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A BILL TO BE ENTITLED
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AN ACT
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relating to a cause of action for the bad faith washout of an |
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overriding royalty interest in an oil and gas lease. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Title 4, Property Code, is amended by adding |
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Chapter 31 to read as follows: |
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CHAPTER 31. BAD FAITH WASHOUT OF OVERRIDING ROYALTY INTEREST IN OIL |
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AND GAS LEASE |
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Sec. 31.001. DEFINITIONS. In this chapter: |
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(1) "Bad faith" means the conscious taking of action |
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for the purpose of washing out all or part of an overriding royalty |
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interest. |
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(2) "Washout" means the elimination or reduction of an |
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overriding royalty interest in an oil and gas lease by the |
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forfeiture or surrender of the oil and gas lease by a lessee or the |
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lessee's successors or assigns and the subsequent reacquisition of |
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a lease, or all or part of the mineral estate associated with the |
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lease, by the lessee or the lessee's successors, assigns, |
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contractors, or subsidiaries on all or part of the same land, free |
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of the overriding royalty interest. |
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Sec. 31.002. CAUSE OF ACTION FOR BAD FAITH WASHOUT. A |
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person may bring a cause of action for a bad faith washout of the |
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person's overriding royalty interest in an oil and gas lease. The |
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person is entitled to a remedy under this chapter if the person |
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proves by a preponderance of the evidence that: |
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(1) the person owned or had a legal right to the |
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overriding royalty interest; |
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(2) the defendant had control over the oil and gas |
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lease burdened by the overriding royalty interest; |
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(3) the defendant caused a washout of the person's |
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overriding royalty interest; and |
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(4) the defendant acted in bad faith by knowingly or |
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intentionally causing the washout. |
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Sec. 31.003. VENUE. An owner of an overriding royalty |
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interest in an oil and gas lease may bring an action under this |
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chapter in a district court of a county in which any part of the |
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property subject to the oil and gas lease is located. |
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Sec. 31.004. REMEDIES; COSTS AND FEES. (a) An owner of an |
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overriding royalty interest who prevails in an action under this |
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chapter may recover: |
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(1) actual damages; |
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(2) enforcement of a constructive trust on the oil and |
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gas lease or mineral estate acquired to accomplish the washout of |
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the overriding royalty interest; and |
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(3) court costs and attorney's fees. |
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(b) The remedies provided by this chapter are cumulative of |
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other remedies provided by common law or statute. |
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Sec. 31.005. LIMITATION ON FILING ACTION. A person must |
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bring an action under this chapter not later than the second |
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anniversary of the date the person obtained actual knowledge that |
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the washout occurred. |
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SECTION 2. Chapter 31, Property Code, as added by this Act, |
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applies only to a washout that occurs on or after the effective date |
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of this Act. A washout that occurred before that date is governed |
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by the law in effect immediately before the effective date of this |
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Act, and that law is continued in effect for that purpose. |
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SECTION 3. This Act takes effect September 1, 2021. |