82R9508 T
By: Craddick H.B. No. 2087
A BILL TO BE ENTITLED
AN ACT
relating to allocating production from horizontal wells to
non-participating royalty interests.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 91, Natural Resources Code, is amended
by adding the following to Subchapter J, to read as follows:
Sec. 91.409. Allocation of Production From Horizontal
Drainhole Wells to Non-Participating Royalty Interests
(a) A payee that owns a non-participating royalty interest
in a tract that has been penetrated by a horizontal drainhole well
as defined by the Railroad Commission, for oil or gas, or both, but
who has not ratified a lease or pooling agreement covering such
tract, shall be entitled to be paid its allocated share of
production proceeds from such horizontal drainhole well based upon
the ratio of the length of the horizontal drainhole across the
payee's tract between the first take point and last take point to
the total length of the horizontal drainhole between the first take
point and the last take point. A payor who pays such payee's
non-participating royalty interest based upon the allocation
method set forth in this section shall be presumed to have
accurately attributed production to that interest.
(b) A payee or payor under this section may rebut the
presumption that the allocation method set forth in this section
accurately attributes production to the payee's non-participating
royalty interest through a final order of the Railroad Commission
establishing another method of allocation of production to the
payee's non-participating royalty interest. Such order may only be
obtained after application, notice to the payees associated with
the tract containing the non-participating royalty interest and the
payor, and an opportunity for hearing. The Railroad Commission may
establish an alternate method of allocation only upon a showing by
clear and convincing evidence that such method is more accurate in
attributing production to the payee's interest than the method set
out in this section. The Railroad Commission shall have exclusive
primary jurisdiction over such a determination.
(c) This section shall not apply to units formed under
Chapter 102, Natural Resources Code.
SECTION 2. This Act shall apply to production from wells
spudded on or after September 1, 2011.
SECTION 3. 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, 2011.