Texas 2021 - 87th Regular

Texas Senate Bill SB1258 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	S.B. No. 1258
	1	+	By: Birdwell S.B. No. 1258
	2	+	(Goldman)
2	3
3	4
	5	+	A BILL TO BE ENTITLED
4	6		AN ACT
5	7		relating to the duty of a lessee or other agent in control of
6	8		certain state land to drill an offset well, pay compensatory
7	9		royalty, or otherwise protect the land from drainage of oil or gas
8	10		by a horizontal drainhole well located on certain land.
9	11		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	12		SECTION 1. Section 52.034, Natural Resources Code, is
11	13		amended by amending Subsections (a) and (d) and adding Subsections
12	14		(a-1) and (a-2) to read as follows:
13	15		(a) In this section:
14	16		(1) "Horizontal drainhole well" means a well with a
15	17		horizontal drainhole that may produce oil or gas along at least 100
16	18		feet of the drainhole.
17	19		(2) "Take point" means any point in a horizontal
18	20		drainhole well where oil and gas can be produced from the reservoir
19	21		or field interval recognized by the Railroad Commission of Texas.
20	22		(3) "Unconventional fracture treated field" means an
21	23		oil or gas field in which horizontal well development and hydraulic
22	24		fracture treatment must be used to recover resources from all or
23	25		part of the field.
24	26		(a-1) Except as provided by Subsection (a-2), if [If] oil or
25	27		gas is produced in commercial quantities from a well located on a
26	28		privately owned area or areas of state land leased at a lesser
27	29		royalty and the well is located within 1,000 feet of an area leased
28	30		under this subchapter[,] or [in any case where such an area] is
29	31		draining an area leased under this subchapter [being drained by
30	32		such a well or wells], the lessee of the state area shall begin in
31	33		good faith and prosecute diligently the drilling of an offset well
32	34		or wells on the area leased from the state within 60 days after the
33	35		initial production from the draining well or the well located
34	36		within 1,000 feet of the leased state area.
35	37		(a-2) If the well producing oil or gas in commercial
36	38		quantities under Subsection (a-1) is a horizontal drainhole well
37	39		located in an unconventional fracture treated field, a lessee of a
38	40		state area is not required to drill an offset well as provided by
39	41		Subsection (a-1) unless any take point in the horizontal drainhole
40	42		well is located closer to the leased state area than the greater of:
41	43		(1) the minimum distance established by the applicable
42	44		lease-line spacing requirement of the Railroad Commission of Texas;
43	45		or
44	46		(2) a perpendicular distance of 330 feet.
45	47		(d) At the determination of the commissioner and with the
46	48		commissioner's [his] written approval, the payment of a
47	49		compensatory royalty shall satisfy the obligation to drill an
48	50		offset well or wells required by Subsection (a-1) [Subsection (a)
49	51		of this section]. Such compensatory royalty shall be paid at the
50	52		royalty rate provided by the state lease issued under this
51	53		subchapter and shall be paid on the market value at the well of
52	54		production from the [draining] well producing oil or gas in
53	55		commercial quantities described by Subsection (a-1) [or the well
54	56		located within 1,000 feet of the leased state area].
55	57		SECTION 2. Section 52.173, Natural Resources Code, is
56	58		amended by amending Subsections (a) and (d) and adding Subsections
57	59		(a-1) and (a-2) to read as follows:
58	60		(a) In this section:
59	61		(1) "Horizontal drainhole well" means a well with a
60	62		horizontal drainhole that may produce oil or gas along at least 100
61	63		feet of the drainhole.
62	64		(2) "Take point" means any point in a horizontal
63	65		drainhole well where oil or gas can be produced from the reservoir
64	66		or field interval recognized by the Railroad Commission of Texas.
65	67		(3) "Unconventional fracture treated field" means an
66	68		oil or gas field in which horizontal well development and hydraulic
67	69		fracture treatment must be used to recover resources from all or
68	70		part of the field.
69	71		(a-1) Except as provided by Subsection (a-2), if [If] oil or
70	72		[and/or] gas is [should be] produced in commercial quantities
71	73		within 1,000 feet of land subject to this subchapter[,] or if
72	74		production of oil or gas is draining [in any case where] land
73	75		subject to this subchapter, [is being drained by production of oil
74	76		or gas] the owner, lessee, sublessee, receiver, or other agent in
75	77		control of land subject to this subchapter shall in good faith begin
76	78		the drilling of a well or wells upon such state land within 100 days
77	79		after the draining well or wells or the well or wells completed
78	80		within 1,000 feet of the state land commence to produce in
79	81		commercial quantities[,] and shall prosecute such drilling with
80	82		diligence to reasonably develop the state land and to protect such
81	83		state land against drainage.
82	84		(a-2) If the well producing oil or gas in commercial
83	85		quantities under Subsection (a-1) is a horizontal drainhole well
84	86		located in an unconventional fracture treated field, the owner,
85	87		lessee, sublessee, receiver, or other agent in control of land
86	88		subject to this subchapter is not required to drill an offset well
87	89		as provided by Subsection (a-1) unless any take point in the
88	90		horizontal drainhole well is located closer to the state land than
89	91		the greater of:
90	92		(1) the minimum distance established by the applicable
91	93		lease-line spacing requirement of the Railroad Commission of Texas;
92	94		or
93	95		(2) a perpendicular distance of 330 feet.
94	96		(d) At the determination of the commissioner and with the
95	97		commissioner's [his] written approval, the payment of a
96	98		compensatory royalty shall satisfy the obligation to drill an
97	99		offset well or wells required by Subsection (a-1). Such
98	100		compensatory royalty shall be paid at a royalty rate established by
99	101		the commissioner if the land is unleased, or at the royalty rate
100	102		provided by the state lease, if the land is leased. Such
101	103		compensatory royalty shall be paid on the market value at the well
102	104		of production from the [draining] well producing oil or gas in
103	105		commercial quantities described by Subsection (a-1) [or the well
104	106		located within 1,000 feet of the state land].
105	107		SECTION 3. Notwithstanding Section 4 of this Act, the
106	108		changes in law made by this Act apply only to a lease or other
107	109		agreement or an amendment to a lease or other agreement entered into
108	110		on or after the effective date of this Act. A lease or other
109	111		agreement or an amendment to a lease or other agreement entered into
110	112		before the effective date of this Act is governed by the law in
111	113		effect on the date the lease or other agreement or amendment to the
112	114		lease or other agreement is entered into, and that law is continued
113	115		in effect for that purpose.
114	116		SECTION 4. The parties to a lease or other agreement entered
115	117		into before the effective date of this Act pertaining to land
116	118		subject to Subchapter B or F, Chapter 52, Natural Resources Code,
117	119		may:
118	120		(1) contractually agree to amend the lease or other
119	121		agreement to bring the lease or other agreement into conformity
120	122		with the changes in law made by this Act; or
121	123		(2) after reviewing pertinent data, contractually
122	124		agree that a horizontal drainhole well in an unconventional
123	125		fracture treated field is incapable of draining the land subject to
124	126		the lease or other agreement.
125	127		SECTION 5. This Act takes effect September 1, 2021.
126		-	______________________________ ______________________________
127		-	President of the Senate Speaker of the House
128		-	I hereby certify that S.B. No. 1258 passed the Senate on
129		-	May 3, 2021, by the following vote: Yeas 30, Nays 0.
130		-	______________________________
131		-	Secretary of the Senate
132		-	I hereby certify that S.B. No. 1258 passed the House on
133		-	May 24, 2021, by the following vote: Yeas 140, Nays 5, one present
134		-	not voting.
135		-	______________________________
136		-	Chief Clerk of the House
137		-	Approved:
138		-	______________________________
139		-	Date
140		-	______________________________
141		-	Governor