Texas Senate Bill SB1031

Texas 2021 - 87th Regular

Caption

Relating to information provided to a payee by a payor of proceeds of production from an oil or gas well that traverses multiple tracts.

Impact

One significant aspect of SB1031 is that it mandates payors to include an 'as-drilled' plat of the well and a detailed explanation of the allocation formula used to determine how production is shared between the various tracts. This requirement is particularly vital given the complexities involved in horizontal drilling, where a well may span across multiple property lines. The implementation of this bill could lead to more informed and equitable revenue sharing for payees involved in the oil and gas industry.

Summary

Senate Bill 1031 addresses the information that a payor must provide to a payee concerning proceeds from the production of oil and gas from wells that traverse multiple tracts. This legislation specifically amends Section 91.402 of the Natural Resources Code, focusing on the requirements for division orders related to horizontal wells. The bill aims to enhance transparency and accuracy in the allocation of production revenues among different landowners who may have interests in the well's output due to horizontal drilling techniques.

Contention

While SB1031 has the potential to enhance transparency in production allocations, there may be contention from industry stakeholders regarding the feasibility and financial implications of the mandated reporting requirements. Payors may express concerns about the administrative burden of creating detailed plats and allocation explanations while also focusing on maintaining productive operations. Disputes could arise over how these requirements will be enforced and what penalties will apply for non-compliance, thus impacting relationships between payors and payees in the industry.