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A BILL TO BE ENTITLED
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AN ACT
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relating to the allocation of production from a horizontal |
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drainhole oil or gas well to an owner of a nonparticipating royalty |
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interest in production from the well. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter J, Chapter 91, Natural Resources |
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Code, is amended by adding Section 91.409 to read as follows: |
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Sec. 91.409. ALLOCATION OF PRODUCTION FROM HORIZONTAL |
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DRAINHOLE WELL TO OWNER OF NONPARTICIPATING ROYALTY INTEREST. (a) |
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This section does not apply to: |
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(1) a unit formed under Chapter 102; or |
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(2) an interest owned by this state. |
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(b) A payee who owns a nonparticipating royalty interest in |
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a tract that has been penetrated by a horizontal drainhole well for |
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oil, gas, or both oil and gas and who has not ratified a lease or |
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pooling agreement covering the tract is entitled to be paid the |
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payee's allocated share of the proceeds derived from the sale of oil |
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or gas production from the well based on the ratio of the length of |
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the portion of the horizontal drainhole between the first take |
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point and the last take point of the horizontal drainhole that |
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crosses the tract in which the payee owns the nonparticipating |
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royalty interest to the total length of the horizontal drainhole |
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between the first take point and the last take point of the |
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horizontal drainhole. A payor who pays such a payee based on the |
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allocation method provided by this section is presumed to have |
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accurately attributed production to the payee's interest. |
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(c) A payor or payee to whom this section applies may rebut |
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the presumption that the allocation method provided by this section |
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accurately attributes production to the payee's nonparticipating |
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royalty interest by obtaining a final order of the commission |
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establishing another method of allocation of production to the |
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payee's interest. The payor or payee may obtain such an order only |
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after application, notice to each payee owning an interest in the |
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tract that is subject to the nonparticipating royalty interest and |
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the payor, and an opportunity for a hearing. The commission may |
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establish an alternate method of allocation only on a showing by |
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clear and convincing evidence that the method is more accurate in |
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attributing production to the payee's interest than the method |
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provided by Subsection (b). The commission has exclusive primary |
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jurisdiction over such a determination. |
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SECTION 2. This Act applies only to the allocation of |
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production from a horizontal drainhole oil or gas well that is |
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spudded on or after the effective date of this Act. The allocation |
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of production from a horizontal drainhole oil or gas well that is |
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spudded before the effective date of this Act is governed by the law |
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as it existed immediately before the effective date of this Act, and |
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that law is continued in effect for that purpose. |
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SECTION 3. This Act takes effect immediately if it receives |
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a vote of two-thirds of all the members elected to each house, as |
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provided by Section 39, Article III, Texas Constitution. If this |
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Act does not receive the vote necessary for immediate effect, this |
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Act takes effect September 1, 2011. |