By: Hughes  S.B. No. 501
         (In the Senate - Filed January 19, 2023; February 17, 2023,
  read first time and referred to Committee on Natural Resources &
  Economic Development; April 4, 2023, reported favorably by the
  following vote:  Yeas 8, Nays 0; April 4, 2023, sent to printer.)
Click here to see the committee vote
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to a cause of action for the bad faith washout of an
  overriding royalty interest in an oil and gas lease.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Title 4, Property Code, is amended by adding
  Chapter 31 to read as follows:
  CHAPTER 31. BAD FAITH WASHOUT OF OVERRIDING ROYALTY INTEREST IN OIL
  AND GAS LEASE
         Sec. 31.001.  DEFINITIONS. In this chapter:
               (1)  "Bad faith"  means the conscious taking of action
  for the purpose of washing out all or part of an overriding royalty
  interest.
               (2)  "Washout" means the elimination or reduction of an
  overriding royalty interest in an oil and gas lease by the
  forfeiture or surrender of the oil and gas lease by a lessee or the
  lessee's successors or assigns and the subsequent reacquisition of
  a lease, or all or part of the mineral estate associated with the
  lease, by the lessee or the lessee's successors, assigns,
  contractors, or subsidiaries on all or part of the same land, free
  of the overriding royalty interest.
         Sec. 31.002.  CAUSE OF ACTION FOR BAD FAITH WASHOUT. A
  person may bring a cause of action for a bad faith washout of the
  person's overriding royalty interest in an oil and gas lease. The
  person is entitled to a remedy under this chapter if the person
  proves by a preponderance of the evidence that:
               (1)  the person owned or had a legal right to the
  overriding royalty interest;
               (2)  the defendant had control over the oil and gas
  lease burdened by the overriding royalty interest;
               (3)  the defendant caused a washout of the person's
  overriding royalty interest; and
               (4)  the defendant acted in bad faith by knowingly or
  intentionally causing the washout.
         Sec. 31.003.  VENUE. An owner of an overriding royalty
  interest in an oil and gas lease may bring an action under this
  chapter in a district court of a county in which any part of the
  property subject to the oil and gas lease is located.
         Sec. 31.004.  REMEDIES; COSTS AND FEES. (a) An owner of an
  overriding royalty interest who prevails in an action under this
  chapter may recover:
               (1)  actual damages;
               (2)  enforcement of a constructive trust on the oil and
  gas lease or mineral estate acquired to accomplish the washout of
  the overriding royalty interest; and
               (3)  court costs and attorney's fees.
         (b)  The remedies provided by this chapter are cumulative of
  other remedies provided by common law or statute.
         Sec. 31.005.  LIMITATION ON FILING ACTION. A person must
  bring an action under this chapter not later than the second
  anniversary of the date the person obtained actual knowledge that
  the washout occurred.
         SECTION 2.  Chapter 31, Property Code, as added by this Act,
  applies only to a washout that occurs on or after the effective date
  of this Act. A washout that occurred before that date 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 3.  This Act takes effect September 1, 2023.
 
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