82R17252 SMH-F
By: Craddick H.B. No. 2087
Substitute the following for H.B. No. 2087:
By: J. Davis of Harris C.S.H.B. No. 2087
A BILL TO BE ENTITLED
AN ACT
relating to the allocation of production from a horizontal
drainhole oil or gas well to an owner of a nonparticipating royalty
interest in production from the well.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter J, Chapter 91, Natural Resources
Code, is amended by adding Section 91.409 to read as follows:
Sec. 91.409. ALLOCATION OF PRODUCTION FROM HORIZONTAL
DRAINHOLE WELL TO OWNER OF NONPARTICIPATING ROYALTY INTEREST. (a)
This section does not apply to:
(1) a unit formed under Chapter 102; or
(2) an interest owned by this state.
(b) A payee who owns a nonparticipating royalty interest in
a tract that has been penetrated by a horizontal drainhole well for
oil, gas, or both oil and gas and who has not ratified a lease or
pooling agreement covering the tract is entitled to be paid the
payee's allocated share of the proceeds derived from the sale of oil
or gas production from the well based on the ratio of the length of
the portion of the horizontal drainhole between the first take
point and the last take point of the horizontal drainhole that
crosses the tract in which the payee owns the nonparticipating
royalty interest to the total length of the horizontal drainhole
between the first take point and the last take point of the
horizontal drainhole. A payor who pays such a payee based on the
allocation method provided by this section is presumed to have
accurately attributed production to the payee's interest.
(c) A payor or payee to whom this section applies may rebut
the presumption that the allocation method provided by this section
accurately attributes production to the payee's nonparticipating
royalty interest by obtaining a final order of the commission
establishing another method of allocation of production to the
payee's interest. The payor or payee may obtain such an order only
after application, notice to each payee owning an interest in the
tract that is subject to the nonparticipating royalty interest and
the payor, and an opportunity for a hearing. The commission may
establish an alternate method of allocation only on a showing by
clear and convincing evidence that the method is more accurate in
attributing production to the payee's interest than the method
provided by Subsection (b). The commission has exclusive primary
jurisdiction over such a determination.
SECTION 2. This Act applies only to the allocation of
production from a horizontal drainhole oil or gas well that is
spudded on or after the effective date of this Act. The allocation
of production from a horizontal drainhole oil or gas well that is
spudded before the effective date of this Act is governed by the law
as it existed immediately before the effective date of this Act, and
that law is continued in effect for that purpose.
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.