87R10225 ANG-F
 
  By: Birdwell S.B. No. 1258
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the duty of a lessee or other agent in control of
  certain state land to drill an offset well, pay compensatory
  royalty, or otherwise protect the land from drainage of oil or gas
  by a horizontal drainhole well located on certain land.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 66.75, Education Code, is amended by
  amending Subsection (a) and adding Subsections (a-1) and (g) to
  read as follows:
         (a)  In this section:
               (1)  "Horizontal drainhole well" means a well with a
  horizontal drainhole that may produce oil or gas along at least 100
  feet of the drainhole.
               (2)  "Take point" means any point in a horizontal
  drainhole well where oil and gas can be produced from the reservoir
  or field interval recognized by the Railroad Commission of Texas.
               (3)  "Unconventional fracture treated field" means an
  oil or gas field in which horizontal well development and hydraulic
  fracture treatment must be used to recover resources from all or
  part of the field.
         (a-1)  The lessee shall protect the leased premises from
  drainage.  The lease may contain express terms regarding drainage
  as the board may adopt.
         (g)  Notwithstanding any other provision of this section, a
  lease or other agreement relating to university lands may not
  require a lessee to drill an offset well, pay compensatory royalty,
  or otherwise protect the leased premises or acreage pooled with the
  leased premises from drainage by a horizontal drainhole well
  located in an unconventional fracture treated field if no take
  point of the horizontal drainhole well is located closer to the
  leased premises or acreage pooled with the leased premises than the
  applicable lease-line spacing distance requirement of the Railroad
  Commission of Texas.
         SECTION 2.  Section 52.034, Natural Resources Code, is
  amended by amending Subsections (a) and (d) and adding Subsections
  (a-1) and (a-2) to read as follows:
         (a)  In this section:
               (1)  "Horizontal drainhole well" means a well with a
  horizontal drainhole that may produce oil or gas along at least 100
  feet of the drainhole.
               (2)  "Take point" means any point in a horizontal
  drainhole well where oil and gas can be produced from the reservoir
  or field interval recognized by the Railroad Commission of Texas.
               (3)  "Unconventional fracture treated field" means an
  oil or gas field in which horizontal well development and hydraulic
  fracture treatment must be used to recover resources from all or
  part of the field.
         (a-1)  Except as provided by Subsection (a-2), if [If] oil or
  gas is produced in commercial quantities from a well located on a
  privately owned area or areas of state land leased at a lesser
  royalty and the well is located within 1,000 feet of an area leased
  under this subchapter[,] or [in any case where such an area] is
  draining an area leased under this subchapter [being drained by
  such a well or wells], the lessee of the state area shall begin in
  good faith and prosecute diligently the drilling of an offset well
  or wells on the area leased from the state within 60 days after the
  initial production from the draining well or the well located
  within 1,000 feet of the leased state area.
         (a-2)  If the well producing oil or gas in commercial
  quantities under Subsection (a-1) is a horizontal drainhole well
  located in an unconventional fracture treated field, a lessee of a
  state area is not required to drill an offset well as provided by
  Subsection (a-1) unless any take point in the horizontal drainhole
  well is located closer to the leased state area than the minimum
  distance established by the applicable lease-line spacing
  requirement of the Railroad Commission of Texas.
         (d)  At the determination of the commissioner and with the
  commissioner's [his] written approval, the payment of a
  compensatory royalty shall satisfy the obligation to drill an
  offset well or wells required by Subsection (a-1) [Subsection (a)
  of this section]. Such compensatory royalty shall be paid at the
  royalty rate provided by the state lease issued under this
  subchapter and shall be paid on the market value at the well of
  production from the [draining] well producing oil or gas in
  commercial quantities described by Subsection (a-1) [or the well
  located within 1,000 feet of the leased state area].
         SECTION 3.  Section 52.173, Natural Resources Code, is
  amended by amending Subsections (a) and (d) and adding Subsections
  (a-1) and (a-2) to read as follows:
         (a)  In this section:
               (1)  "Horizontal drainhole well" means a well with a
  horizontal drainhole that may produce oil or gas along at least 100
  feet of the drainhole.
               (2)  "Take point" means any point in a horizontal
  drainhole well where oil or gas can be produced from the reservoir
  or field interval recognized by the Railroad Commission of Texas.
               (3)  "Unconventional fracture treated field" means an
  oil or gas field in which horizontal well development and hydraulic
  fracture treatment must be used to recover resources from all or
  part of the field.
         (a-1)  Except as provided by Subsection (a-2), if [If] oil or
  [and/or] gas is [should be] produced in commercial quantities
  within 1,000 feet of land subject to this subchapter[,] or if
  production of oil or gas is draining [in any case where] land
  subject to this subchapter, [is being drained by production of oil
  or gas] the owner, lessee, sublessee, receiver, or other agent in
  control of land subject to this subchapter shall in good faith begin
  the drilling of a well or wells upon such state land within 100 days
  after the draining well or wells or the well or wells completed
  within 1,000 feet of the state land commence to produce in
  commercial quantities[,] and shall prosecute such drilling with
  diligence to reasonably develop the state land and to protect such
  state land against drainage.
         (a-2)  If the well producing oil or gas in commercial
  quantities under Subsection (a-1) is a horizontal drainhole well
  located in an unconventional fracture treated field, the owner,
  lessee, sublessee, receiver, or other agent in control of land
  subject to this subchapter is not required to drill an offset well
  as provided by Subsection (a-1) unless any take point in the
  horizontal drainhole well is located closer to the state land than
  the minimum distance established by the applicable lease-line
  spacing requirement of the Railroad Commission of Texas.
         (d)  At the determination of the commissioner and with the
  commissioner's [his] written approval, the payment of a
  compensatory royalty shall satisfy the obligation to drill an
  offset well or wells required by Subsection (a-1). Such
  compensatory royalty shall be paid at a royalty rate established by
  the commissioner if the land is unleased, or at the royalty rate
  provided by the state lease, if the land is leased. Such
  compensatory royalty shall be paid on the market value at the well
  of production from the [draining] well producing oil or gas in
  commercial quantities described by Subsection (a-1) [or the well
  located within 1,000 feet of the state land].
         SECTION 4.  This Act takes effect September 1, 2021.