83R9675 ATP-F
 
  By: Hinojosa S.B. No. 1094
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to security interests in oil and gas production and its
  proceeds.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 9.301, Business & Commerce Code, is
  amended to read as follows:
         Sec. 9.301.  LAW GOVERNING PERFECTION AND PRIORITY OF
  SECURITY INTERESTS. In this section, "first purchaser" and "oil
  and gas production" have the meanings assigned by Section 9.343(r).  
  Except as otherwise provided in Sections 9.303 through 9.306, the
  following rules determine the law governing perfection, the effect
  of perfection or nonperfection, and the priority of a security
  interest in collateral:
               (1)  Except as otherwise provided in this section,
  while a debtor is located in a jurisdiction, the local law of that
  jurisdiction governs perfection, the effect of perfection or
  nonperfection, and the priority of a security interest in
  collateral.
               (2)  While collateral is located in a jurisdiction, the
  local law of that jurisdiction governs perfection, the effect of
  perfection or nonperfection, and the priority of a possessory
  security interest in that collateral.
               (3)  Except as otherwise provided in Subdivision (4),
  while tangible negotiable documents, goods, instruments, money, or
  tangible chattel paper is located in a jurisdiction, the local law
  of that jurisdiction governs:
                     (A)  perfection of a security interest in the
  goods by filing a fixture filing;
                     (B)  perfection of a security interest in timber
  to be cut; and
                     (C)  the effect of perfection or nonperfection and
  the priority of a nonpossessory security interest in the
  collateral.
               (4)  The local law of the jurisdiction in which the
  wellhead or minehead is located governs perfection, the effect of
  perfection or nonperfection, and the priority of a security
  interest in as-extracted collateral. The local law of the
  jurisdiction in which the wellhead or minehead is located,
  including, if applicable, the provisions of Section 9.343(b) that
  provide for the automatic perfection of a security interest, govern
  the perfection of a security interest against the first purchaser,
  regardless of the jurisdiction in which the first purchaser is
  organized, for oil and gas production owned by, received by, or due
  to the first purchaser and in the identifiable proceeds of that
  production owned by, received by, or due to the first purchaser, if
  the proceeds are oil or gas production, inventory of raw, refined,
  or manufactured oil or gas production, or rights to or products of
  any of those.
               (5)  For a purchase-money security interest against the
  first purchaser of oil and gas production or its proceeds, Sections
  9.324(b) and 9.343(f) govern the priority of the purchase-money
  security interest, regardless of:
                     (A)  the jurisdiction in which the first purchaser
  is organized; or
                     (B)  whether the purchase-money security interest
  was perfected by filing a financing statement, if the
  purchase-money security interest was also perfected automatically
  under Section 9.343(b).
         SECTION 2.  Sections 9.324(b) and (c), Business & Commerce
  Code, are amended to read as follows:
         (b)  In this subsection, "first purchaser," "oil and gas
  production," and "subsequent purchaser" have the meanings assigned
  by Section 9.343(r). The provisions of this subsection apply
  regardless of the jurisdiction in which the first purchaser is
  organized. Subject to Subsection (c) and except as otherwise
  provided in Subsection (g), a perfected purchase-money security
  interest in inventory has priority over a conflicting security
  interest in the same inventory, has priority over a conflicting
  security interest in chattel paper or an instrument constituting
  proceeds of the inventory and in proceeds of the chattel paper, if
  so provided in Section 9.330, and, except as otherwise provided in
  Section 9.327, also has priority in identifiable cash proceeds of
  the inventory to the extent the identifiable cash proceeds are
  received on or before the delivery of the inventory to a buyer or,
  in the case of identifiable cash proceeds from oil and gas
  production or its proceeds, to the extent the identifiable cash
  proceeds are owned by, received by, or due to the first purchaser on
  or before the delivery of the inventory to a subsequent purchaser,
  if:
               (1)  the purchase-money security interest is perfected
  automatically under Section 9.343(b) or in another authorized
  manner when the debtor receives possession of the inventory;
               (2)  except where excused by Section 9.343 (oil and gas
  production), the purchase-money secured party sends an
  authenticated notification to the holder of the conflicting
  security interest;
               (3)  the holder of the conflicting security interest
  receives any required notification within five years before the
  debtor receives possession of the inventory; and
               (4)  the notification, if notification is required,
  states that the person sending the notification has or expects to
  acquire a purchase-money security interest in inventory of the
  debtor and describes the inventory.
         (c)  Subsections (b)(2)-(4) apply only if the holder of the
  conflicting security interest had filed a financing statement
  covering the same types of inventory:
               (1)  before the date of the filing, if the
  purchase-money security interest is perfected only by filing, and
  is not also perfected automatically under Section 9.343(b) [before
  the date of the filing]; or
               (2)  if the purchase-money security interest is
  temporarily perfected without filing or possession under Section
  9.312(f), before the beginning of the 20-day period under that
  subsection.
         SECTION 3.  Section 9.343, Business & Commerce Code, is
  amended by amending Subsections (c), (f), and (g) and adding
  Subsection (k-1) to read as follows:
         (c)  The security interest exists in oil and gas production
  owned by, received by, or due to the first purchaser [,] and [also]
  in the identifiable proceeds of that production owned by, received
  by, or due to the first purchaser:
               (1)  for an unlimited time if:
                     (A)  the proceeds are oil or gas production,
  inventory of raw, refined, or manufactured oil or gas production,
  or rights to or products of any of those, although the sale of those
  proceeds to a subsequent [by a first] purchaser [to a buyer in the
  ordinary course of business as provided in Subsection (e)] cuts off
  the security interest in those proceeds;
                     (B)  the proceeds are accounts, chattel paper,
  instruments, documents, or payment intangibles; or
                     (C)  the proceeds are cash proceeds, as defined in
  Section 9.102; and
               (2)  for the length of time provided in Section 9.315
  for all other proceeds.
         (f)  The security interests and all liens created by this
  section have the following priorities over other Chapter 9 security
  interests:
               (1)  A security interest created by this section,
  whether perfected automatically under Subsection (b) or perfected
  by the filing of the optional financing statement authorized by
  Section 9.5055, is treated as a purchase-money security interest
  for purposes of determining its relative priority under Section
  9.324 over other security interests not provided for by this
  section. A holder of a security interest created under this section
  is not required to give the written notice every five years as
  provided in Section 9.324(b)(3) to have purchase-money priority
  over a security interest with a prior financing statement covering
  inventory.
               (2)  A statutory lien is subordinate to all other
  perfected Chapter 9 security interests and has priority over
  unperfected Chapter 9 security interests and the lien creditors,
  buyers, and transferees mentioned in Section 9.317.
         (g)  The security interests and liens created by this section
  have the following priorities among themselves:
               (1)  Regardless of whether the optional financing
  statement authorized by Section 9.5055 was filed to perfect those
  security interests, if [If] a record effective as a filed financing
  statement under Subsection (b) exists, the security interests
  perfected by that record have priority over a security interest
  automatically perfected without filing under Subsection (b). If
  several security interests perfected by records exist, they have
  the same priority among themselves as established by real property
  law for interests in oil and gas in place. If real property law
  establishes no priority among them, they share priority pro rata.
               (2)  A security interest perfected automatically
  without filing under Subsection (b), or for which the optional
  financing statement authorized by Section 9.5055 was filed, if the
  security interest was also perfected automatically without filing
  under Subsection (b), has priority over a lien created under
  Subsection (d).
               (3)  A nontax lien under Subsection (d) has priority
  over a lien created under that subsection that secures the payment
  of taxes.
         (k-1)  The sale to a subsequent purchaser by the first
  purchaser of oil and gas production or the proceeds of that
  production, if the proceeds are oil or gas production, inventory of
  raw, refined, or manufactured oil or gas production, or rights to or
  products of any of those, cuts off the liens and security interests
  created by this section in the oil and gas production and its
  proceeds. The security interests and liens created by this section
  are subject to and do not impair or impact in any manner the
  exercise or enforcement by a subsequent purchaser of any rights,
  including rights of a secured creditor and rights of set-off,
  net-out, exchange, recoupment, or withholding of funds, provided
  under any enforceable contract or applicable law that governs the
  relationship between a subsequent purchaser and the first purchaser
  or an affiliate or representative of the first purchaser.
         SECTION 4.  Section 9.343(r), Business & Commerce Code, is
  amended by adding Subdivision (5) to read as follows:
               (5)  "Subsequent purchaser" means a person who is not
  an affiliate of the first purchaser and who purchases from the first
  purchaser or affiliate or representative of the first purchaser oil
  and gas production or the proceeds of that production, if the
  proceeds are oil or gas production, inventory of raw, refined, or
  manufactured oil or gas production, or rights to or products of any
  of those.
         SECTION 5.  Subchapter E, Chapter 9, Business & Commerce
  Code, is amended by adding Section 9.5055 to read as follows:
         Sec. 9.5055.  OPTIONAL FINANCING STATEMENT FOR SECURITY
  INTEREST IN OIL AND GAS PRODUCTION AND ITS PROCEEDS. (a)  In this
  section, "first purchaser," "interest owner," "operator," and "oil
  and gas production" have the meanings assigned by Section 9.343(r).
         (b)  To the extent of a conflict between this section and
  another provision of this subchapter, this section prevails.
         (c)  If a security interest in oil and gas production or its
  proceeds is perfected automatically under Section 9.343(b), an
  interest owner or an operator acting on behalf of one or more
  interest owners may also, but is not required to, file a financing
  statement against the first purchaser in the jurisdiction in which
  the first purchaser is organized.
         (d)  A financing statement filed pursuant to this section is
  sufficient if it:
               (1)  provides the name of the debtor;
               (2)  provides the name of the secured party or a
  representative of the secured party; and
               (3)  indicates the collateral covered by the financing
  statement.
         SECTION 6.  Sections 9.343(e), (m), and (n), Business &
  Commerce Code, are repealed.
         SECTION 7.  The changes in law made by this Act apply only to
  a civil action commenced on or after the effective date of this Act.  
  A civil action commenced before the effective date of this Act is
  governed by the law in effect immediately before the effective date
  of this Act, and that law is continued in effect for that purpose.
         SECTION 8.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2013.