By: Davis S.B. No. 1870
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of mineral interest pooling by the
Railroad Commission of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The Legislature finds that the exploration and
production of unconventional reservoirs of minerals in this State
pose unique circumstances pertaining to the establishment of
production units in areas where property ownership is highly
fragmented. The production of minerals in these reservoirs should
avoid waste and at the same time minimize drilling locations in
dense urban settings. The establishment of units through pooling
requests may in the proper circumstances accomplish both purposes.
Existing commission approaches to production units of minerals in
unconventional reservoirs are uneven and fail to adequately address
compensation to the mineral owners of this State. Upon a showing of
reasonable necessity, an owner located in an unconventional
reservoir may seek to establish a unit through pooling pursuant to
this Section.
SECTION 2. Section 102.002, Natural Resources Code, is
amended to read as follows:
In this chapter:
(1) "Mineral" means and is limited to oil and gas.
(2) "Commission" means the Railroad Commission of
Texas.
(3) "Unconventional Reservoirs" means a Railroad
Commission-designated field which produces hydrocarbons from one
or more of the following geologic formations: Barnett Shale,
Bossier Shale, Eagle Ford, Haynesville, Woodford, and any other
field which is geologically correlative to the formations listed
above, including fields designated by the commission as
"Unconventional Reservoirs" after notice and hearing.
SECTION 3. Section 102.011, Natural Resources Code, is
amended to read as follows:
(a) Conventional Reservoirs. When two or more separately
owned tracts of land are embraced in a common reservoir of oil or
gas for which the commission has established the size and shape of
proration units, whether by temporary or permanent field rules, and
where there are separately owned interests in oil and gas within an
existing or proposed proration unit in the common reservoir and the
owners have not agreed to pool their interests, and where at least
one of the owners of the right to drill has drilled or has proposed
to drill a well on the existing or proposed proration unit to the
common reservoir, the commission, on the application of an owner
specified in Section 102.012 of this code and for the purpose of
avoiding the drilling of unnecessary wells, protecting correlative
rights, or preventing waste, shall establish a unit and pool all of
the interests in the unit within an area containing the approximate
acreage of the proration unit, which unit shall in no event exceed
160 acres for an oil well or 640 acres for a gas well plus 10 percent
tolerance.
(b) Unconventional Reservoirs. When two or more
separately-owned tracts of land overlie an Unconventional
Reservoir productive of oil or gas and where there are
separately-owned interests in oil and gas within an existing or
proposed unit and the owners have not agreed to pool their
interests, and where at least one of the owners of the right to
drill, has drilled, or has proposed to drill a well on the existing
or proposed unit to the Unconventional Reservoir, the commission,
on the application of an owner specified in Section 102.012 of this
code and for the purpose of avoiding he drilling of unnecessary
wells, protecting correlative rights, or preventing waste, may upon
a proper showing, establish a unit and pool all of the interests in
the unit. Such unit shall be of such a size and shape as to minimize
as much as reasonably possible the number of surface locations for
wells to properly and fully develop the unit for said
Unconventional Reservoir. Such unit shall not exceed 640 acres
plus ten percent tolerance.
(c) The application and the evidence at any hearing must
demonstrate reasonable necessity for the establishment of the unit
and pooling request. The commission may not grant a request under
this subsection that is made for the mere convenience of the
operator, for purposes of locating a wellbore in avoidance of Rule
37 requirements or to unnecessarily coerce owners into negotiating
a lease of their mineral interests.
SECTION 4. Section 102.014, Natural Resources Code, is
amended to read as follows:
(a) The commission shall not require the owner of a mineral
interest, the productive acreage of which is equal to or in excess
of the standard proration unit for the reservoir, to pool his
interest with others unless requested by the holder of an adjoining
mineral interest, the productive acreage of which is smaller than
such pattern, who has not been provided a reasonable opportunity to
pool voluntarily.
(b) If the conditions specified in Subsection (a) of this
section exist, the commission shall pool the smaller tract with
adjacent acreage on a fair and reasonable basis and may authorize a
larger allowable for the unit if it exceeds the size of the standard
proration unit for the reservoir.
(c) This section shall not apply to Unconventional
Reservoirs.
SECTION 5. Section 102.017, Natural Resources Code, is
amended to read as follows:
(a) The applicant shall bear the burden of proof on all
issues and Aafter notice and hearing, all orders affecting the
pooling shall be made on terms and conditions that are fair and
reasonable and will afford the owner or owners of each tract or
interest in the unit the opportunity to produce or receive his fair
share.
(b) Each order shall:
(1) describe the land included in the unit,
identifying the reservoir to which it applies;
(2) set forth the reasonable necessity for the
establishment of the unit;
(3) designate the location of the well; and
(4) appoint an operator for the unit.
SECTION 6. Section 102.051, Natural Resources Code, is
amended to read as follows:
(a) For the purpose of determining the portions of
production owned by the persons owning interests in the pooled
unit, the production shall be allocated to the respective tracts
within the unit in the proportion that the number of surface acres
included within each tract bears to the number of surface acres
included in the entire unit.
(b) notwithstanding the provisions in Subsection (a) of
this section, if the commission finds that allocation on a
surface-acreage basis does not allocate to each tract its fair
share, the commission shall allocate the production so that each
tract will receive its fair share, which for any nonconsenting
owner shall be no less than the would receive under a
surface-acreage allocation.
(c) For the purpose of this section, the owner or owners of
unleased oil and gas rights in and under land pooled for production
from an Unconventional Reservoir shall be regarded as a lessee to
the extent of 7/8 interest in and to said rights and a lessor to the
extent of the remaining 1/8 interest therein.
SECTION 7. This Act takes effect September 1, 2011.