and gas or proceeds of oil and gas production,
2-26 other than a working interest.
2-27 (11) "Royalty owner" means the owner of a royalty
3-1 interest.
3-2 (12) "Tract" means a parcel of land lying within the
3-3 unit area that is under uniform royalty and working interest
3-4 ownership.
3-5 (13) "Tract participation" means the percentage shown
3-6 in the plan of unitization for allocating unit production to a
3-7 tract.
3-8 (14) "Unit area" includes the surface area inside the
3-9 boundaries of the unit and the common source of supply or the part
3-10 of the common source underlying the surface area that may be
3-11 reasonably required for conduct of unit operations.
3-12 (15) "Unit cost" or "unit expense" includes any cost
3-13 or expense incurred in the conduct of unit operations.
3-14 (16) "Unit incremental enhanced recovery production"
3-15 means the amount of production allocated to a working interest
3-16 owner exceeding the working interest owner's postunitized daily
3-17 average primary production established under Section 104.028.
3-18 (17) "Unit operations" means:
3-19 (A) operations, other than operations involving
3-20 experimental or unproven enhanced recovery techniques, related to
3-21 the production of oil and gas from the unit area, including:
3-22 (i) repressuring;
3-23 (ii) waterflooding;
3-24 (iii) pressure maintenance;
3-25 (iv) tertiary recovery operations; or
3-26 (v) any other similar operations that are
3-27 incidental or necessary to increase the ultimate recovery of oil or
4-1 gas, oil and gas, or other hydrocarbons from the proposed unit
4-2 area; or
4-3 (B) the establishment and operation of the
4-4 necessary facilities for the operations listed in Paragraph (A).
4-5 (18) "Unit operator" means the person designated under
4-6 the plan of unitization to conduct unit operations, acting as
4-7 operator and not merely as a working interest owner.
4-8 (19) "Unit participation of a royalty owner" means the
4-9 percentage equal to the sum of the products obtained by
4-10 multiplying the royalty interest of each royalty owner in each
4-11 tract by the tract participation of that tract.
4-12 (20) "Unit participation of a working interest owner
4-13 or unleased mineral interest owner" means the percentage equal to
4-14 the sum of the products obtained by multiplying the working
4-15 interest of the working interest owner in each tract or, if the
4-16 working interest owner is an unleased mineral interest owner, the
4-17 mineral interest of that owner in each tract, by the tract
4-18 participation of that tract.
4-19 (21) "Unit production" includes all oil and gas or oil
4-20 or gas produced and saved from a unit area after the effective date
4-21 of the unit regardless of the well or tract in the unit area from
4-22 which the oil and gas are produced. The term does not include the
4-23 following substances if the working interest owners under a lease,
4-24 contract, agreement, or unit plan have excluded the substances from
4-25 unit production:
4-26 (A) recoverable extraneous substances injected
4-27 into the common source of supply or used in well treatment or
5-1 pressure maintenance;
5-2 (B) any production that is reinjected into the
5-3 unit area, unless the reinjected production is later removed from
5-4 the unit area for nonunit purposes or sold, in which case it will
5-5 be considered to be unit production; or
5-6 (C) any production used or consumed in unit
5-7 operations.
5-8 (22) "Working interest" means an interest in oil and
5-9 gas by virtue of a lease, operating agreement, fee title, or
5-10 otherwise, including a carried interest, the owner of which is
5-11 obligated to pay, in cash, out of production, or otherwise, the
5-12 owner's share of the unit expense under the proposed or approved
5-13 plan of unitization.
5-14 (23) "Working interest owner" means the owner of
5-15 working interest.
5-16 Sec. 104.003. POWER AND AUTHORITY OF COMMISSION. (a) The
5-17 commission shall adopt any necessary rule, issue and enforce any
5-18 necessary order, and perform all required acts necessary to carry
5-19 out the purposes of this chapter.
5-20 (b) The commission in accordance with this chapter shall
5-21 determine whether a plan of unitization, including the
5-22 participation formula, proposed under this chapter for all or part
5-23 of a common reservoir is fair, reasonable, and equitable for all
5-24 interests concerned and necessary to carry out the purposes of this
5-25 chapter.
5-26 Sec. 104.004. APPLICABILITY. (a) This chapter does not
5-27 apply to:
6-1 (1) any common source of supply that has produced over
6-2 five billion barrels of oil;
6-3 (2) a gas field that produces primarily dry gas or
6-4 natural gas and condensate; or
6-5 (3) land that has been excluded from unitization under
6-6 Section 104.030.
6-7 (b) This chapter does not affect or apply to a voluntary
6-8 cooperative agreement in secondary recovery operations as provided
6-9 by Subchapter B, Chapter 101.
6-10 Sec. 104.005. APPLICATION TO PUBLIC LAND. (a) This chapter
6-11 does not apply to land owned by the state or land in which the
6-12 state has a direct or indirect interest.
6-13 (b) Except as provided by Subsection (c), this chapter does
6-14 not amend, repeal, change, alter, or affect in any manner the
6-15 authority or jurisdiction of the state, the commissioner of the
6-16 General Land Office, or any board or agency of the state with
6-17 respect to any land or interest in land in which the state, the
6-18 commissioner of the General Land Office, or any board or agency of
6-19 the state has jurisdiction or the unitization of such land.
6-20 (c) Land in which the state has an interest as described in
6-21 this chapter may be unitized under this chapter:
6-22 (1) at the instance of the commissioner of the General
6-23 Land Office; or
6-24 (2) with the approval of or consent to a plan of
6-25 unitization by the state, the commissioner of the General Land
6-26 Office, or the board or agency having jurisdiction.
6-27 (d) If land in which the state has an interest is to be
7-1 unitized as provided for by Subsection (c), the plan of unitization
7-2 and unit operating agreement is subject to and shall incorporate by
7-3 reference all statutes, rules, and regulations that apply to the
7-4 land in which the state has an interest.
7-5 Sec. 104.006. CONFLICT WITH ANTITRUST ACTS. (a) A plan of
7-6 unitization and operation under an agreement that complies with
7-7 this chapter, is approved by commission order, and is found by the
7-8 commission to be necessary to prevent waste and conserve the
7-9 natural resources of this state may not be construed to be in
7-10 violation of Chapter 15, Business & Commerce Code.
7-11 (b) If a court finds a conflict between this chapter and
7-12 Chapter 15, Business & Commerce Code, this chapter is intended as a
7-13 reasonable exception to that law that is necessary for the public
7-14 interest described by Subsection (a).
7-15 (c) If a court finds a conflict between this chapter and
7-16 Chapter 15, Business & Commerce Code, and finds that this chapter
7-17 is not a reasonable exception to Chapter 15, Business & Commerce
7-18 Code, the legislature intends that this chapter, or any conflicting
7-19 part of this chapter, be declared invalid rather than that Chapter
7-20 15, Business & Commerce Code, or any portion of that chapter, be
7-21 declared invalid.
7-22 Sec. 104.007. APPEALS. A person affected by an order of the
7-23 commission issued under this chapter is entitled to judicial review
7-24 of that order in accordance with Chapter 2001, Government Code.
7-25 The petition for review shall be filed in Travis County or in any
7-26 county in which the affected tract is located.
7-27 (Sections 104.008-104.020 reserved for expansion
8-1 SUBCHAPTER B. APPLICATION PROCEDURES; CONSIDERATION
8-2 AND APPROVAL OF PLAN
8-3 Sec. 104.021. APPLICATION FOR UNITIZATION. (a) Any working
8-4 interest owner or proposed unit operator may file an application
8-5 with the commission requesting an order under this chapter for the
8-6 unit operation of a common source of supply or a part of that
8-7 common source of supply.
8-8 (b) The application shall contain:
8-9 (1) a description of the proposed unit area and the
8-10 vertical limits and producing horizons to be included in that unit
8-11 area with a map or plat attached;
8-12 (2) a statement of the type of operations contemplated
8-13 for the unit area;
8-14 (3) a copy of a proposed plan of unitization and all
8-15 agreements related to that plan that the applicant considers fair,
8-16 reasonable, and equitable, including a unit operating agreement
8-17 that contains provisions dealing with:
8-18 (A) overhead rates, interest charges, costs
8-19 directly associated with marketing of unit production, or any other
8-20 profit or benefit that may accrue solely or in unequal shares to
8-21 the unit operator;
8-22 (B) voting procedures;
8-23 (C) removal or replacement of the unit operator;
8-24 (D) allocation of unit expense;
8-25 (E) audit periods and rights to review all
8-26 records pertaining to unit operation;
8-27 (F) dissolution of the unit; and
9-1 (G) disclosure regarding any use by the unit
9-2 operator of any affiliate of the operator for marketing production
9-3 or for products or services costing more than $100,000 in the
9-4 aggregate for each particular product or service;
9-5 (4) an allegation of the facts required to be found by
9-6 the commission under Section 104.024;
9-7 (5) an allegation that the applicant has obtained at
9-8 least the minimum required approval of the plan of unitization as
9-9 required by Section 104.026; and
9-10 (6) an allegation that:
9-11 (A) each owner of an interest in the oil and gas
9-12 under each tract in the proposed unit area has been given an
9-13 opportunity to enter into the unit on the same basis; and
9-14 (B) the applicant or proposed unit operator has
9-15 made a good faith effort to voluntarily unitize all interests in
9-16 the proposed unit area.
9-17 (c) The applicant shall submit with the application a list
9-18 including:
9-19 (1) the name of each person owning or having a working
9-20 or royalty interest in the proposed unit area and each offset
9-21 operator adjacent to the proposed unit area; and
9-22 (2) an address for each person listed or a statement
9-23 that the person's address is unknown.
9-24 Sec. 104.022. HEARING REQUIRED. (a) On receipt of an
9-25 application, the commission shall promptly set the matter for
9-26 hearing and cause notice of the hearing to be given as provided by
9-27 Section 104.023.
10-1 (b) At the hearing an affected person is entitled to be
10-2 heard, to introduce evidence, and to introduce and cross-examine
10-3 witnesses.
10-4 Sec. 104.023. NOTICE. (a) Notice of the application and
10-5 the time and place of the hearing on the application shall be
10-6 mailed, postage prepaid, not later than the 31st day before the
10-7 hearing date to each working interest owner, operator, and royalty
10-8 owner in the unit area and to each offset operator whose name and
10-9 address is shown on the list provided by the applicant under
10-10 Section 104.021.
10-11 (b) Notice of an application and the time and place of
10-12 hearing shall be published once a week for four consecutive weeks
10-13 in a newspaper of general circulation authorized by law to publish
10-14 legal notices in the county or counties in which the land involved
10-15 is located, or in another newspaper or publication designated by
10-16 the commission, not later than the 31st day before the hearing
10-17 date.
10-18 (c) Typographical errors in a notice that are not material
10-19 do not affect the validity of the notice.
10-20 Sec. 104.024. FINDINGS OF COMMISSION. After notice and a
10-21 hearing as provided by Sections 104.022 and 104.023, the commission
10-22 shall determine whether:
10-23 (1) the unitized operation of the common source of
10-24 supply or the part of the common source of supply involved in the
10-25 plan of unitization is reasonably necessary to conduct unit
10-26 operations and the plan of unitization is reasonably necessary to
10-27 prevent waste, protect correlative rights, and promote the
11-1 conservation of oil or oil and gas;
11-2 (2) the present value of the estimated incremental
11-3 recovery of oil or oil and gas from the common source of supply is
11-4 reasonably anticipated to exceed the present value of all estimated
11-5 incremental expenses incident to conducting unit operations;
11-6 (3) the productive limits of the common source of
11-7 supply or the part of the common source of supply proposed for
11-8 unitization have been reasonably defined by development and the
11-9 area proposed for unitization is reasonably necessary and
11-10 sufficient for unit operations;
11-11 (4) the unsigned owners of interests in the oil and
11-12 gas under each tract of land in the proposed unit area have been
11-13 given a reasonable opportunity to enter into the unit on the same
11-14 basis as the owners of interests in the oil and gas under the other
11-15 tracts in the unit area and the applicant or proposed unit operator
11-16 has made a good faith effort to voluntarily unitize all interests
11-17 within the proposed unit area;
11-18 (5) the applicant has obtained approval for the plan
11-19 of unitization from at least the minimum number of working interest
11-20 and royalty interest owners required by Section 104.026;
11-21 (6) the expense of establishing the unit and unit
11-22 expenses that are to be charged as unit expenses are reasonable and
11-23 necessary;
11-24 (7) the expenses relating to unit operations will:
11-25 (A) be for the common benefit of all persons
11-26 with interests in the unit;
11-27 (B) be allocated on a fair and equitable basis;
12-1 and
12-2 (C) result in a profit or other benefit that
12-3 accrues solely or in unequal shares to the unit operator or an
12-4 affiliate of the operator only if authorized by the plan of
12-5 unitization;
12-6 (8) a working interest owner has a reasonable right to
12-7 review all records pertaining to unit operations and a reasonable
12-8 amount of time to audit unit expenses;
12-9 (9) the plan of unitization meets the requirements of
12-10 Subchapter C and reasonably conforms to the requirements of this
12-11 chapter; and
12-12 (10) the proposed plan of unitization, including the
12-13 tract participation formula and percentages, is in all respects
12-14 fair, reasonable, and equitable.
12-15 Sec. 104.025. UNITIZATION ORDER; EFFECT OF OPERATIONS. (a)
12-16 If the commission finds that all the requirements of Section
12-17 104.024 are met, the commission shall order:
12-18 (1) the unitized operation of the unit area; and
12-19 (2) unitization of all working interests and royalty
12-20 interests in the unit area.
12-21 (b) The order shall:
12-22 (1) unitize all interests of all owners in the area
12-23 covered by the plan of unitization with the same effect as if those
12-24 owners had executed the plan of unitization and had been parties to
12-25 the unit agreement;
12-26 (2) approve the area of the common source of supply or
12-27 the part of the common source of supply to be included in the unit
13-1 area and the vertical limits of the common source of supply;
13-2 (3) approve the plan of unitization, including the
13-3 allocation of production and costs among tracts; and
13-4 (4) designate the initial unit operator named in the
13-5 plan of unitization.
13-6 (c) Unit operations on and production from any lease in the
13-7 unit area for which a unitization order has been entered shall be
13-8 considered for all purposes the conduct of unit operations on and
13-9 production from each separately owned lease in the unit.
13-10 (d) If only a part of a lease is included in the unit, unit
13-11 operations on or production from the unit maintains an oil and gas
13-12 lease as to the part excluded from the unit only if the excluded
13-13 part of the lease would have been maintained under the lease.
13-14 Sec. 104.026. APPROVAL OF PROPOSED PLAN OF UNITIZATION BY
13-15 WORKING INTEREST AND ROYALTY OWNERS. (a) A proposed plan of
13-16 unitization must be approved in writing by:
13-17 (1) the owners, on a unit participation basis, of at
13-18 least 80 percent of the aggregate unit working interests; and
13-19 (2) at least 80 percent of the owners, on a unit
13-20 participation basis, of the aggregate unit royalty interests that
13-21 complete and return the ballot provided for in Subsection (b).
13-22 (b) A ballot distributed to the owners of royalty interests
13-23 must:
13-24 (1) state that the applicant will confirm by mail that
13-25 the ballot has been received and whether it has been counted as a
13-26 vote for or against the proposed plan;
13-27 (2) be sent by certified mail, return receipt
14-1 requested, to each owner of a royalty interest in the proposed unit
14-2 area, including each owner of an unleased mineral interest;
14-3 (3) be sent a second time by certified mail, return
14-4 receipt requested, to any interest owner for whom a receipt from
14-5 the first mailing is not returned after a reasonable effort has
14-6 been made between the first and the second mailings to correct any
14-7 address that appears to be inaccurate; and
14-8 (4) be accompanied by:
14-9 (A) a copy of the proposed plan of unitization;
14-10 (B) an objective summary of the proposed plan
14-11 that is reasonably calculated to provide an ordinary royalty owner
14-12 with an adequate understanding of how the royalty owner's property
14-13 interest would be affected by a favorable vote and how that
14-14 interest would be affected by an unfavorable vote; and
14-15 (C) a postage-paid reply envelope.
14-16 (c) A royalty owner may not be required to return a ballot
14-17 earlier than the 14th day after the date the owner receives the
14-18 ballot and other information required by Subsection (b).
14-19 (d) The applicant shall confirm the receipt of each ballot
14-20 and indicate to the royalty owner returning the ballot whether it
14-21 has been counted as a vote for or a vote against the proposed
14-22 plan.
14-23 (e) The commission shall dismiss the application if the
14-24 commission finds that the applicant has not reasonably complied
14-25 with Subsection (b), (c), or (d).
14-26 Sec. 104.027. WORKING INTEREST OWNER OPTIONS. (a) Each
14-27 working interest owner, excluding the unit operator, may elect,
15-1 before the commission issues the order approving unitization and
15-2 subject to commission approval, to receive the rights associated
15-3 with the postunitized daily average primary production net revenues
15-4 of the working interest owner as established under Section 104.028
15-5 throughout the life of the unit and the right to share in unit
15-6 incremental enhanced recovery production, subject to the payment of
15-7 costs of unit operations as established under Section 104.024.
15-8 (b) The working interest owner's share of unit expenses
15-9 shall be credited by the amount of the working interest owner's
15-10 postunitized daily average primary production costs established
15-11 under Section 104.028 before the compensation amount established
15-12 under Section 104.048 is computed.
15-13 (c) At no time during the life of the unit shall the unit
15-14 expenses associated with the working interest owner's share of the
15-15 unit incremental enhanced recovery production be paid from the
15-16 postunitized daily average primary production net revenues of the
15-17 working interest owner.
15-18 (d) If a working interest owner makes the election under
15-19 this section, the operator is obligated to pay, or cause to be
15-20 paid, to the working interest owner's royalty owners their full
15-21 share of unit production, unless the royalty owners, the working
15-22 interest owner, and the operator voluntarily agree otherwise.
15-23 Sec. 104.028. ESTABLISHMENT OF PRIMARY PRODUCTION NET
15-24 REVENUES AND COSTS OF WORKING INTEREST OWNER. (a) The primary
15-25 production net revenue of a working interest owner equals the
15-26 revenue associated with the postunitized daily average primary
15-27 production attributable to that working interest owner minus the
16-1 unit operator's royalty obligations associated with the working
16-2 interest owner and the postunitized daily average primary
16-3 production costs to produce the postunitized daily average primary
16-4 production.
16-5 (b) The postunitized daily average primary production
16-6 attributable to the working interest owner is the amount of
16-7 production the working interest owner would be entitled to if the
16-8 leases were still in primary production. The postunitized daily
16-9 average primary production shall be based on:
16-10 (1) the commission's establishing the working interest
16-11 owner's average daily preunitized production level based on the
16-12 six-month period before the filing of the plan of unitization or
16-13 another period established by the commission; and
16-14 (2) the commission's establishing a production decline
16-15 curve that is agreed to by the working interest owner and the
16-16 operator or, if the working interest owner and the operator fail to
16-17 agree, set by the commission.
16-18 (c) The postunitized daily average primary production costs
16-19 to produce the postunitized daily average primary production are
16-20 equal to an amount agreed to by the working interest owner and the
16-21 operator. If the working interest owner and the operator fail to
16-22 agree, the postunitized daily average primary production costs are
16-23 the amount that the commission fairly and reasonably determines the
16-24 working interest owner would have incurred if the working interest
16-25 owner's operator immediately before the application was filed were
16-26 still operating the leases and associated production in primary
16-27 production.
17-1 Sec. 104.029. WORKING INTEREST OWNER NET REVENUES AND
17-2 MARKETING RIGHTS. The working interest owner shall receive all net
17-3 revenues attributable to the postunitized daily average primary
17-4 production as established by Section 104.028. At no time during
17-5 the life of the unit may the unit operator or any other working
17-6 interest owner attach or place a lien on the working interest
17-7 owner's postunitized daily average primary production net revenues
17-8 established under Section 104.027 or the production associated with
17-9 those revenues. The rights and obligations under Section 104.091
17-10 of a working interest owner who makes an election under this
17-11 section apply to both the owner's postunitized daily average
17-12 primary production and the owner's share of unit incremental
17-13 enhanced recovery production.
17-14 Sec. 104.030. EXCLUSION OF LAND. (a) Land may be excluded
17-15 from a unitization plan if, on the date the application for
17-16 unitization is filed with the commission under Section 104.021:
17-17 (1) the land is not under current lease or agreement
17-18 providing for permitting the exploration for or production of oil
17-19 or oil and gas;
17-20 (2) the fee surface ownership has not been severed
17-21 from the fee mineral ownership; and
17-22 (3) all the owners owning present possessory or future
17-23 possessory interests in the land have elected to exclude the land
17-24 from the proposed plan of unitization.
17-25 (b) The commission shall provide an opportunity for, but may
17-26 not require, an owner described by Subsection (a)(3) to elect to
17-27 exclude land under this section. The election must be made not
18-1 later than the 30th day before the date on which the ballots
18-2 required by Section 104.026 are mailed by the commission.
18-3 (c) If land is excluded from unitization under this section,
18-4 and unless the owners who elected to exclude the land and the unit
18-5 owners subsequently otherwise agree, the owners who have elected to
18-6 exclude land forfeit:
18-7 (1) any right to present and future production of oil
18-8 or oil and gas from the unitized formation established under the
18-9 plan of unitization; and
18-10 (2) any right to proceeds or other money arising from
18-11 or associated with the production described by Subdivision (1).
18-12 Sec. 104.031. PARTIAL FIELD UNITIZATIONS. (a) Any party
18-13 who claims that the exclusion of a tract from a proposed unit area
18-14 will have an unreasonable adverse effect on the excluded tract has
18-15 the burden of proving that claim by clear and convincing evidence.
18-16 (b) The commission may not deny an application for
18-17 unitization under this chapter solely because the commission finds
18-18 that exclusion of a tract from a proposed unit area will have an
18-19 unreasonable adverse effect on the excluded tract. In that
18-20 instance the commission shall issue an order under Section 104.025
18-21 approving the application on the condition that the applicant or
18-22 unit operator offer participation in the approved unit under the
18-23 unit expansion provisions of Section 104.072 or under the approved
18-24 unit agreement.
18-25 Sec. 104.032. STATUS OF UNLEASED MINERAL INTERESTS. Any
18-26 mineral interest in the unit area that is unleased on the effective
18-27 date of unitization is considered for purposes of unit
19-1 participation:
19-2 (1) to have a royalty interest of one-fifth (1/5) of
19-3 that interest, unless the commission determines that a different
19-4 royalty interest is reasonable under the circumstances; and
19-5 (2) to be a working interest to the extent of
19-6 four-fifths (4/5) of that interest, unless the commission
19-7 determines that a different working interest is reasonable under
19-8 the circumstances in order to consider the unleased interest or
19-9 right to have a different royalty interest as provided by
19-10 Subdivision (1), with all the rights and obligations of a lessee as
19-11 if the mineral rights were leased.
19-12 (Sections 104.033-104.040 reserved for expansion
19-13 SUBCHAPTER C. PLAN OF UNITIZATION
19-14 Sec. 104.041. AUTHORIZED PLANS. (a) A plan of unitization
19-15 may be proposed under this chapter only to establish units and
19-16 cooperative facilities necessary for unit operations that are
19-17 reasonably anticipated to substantially increase the recovery of
19-18 oil above that which would be recovered by primary recovery alone.
19-19 (b) The proposed plan of unitization and the commission
19-20 order approving the plan may provide for unit operation of less
19-21 than the whole of a common source of supply if:
19-22 (1) the unit area is of a size and shape that is
19-23 reasonably suitable for unit operations; and
19-24 (2) that operation will not have an unreasonable
19-25 adverse effect on the other parts of the common source of supply
19-26 that are not included in the plan of unitization.
19-27 Sec. 104.042. SINGLE OR MULTIPLE AGREEMENTS. The plan of
20-1 unitization may consist of one or more agreements that the
20-2 applicant considers to be fair, reasonable, and equitable if the
20-3 applicant submits each agreement to the commission as required by
20-4 Section 104.021(b)(3).
20-5 Sec. 104.043. PARTICIPATION; ALLOCATION OF UNIT PRODUCTION.
20-6 (a) The proposed plan shall provide for the apportionment and
20-7 allocation of the unit production among the tracts in the unit area
20-8 in order to reasonably permit a person entitled to share in, or
20-9 benefit by, the production from a tract in the unit to receive a
20-10 fair share of the unit production or other benefits.
20-11 (b) A tract's fair share of the unit production shall be
20-12 measured by the value of each tract and its contributing value to
20-13 the unit in relation to like values of other tracts in the unit,
20-14 taking into account the amount of acreage, the quantity of oil and
20-15 gas recoverable from the tract, the tract's location on the
20-16 geological structure, the tract's probable productivity of oil and
20-17 gas in the absence of unit operations, or as many other factors,
20-18 including other pertinent engineering, geological, or operating
20-19 factors, as are reasonable.
20-20 Sec. 104.044. VOTING BY WORKING INTEREST OWNERS. (a) The
20-21 proposed plan of unitization shall establish a voting procedure for
20-22 decisions by the working interest owners. The voting procedure
20-23 need not be the same for each type of decision that may be made by
20-24 the working interest owners if each working interest owner has a
20-25 voting interest equal to that owner's unit participation.
20-26 (b) Subject to reasonable limitations regarding voting
20-27 frequency and in addition to other appropriate provisions, the plan
21-1 must require an operator to submit the following matters to the
21-2 working interest owners for a decision in accordance with the plan
21-3 if petitioned to do so by the vote of at least 15 percent of the
21-4 nonoperating working interest owners:
21-5 (1) use of an affiliate of the operator to market
21-6 production;
21-7 (2) use of an affiliate of the operator for purposes
21-8 other than marketing production, including acquisition of
21-9 extraneous substances such as carbon dioxide for unit operation
21-10 purposes; or
21-11 (3) commencement of tertiary recovery operations.
21-12 Sec. 104.045. OPERATING AGREEMENT. The proposed plan of
21-13 unitization shall include a proposed operating agreement
21-14 establishing:
21-15 (1) the manner in which the unit will be operated,
21-16 supervised, and managed by the unit operator in the conduct of unit
21-17 operations;
21-18 (2) the grounds on which a unit operator may be
21-19 replaced for cause;
21-20 (3) a procedure by which a unit operator may be
21-21 replaced without cause;
21-22 (4) allocation of and provision for payment of unit
21-23 costs; and
21-24 (5) the other matters required by Section
21-25 104.021(b)(3).
21-26 Sec. 104.046. EFFECTIVE DATE AND TERMINATION DATE OF PLAN OF
21-27 UNITIZATION. (a) The proposed plan of unitization shall provide
22-1 for the date on which the plan takes effect, the manner in which
22-2 and the circumstances under which unit operations terminate, the
22-3 settlement of accounts on termination, and notice by the unit
22-4 operator to the public within 30 days after the effective date of
22-5 the unit. After the commission by order adopts the plan of
22-6 unitization, the unit operator shall give public notice by filing
22-7 for record, in the real property records of the county or counties
22-8 in which the unit area or any part of the unit area is located, a
22-9 certificate containing:
22-10 (1) the name of the unit;
22-11 (2) the legal description of each tract included in
22-12 the unit area and a description of the common source of supply or
22-13 the part of the common source of supply included in the unit area;
22-14 (3) the commission docket number;
22-15 (4) the date of the commission order, including any
22-16 supplemental orders, relating to approval of the plan of
22-17 unitization;
22-18 (5) the effective date of unit operations; and
22-19 (6) a survey plat setting out the unit boundaries.
22-20 (b) The plan of unitization shall require the unit operator,
22-21 not later than the 60th day after the date of termination of the
22-22 unit, to file for record in each county in which any part of the
22-23 unit area is located a certificate stating the date the unit
22-24 operations terminated.
22-25 Sec. 104.047. FINANCING UNIT OPERATIONS. (a) The plan of
22-26 unitization shall provide the manner in which unit costs, including
22-27 overhead and interest, are determined, allocated, and charged to
23-1 the separately owned tracts or interests and shall include a
23-2 detailed accounting procedure for all charges and credits incident
23-3 to unit operations. The unit costs chargeable to a tract or
23-4 interest shall be paid by the working interest owners who, in the
23-5 absence of unit operations, would be responsible for the costs and
23-6 expenses of developing and operating the tract or interest.
23-7 (b) The plan shall also:
23-8 (1) provide for the auditing of all records of the
23-9 unit operator pertaining to unit operation;
23-10 (2) require the operator to maintain records
23-11 sufficient to show the reasonableness of any payments to affiliates
23-12 of the operator and of other unit costs;
23-13 (3) provide for disclosure so that working interest
23-14 owners will be informed in a timely manner whether particular costs
23-15 and expenses relate to activities undertaken by an affiliate of the
23-16 operator; and
23-17 (4) include provisions that disallow or govern
23-18 situations in which a profit or other benefit accrues solely or in
23-19 unequal shares to the operator.
23-20 Sec. 104.048. ATTACHMENT OF PROCEEDS OF PRODUCTION TO COVER
23-21 DEBTS OF NONPAYING WORKING INTEREST OWNERS. (a) Except as
23-22 otherwise provided by Section 104.027 or 104.028, the plan of
23-23 unitization shall allow the attachment of proceeds of production
23-24 due to any owner who is not paying the owner's share of the costs
23-25 of unit operation as compensation to the paying owner or owners.
23-26 The compensation amount may not exceed 175 percent of the nonpaying
23-27 owner's share of unit costs, which is considered to include all
24-1 interest. The maximum compensation amount shall be set by the
24-2 commission in each case.
24-3 (b) The plan of unitization shall provide that all of the
24-4 unit production allocated to a nonpaying working interest owner who
24-5 does not pay the share of the unit expenses charged and any
24-6 additional compensation amounts applied to that nonpaying owner
24-7 under Subsection (a) may be appropriated by the unit operator and
24-8 marketed and sold for the payment of unit expenses and additional
24-9 compensation amounts. Any sale proceeds remaining after payment of
24-10 unit expenses and additional compensation amounts shall be remitted
24-11 to the nonpaying working interest owner.
24-12 (c) As to an interest located in the unit that is not leased
24-13 by the effective date of unitization, one-fifth (1/5) of the
24-14 production attributable to the unleased interest, or a different
24-15 amount determined by the commission under Section 104.097(b), is
24-16 considered as royalty interest and shall be free and clear of all
24-17 unit expenses and additional compensation amounts. Four-fifths
24-18 (4/5) of the unleased interest, or a different amount determined by
24-19 the commission under Section 104.097(b), is considered as working
24-20 interest and is subject to being financed or carried under this
24-21 section.
24-22 Sec. 104.049. SALE BY NONSIGNING WORKING INTEREST OWNER.
24-23 (a) A nonsigning working interest owner may elect to offer through
24-24 the unit operator to sell and assign all of that owner's working
24-25 interest in the unit area to the unit operator and to other working
24-26 interest owners who desire to acquire a portion of the interest
24-27 under this section:
25-1 (1) at any time after a plan of unitization has been
25-2 filed and before the 60th day after the later of the first day on
25-3 which:
25-4 (A) the order approving the plan of unitization
25-5 is final; or
25-6 (B) all appeals are final;
25-7 (2) at any time after the commencement of tertiary
25-8 recovery operations and before the 120th day after the day of the
25-9 commencement of those operations; or
25-10 (3) at any time after an order is final that approves
25-11 an amendment referenced in Section 104.071(c) or (d) and before the
25-12 60th day after the first day on which that order is final.
25-13 (b) The unit operator shall consider the offer to sell the
25-14 interest and shall promptly negotiate any differences in value with
25-15 the nonsigning working interest owner who is offering to sell.
25-16 (c) If the unit operator and the nonsigning working interest
25-17 owner who is offering to sell agree on a price, payment shall be
25-18 made in accordance with the sales agreement. The interest to be
25-19 acquired shall be offered for a period of 21 days to all signing
25-20 working interest owners, including the operator, at cost in
25-21 proportion to each owner's working interest ownership unless the
25-22 signing working interest owners agree on a different proportion.
25-23 Any part of the interest not acquired or contracted for by the
25-24 signing working interest owners within the prescribed period shall
25-25 then be offered for a period of 15 days to those persons who
25-26 acquired or contracted for the other part of the interest in
25-27 proportion to each person's percentage of acquisition. The unit
26-1 operator shall purchase any part of the interest remaining after
26-2 the 15-day period expires.
26-3 (d) If the unit operator and the nonsigning working interest
26-4 owner who is offering to sell are unable to agree on a sales price,
26-5 the nonsigning working interest owner who is offering to sell may
26-6 withdraw the offer to sell not later than the 30th day after the
26-7 date of the offer to sell or may elect to be carried or otherwise
26-8 financed under Section 104.048 and may submit the issue to binding
26-9 arbitration or to qualified impartial appraisers to set the price
26-10 of the nonsigning working interest owner's interest in the unit.
26-11 If the nonsigning working interest owner who is offering to sell
26-12 chooses the use of impartial appraisers, that person and the unit
26-13 operator each shall select a qualified impartial appraiser and the
26-14 two selected appraisers together shall select a third qualified
26-15 impartial appraiser. The arbitrator, arbitrators, or selected
26-16 appraisers shall establish a price that is equal to the higher of
26-17 the fair market value of the interest and the fair market value the
26-18 interest would have in the absence of the proposed unitized
26-19 operations. The nonsigning working interest owner who is offering
26-20 to sell shall pay one-half of the appraisal or arbitration costs.
26-21 Each acquiring interest owner shall pay a part of the remainder of
26-22 the appraisal or arbitration costs in proportion to the owner's
26-23 working interest ownership.
26-24 (e) The nonsigning working interest owner who is offering to
26-25 sell shall sell for the price set by the procedure described by
26-26 Subsection (d), and the unit operator shall purchase that interest
26-27 for that price, subject to the participation of other signing
27-1 working interest owners as provided by Subsection (c).
27-2 Sec. 104.050. INVESTMENT ADJUSTMENTS AND PROPERTY TAKEN
27-3 OVER. The plan of unitization shall provide for the procedure and
27-4 basis for adjustment among the working interest owners in the unit
27-5 area of their respective investment in wells, tanks, pumps,
27-6 machinery, materials, equipment, facilities, and other items of
27-7 value taken over and used in unit operations. Investment
27-8 adjustments and credits for property taken over may not be used as
27-9 a factor in setting participation percentages and allocations of
27-10 unit production under Section 104.043.
27-11 Sec. 104.051. ADDITIONAL PLAN PROVISIONS. The plan of
27-12 unitization may include any additional provisions approved by the
27-13 commission that are consistent with the findings required by
27-14 Section 104.024.
27-15 (Sections 104.052-104.070 reserved for expansion
27-16 SUBCHAPTER D. AMENDMENT OF PLAN OR ORDER OF
27-17 UNITIZATION; EXPANSION OF UNIT AREA
27-18 Sec. 104.071. AMENDMENT OF PLAN OR ORDER FOR UNITIZATION.
27-19 (a) A commission order approving unitization may be amended in the
27-20 same manner and subject to the same conditions as are required for
27-21 an original order providing for unitized operations.
27-22 (b) Approval of an amendment by royalty owners is not
27-23 required if the amendment affects only the rights and interests of
27-24 working interest owners.
27-25 (c) An amendment to an order may not, without the aggregate
27-26 approval of at least the minimum percentage of the working interest
27-27 and royalty interest ownership required under Section 104.026 for
28-1 approval of unitization and compliance with Section 104.005,
28-2 change:
28-3 (1) the percentage of unit oil and gas production
28-4 allocated to each tract in the plan approved by the original or
28-5 amended order approving the existing unit;
28-6 (2) the percentage of unit expenses allocated to each
28-7 tract in the plan of unitization approved by the original or
28-8 amended order for the existing unit; or
28-9 (3) the unit operations from secondary recovery
28-10 operations to tertiary recovery operations.
28-11 (d) An amendment to an order may not, without the aggregate
28-12 approval of at least the minimum percentage of the working interest
28-13 ownership required under Section 104.026 for approval of
28-14 unitization, change a provision of the operating agreement dealing
28-15 with:
28-16 (1) overhead rates or any other profit or benefit that
28-17 may accrue solely or in unequal shares to the unit operator;
28-18 (2) voting procedures;
28-19 (3) change of operator procedures;
28-20 (4) dissolution of the unit; or
28-21 (5) disclosure provisions regarding the use of
28-22 affiliates of the operator.
28-23 (e) This section does not apply to an order:
28-24 (1) expanding an existing unit area under Section
28-25 104.072; or
28-26 (2) creating a new unit area under Section 104.073.
28-27 Sec. 104.072. EXPANSION OF UNIT AREA. (a) In accordance
29-1 with this section and subject to Section 104.073, an existing unit
29-2 area may be expanded to include additional nonunitized tracts under
29-3 the terms contained in the plan of unitization for the existing
29-4 unit if the working interest owners and the royalty interest owners
29-5 in each additional tract and in the existing unit area approve the
29-6 expansion by the same percentages and in the same manner as
29-7 required by Section 104.026 and Section 104.005(c), if applicable,
29-8 for the creation of a unit. The requirements for creating a unit
29-9 under this chapter apply to the expansion of the unit area under
29-10 this section.
29-11 (b) Allocation of unit production from the expanded unit
29-12 shall be calculated first by allocating to the expansion area a
29-13 portion of the total production of oil or gas or both oil and gas
29-14 from the unit area as enlarged. That allocation shall be based on
29-15 the relative contribution to the total production of oil or gas or
29-16 both oil and gas that the expansion area is expected to make during
29-17 the remaining course of unit operations. If the expansion area
29-18 consists of separately owned tracts, the production allocated to
29-19 the expansion area shall be allocated to the separately owned
29-20 tracts in proportion to the relative contribution of each of those
29-21 tracts as provided by Section 104.043. The remaining portion of
29-22 unit production shall be allocated among the tracts in the existing
29-23 unit area in the same proportions as those set out in the existing
29-24 plan of unitization.
29-25 Sec. 104.073. ENLARGEMENT INCLUDING ALL OR PART OF
29-26 PREVIOUSLY ESTABLISHED UNIT. (a) The commission may not combine
29-27 two or more units created under this chapter or parts of units
30-1 created under this chapter unless each working interest or royalty
30-2 owner in each unit or part to be combined has agreed to the
30-3 combination.
30-4 (b) A commission order combining units or parts of units
30-5 created under this chapter, in allocating unit production between
30-6 the previously established units or parts of units to be combined,
30-7 shall first treat each unit or part to be combined as a single
30-8 tract for purposes of production allocation. The part of unit
30-9 production that is allocated to each unit or part to be combined
30-10 shall then be allocated among the separately owned tracts included
30-11 in the previously established units or parts in the same proportion
30-12 as provided in each previous commission order establishing a unit
30-13 all or part of which is combined under this section.
30-14 (Sections 104.074-104.090 reserved for expansion
30-15 SUBCHAPTER E. UNIT OPERATIONS
30-16 Sec. 104.091. STATUS OF PRODUCTION PROCEEDS; STANDARD OF
30-17 CARE; DISTRIBUTION. (a) Unit production, proceeds from the sale
30-18 of production, or other receipts may not be treated or taxed as
30-19 income or profit of the unit. All unit production and proceeds are
30-20 income of the owners to whom or to whose credit the production or
30-21 proceeds are payable under the plan of unitization.
30-22 (b) The unit operator does not become an agent or fiduciary
30-23 of a working interest owner to whom production or proceeds are
30-24 payable solely by reason of receiving or disbursing production or
30-25 proceeds. When disposing of production for working interest
30-26 owners, a unit operator who is not an agent or fiduciary shall act
30-27 with the same standard of care as is required in the plan of
31-1 unitization. In the absence of such a standard, the operator shall
31-2 act in the same manner in which a reasonably prudent operator would
31-3 act under the same or similar circumstances. A unit operator who
31-4 is not an agent or a fiduciary who has acted according to these
31-5 standards is not liable to any working interest owner who elects to
31-6 have the owner's share of unit production disposed of by the unit
31-7 operator for losses sustained or liability incurred as a result of
31-8 the unit operator's actions under this section in selling or
31-9 disposing of others' production.
31-10 (c) The unit operator shall make available, to any working
31-11 interest owner or to any royalty interest owner who has the
31-12 preexisting right to take the owner's production in kind, to whom
31-13 production or proceeds are payable, the opportunity to elect either
31-14 to have the owner's share of production marketed by the unit
31-15 operator or to market the owner's share of production himself or
31-16 herself. The operator, or any affiliate of the operator that
31-17 markets production at or in the vicinity of the unit, shall market
31-18 the production of owners, who elect to have their shares marketed
31-19 by the operator, in such a manner that each electing owner receives
31-20 the same price and proportionate share of premiums and other
31-21 compensation as the unit operator, or an affiliate of the unit
31-22 operator marketing at or in the vicinity of the unit, receives for
31-23 the unit operator's share of unit production, except to the extent
31-24 that a prior contractual commitment or express specific term of a
31-25 contract entered into in good faith prohibits such sharing or
31-26 marketing of additional production. This subsection may not be
31-27 construed to require that any profit, compensation, or other
32-1 benefit received by the operator or an affiliate of the operator
32-2 that is realized on a transaction occurring beyond the point of
32-3 first sale at the unit or in the vicinity of the unit be shared
32-4 with or distributed to any owner electing to have the owner's
32-5 production marketed by the operator.
32-6 (d) Unless the plan of unitization otherwise provides, a
32-7 working interest owner or royalty interest owner described by
32-8 Subsection (c) shall make an initial election under that subsection
32-9 not later than the 30th day after the effective date of the
32-10 commission order approving the unit. Unless the plan of
32-11 unitization otherwise provides, an initial marketing election takes
32-12 effect on the 60th day after the effective date of the commission
32-13 order approving the unit. Unless the plan of unitization otherwise
32-14 provides, subsequent marketing elections shall be made annually by
32-15 written notice to the unit operator not later than the 45th
32-16 business day before the existing interval expires. Failure of an
32-17 owner to make a timely election under this subsection is considered
32-18 an election by that owner, for the relevant period, to have the
32-19 owner's production marketed by the unit operator.
32-20 Sec. 104.092. LIABILITY OF WORKING INTEREST OWNER. (a) The
32-21 liability of a working interest owner for payment of unit expense
32-22 is several and not joint or collective.
32-23 (b) Except as provided by this subsection and Section
32-24 104.048, a working interest owner in a tract is not liable,
32-25 directly or indirectly, for more than the amount charged to that
32-26 owner's interest in the tract.
32-27 (c) Unless otherwise specifically agreed to by the parties
33-1 as part of a plan of unitization approved by the commission, any
33-2 environmental condition or liability existing before the effective
33-3 date of the commission order approving the unit remains the sole
33-4 responsibility of the party or parties responsible for that
33-5 environmental condition or liability before the effective date of
33-6 the commission order approving the unit.
33-7 Sec. 104.093. LIEN FOR COSTS. (a) Subject to any
33-8 reasonable limitations in the plan of unitization, a unit operator
33-9 has a lien on the leasehold estate and other oil and gas rights in
33-10 each separately owned tract, the interest of the owners in the unit
33-11 production, and all equipment in the possession of the unit to
33-12 secure the payment of the amount of the unit expense and other
33-13 additional compensation charges as provided for in Section 104.048
33-14 charged to each separate working interest.
33-15 (b) The lien established under this section does not attach
33-16 to the royalty interest under lease or the one-fifth (1/5) royalty
33-17 interest assigned to an unleased mineral interest or to any
33-18 interest in land directly or indirectly owned by the state.
33-19 Sec. 104.094. EFFECT OF UNIT OPERATIONS ON EXPRESSED OR
33-20 IMPLIED COVENANTS AND CONDITIONS. (a) To the extent a lease,
33-21 division order, or contract covering lands in the unit area relates
33-22 to the common source of supply or the part of the common source of
33-23 supply included in the unit area, all terms of the lease, division
33-24 order, or contract, express or implied, shall be construed by
33-25 giving due regard to the plan of unitization approved by the
33-26 commission. Operations conducted in accordance with a plan of
33-27 unitization approved by the commission are presumed to comply with
34-1 those terms unless there is an irreconcilable conflict between the
34-2 lease, division order, or contract and the approved plan of
34-3 unitization. If there is an irreconcilable conflict between the
34-4 lease, division order, or contract and the approved plan of
34-5 unitization, the plan controls, but the lease, division order, or
34-6 contract terms shall be regarded as modified only to the extent
34-7 necessary to conform to the plan.
34-8 (b) Notwithstanding any other provision of this chapter,
34-9 without a separate voluntary agreement supported by consideration,
34-10 a plan of unitization may not:
34-11 (1) cause a royalty interest to become liable for any
34-12 part of unit expense that the interest is not otherwise obligated
34-13 to pay;
34-14 (2) reduce a royalty interest fraction;
34-15 (3) alter an express surface use restriction,
34-16 including a restriction on the use of freshwater, that exists in a
34-17 lease or contract on the date the application authorized by Section
34-18 104.021 is filed; or
34-19 (4) alter a provision of a lease or contract providing
34-20 for indemnification or similar compensation in the event the
34-21 actions of one person cause another person to become liable for
34-22 damages to the environment or for a violation of a statute, rule,
34-23 or common-law standard that serves to protect the environment.
34-24 (c) A surface use conflict that is not governed by express
34-25 lease or contract terms shall be accommodated or otherwise resolved
34-26 after giving due regard to the plan of unitization as provided by
34-27 this section.
35-1 (d) Section 104.091 may not be construed to diminish an
35-2 operator's duty to market production on behalf of a royalty
35-3 interest owner.
35-4 Sec. 104.095. DISTRIBUTION OF UNIT PRODUCTION. Except as
35-5 authorized by this chapter or in a plan of unitization approved by
35-6 the commission, the unit production shall be distributed among, or
35-7 the proceeds paid to, the owners entitled to share in the
35-8 production from each tract in the same manner that those owners
35-9 would have shared in the production or proceeds from the tract if
35-10 the unit had not been established.
35-11 Sec. 104.096. MODIFICATION OF PROPERTY RIGHTS OR TITLES.
35-12 Except to the extent that the parties affected by the plan of
35-13 unitization otherwise agree, a commission order entered under
35-14 Section 104.025 does not alienate, convey, cross-convey, transfer,
35-15 or change title or ownership, legal or equitable, of a person in a
35-16 parcel of land or the oil and gas rights in that parcel.
35-17 Sec. 104.097. ROYALTY OBLIGATIONS; BURDENS; UNLEASED
35-18 INTERESTS. (a) Each working interest owner who is the owner of an
35-19 interest in an oil and gas lease is responsible for the payment of
35-20 all royalty, overriding royalty, or other lease burdens affecting
35-21 the owner's leasehold estate unless the plan of unitization
35-22 provides otherwise.
35-23 (b) One-fifth (1/5) of the production or proceeds
35-24 attributable to any unleased interest located in the unit area,
35-25 free of all unit expense and free of any lien, shall be allocated
35-26 to that interest unless the commission determines that a different
35-27 allocation is reasonable under the circumstances. Four-fifths
36-1 (4/5) of any unleased interests in the production or proceeds shall
36-2 bear its pro rata share of all unit expense and is subject to any
36-3 lien provided by this chapter or the plan of unitization. If the
36-4 commission allocates more than one-fifth (1/5) of the production or
36-5 proceeds free of all unit expense and free of any lien, the
36-6 commission shall make an equal, opposite adjustment in the part of
36-7 production or proceeds allocated to the interest that is to bear
36-8 expense and be subject to liens.
36-9 Sec. 104.098. UNIT OWNERSHIP OF PRODUCTION, PROCEEDS, AND
36-10 ACQUIRED PROPERTY. (a) The part of the unit production allocated
36-11 to any tract and the proceeds from the sale of that production are
36-12 the property and income of the owners to whom or to whose credit
36-13 the production and proceeds are allocated or payable under the
36-14 order for unit operations.
36-15 (b) Any property that is acquired in the conduct of unit
36-16 operations and charged as an item of unit expense is owned by the
36-17 working interest owners in the unit area as provided in the plan of
36-18 unitization.
36-19 SECTION 2. This Act takes effect immediately if it receives
36-20 a vote of two-thirds of all the members elected to each house, as
36-21 provided by Section 39, Article III, Texas Constitution. If this
36-22 Act does not receive the vote necessary for immediate effect, this
36-23 Act takes effect September 1, 2001.