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A BILL TO BE ENTITLED
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AN ACT
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relating to allocating production from horizontal wells to |
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non-participating royalty interests. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Chapter 91, Natural Resources Code, is amended |
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by adding the following to Subchapter J, to read as follows: |
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Sec. 91.409. Allocation of Production From Horizontal |
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Drainhole Wells to Non-Participating Royalty Interests |
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(a) A payee that owns a non-participating royalty interest |
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in a tract that has been penetrated by a horizontal drainhole well |
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as defined by the Railroad Commission, for oil or gas, or both, but |
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who has not ratified a lease or pooling agreement covering such |
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tract, shall be entitled to be paid its allocated share of |
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production proceeds from such horizontal drainhole well based upon |
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the ratio of the length of the horizontal drainhole across the |
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payee's tract between the first take point and last take point to |
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the total length of the horizontal drainhole between the first take |
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point and the last take point. A payor who pays such payee's |
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non-participating royalty interest based upon the allocation |
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method set forth in this section shall be presumed to have |
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accurately attributed production to that interest. |
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(b) A payee or payor under this section may rebut the |
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presumption that the allocation method set forth in this section |
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accurately attributes production to the payee's non-participating |
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royalty interest through a final order of the Railroad Commission |
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establishing another method of allocation of production to the |
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payee's non-participating royalty interest. Such order may only be |
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obtained after application, notice to the payees associated with |
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the tract containing the non-participating royalty interest and the |
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payor, and an opportunity for hearing. The Railroad Commission may |
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establish an alternate method of allocation only upon a showing by |
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clear and convincing evidence that such method is more accurate in |
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attributing production to the payee's interest than the method set |
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out in this section. The Railroad Commission shall have exclusive |
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primary jurisdiction over such a determination. |
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(c) This section shall not apply to units formed under |
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Chapter 102, Natural Resources Code. |
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SECTION 2. This Act shall apply to production from wells |
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spudded on or after September 1, 2011. |
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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. |