Texas House Bill HB2087

Texas 2011 - 82nd Regular

• Out of House Committee: 4/13/11
• Introduced: 3/2/11
• Refer: 3/8/11
• Report Pass: 3/30/11

Caption

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.

Impact

This bill stipulates that a payee with a nonparticipating royalty interest is entitled to receive payment based on the length of the horizontal drainhole that intersects their tract compared to the overall length of the drainhole. The legislation aims to provide a standardized and presumed basis for allocation, thereby simplifying the payment process for royalty owners. Additionally, if this standard allocation is disputed, the bill allows for alternative methods to be established through a final order by the relevant commission, ensuring that the dispute can be resolved through regulatory oversight.

Summary

House Bill 2087 addresses the allocation of production from horizontal drainhole oil or gas wells specifically for owners of nonparticipating royalty interests. The bill is titled '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.' The central focus of the legislation is to establish a clear method for determining and allocating proceeds from oil and gas production to those nonparticipating royalty owners who have not ratified a lease or pooling agreement.

Contention

While the bill appears to create clarity in the allocation process, it may raise concerns among stakeholders in the oil and gas industry regarding the impacts on existing leases and agreements. Notably, the restriction of the bill to horizontal drainhole wells spudded after the effective date raises questions about the treatment of existing wells and how the new allocation standards may affect revenues for established ownership claims. Discussions around the bill likely encompass concerns over fairness and the implications for current royalty structures, as well as the administrative burden of potentially disputing allocation methodologies.