Part 1.
GENERAL LAND OFFICE
Chapter 9.
EXPLORATION AND LEASING OF STATE OIL AND GAS
The Texas General Land Office proposes amendments §9.51 of Title
31, Part 1, Chapter 9, Subchapter D of the Texas Administrative Code, relating
to Royalty and Reporting Obligations to the State and §9.93 of Title
31, Part 1, Chapter 9, Subchapter F of the Texas Administrative Code, relating
to Assignments. The proposed change to §9.51(a) corrects an inexplicable
spelling and punctuation error. The proposed changes to §9.51(b)(2)(N)
relate to the State's first lien on oil, gas, proceeds from the production
of oil and gas, and all equipment that may be used in the production and processing
of oil and gas. The proposed changes to §9.51(b)(3)(A) relate to the
basis for calculating penalties on delinquent royalty payments. The proposed
changes to §9.93(e) relate to the liabilities of assignors of state leases
and allow the commissioner to require assurance of financial responsibility
of transferees. The amendments conforms the rule to amendments to Texas Natural
Resources Code §52.136 by Acts 1997, 75th Leg., ch. 1324, §2, eff.
Jan. 1, 1998, to Texas Natural Resources Code §52.131(e) by Acts 1993,
73rd Leg., ch. 897, §30, eff. Sept. 1, 1993, and to Texas Natural Resources
Code §52.026 by Acts 1999, 76th Leg., ch. 1125, §1, eff. Sept. 1,
1999. The changes are being made pursuant to §2001.039 (Agency Review
of Existing Rules) of the Government Code in order to conform agency rules
to statutory changes.
Marshall Enquist, Attorney with the Energy Section, has determined that
for each of the first five years that the amendments as proposed will be in
effect, there will be no negative fiscal impact to state or local government
as a result of administering the sections as amended.
Marshall Enquist, Attorney with the Energy Section, has determined that
the amendment to §9.51(a) will have a negligible effect as to public
benefit or cost. The amendment to §9.51(b)(2)(N) will improve the State's
lien position and may result in enhanced recovery of unpaid royalty amounts,
resulting in a benefit to the Permanent School Fund. The amendment to §9.51(b)(3)(A)
simply makes it clear that the term "market value" refers to the value of
production, not the value of royalty, and will have a negligible impact, if
any, as either a public cost or benefit. The amendment to §9.93(e) will
result in an improvement in the state's ability to recover its costs of plugging
abandoned wells, removing old platforms and pipelines, and cleaning up oilfield
contamination, resulting in a substantial public benefit.
Marshall Enquist, Attorney with the Energy Section, has determined that
for each of the first five years that the amendment as proposed will be in
effect, there will be no impact on local employment.
Comments may be submitted to Melinda Tracy, Legal Services, Texas General
Land Office, 1700 N. Congress Avenue, Austin, Texas 78711 or by fax at (512)
463-6311, no later than 30 days after publication.
Subchapter D. PAYING ROYALTY TO THE STATE
31 TAC §9.51
The amendments to these sections are proposed under Texas
Natural Resources Code §31.051, which authorizes the Commissioner of
the Texas General Land Office to make and enforce suitable rules consistent
with the law.
The proposed amendments affect Sections 52.136, 52.131(e) and 52.026 of
the Texas Natural Resources Code.
§9.51.Royalty and Reporting Obligations to the State.
(a)
In-kind royalties and reports. Producers meeting their
royalty obligations by delivering the state's royalty in-kind shall contact
the General Land Office (GLO) for specific instructions for making and reporting
in-kind royalties. Purchasers of the state's oil or gas in-kind must make
the payment for this oil or gas separately from any payment of monetary
royalty.
[
(b)
Monetary royalties and reports.
(1)
Basis for computing royalties.
(A)
Gross proceeds. Lessees shall compute and pay oil and gas
royalties due under each lease on the gross proceeds received by the seller,
including amounts collected to reimburse the seller for severance taxes and
production-related costs. Lessees shall not deduct production or severance
taxes, or the cost of producing, processing, transporting, and otherwise making
the oil, gas, and other products produced from the premises ready for sale
or use.
(B)
Volume subject to royalty.
(i)
General. Royalties are due and payable by all lessees on
100% of each lease's gross production of oil and gas unless the lease contains
language expressly exempting certain dispositions of oil and/or gas from state
royalties.
(ii)
Oil sales and stocks. As a matter of convenience, during
periods of regular sales, the GLO will permit lessees to pay monthly oil royalties
based on the number of barrels sold (or otherwise disposed of) in a given
month rather than on the gross production as may be required by the lease.
Unless the lessee is otherwise notified by the GLO, no royalties are payable
on lease stocks until such stocks are disposed of either by sale or otherwise.
The GLO reserves the right to require at any time, or from time to time, that
lessees pay royalties on gross production rather than on barrels sold. The
GLO requires that lessees pay royalties on existing stocks when there have
been no sales from such stocks for several months.
(C)
Plant products. Lessees shall calculate the volume and
value of plant products subject to state royalty in accordance with the lease
under which the gas is produced and processed and this volume and value shall
never be less than the minimum percentage specified in the lease. In cases
where the lease does not specify the manner in which lessees are to calculate
plant product royalties, then the volume and value of plant products subject
to state royalty shall be that volume and value for which settlement is being
made to the producer, under a gas contract prudently negotiated between the
producer and processor. When gas is processed for the recovery of liquid hydrocarbons
or other products, lessees shall pay royalties on residue gas and plant products
in an amount not less than the royalties which would have been due had the
gas not been processed.
(D)
Market value. Nothing in this subsection shall limit or
waive the right of the state to receive its royalties based on market value
of the oil and gas produced, if authorized by the lease, unit agreement, judgment,
or other contract authorized by law.
(E)
Determination of market value.
(i)
For the purpose of computing and paying royalties to the
state based on market value, the market value shall be presumed to be the
gross proceeds received pursuant to a bona fide contract entered into at arm's
length between nonaffiliated parties of adverse economic interests.
(ii)
If a contract is not negotiated at arm's length, or was
between affiliated parties, the presumption that market value is equal to
gross proceeds shall not apply. In this situation, the lessee has the burden
to establish that royalties paid to the state are based on market value.
(iii)
The commissioner may overcome the presumption established
under clause (i) of this subparagraph and assess additional royalties due
by establishing a different price based on other sales in the general area
which are comparable in time, quality, volume, and legal characteristics.
If some of this information is not available to the commissioner, an assessment
will be based on the best information available.
(iv)
A lessee may challenge an assessment of additional royalties
due by submitting information which establishes the prices used for comparison
by the commissioner involve products of significantly different quality; were
based on contracts to deliver significantly different volumes or for different
terms; were not from a relevant market; were derived from an area in which
deliverability is significantly different; or by presenting any other information
which could establish a more accurate market price. However, under no circumstances
will the state's royalty be computed on less than gross proceeds received,
including reimbursements received for severance taxes and production-related
costs.
(v)
Parties are affiliated under this subsection if they are
related by blood, marriage, or common business enterprise, are members of
a corporate affiliated group, or where one party owns a 10% or greater interest
in the other.
(vi)
The term "general area," as used in this subsection, means
the smallest geographical area which contains sufficient data to establish
a market price. Examples include a unit, a field, a county, or the applicable
RRC district.
(vii)
For the purpose of computing and paying oil royalties
to the state based upon a market value determined by the highest posted price,
that phrase is defined as the greater of:
(I)
the highest price available to the producer; or
(II)
the gross price posted by the purchaser of the oil, less
a reasonable transportation allowance after sale and delivery if the price
bulletin reflects on its face that the purchaser will deduct a marketing or
transportation allowance, and a transportation allowance is actually deducted
by the purchaser from its gross price.
(viii)
For the purposes of clause (vii)(I) of this subparagraph,
a price will be presumed to be available to the producer if it is offered
in the field where the lease is located at the time of sale. A producer may
overcome the presumption by submitting evidence that the price is not actually
available to the producer. The terms "available" and "actually available,"
as used in this subsection, mean that a price is being offered to nonaffiliated
parties by posting, contract listing or amendment, or otherwise and that if
a producer presented a barrel of oil to an entity offering said price, assuming
all quality specifications for the price were met, that producer would, in
fact, receive that offered price.
(ix)
Clause (vii) of this subparagraph shall not be construed
to allow the lessee, when calculating royalties to the state, to make any
deductions for the cost of producing, processing, or transporting the oil
prior to its sale and delivery.
(2)
Royalty payments and reports.
(A)
Mode of payment. Except as provided in subsection (a) of
this section, relating to payments made in-kind, and subject to clauses (i)-(vi)
of this subparagraph, relating to mandatory electronic funds transfer, lessees
may pay royalties and other monies due by cash or check, money order, or sight
draft made payable to the commissioner. Lessees may also pay by electronic
funds transfer or in any manner that may be lawfully made to the state comptroller.
Information regarding alternative payment methods may be obtained from the
GLO Royalty Management Division. Payors are required to make payments by electronic
funds transfer in compliance with 34 Texas Administrative Code Chapter 15
in the circumstances outlined:
(i)
For leases executed or amended after May 11, 1989, but
before September 1, 1991, payors that have made over $500,000 in a category
of payments, defined in clause (iv) below, to the GLO during the preceding
state fiscal year shall make payments of $10,000 or more in the current fiscal
year for those leases and in that category by electronic funds transfer.
(ii)
For leases executed or amended after August 30, 1991,
but before June 9, 1995, payors that have made over $250,000 in a category
of payments, defined in clause (iv) below, to the GLO during the preceding
state fiscal year shall make payments of $10,000 or more in the current fiscal
year for those leases and in that category by electronic funds transfer.
(iii)
For leases executed or amended on or after June 9, 1995,
payors that have made over $25,000 in a category of payments, defined in clause
(iv) below, to the GLO during the preceding state fiscal year shall make all
payments in the current fiscal year for those leases and in that category
by electronic funds transfer.
(iv)
For purposes of clauses (i)-(iii) of this subparagraph,
each of the following is a separate category of payments:
(I)
royalties (including shut-in and minimum royalties);
(II)
penalties;
(III)
other payments to the state agency, excluding interest
and extraordinary payments such as payments made in settlement of litigation.
(v)
The GLO anticipates that those payors that have exceeded
the threshold sums set out in clauses (i)-(iii) of this subparagraph in the
preceding state fiscal year will also exceed those sums in the current state
fiscal year. The application of clauses (i)-(iii) to a specific payor may
be waived at the commissioner's discretion to the extent allowed by law, upon
a showing that a payor will not exceed the threshold sums set out in clauses
(i)-(iii) in the current fiscal year, or for other good cause.
(vi)
The GLO will notify each payor to whom this subparagraph
applies in compliance with 34 Texas Administrative Code Chapter 15.
(B)
Information required with royalty payments. Lessees shall
submit all royalty payments in a manner which identifies the assigned GLO
lease number, the annual submission certification number, if any, and the
amount of oil and gas royalty being paid. Royalty payments not identified
by the lease number and the annual submission certification number, if any,
shall be considered delinquent and shall be subject to the delinquency provisions
of paragraph (3) of this subsection.
(C)
Required reports. Lessees shall provide, in the form and
manner prescribed by the GLO, production/royalty reports (Form GLO-1 for oil
and condensate and Form GLO-2 for gas), other required reporting documents
for gas or oil and condensate, and other supporting documents required by
GLO to verify gross production, disposition, and market value of the oil and
condensate, gas, and other products produced therefrom. Reporters for leases
which the GLO has approved for annual royalty payments may submit such reports
on an annual basis as well after receipt of an annual royalty certification
number. Parties approved for annual reporting or payment shall notify the
GLO in writing within ten business days of a complete release, forfeiture,
termination, assignment, or change of operator or payor of a lease approved
for annual reporting and payment. Failure to comply with the statutes and
the reporting requirements of this chapter may subject a lease to forfeiture,
delinquency penalties, or both.
(D)
Timely receipt of royalty payments and reports.
(i)
For the purpose of this subsection, the GLO will consider
a report timely received if the report:
(I)
arrives postpaid and properly addressed; and
(II)
is deposited with the United States Postal Service or
any parcel delivery service at least one day before it is due and such deposit
is evidenced by a postmark, a postal meter stamp, or a receipt.
(ii)
For the purpose of this subsection, the GLO will consider
a royalty payment timely made if:
(I)
the payment is received by electronic funds transfer, it
is received on or before the date it is due (please be advised that delivery
of payment to the state comptroller's office does not satisfy this requirement.
Due to the time required by the comptroller's office to process a payment
and forward it to the GLO, payors are strongly encouraged to submit payments
to the comptroller's office before 6:00 p.m. CST on the business day preceding
the business day on which the payment is due).
(II)
the payment is not made by electronic funds transfer,
it arrives postpaid and properly addressed and it is deposited with the United
States Postal Service or any parcel delivery service at least one day before
it is due and such deposit is evidenced by a postmark, a postal meter stamp,
or a receipt.
(iii)
If a royalty payment or report is due on a Sunday or
a legal state or federal holiday, then lessees shall ensure that such payment
or report is either received by the GLO on the next calendar day which is
not a Sunday or a holiday, or postmarked or stamped prior to the next calendar
day which is not a Sunday or a holiday.
(E)
Oil and condensate royalties--due date.
(i)
Lessees shall ensure that all oil and condensate royalties,
except royalties approved by GLO to be paid on an annual basis, are timely
received by the GLO on or before the fifth day of the second month following
the month of production.
(ii)
Upon application to and written approval by the GLO, future
royalties attributable to leases for which oil, condensate, and gas royalty
due for the immediately preceding September 1 to August 31 period equaled
$3, 000 or less may be paid on an annual, rather than monthly, basis. A party
who is both a payor and a reporter for a lease shall submit both payments
and reports on a monthly or, if the GLO grants approval, an annual, basis.
(I)
The applicant shall designate the payor who will submit
the annual royalty payments and, if there are multiple payors for a lease,
the share of royalty the designated payors will submit. Upon approval, GLO
staff will assign an annual submission certification number to the designated
payor and the GLO will authorize the designated payor to submit the designated
share of royalty payments on an annual basis. The applicant shall notify the
GLO in writing of any change in the payor designation within ten business
days of its effective date.
(II)
Payors, after approval, shall pay annual royalties for
the following January 1 to December 31 annual production periods.
(III)
Payors, after approval, shall continue to make payments
on a monthly basis until the commencement of the next annual production period.
(IV)
Each year, payors shall ensure that all annual oil and
condensate royalties are timely received by the GLO on or before the fifth
day of February following each annual production period. Each year, payors
shall ensure that all annual gas royalties are timely received by the GLO
on or before the 15th day of February following each annual production period.
(V)
After the payor receives GLO approval for annual royalty
payments, if the total annual oil, condensate, and gas royalty due under a
lease exceeds $3,000 for any annual production period, payors shall resume
making monthly royalty payments starting with the January production month
immediately following that annual production period.
(VI)
For any royalty approved to be paid on an annual basis,
payors shall ensure that the total royalties that have accrued as of the date
of a complete lease forfeiture, release, termination, assignment, or any change
of designated payor, are timely received by the GLO on or before 75 calendar
days after that date. If a change of payor occurs for a lease with multiple
payors, only the changing payor shall pay the accrued royalties for which
he is designated as being responsible on or before 75 calendar days after
the change.
(VII)
Any forfeiture, release, termination, assignment, or
change of operator or payor, does not affect the approved annual royalty payment
status, subject to subclause (VI) of this clause. However, as provided in §9.93(l)
of this title (relating to Assignment), an assignee or successor in interest
is liable for all unsatisfied royalty requirements of the assignor or predecessor
in interest.
(VIII)
The GLO may prescribe further specific forms and instructions
applicable to this subparagraph.
(IX)
The GLO has the sole discretion to approve annual royalty
payments. Approval does not affect the state's right to take its royalty in-kind,
nor does it constitute a finding that a lease has been maintained in force
and effect or otherwise ratify or revive any lease. GLO approval does not
abrogate the lessee's responsibility to submit timely royalty payments and
reports to the GLO as provided in subparagraphs (L) and (M) of this paragraph.
(X)
Determination of royalty due for purposes of clause (ii)
of this subparagraph is not an official GLO determination of royalty due under
a lease. The GLO may audit any lease to determine if royalty was properly
paid and may pursue its rights and remedies through an administrative hearing
or litigation.
(F)
Gas royalties--due date.
(i)
Lessee shall ensure that all gas royalties, except royalties
approved by GLO to be paid on an annual basis, are timely received by the
GLO on or before the 15th day of the second month following the month of production.
(ii)
The provisions of subparagraph (E)(ii)(I)-(X) of this
paragraph apply to the payment of gas royalties.
(G)
Required reports--due date.
(i)
Lessees shall ensure that all required production/royalty
reports and other required documents (hereafter "reports" in subparagraph
(G) of this paragraph), in whatever format submitted, for gas or oil and condensate
are timely received by the GLO on or before the due date of the corresponding
monthly royalty payment.
(ii)
Upon application to and written approval by the GLO, future
reports for leases for which oil, condensate, and gas royalty due for the
immediately preceding September 1 to August 31 period equaled $3,000 or less
may be submitted on an annual, rather than monthly, basis. A party who is
both a payor and a reporter for a lease shall submit both payments and reports
on a monthly or, if the GLO grants approval, an annual, basis.
(I)
The applicant shall designate the reporter who will submit
the annual reports and, if there are multiple reporters for a lease, the information
the designated reporter will submit. Upon approval, GLO staff will assign
an annual submission certification number to the designated reporter and the
GLO will authorize the designated reporter to submit the designated reports
on an annual basis. The applicant shall notify GLO in writing of any change
in the reporter designation within ten business days of its effective date.
(II)
Reporters, after approval, shall submit annual reports
for the following January 1 to December 31 annual production periods.
(III)
Reporters, after approval, shall continue to submit reports
on a monthly basis until the commencement of the next annual production period.
Unless the GLO expressly approves otherwise in writing, reporters shall submit
unit production/royalty reports on a monthly basis regardless of the annual
reporting status of individual leases within the unit.
(IV)
Each year, reporters shall ensure that all annual reports
concerning oil and condensate are timely received by the GLO on or before
the fifth day of February following each annual production period. Each year,
reporters shall ensure that all annual reports concerning gas are timely received
by the GLO on or before the 15th day of February following each annual production
period.
(V)
After the reporter receives GLO approval for annual reporting,
if the total annual oil, condensate, and gas royalty due under a lease exceeds
$3,000 for any annual production period, reporters shall resume making monthly
reports starting with the January production month immediately following that
annual production period.
(VI)
Reporters shall ensure that all reports approved by the
GLO for submission on an annual basis are timely received by the GLO on or
before 75 calendar days after a complete lease forfeiture, release, termination,
assignment, or any change of designated reporter. If a change of reporter
occurs for a lease with multiple reporters, only the changing reporter shall
submit the reports for which he is designated as being responsible on or before
75 calendar days after the change.
(VII)
Any forfeiture, release, termination, assignment, or
change of operator or reporter does not affect the approved annual reporting
status, subject to subclause (VI) of this clause. However, as provided in §9.93(l)
of this title (relating to Assignment), an assignee or successor in interest
is liable for all unsatisfied reporting requirements of the assignor or predecessor
in interest.
(VIII)
The GLO may prescribe further specific forms and instructions
applicable to this subparagraph.
(IX)
The GLO has the sole discretion to approve annual reporting.
Approval does not affect the state's right to take its royalty in-kind, nor
does it constitute a finding that a lease has been maintained in force and
effect or otherwise ratify or revive any lease. GLO approval does not abrogate
the lessee's responsibility to submit timely royalty payments and reports
to the GLO as provided in subparagraphs (L) and (M) of this paragraph.
(X)
Determination of royalty due for purposes of clause (ii)
of this subparagraph is not an official GLO determination of royalty due under
a lease. The GLO may audit any lease to determine if royalty was properly
paid and may pursue its rights and remedies through an administrative hearing
or litigation.
(iii)
Lessees shall identify the relevant GLO lease numbers
and annual submission certification numbers, if any, on all required reports.
Reports that fail to identify these numbers shall be considered delinquent
and shall be subject to the delinquency provisions of subsection (b)(3) of
this section.
(H)
Gas contracts. Lessees shall file with the GLO a copy of
all contracts under which gas is sold or processed and all subsequent agreements
or amendments to such contracts within 30 days of entering into or making
such contracts, agreements, or amendments. Such contracts, agreements, and
amendments, when received by the GLO will be held in confidence by the GLO
unless otherwise authorized by lessee.
(I)
Gas contract brief (Form GLO-5).
(i)
Each gas contract, agreement, or contract amendment must
be accompanied by a gas contract brief (Form GLO-5) completed in the form
and manner prescribed by GLO. The GLO-5 must be submitted even if GLO is taking
its royalty in-kind from the leases subject to the contract or agreement.
The GLO-5 shall be submitted to the GLO within 30 days of executing a contract,
agreement, or contract amendment. While the lessee is responsible for the
preparation and filing of the GLO-5 and supplements, the lessee is not required
to submit the GLO-5 or supplements for royalty volumes which the state is
taking in kind. Rather, the lessee must submit the GLO-5 and supplements for
other volumes produced from the lease or leases.
(ii)
A gas contract brief supplement (GLO-5(s)) may be filed
for sales of gas on the spot or other markets in which price changes occur
monthly. A GLO-5(s) should be submitted to the GLO within 30 days of the completion
of each six-month period of sales. A GLO-5 does not have to be submitted as
long as other contract provisions remain unchanged.
(iii)
For spot or similar sales situations in which supplements
will be submitted, the GLO-5 is due within 30 days of the completion of the
first six-month sales period.
(iv)
Gas contract briefs and supplements should be directed
to: General Land Office, Energy Resources Division, Stephen F. Austin Building,
1700 North Congress Avenue, Austin, Texas 78701-1465, Attention: Gas Contracts
Administrator.
(J)
Settlements and judgments. Lessee shall file with the GLO
a copy of each settlement reached or judgment rendered in a dispute between
the lessee and a purchaser regarding production from, and/or contracts relating
to, state lands. Lessee shall file these documents with the GLO within 30
days of entering into any such settlement or within 30 days of the rendering
of such judgment.
(K)
Other records. At any time, or from time to time, the GLO
may require any additional records relating to any aspect of lease operations
and accounting.
(L)
Responsibility of lessee to file royalty payments and required
reports. Parties other than the lessee may remit royalties to the state on
the lessee's behalf. This practice does not relieve the lessee of any statutory
or contractual obligation to pay royalty or file reports and supporting documents.
The lessee bears full responsibility for paying royalties and for filing reports
and supporting documents as required in this chapter.
(M)
Cooperation of operators, purchasers, payors, reporters,
and lessees. The GLO recognizes that lessees may often delegate various lease
obligations to third parties. However, such a delegation does not relieve
a lessee of these obligations. Lessees must be aware that the acts and omissions
of these third parties regarding these obligations may subject a lease to
a delinquency penalty or forfeiture. Therefore, these parties must cooperate
to responsibly discharge their obligations to each other and to the state.
(N)
State's lien. The state has a
statutory
first
lien on all oil and gas produced from the leased area to secure the payment
of all unpaid royalty or other sums of money that may become due.
Acceptance
of an oil and gas lease from the state grants to the state a contractual first
lien on and security interest in all oil and gas extracted from the lease
area, all proceeds that may accrue to the lessee, and all fixtures on and
improvements to the area covered by the lease that may be used in the production
or processing of oil and gas.
(O)
Certification of sufficient royalties. The GLO will not
be responsible for certifying, prior to the rental anniversary date, that
sufficient royalty has been received to obviate the necessity of paying rentals
or minimum royalties as may be required by lease. Lessees should maintain
adequate records relating to lease royalty and rental status to determine
if additional liability exists. If there is uncertainty concerning whether
or not rental or minimum royalties are due, a lessee may maintain a lease
in effect by remitting the annual amount required under each lease. The GLO
will refund or grant credit to lessees for payments received in this manner
that are later found to have not been due.
(P)
Partial payments. The GLO will apply a lessee's partial
payment of amounts assessed (delinquent royalties, penalty, and interest)
first to unpaid penalty and interest and then to delinquent royalties. Penalty
and interest will continue to accrue until the delinquent royalties are fully
paid.
(3)
Penalties and interest.
(A)
Penalties on delinquencies. Any royalty not paid when due,
or any required report or document not submitted when due, is delinquent and
penalties as provided in this subsection shall be added. Royalty payments
or any required reports or documents that do not identify GLO lease numbers
and annual submission certification numbers, if any, and any royalty payments
not accompanied by any required reports or documents are also delinquent.
The penalties on delinquent royalties specified in this subsection shall not
be assessed in cases of title dispute as to the state's portion of the royalty
or to that portion of the royalty in dispute as
the market value of the
production
[
(i)
For royalties and reports due on or after September 1,
1985, including those for oil and gas produced since July 1, 1985, the GLO
shall add:
(I)
a penalty of 5.0% of the delinquent amount or $25, whichever
is greater, to any royalty which is delinquent 30 days or less;
(II)
a penalty of 10% of the delinquent amount or $25, whichever
is greater, to any royalty which is more than 30 days delinquent;
(III)
at its discretion, a penalty of $10 per document for
each 30-day period that each report, affidavit, or other document is delinquent.
The GLO shall impose this penalty of $10 per document only after the commissioner
or a designated representative has notified the lessee in writing that reports,
affidavits, or documents are not being filed correctly and that the GLO will
assess the penalty on subsequent reporting errors.
(ii)
For royalties and reports due before September 1, 1985,
including those for oil and gas produced prior to July 1, 1985, the GLO shall
add:
(I)
a penalty of 1.0% of the delinquent amount or $5.00, whichever
is greater, for each 30-day period that any royalty is delinquent;
(II)
a penalty of $5.00 per document for each 30-day period
that each report, affidavit, or other document is delinquent.
(iii)
For royalties and reports due before September 1, 1975,
including those for oil and gas produced prior to August 1, 1975, the GLO
shall impose no penalty for delinquent royalties or delinquent reports.
(B)
Interest on delinquencies. Any royalty not paid when due
is delinquent and shall accrue interest as provided in this subsection.
(i)
For royalties due on or after September 1, 1985, including
those for oil and gas produced since July 1, 1985:
(I)
interest shall accrue on all delinquent royalties at the
rate of 12% per year (simple interest) pursuant to the Texas Natural Resources
Code, §52.131(g);
(II)
interest shall begin to accrue 60 days after the due date.
(ii)
For royalties due before September 1, 1985, including
those for oil and gas produced prior to July 1, 1985:
(I)
interest shall accrue on all delinquent royalties at the
rate of 6.0% per year compounded daily pursuant to Texas Civil Statutes, Article
5069-1.03;
(II)
interest shall begin to accrue 30 days after the date
due.
(C)
Penalties for fraud. The commissioner shall add a penalty
of 25% of the delinquent amount if any part of the delinquency is due to fraud
or an attempt to evade the provisions of statutes or rules governing payment
of royalty. The GLO shall apply this penalty in cases of title dispute as
to the state's portion of the royalty or to that portion of the royalty in
dispute as to the fair market value. The GLO shall apply this penalty in addition
to any other penalty assessed.
(D)
Forfeiture. The state's power to forfeit a lease is not
affected by the assessment or payment of any delinquency, penalty, or interest
as provided in this subsection. Specifically, the lessee's failure to pay
royalties and other sums of money within 30 days of the due date or the failure
to file reports completed in the form and manner prescribed by this section
shall subject a lease to forfeiture under §9.95 of this title (relating
to Forfeiture).
(E)
Reduction of penalty and/or interest. The SLB may reduce
penalties and/or interest assessed under Texas Natural Resources Code, §52.131,
and/or any other penalties or interest relating to delinquent or unpaid royalties
that have been assessed by the commissioner in the following circumstances:
(i)
when a lessee brings a deficiency to the GLO's attention
voluntarily; and/or
(ii)
when a lessee and the GLO have reached an agreement regarding
the reduction as part of a resolution of an outstanding audit issue.
(4)
Corrections and adjustments to royalty payments and reports.
(A)
Nonroutine corrections and/or adjustments, as used in this
subsection, are defined as those corrections and adjustments by which someone
seeks to change, on a lease basis, the originally reported royalty due for
oil or the originally reported royalty due for gas by at least $25,000 or
25%.
(B)
The GLO Royalty Management Division must receive at least
30 days advance written notice of the lessee's intention to take a nonroutine
correction and/or adjustment which will result in a credit with written documentation
explaining and supporting the requested credit. The credit may be taken 30
days after that GLO division receives such notice if by that date, the GLO
has not, in writing, denied lessee permission to take the credit. If the GLO
denies permission, the GLO will set forth its reasons for such denial. Any
nonroutine credit improperly taken may not be used to offset royalty due on
current reports. The improper application of credits will result in a current
month delinquency and the assessment of associated penalties and interest.
(C)
Effective with the production month of March 1989, all
prior month adjustments must be submitted on GLO-1 and GLO-2 report documents
separate from the reports containing the current month royalty activity. The
GLO-1 or GLO-2 containing prior month adjustments must be labeled as "Amended
Reports" (underlined).
(5)
Temporary reduction of gas royalty rates.
(A)
Prerequisites. Application for a temporary reduction of
the royalty rates established may be considered by SLB if:
(i)
the lease covers any of the state lands described in §9.21
of this title (relating to Leasing Guide)
(ii)
state land was leased by SLB on the basis of a royalty
bid and at a royalty rate exceeding 25%; and
(iii)
the lease has not been pooled or unitized with other
leases.
(B)
Amount of reduction. If the value of gas from such lands
is at or below $3.00 for each 1,000 cubic feet of gas, the board may reduce
the royalty rate for gas produced from such lands for any term set by SLB,
such term to be set after September 1, 1987, and before September 1, 1990,
as follows:
(i)
for gas valued as $1.50 or less per Mcf of gas, the board
may reduce a royalty rate to 25%;
(ii)
for gas valued from $1.51 to $2.00 per Mcf of gas, the
board may reduce a royalty rate to 30%;
(iii)
for gas valued from $2.01 to $2.50 per Mcf of gas, the
board may reduce a royalty rate to 35%;
(iv)
for gas valued from $2.51 to $3.00 per Mcf of gas, the
board may reduce a royalty rate to 40%.
(C)
Definition of value. For purposes of this paragraph, the
value of the gas is defined as the highest market price paid or offered for
gas of comparable quality in the general area where produced and when run,
or the gross price paid is offered to the producer, whichever is greater.
(D)
Request for reduction. A lessee seeking the approval of
SLB for a temporary reduction in gas royalty rates must make written request
for an application to the Minerals Leasing Division, General Land Office,
1700 North Congress Avenue, Room 640, Austin, Texas 78701-1495. The application
should be completed and returned to the Minerals Leasing Division of the GLO.
(i)
The applicant must submit an affidavit and documentation
in support of its request for a temporary reduction of gas royalty rates.
The affidavit will attest to the fact that the requirements set out in this
paragraph have been satisfied. The accompanying documentation will contain
pertinent lease data, production and reserve data, gas price data, development
data, and any other information which may be required to support the application,
including the reason for requesting a royalty reduction.
(ii)
SLB will consider the request for temporary reduction
in gas royalty rates based upon lessee's affidavit, documents in support thereof,
and the recommendation of the Minerals Leasing Division.
(iii)
SLB may reevaluate the temporary reduction in gas royalty
rates at any time.
(E)
Verification of gas valuation. The gas valuation information
submitted by the lessee will be subject to verification by the Royalty Audit
Division.
(F)
Effective dates for reduced royalty rates. The reduced
royalty rates shall be effective beginning the first day of the next month
following approval by SLB. Royalty rates on gas produced after September 1,
1990, will not be subject to reduction under this section.
(G)
No retroactive effect. The reduced royalty rates will not
be applied retroactively for previous months' production.
(c)
Marginal Properties Royalty Incentive Program.
(1)
Definitions. The following words and terms, when used in
this subsection, shall have the following meanings, unless the context clearly
indicates otherwise.
(A)
Active well--Any well on the qualifying property as defined
in subparagraph (H) of this paragraph in actual use either as a producing
well or an injection well as defined in subparagraph (D) of this paragraph
during at least six months of the qualifying period as defined in subparagraph
(G) of this paragraph.
(B)
Average daily per well production--
(i)
Un-pooled leases: For a given reservoir, the total oil,
condensate, and/or natural gas production from the lease for the qualifying
period, in BOE as defined in subparagraph (C) of this paragraph, divided by
the product of 365 and the number of the reservoir's active wells on the lease.
Average daily per well production is calculated in BOE/day and is rounded
down to the next whole number.
(ii)
Pooled leases: For a given reservoir, the total oil, condensate,
and/or natural gas production from the unit for the qualifying period, in
BOE, divided by the product of 365 and the number of the reservoir's active
wells in the unit. Average daily per well production is calculated in BOE/day
and is rounded down to the next whole number.
(C)
Barrel of oil equivalent (BOE)--One 42-gallon barrel of
crude oil, or the greater of 6,000 cubic feet (6 Mcf) of natural gas available
for sale off the lease or unit or a volume of natural gas available for sale
off the lease or unit with a minimum heating value of 6,000,000 British thermal
units (6,000 MBtu).
(D)
Injection well--Any well approved by the RRC for use in
the injection of gas or fluids in a secondary or tertiary enhanced recovery
or pressure maintenance operation, excluding disposal wells.
(E)
Mcf--Thousand cubic feet.
(F)
Price--The five-day average spot price of West Texas Intermediate
crude oil at the Midland, Texas, oil terminal as reported in The Oil Daily.
(G)
Qualifying period--The 12-month period immediately preceding
the most recent month of production.
(H)
Qualifying property--Land subject to a State of Texas oil
and gas lease issued pursuant to Texas Natural Resources Code, Chapter 32,
Chapter 51, Subchapter E, or Chapter 52. Land subject to a free royalty reserved
by the state under Texas Natural Resources Code, §51.054 or its predecessor
statutes cannot be qualifying property.
(I)
Qualifying Gulf of Mexico property--Land described in Texas
Natural Resources Code, §52.011(2), that is subject to a State of Texas
oil and gas lease issued pursuant to Texas Natural Resources Code, Chapter
52, Subchapter B.
(J)
Qualifying reservoir--A reservoir underlying a qualifying
property or a reservoir within a pooled unit that includes qualifying property,
having average daily per well production during the qualifying period equal
to or less than 15 BOE/day. Unless specified or unless the context clearly
requires a different interpretation, the term "qualifying reservoir" includes
a "qualifying Gulf of Mexico reservoir."
(K)
Qualifying Gulf of Mexico (GOM) reservoir--A reservoir
underlying a qualifying GOM property or a reservoir within a pooled unit that
includes qualifying GOM property, having average daily per well production
during the qualifying period equal to or less than 50 BOE/day.
(L)
Reservoir--A "common reservoir" as defined in Texas Natural
Resources Code, Chapter 86, Subchapter A, §86.002.
(2)
Qualification for Royalty Reduction.
(A)
The SLB may consider a lease for a royalty reduction if:
(i)
the average of the daily price of oil during the qualifying
period was equal to or less than $25 per barrel; and
(ii)
the applicant submits a sworn application to the SLB which
includes:
(I)
proof that the applicant is the lease operator as shown
by the most current RRC records;
(II)
proof that the land is qualifying property;
(III)
proof that the reservoir is a qualifying reservoir, including
proof of the reservoir's volume of oil, condensate, and/or natural gas produced
from, or attributable to, the lease during the qualifying period;
(IV)
a representation that the lease is in force and effect;
and
(V)
such additional information as may be required upon written
request by GLO staff.
(B)
GLO staff will review the application and submit it and
a recommendation to the SLB. The staff shall include in the recommendation
information regarding any other royalty interests in the tract, including
royalty interests held by owners of the soil (or their successors in interest)
of Relinquishment Act lands, as defined in §9.1 of this title (relating
to Definitions). Thereafter, if the SLB finds that all requirements under
subparagraph (A) of this paragraph are met, the SLB may approve the application
or may condition approval on specified requirements. In determining whether
to grant a reduction in the royalty rate, the SLB may consider whether the
qualifying property or qualifying Gulf of Mexico property is being operated
efficiently, including whether the property is pooled or has reasonable potential
for the application of secondary or tertiary recovery techniques. If a qualifying
reservoir for which a royalty rate reduction is sought under this section
is included in a unit subject to SLB authority, the SLB may modify the terms
and conditions for the unit as a condition of approving the requested reduction
in the royalty rate. The SLB has the sole discretion to grant final approval.
SLB approval of a reduced royalty applies only to the qualifying reservoir.
The effective date of the royalty rate reduction is the first day of the month
following SLB approval of the application. A reduced royalty under this incentive
program is available only for a lease issued or approved by the state that
is in effect on, or takes effect on or after, the effective date of this subsection.
(C)
The approval of an application shall not constitute a finding
that a lease has been maintained in force and effect or otherwise ratify or
revive any lease.
(3)
Royalty Rate. After the SLB approves an application:
(A)
the SLB will determine the qualifying reservoir's applicable
royalty rate according to the published reduced royalty schedules. The SLB
may not set the royalty at a rate less than the lowest rate provided by statute
for the category of property for which application is made.
Figure: 31 TAC §9.51(c)(3)(A) (No change)
(B)
Except as provided in subparagraph (C) of this paragraph,
the royalty rate may not be reduced to less than 6.25% of 100% (one-sixteenth
of eight-eighths).
(C)
Royalty rate under specific types of leases:
(i)
The royalty rate owed to the state under a lease issued
under Texas Natural Resources Code, Chapter 52, Subchapter F (Relinquishment
Act leases) or §51.195(c)(2) or (d) may not be reduced under this subsection
to less than 3.125% of 100% (one thirty-second of eight-eighths). The state's
royalty rate may not be reduced under this clause only if the aggregate royalty
rate for the owner(s) of the soil is reduced in the same proportion. Only
royalty payable by the lessee to the commissioner may be reduced by the SLB
pursuant to this rule.
(ii)
The royalty rate under a lease issued under Texas Natural
Resources Code, Chapter 52, Subchapter C (riverbed leases), may not be reduced
to a rate lower than the rate under a lease of land that:
(I)
adjoins the land leased under Subchapter C; and
(II)
is held or operated by, or is under the significant control
of, the state's lessee.
(iii)
The royalty rate under a lease issued under Texas Natural
Resources Code, Chapter 32, Subchapter F (highway leases), may not be reduced
to a rate that is lower than the rate under a lease of land that adjoins the
land leased under Subchapter F.
(D)
The qualifying reservoir's reduced royalty rate applies
for two years from the effective date of the royalty rate reduction. The SLB
may extend the reduced rate for additional periods not to exceed two years
each. An operator may apply for a two-year extension by filing an affidavit
that the conditions that existed at the time that the original royalty rate
reduction was granted have not changed materially. The GLO or the SLB may
require an operator to submit additional information in support of an application
for extension. An operator may apply for further royalty reduction to a qualified
reservoir during the anniversary month of the effective date of the current
royalty rate reduction.
(E)
Except as provided in subparagraph (F) of this paragraph,
a reservoir that has not produced during the preceding 12 months and is located
under, or is attributable to, a lease with a royalty reduction under this
program, may be granted the lowest royalty rate currently allowed by the SLB
for any other reservoir under, or attributable to, that lease. Such rate applies
for two years from the month production from the newly productive reservoir
commences. An operator must request and obtain written approval from the GLO
for reduced royalty under this subparagraph.
(F)
On leases with a royalty reduction under this program,
a reservoir below the stratigraphic equivalent of any producing qualifying
reservoir under, or attributable to, that lease may be granted the lowest
royalty rate currently allowed by the SLB for any other reservoir under, or
attributable to, that lease. To qualify for such reduced royalty, the deeper
reservoir production cannot exceed 15 BOE per day per well (50 BOE for Gulf
of Mexico properties), as shown by well tests and/or other appropriate data.
If the deeper reservoir production exceeds 15 BOE per day per well (50 BOE
for Gulf of Mexico properties), the royalty rate for such production is the
rate specified in the lease. A royalty reduced under this subparagraph applies
for one year from the month production from the deeper reservoir commences,
after which the reduction terminates unless the operator by application seeks
and obtains SLB approval for the reduction for that deeper reservoir.
(G)
If the minimum annual royalty payment provided for in the
lease exceeds the SLB-approved reduced royalty, the reduced royalty is the
amount due from the lessee as the minimum annual royalty payment.
(H)
If over a consecutive six-month period the average of the
daily price of oil exceeds $25 per barrel, the SLB may terminate all previously
granted royalty rate reductions upon 60 calendar days notice in writing to
the operators of the leases for which royalty reduction has been granted.
This agency hereby certifies that the proposal
has been reviewed by legal counsel and found to be within the agency's legal
authority to adopt.
Filed with the Office of
the Secretary of State on January 21, 2004.
TRD-200400429
Larry L. Laine
Chief Clerk, Deputy Land Commissioner
General Land Office
Earliest possible date of adoption: March 7, 2004
For further information, please call: (512) 305-9129
31 TAC §9.93
The amendments to these sections are proposed under Texas
Natural Resources Code §31.051, which authorizes the Commissioner of
the Texas General Land Office to make and enforce suitable rules consistent
with the law.
The proposed amendments affect Sections 52.136, 52.131(e) and 52.026 of
the Texas Natural Resources Code.
§9.93.Assignments.
(a)
Assignment of a state oil and gas lease. All or part of
a state oil and gas leasehold interest may be assigned at any time, except
as prohibited by statute, administrative rule, or common law. All assignments,
including assignments of overriding royalty interests on Relinquishment Act
lands, must be recorded in each county in which all or part of the original
acreage covered by the lease is located. The original recorded assignment
or a certified copy thereof shall be filed in the GLO within 90 days of its
execution. For purposes of this paragraph, the last execution date shown on
the instrument shall be deemed to be the date of execution. The following
must accompany each assignment required to be filed and every counterpart
so filed in the GLO under this subsection:
(1)
a list clearly designating each state lease, as identified
by its mineral file number, affected by the assignment;
(2)
the payment of the filing fee required by §1.3 of
this title, (relating to Fees) for each state lease, as identified by its
mineral file number, affected by the assignment;
(3)
an adequate legal description of the premises assigned,
including the survey name, block, township, county, and any other descriptive
information requested by the GLO;
(4)
in cases of vertical severance, partial assignments of
state oil and gas leases shall be filed in the same manner as complete assignments
are filed, and must include a metes and bounds description of the area so
assigned, including relevant plats, unless the area assigned can be and is
accurately described as a part of the section; and
(5)
in cases of horizontal severance, partial releases of state
oil and gas leases shall be filed in the GLO, and shall include a description
of all relevant depths and formations.
(b)
Any assignment not accompanied by the required information
or fees shall not be accepted for filing. If an assignment is not properly
filed within 90 days of its execution, the filing fee due shall be double
the usual fee.
(c)
In-lieu assignments will not be accepted or filed in the
records of the GLO.
(d)
An assignee cannot use a failure to comply with the requirements
in this section to avoid its liability to the state.
(e)
The liability of an assignor of any state oil and
gas lease to properly discharge its obligations under the lease, including
properly plugging abandoned wells, removing platforms or pipelines, or remediation
of contamination at drill sites shall pass to the assignee upon proper written
consent of the commissioner. The commissioner may not withhold the consent
unreasonably. The commissioner may require the transferee to demonstrate that
it has the financial responsibility to properly discharge its obligations
under the lease and may require the transferee to post a bond or provide other
security to secure those obligations if the tranferee is unable to demonstrate
such financial responsibility to the satisfaction of the commissioner.
[
(f)
If an assignment has not been properly filed, the commissioner
may forfeit the lease at his discretion.
(g)
The current holder of a lease or of any interest therein
shall be responsible for proper filing with the GLO of any assignments not
previously filed by any predecessor in interest.
(h)
The heir, devisee, executor, or administrator, as the case
may be, of the estate of an assignee may file a statement of the parties entitled
to hold the interest of the assignee in the lease. Such statement should include
a list by mineral file number of all leases affected. No filing fee shall
be required.
(i)
Should an assignee formally change names, a notice of name
change, accompanied by a list of file numbers of all leases affected, shall
be submitted to the GLO. No filing fee shall be required.
(j)
A corporate merger shall be considered an assignment under
this section. A certified copy of the certificate of merger shall be furnished
to the GLO not later than 90 days after it is accepted for filing by the Secretary
of the State of Texas. A list of each state lease affected by the merger shall
accompany the certified copy of the certificate of merger. Leases held by
the surviving corporation prior to the merger need not be listed, unless the
name of the surviving corporation is changed, in which event subsection (i)
of this section shall apply.
(k)
A deed of trust, mortgage or other security agreement shall
be considered an assignment under this subsection. If a state lease is subject
to a deed of trust, mortgage or other security agreement, a memorandum of
such instrument shall be furnished to the GLO in accordance with this section.
(l)
Upon complete compliance with this subsection, the assignee
will:
(1)
succeed to all rights and be subject to all liabilities,
obligations, penalties, and the like incurred by any prior lessee, including
any liability to the state for unpaid royalty; and
(2)
assume all obligations, liabilities, and consequences arising
from all covenants, conditions, and terms (whether express or implied) of
the lease.
(m)
Assignments of Relinquishment Act lease to surface owner.
A surface owner may acquire by assignment a lease which he or she executed
on land subject to the Relinquishment Act only by complying with Texas Natural
Resources Code, §52.188, and any other relevant laws or regulations.
See also §9.22(2) of this title, (relating to Leasing Procedures).
(n)
Acceptance of an assignment by the GLO does not waive any
claim the agency may have against a party relating to that assignment.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed
with the Office of the Secretary of State on January 21, 2004.
TRD-200400430
Larry L. Laine
Chief Clerk, Deputy Land Commissioner
General Land Office
Earliest possible date of adoption: March 7, 2004
For further information, please call: (512) 305-9129
31 TAC §§10.1, 10.2, 10.5, 10.8, 10.9
The Texas General Land Office proposes amendments to Texas
Administrative Code, Title 31, Part 1, Chapter 10, §10.1 relating to
the Definitions; Exploration and Development Guide, §10.2 relating to
Prospect Permits on State Lands; §10.5 relating to Mining Leases on Relinquishment
Act Lands; §10.8 relating to Assignments, Releases, Reports, Royalty
Payments, Inspections, Forfeitures, and Reinstatements; and §10.9 relating
to Mineral Awards and Patents. The proposed changes to §10.1(a) add two
definitions to the section at §10.1(a)(1) and §10.1(a)(12). New §10.1(a)(1)
conforms the rule to an amendment to Texas Natural Resources Code §53.001
by Acts 1993, 73rd Leg., ch. 897, §45, eff. Sept. 1, 1993. New §10.1(a)(12)
conforms the rule to an amendment to Texas Natural Resources Code §53.001
by Acts 1999, 76th Leg., ch. 1483, §3, eff. Aug. 30, 1999. The proposed
change to §10.2(b)(1) makes clear that it is the commissioner's duty
to prepare an application form for prospect permits and conforms the rule
to an amendment to Texas Natural Resources Code §53.012(c) by Acts 1993,
73rd Leg., ch. 897, §46, eff. Sept. 1, 1993. The proposed change to §10.5(b)(1)(F)
limits the scope of self-dealing violations among family members to those
within the second degree of consanguinity or affinity and conforms the rule
to Texas Natural Resources Code §53.074(a)(2), added by Acts 1995, 74th
Leg., ch. 937, §4, eff. Sept. 1, 1995; the proposed change to §10.5(e)(1)(C)
changes the division of lease benefits for a defined class of minerals for
certain leases let after September 1, 1999. and conforms the rule to Texas
Natural Resources Code §53.065(c), added by Acts 1999, 76th Leg., ch.
1483, §4, eff. Aug. 30, 1999; the proposed change to §10.8(a)(1)
requires that lease transfers and assignments comply with TNRC §52.026
and conforms the rule to an amendment to Texas Natural Resources Code §53.020
by Acts 1993, 73rd Leg., ch. 897, §50, eff. Sept. 1, 1993; the proposed
change to §10.8(b)(4)(D)(ii) requires that leases issued under TNRC Chapter
53, Subchapter B be subject to penalty and interest assessments as described
in TNRC §52.131(e)-(j) and conforms the rule to an amendment to Texas
Natural Resources Code §53.024 by Acts 1993, 73rd Leg., ch. 897, §51,
eff. Sept. 1, 1993; and the proposed changes to §10.8(c)(3) and §10.9(f)(3)
requires that contracts and agreements requested for inspection by the GLO
be held confidential and conforms the rule to Texas Natural Resources Code §53.027,
added by Acts 1993, 73rd Leg., ch. 897, §52, eff. Sept. 1, 1993. The
proposed amendments are being made pursuant to §2001.039 (Agency Review
of Existing Rules) of the Government Code. The rule review was adopted and
published in the August 22, 2003, edition of the
Texas Register
(28 TexReg 6958).
Marshall Enquist, Attorney with the Energy Section, has determined that
for each of the first five years that the proposed amendments will be in effect,
there will be no negative fiscal impact to state or local government as a
result of administering the proposed sections as amended. There may be a slight
positive fiscal impact to the state as a result of collecting both penalties
and interest under §10.8(b)(4)(D)(ii) as amended.
Marshall Enquist, Attorney with the Energy Section, has determined that
the amendments to 31 TAC §10.1(a), §10.2(b)(1) and §10.5(b)(1)(F)
will be neutral in their effect on public benefits and/or costs. The amendment
to 31 TAC §10.5(e)(1)(C) may have a slight negative impact to the state
by reducing the state's share of lease benefits, but this may be offset by
an increased willingness on the part of RAL owners to actively seek leases
on the state's minerals. The amendment to 31 TAC §10.8(a)(1) will reduce
the state's cost of removing abandoned equipment and remediating mine sites,
resulting in a substantial public benefit. The amendment to 31 TAC §10.8(b)(4)(D)(ii)
may result in a slight public benefit in allowing the state to collect interest
on delinquent payments under hard mineral leases. The amendments to 31 TAC §10.8(c)(3)
and §10.9(f)(3) will be neutral in their effect on public benefits and/or
costs.
Marshall Enquist, Attorney with the Energy Section, has determined that
for each of the first five years that the amendments as proposed will be in
effect, there will be no impact on local employment.
Comments may be submitted to Melinda Tracy, Legal Services, Texas General
Land Office, 1700 N. Congress Avenue, Austin, Texas 78711 or by fax at (512)
463-6311, no later than 30 days after publication.
The amendments to these sections are proposed under Texas Natural
Resources Code §31.051, which authorizes the Commissioner of the Texas
General Land Office to make and enforce suitable rules consistent with the
law.
The proposed amendments affect §§53.001, 53.012, 53.074, 53.065,
53.020, 53.024 and 53.027 of the Texas Natural Resources Code.
§10.1.Definitions; Exploration and Development Guide.
(a)
Definitions. The following words and terms, when used in
this chapter, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Board--The School Land Board.
(2)
[
(3)
[
(4)
[
(5)
[
(6)
[
(7)
[
(8)
[
(9)
[
(10)
[
(11)
[
(12)
Surface mining--The mining
of minerals by removing the overburden lying above the natural deposit of
minerals and mining directly from the natural deposits that are exposed. The
term does not include in situ mining activities.
(13)
[
(14)
[
(b)
Exploration and development guide. For exploration and
development for oil and gas, see Chapter 9 of this title (relating to Exploration
and Development). Minerals, other than oil and gas, underlying state lands
are explored and leased in the following ways, depending upon the type of
mineral and the type of land.
(1)
PSF lands, upland.
(A)
Coal, lignite, sulphur, salt, and potash: leased by sealed
bid by the SLB. See the Texas Natural Resources Code, Chapter 53, Subchapter
E and I, and §10.4 of this title (relating to Exploration and Mining
Leases for Minerals Subject to Sealed Bid).
(B)
All other minerals, and shell, sand, and gravel: explored
and mined under prospect permits and leases issued by the GLO. See the Texas
Natural Resources Code, Chapter 53, Subchapter B; §10.2 of this title
(relating to Prospect Permits on State Lands) and §10.3 of this title
(relating to Mining Leases on Properties Subject to Prospect).
(2)
PSF lands, submerged, and state-owned riverbeds and channels.
(A)
Coal, lignite, sulphur, salt, and potash: subject to exploration
under §10.4 of this title (relating to Exploration and Mining Leases
for Minerals Subject to Sealed Bid). Leased by sealed bid by the SLB. See
the Texas Natural Resources Code, Chapter 53, Subchapter E; §10.4 of
this title (relating to Exploration and Mining Leases for Minerals Subject
to Sealed Bid).
(B)
Marl, shell, sand, gravel, and mudshell: mined under permit
issued by the TPWD. See the Texas Parks and Wildlife Code, Chapter 86.
(C)
All other minerals: subject to exploration under §10.2
of this title (relating to Prospect Permits on State Lands). Mined under leases
issued by the GLO. See the Texas Natural Resources Code, Chapter 53, Subchapter
B; §10.2 of this title (relating to Prospect Permits on State Lands)
and §10.3 of this title (relating to Mining Leases on Properties Subject
to Prospect).
(3)
Relinquishment Act lands. All minerals: leased by surface
owner as agent for the state. See the Texas Natural Resources Code, Chapter
53, Subchapter C; §10.5 of this title (relating to Mining Leases on Relinquishment
Act Lands).
(4)
Land trade lands.
(A)
Coal, lignite, sulphur, salt, and potash: leased by sealed
bid by the SLB. See the Texas Natural Resources Code, Chapter 53, Subchapter
E; §10.4 of this title (relating to Exploration and Mining Leases for
Minerals Subject to Sealed Bid).
(B)
All other minerals: explored and mined under prospect permits
and/or leases issued by the GLO. See the Texas Natural Resources Code, Chapter
53, Subchapter B; §10.2 of this title (relating to Prospect Permits on
State Lands) and §10.3 of this title (relating to Mining Leases on Properties
Subject to Prospect).
(5)
State agency lands (except TPWD and TDC lands). All minerals:
leased by sealed bid by the SLB. See the Texas Natural Resources Code, Chapter
32, Subchapters D and E; Chapter 153 of this title (relating to Exploration
and Development).
(6)
TDC and TPWD lands. All minerals: leased by sealed bid
by the appropriate board for lease. See the Texas Natural Resources Code,
Chapter 34; §§201.5-201.8 of this title (relating to Land for Lease;
Excluded Land; Lease Sale; and Nominations of Tracts for Lease).
(7)
PUF lands. All minerals: lease or otherwise develop as
decided by the board of regents. See the Texas Education Code, §66.44.
§10.2.Prospect Permits on State Lands.
(a)
Lands and minerals subject to prospecting. See §10.1
of this title (relating to Definitions; Exploration and Development Guide)
to determine which lands and minerals are subject to prospect permit procedures.
Generally, minerals other than coal, lignite, sulphur, salt, and potash, on
PSF fee lands and land trade lands are subject to prospecting under this section.
(b)
Application requirements and procedures.
(1)
Any person, firm, or corporation desiring to apply for
a prospect permit shall make written application upon the form prescribed
by the commissioner
and furnished by the GLO. The application to prospect
shall include:
(A)
a description of the tract of land which identifies it
by the section number, part of section or survey to be prospected, township
number, and/or certificate number, if applicable, survey name, block number,
number of acres to be prospected, and county or counties in which the land
lies and, if land trade lands, the name and address of surface owner of record
in the tax assessor's office; and
(B)
the name, address, phone number, and taxpayer ID number
of the applicant. If the applicant is a corporation, the corporate name, address,
phone number, taxpayer ID number, the name of the officer authorized to execute
applications for permits and leases, and written evidence confirming that
it is not delinquent in paying its franchise taxes.
(2)
The application to prospect shall be for an area not in
excess of 640 acres with a 10% tolerance for tracts, sections, and surveys
that contain more than 640 acres.
(3)
The application to prospect may be for a part of a section
if the part is described by field notes of record in the GLO or if the part
can accurately be described as a part of the section such as the NE/4.
(4)
The application to prospect shall be accompanied by the
filing fee prescribed by §1.3 of this title (relating to Fees) and, except
as otherwise provided in §10.5(g)(7) of this title (relating to Mining
Leases on Relinquishment Act Lands) the first year's rental payment of $.50
per acre.
(5)
Within 10 days of receipt of an application for permit
on lands whose surface is owned or leased by TPWD or is subject to a conservation
easement in favor of TPWD, the GLO shall notify the executive director of
the TPWD that an application for permit has been received.
(6)
Permits or immediate leases issued under §10.3(b)(1)
of this title (relating to Mining Leases on Properties Subject to Prospect)
will be issued on the basis of the order in which applications to prospect
are received. An application will be determined to be received on the date
and time receipt is acknowledged by the mailroom staff of the GLO.
(7)
If an application to prospect is received for a tract of
land encumbered by a previously received application or by a valid prospect
permit, the application will be rejected and the applicant will be notified
and all monies tendered will be refunded.
(8)
An applicant may request that the application to prospect
be withdrawn. If the request is received prior to processing of the prospect
permit, all monies tendered will be refunded.
(9)
An applicant may be requested to supplement the application
with information in order that the land office may determine whether prospecting
will be conducted in good faith and in an orderly and environmentally responsible
manner.
(c)
Prospect permit issuance and requirements.
(1)
After the application requirements have been satisfied,
a prospect permit will be issued on a form prescribed and furnished by the
GLO.
(2)
The prospect permit will be for a term of one year from
the date of application and, except as otherwise provided in §10.5(g)(7)
of this title (relating to Mining Leases on Relinquishment Act Lands), will
require an advance annual rental payment of $.50 per acre.
(3)
On the same day a permit is issued under this section on
land whose surface is owned or leased by TPWD or is subject to a conservation
easement in favor of TPWD, the GLO will notify TPWD of the issuance of the
permit. The permit issued on such land will state that the surface of such
land is owned or leased by TPWD or is subject to a conservation easement in
favor of TPWD. Such permit will also state the name of the TPWD park or area
manager responsible for the surface of such land.
(4)
On land trade lands, the GLO will notify the surface owner
that a permit has been issued if the surface owner requests such notice in
writing by furnishing the GLO with a current mailing address and a legal description
of each tract on which he desires such notice. Notice will also be sent to
the surface owner at the address supplied on the application form. Failure
to receive notice will not affect the validity of a permit issued under this
section.
(d)
Prospect permit renewal.
(1)
Permittee may request a renewal of a permit by tendering
the appropriate rental payment and filing fee before the expiration date of
the current permit. Prospect permit renewals, if granted, will be issued on
a form prescribed and furnished by the GLO and shall extend the term of the
permit for one year from the expiration date.
(2)
Subject to the discretion of the commissioner, a prospect
permit may be renewed up to and including four times, allowing the holder
to retain the permit for five consecutive years from the date of issuance
of the original prospect permit. At the time a permittee requests renewal
of a permit, a determination of whether the permittee has exhibited good faith
in prospecting and whether the permittee has complied with all GLO rules and
regulations will be considered in the decision to grant or deny a renewal.
(3)
If the holder of a prospect permit allows the permit to
expire without filing for renewal, a new application must be submitted. Priority
of competing applications are governed by subsection (b)(7) of this section.
(e)
Assignments and releases. Prospect permits may be assigned
or released in accordance with §10.8 of this title (relating to Assignments,
Releases, Reports, Royalty Payments, Inspections, Forfeitures, and Reinstatements).
The assignment or release must be filed with GLO and must be accompanied by
the filing fee prescribed by §1.3 of this title (relating to Fees).
(f)
Reports and inspections.
(1)
Permittee must comply with all requirements of §10.7
of this title (relating to Conduct of Exploration and Mining Operations) and §10.8
of this title (relating to Assignments, Releases, Reports, Royalty Payments,
Inspections, Forfeitures, and Reinstatements).
(2)
All prospecting operations shall be subject at any time
to inspection by the commissioner or an authorized representative. Information
or data pertaining to prospecting operations shall be furnished to the commissioner
or an authorized representative upon request.
§10.5.Mining Leases on Relinquishment Act Lands.
(a)
Lands and minerals subject to lease.
(1)
Any survey or portion of a survey of the Relinquishment
Act land, as this term is uniquely defined in §10.1(a)(7) of this title
(relating to Definitions; Exploration and Development Guide), is subject to
lease under this section.
(2)
All minerals are subject to lease by the surface owner
as agent for the state. For purposes of this section, minerals include all
substances commonly classified as minerals even though they may be extracted
by methods which destroy the surface. Minerals other than oil and gas may
be leased together or separately. Oil and gas must be leased under the terms
of Chapter 9 of this title (relating to Exploration and Development).
(b)
Authority and duties of agent.
(1)
Prohibition against self-dealing. A surface owner may not
lease to himself, herself, or itself, either directly or indirectly. A surface
owner may not acquire by assignment a lease executed by the surface owner.
A surface owner will be considered to have engaged in self-dealing if the
surface owner leases to the following persons or entities or if the lease
executed by the surface owner is assigned to the following persons or entities:
(A)
a nominee;
(B)
any corporation or subsidiary in which the surface owner
is a principal stockholder, or an employee of such a corporation or subsidiary;
(C)
a partnership in which the surface owner is a partner,
or an employee of such a partnership;
(D)
if the surface owner is a corporation or a partnership,
a principal stockholder of the corporation or a partner of the partnership,
or any employee of the corporation or partnership;
(E)
a fiduciary representing the surface owner, including,
but not limited to, a guardian, trustee, executor, administrator, receiver,
or conservator; or
(F)
a family member or to anyone related to the surface owner
by marriage, blood, or adoption[
(2)
Fiduciary duty of agent. A surface owner is the state's
agent and owes the state a fiduciary duty and a duty of utmost good faith.
A surface owner must fully disclose any facts affecting the state's interest
and must act in the best interest of the state. Any conflict of interest must
be resolved by putting the interests of the state before the interests of
the surface owner. In addition to these specific duties, the surface owner
owes the state all the common-law duties of a holder of executive rights.
(3)
Consequences of a breach of the surface owner's fiduciary
duty or a violation of the prohibition against self-dealing. When a surface
owner breaches any duties or obligations owed to the state by law, any suit
relating to such breach shall be filed in a district court in Travis County.
Such a suit may seek removal of the owner of the soil's agency rights in addition
to any other remedies authorized by statute or by common-law.
(4)
Penalty assessment for breach of the surface owner's fiduciary
duty. A penalty of 10% shall be imposed on any sums due the state because
a surface owner breaches a fiduciary duty. The imposition of this penalty
will not limit the right of the state to obtain punitive damages, exemplary
damages, or interest. Any punitive damages or exemplary damages assessed by
a court shall be offset by the 10% penalty imposed by this subsection.
(c)
Lease negotiation procedure.
(1)
The surface owner is authorized to act as the state's leasing
agent with any person, firm, or corporation desiring to develop the permanent
school fund's minerals.
(2)
The lease shall be negotiated by the surface owner and
the prospective lessee on a form prepared and furnished by the GLO, which
will incorporate the terms and conditions prescribed by the SLB.
(3)
The proposed lease shall be submitted to the GLO for approval
prior to recording the lease in the county records.
(d)
Approval and filing of lease.
(1)
The commissioner may reject or refuse for filing any lease
deemed not in the best interest of the state.
(2)
Upon rejection of a proposed lease by the commissioner,
the prospective lessee will be given written notice which will specify the
reasons for the rejection and any changes, deletions, or additions which would
render the lease acceptable. The prospective lessee may request reconsideration
or appeal a rejection of a lease under the hearings procedures set out in
Chapter 4 of this title (relating to General Rules of Practice and Procedure).
(3)
Upon receipt of approval of the lease, the prospective
lessee shall finalize the lease and have the lease recorded in the county
or counties in which the land lies and shall file a certified copy of the
lease with the GLO. Leases are not effective until approved and filed in the
GLO.
(4)
The state's share of the approved bonus payment and the
filing fee prescribed by §1.3 of this title (relating to Fees) shall
be submitted along with the certified copy of the lease. Any lease is void
unless it recites the actual consideration paid or promised for the lease.
(5)
A surface owner, as the state's agent, owes the state a
fiduciary duty. See subsection (b) of this section. This fiduciary responsibility
must be of paramount concern when a surface owner enters lease negotiations.
(e)
Lease terms and conditions.
(1)
Lessee shall pay bonus, rentals, royalties, and other lease
considerations as follows.
(A)
On leases filed before September 1, 1987, lessee shall
pay to the state 60% of all bonuses, rentals, and royalties and other considerations
agreed upon. Lessee shall pay to the surface owner 40% of all consideration
agreed upon.
(B)
On leases filed on or after September 1, 1987, lessee shall
pay to the state 80% of all consideration agreed upon. Lessee shall pay to
the surface owner 20% of all bonuses, rentals, and royalties.
(C)
On leases filed after September
1, 1999, for the exploration and production by surface mining of coal, lignite,
potash, sulphur, thorium or uranium, lessee shall pay to the state 60% of
all bonus, rentals, royalties and other considerations agreed upon. Lessee
shall pay to the surface owner 40% of all consideration agreed upon.
(2)
In the event of production, the state must receive not
less than one-sixteenth of the value of the minerals produced. The combined
royalty payable to the surface owner and the state will be expressly provided
for in the lease negotiated by the surface owner.
(3)
All royalties and other payments accruing to the state
shall be paid to the state through the commissioner at Austin, and shall be
deposited to the PSF.
(f)
Reports, assignments, releases, inspection, forfeitures,
and reinstatements. Leases issued under this section will be governed by all
general provisions found in §10.7 of this title (relating to Conduct
of Exploration and Mining Operations) and §10.8 of this title (relating
to Assignments, Releases, Reports, Royalty Payments, Inspections, Forfeitures,
and Reinstatements). However, a lease issued under this section cannot be
assigned to the surface owner who executed the lease. See subsection (b)(1)
of this section.
(g)
Waiver of agency rights.
(1)
The surface owner may waive the surface owner's right to
act as the state's agent for leasing all the state's minerals except oil and
gas. Such a waiver must cover all the state's minerals except oil and gas
and must be on the GLO waiver form. The waiver must be filed for record in
each county where any portion of the land is situated. Before such waiver
can be effective, a certified copy of each recorded waiver must be filed in
the GLO along with a title opinion showing that he is a surface owner of the
relevant land.
(2)
If agency rights are waived under this subsection, the
minerals will be subject to prospect permit and lease under §10.2 of
this title (relating to Prospect Permits on State Lands) and §10.3 of
this title (relating to Mining Leases on Properties Subject to Prospect).
(3)
A surface owner who waives agency rights under this subsection,
or an assignee, heir, or anyone else succeeding to all or part of the surface
owner's interest in the tract will not be the state's agent and will not receive
compensation under a prospect permit or lease for as long as a prospect permit
or lease issued under §10.2 of this title (relating to Prospect Permits
on State Lands) or §10.3 of this title (relating to Mining Leases on
Properties Subject to Prospect) remains in effect.
(4)
Upon expiration, termination, or forfeiture of a lease
or permit, the agency rights of the surface owner shall be ipso facto reinstated.
(5)
If the surface owner conveys the surface owner's interest
in the tract after waiving agency rights, but before any prospect permit or
lease has been issued, the succeeding surface owner will be entitled to act
as the state's agent for leasing the state's minerals.
(6)
A waiver executed under this subsection may be revoked
if there is no prospect permit or lease in effect at the time the waiver is
revoked and if, while the waiver was in effect, the surface owner did not
act in a manner that compromises the surface owner's ability to resume all
duties and responsibilities as the state's agent. Such revocation must be
in writing and filed for record in each county in which any portion of the
land is located. A certified copy of the recorded revocation instrument must
be filed in the GLO before it is effective.
(7)
The fee for a prospect permit issued under this subsection
will be set by the commissioner. This fee will be based on the fair market
value of the bonus and annual rental customarily paid for leasing similar
minerals in the area, prorated for the one-year term of the permit. The terms
of a lease subsequently issued under this subsection will be negotiated. These
terms will be based on the results of exploration activities and other appropriate
data.
(8)
In exceptional circumstances the commissioner may allow
the waiver of agency rights under this subsection as to less than all the
state's minerals except oil and gas. For the commissioner to allow a more
limited waiver of agency rights, a showing that such a limited waiver is in
the best interests of the state will be required.
(h)
Leasing procedure when agent cannot be located. If a potential
lessee cannot locate a surface owner, such lessee can follow the procedures
set out in the Texas Natural Resources Code, §52.186. Once these procedures
have been followed, Relinquishment Act land will be leased for minerals other
than oil and gas through the prospect permit and leasing procedures found
in §10.2 of this title (relating to Prospect Permits on State Lands)
and §10.3 of this title (relating to Mining Leases on Properties Subject
to Prospect). The state will receive all the consideration paid under such
a lease.
(i)
Leasing procedure when agent's rights are forfeited.
(1)
When a surface owner's agency rights have been forfeited
under subsection (b)(3) of this section, the land shall be subject to lease
for minerals other than oil and gas under the procedures set out in §10.1
of this title (relating to Definitions; Exploration and Development Guide)
and §10.2 of this title (relating to Prospect Permits on State Lands).
(2)
When a new lease is executed under subsection (i)(1) of
this section, the surface owner shall not be entitled to any share of the
revenue generated by such lease, but the surface owner's agency rights will
be ipso facto reinstated upon expiration of the new lease.
(3)
If no new lease is executed within one year of the date
of the forfeiture of the agency rights, the commissioner may, in his discretion
and for the best interests of the PSF, reinstate the surface owner's agency
rights.
§10.8.Assignments, Releases, Reports, Royalty Payments, Inspections, Forfeitures, and Reinstatements.
(a)
Assignments and releases.
(1)
A lease or permit issued under this chapter may be
assigned at any time in the manner provided for by TNRC §52.026. The
liability of the transferor to properly discharge its obligations under the
lease shall pass to the transferee upon prior written consent of the commissioner.
The commissioner may require the transferee to demonstrate that it has the
financial responsibility to properly discharge its obligations under the lease,
and may require the transferee to post a bond or provide other security to
secure those obligations.
[
(2)
After recordation, lessee or permittee shall obtain a certified
copy from the county clerk of each recorded assignment covering the state
lease or permit. Lessee or permittee shall send such certified copies to GLO
within 90 days of the date of recordation, accompanied by the filing fee prescribed
in §1.3 of this title (relating to Fees).
(3)
An assignment of any lease except a state agency or a Relinquishment
Act lease is not effective until a certified copy of such assignment has been
filed by the GLO. Failure to file a certified copy of an assignment of any
lease, including a state agency or a Relinquishment Act lease, shall subject
the lease to forfeiture. An assignment shall not have the effect of releasing
the assignor from any liability incurred or claim previously accrued in favor
of the state.
(4)
The lessee or permittee may release the lease or permit
back to the state at any time. To release a lease or permit, a lessee or permittee
must record the release in each county where the state tract is located and
mail a certified copy of each recorded release to GLO accompanied by the filing
fee prescribed in §1.3 of this title (relating to Fees).
(5)
A release is not effective until a certified copy of the
release is filed by the GLO. A release shall not have the effect of releasing
lessee or permittee from any liability incurred or claim previously accrued
in favor of the state.
(b)
Reports and payment of royalties.
(1)
A log, sample analysis, or other information obtained from
each test drilled on the area covered by the lease or permit shall be filed
with the GLO upon request. Lessee or permittee shall furnish annually on the
anniversary date of the lease or permit a map or plat showing all activities
on the state lease or permit. In addition, an evaluation map or plat shall
be filed in the GLO within 90 days after any drilling program shall have been
completed or abandoned, and the correctness of such map shall be sworn to
by lessee or permittee or his representative. The map or plat shall show geologic
formations penetrated, the depth, thickness, grade, and mineral character
of all ore bodies, the water-bearing strata, the elevation and location of
all test holes, and other pertinent information.
(2)
Unless the lease provides otherwise, on or before the last
day of the month after the month when production started, the lessee shall
file a production and royalty report showing production and royalty for the
calendar month when production started. Subsequently, a production and royalty
report shall be filed before the last day of each month for production from
the preceding calendar month. Such report shall be on a form prescribed and
furnished by the GLO and shall show:
(A)
the type and amount of each mineral produced during the
preceding month;
(B)
if any leased mineral has been sold during the preceding
month, then:
(i)
the type and amount of each mineral sold;
(ii)
the purchaser for each type of mineral sold and if the
purchaser is in any way related to the lessee, the details of such relationship
or affiliation;
(iii)
the selling price of each mineral as shown by copies
of smelter, mint, mill, or refinery, returns, sale receipts, invoices, or
other sale documents attached thereto; and
(iv)
the method and figures used by lessee to calculate the
value of each mineral sold as shown by any relevant documents, records, or
schedules;
(C)
if any leased mineral has been used as permitted under
the terms of the lease during the preceding month, then:
(i)
the type and amount of each mineral used; and
(ii)
the method and figures used by lessee to calculate the
value of each mineral used as shown by any relevant documents, records, or
schedules.
(3)
Unless otherwise provided by the lease, royalty payments
are to be received in the GLO on or before the last day of the month following
the month in which leased minerals are produced. However, for the purposes
of this paragraph only, "produced" shall mean actually sold or used by lessee.
Upon termination, forfeiture, or release of the lease, unpaid royalty for
any stockpiled leased minerals shall be due and payable within one month of
the effective date of said termination, forfeiture, or release.
(4)
Except when royalty is taken in-kind, and subject to subparagraphs
(A)-(F) of this paragraph, relating to electronic funds transfer, lessees
may pay royalties and other monies due by cash or check, money order, or sight
draft made payable to the commissioner. Lessees may also pay by electronic
funds transfer or in any manner that may be lawfully made to the state comptroller.
Information regarding alternative payment methods may be obtained from the
GLO Royalty Management Division. Payors are required to make payments by electronic
funds transfer in compliance with 34 Texas Administrative Code Chapter 15
in the following circumstances:
(A)
For leases executed or amended after May 11, 1989, but
before September 1, 1991, payors that have made over $500,000 in a category
of payments, defined in subparagraph (D) of this paragraph, to the GLO during
the preceding state fiscal year shall make payments of $10,000 or more in
the current fiscal year for those leases and in that category by electronic
funds transfer.
(B)
For leases executed or amended after August 30, 1991, but
before June 9, 1995, payors that have made over $250,000 in a category of
payments, defined in subparagraph (D) of this paragraph, to the GLO during
the preceding state fiscal year shall make payments of $10,000 or more in
the current fiscal year for those leases and in that category by electronic
funds transfer.
(C)
For leases executed or amended on or after June 9, 1995,
payors that have made over $25,000 in a category of payments, defined in subparagraph
(D) of this paragraph, to the GLO during the preceding state fiscal year shall
make all payments in the current fiscal year for those leases and in that
category by electronic funds transfer.
(D)
For purposes of subparagraphs (A)-(C) of this paragraph,
each of the following is a separate category of payments:
(i)
royalties (including shut-in and minimum royalties);
(ii)
penalties
and interest (A lease issued under TNRC
Chapter 53, Subchapter C, shall be subject to penalties and interest as described
in TNRC §52.131(e)-(j))
;
(iii)
other payments to the state agency, excluding interest
and extraordinary payments such as payments made in settlement of litigation.
(E)
The GLO anticipates that those payors that have exceeded
the threshold sums set out in subparagraphs (A)-(C) of this paragraph in the
preceding state fiscal year will also exceed those sums in the current state
fiscal year. The application of subparagraphs (A)-(C) to a specific payor
may be waived at the commissioner's discretion to the extent allowed by law,
upon a showing that a payor will not exceed the threshold sums set out in
subparagraphs (A)-(C) in the current fiscal year, or for other good cause.
(F)
The GLO will notify each payor to whom this paragraph applies
in compliance with 34 Texas Administrative Code Chapter 15.
(c)
Inspections.
(1)
The books, accounts, records, contracts, and other documents
pertaining to production, transportation, sale, and marketing of minerals
leased shall at all times be subject to inspection and examination by the
commissioner, or his authorized representative, and copies of such records
shall be furnished to the commissioner upon request.
(2)
All mining, milling, and processing operations shall be
subject at any time to inspection by the commissioner or his authorized representative
and copies of records or other documents pertaining to these operations shall
be furnished to the commissioner upon written request.
(3)
A contract, agreement or amendment
filed in the land office shall be treated as confidential unless otherwise
authorized by the lessee.
(d)
Forfeiture and reinstatement.
(1)
If the owner of a lease or permit shall fail or refuse
to make payment of any sum due, or if the owner or his authorized agent should
knowingly make any false return or false report concerning the lease or permit,
or if the owner or his agent should refuse the commissioner or his authorized
representative access to the records or other data pertaining to operations
under the lease or permit, or if any of the material terms of the lease or
permit should be violated, the lease or permit shall be subject to forfeiture
by the commissioner.
(2)
A lease or permit shall be considered forfeited when it
has been endorsed "forfeited" and the endorsement signed by the commissioner.
(3)
Upon forfeiture, the commissioner will give written notice
to the lessee or permittee stating the date of forfeiture and the reasons
for the forfeiture. The notice of forfeiture will be sufficient if mailed
to the last last known address of the lessee or assignee shown of record in
the GLO.
(4)
A forfeiture may be set aside and all rights under a lease
or permit may be reinstated before the rights of another party intervene,
upon satisfactory evidence to the commissioner of future compliance with the
provisions of the law, of the lease or permit, and of any rules adopted relative
to the lease or permit, and any conditions placed upon the reinstatement.
Lessee or permittee shall offer the evidence required for reinstatement within
30 days after the date the notice of forfeiture was mailed and after such
30 days shall have no future right of reinstatement. If a lease or permit
issued under §10.5 of this title (relating to Mining Leases on Relinquishment
Act Lands) is not reinstated within the 30-day period, the surface owner is
entitled to act as the state's agent for leasing the minerals.
(e)
Reduction of penalty and/or interest. The School Land Board
may reduce penalties and/or interest assessed under the Texas Natural Resources
Code, §52.131, and/or any other penalties or interest relating to delinquent
or unpaid royalties that have been assessed by the commissioner in the following
circumstances:
(1)
when a lessee brings a deficiency to the General Land Office's
attention voluntarily; and/or
(2)
when a lessee and the General Land Office have reached
an agreement regarding the reduction as part of a resolution of an outstanding
audit issue.
§10.9.Mineral Awards and Patents.
(a)
General. Anyone who was issued a mineral award prior to
March 15, 1967, under former Texas Civil Statutes, Articles 5388-5403, may
patent the mineral award upon proper compliance with the statutory requirements
and the rules promulgated by the GLO.
(b)
Lands and minerals subject to patent.
(1)
All valuable mineral-bearing deposits, placers, veins,
lodes, and rock carrying metallic or nonmetallic substances of value except
oil, natural gas, coal, and lignite, shall be subject to patenting.
(2)
Only those lands which are presently encumbered by a mineral
award are subject to patenting.
(c)
Maintaining a mineral award; annual assessment work.
(1)
The owner of an award shall have the exclusive right to
the possession and use of the minerals within the area of the claim so long
as he continues to do or causes to be done the annual assessment work for
each claim.
(2)
The annual assessment work shall consist of an excavation
in the form of a shaft or tunnel or an open cut to the extent of 10 feet in
depth or length and at least four feet by five feet for the other dimensions.
In the event the mineral sought is usually and customarily produced from drilling
holes by means of machinery, except such minerals as oil, natural gas, coal,
or lignite, then the drilling of a hole to such depth or length in lieu of
the digging of a shaft or tunnel or open cut shall constitute the annual assessment
work required.
(3)
During the month of January, the owner of a mineral award
shall file an annual assessment affidavit on a form prescribed and furnished
by the GLO. The affidavit shall be signed and notarized and shall describe
the assessment work which was completed during the previous year. If the assessment
work accomplished is deemed insufficient or if the form is improperly completed,
the owner of the mineral award will be notified.
(4)
The annual assessment work for a contiguous group of mineral
awards may be done on one mineral award.
(d)
Rental payments.
(1)
The owner of a mineral award shall pay annually $.50 per
acre. This annual rental payment shall be due during the month of January
of each year succeeding the year the mineral award was issued.
(2)
Annual rental payments will be applied to the purchase
price of the mineral patent.
(e)
Royalty payments.
(1)
In addition to rental payments, the owner of a mineral
award shall pay a royalty of 6.25% of the value of the production of the minerals
upon such award as shown by the net smelter, mill, mint, or refinery returns
or of the gross sums arising from the sale of the ore or products from the
award and received by the owner.
(2)
Royalty payments arising from the sale of ores, minerals,
or other products shall be due quarterly in January, April, July, and October
for the quarters preceding.
(3)
Royalty payments shall be accompanied by a production and
royalty report filed on a form prescribed and furnished by the GLO.
(f)
Inspection.
(1)
The books, accounts, records, and contracts pertaining
to production, transportation, sale, and marketing of minerals awarded will
at all times be subject to inspection and examination by the commissioner,
or his authorized representative, and copies of such records shall be furnished
to the commissioner upon request.
(2)
All mining, milling, and processing operations shall be
subject at any time to inspection by the commissioner or his authorized representative
and copies of records pertaining to these operations shall be furnished to
the commissioner upon written request.
(3)
A contract, agreement, or other
amendment filed in the land office shall be treated as confidential unless
otherwise authorized by the lessee.
(g)
Forfeiture of mineral award.
(1)
If the owner of a mineral award shall fail or refuse to
make payment of any sum within 30 days after it becomes due, or if the owner
or his authorized agent should knowingly make any false return or false report
concerning production, mining, or development, or if the owner should fail
or refuse the proper authority access to the records pertaining to the operations,
or if the owner or authorized agent should knowingly fail or refuse to give
correct information to the proper authority, or knowingly fail or refuse to
submit to the GLO all correct reports required by statute, the rights acquired
under the award shall be subject to forfeiture by the commissioner.
(2)
Upon forfeiture of a mineral award, notice shall be mailed
to the person, firm, or corporation shown by the records of the GLO to be
the owner of the mineral award.
(3)
Upon satisfactory evidence of future compliance with the
law and with the GLO rules and regulations, the forfeiture may be set aside
and all rights thereto reinstated.
(4)
If a mineral award is forfeited and not reinstated, the
land covered by the mineral award is not subject to being claimed or patented.
(h)
Patenting a mineral award.
(1)
At any time after five years from the date of a mineral
award, the owner of the award may pay the balance due on the purchase price
of the award and request a patent thereto.
(2)
The owner of the mineral award shall make written request
that the award be patented. The request shall be accompanied by three separate
remittances: the balance of the purchase price, a patenting fee, and a recording
fee. The appropriate patenting and recording fees are found in §1.3 of
this title (relating to Fees).
(3)
The purchase price of the mineral patent shall be $10 per
acre, and the annual payments of $.50 per acre on the mineral award shall
be applied to the purchase price.
(i)
Mineral patent requirements.
(1)
After the issuance of a mineral patent, no further assessment
work will be required.
(2)
The royalty due the state on a mineral patent shall be
perpetual and shall be 6.25% of the value of the production of the minerals
as shown by the net smelter, mill, mint, or refinery returns or of the gross
sum, arising from the sale of the ore or products from the mineral patent
and received by the owner.
This agency hereby certifies that the proposal has been
reviewed by legal counsel and found to be within the agency's legal authority
to adopt.
Filed with the Office of
the Secretary of State on January 21, 2004.
TRD-200400428
Larry L. Laine
Chief Clerk, Deputy Land Commissioner
General Land Office
Earliest possible date of adoption: March 7, 2004
For further information, please call: (512) 305-9129
Chapter 363.
FINANCIAL ASSISTANCE PROGRAMS
Subchapter K. SMALL COMMUNITY HARDSHIP PROGRAM
31 TAC §§363.1101 - 363.1107
The Texas Water Development Board (board) proposes amendments
to 31 TAC Chapter 363, concerning Financial Assistance Programs, to create
a new subchapter, Subchapter K, relating to the Small Community Hardship Program,
and proposes new 31 TAC §§363.1101 - 363.1107. Proposed new 31 TAC §§363.1101
- 363.1107 creates a new program by which the board may provide political
subdivisions with grants for projects that provide adequate water and sewer
service to economically distressed areas.
The board proposes new §363.1101, Scope and Purpose of Subchapter,
to identify the purpose of the new rules. This proposed new section also identifies
the source of funds for the program because the use of payments from the Texas
Water Resources Finance Authority creates limitations in the use of these
funds.
The board proposes new §363.1102, Definitions of Terms, which provides
definitions applicable to this proposed new subchapter. It first proposes
to use definitions in Water Code Chapters 15, 16 and 17, unless expressly
defined in this proposed new section. Proposed new §363.1102(1) defines
adjusted median household income as household income identified in the most
recent U.S. Census multiplied by the current Texas Consumer Price Index divided
by the most recent decennial Texas Consumer Price Index. Annual median household
income directly relates to the economic conditions of potential applicants
and its ability to repay loans. The board proposes using a household income
as the economic factor to identify areas as economically distressed and therefore
eligible for assistance under this proposed new subchapter because it is common
and easily identifiable by using the federal census data and accurately reflects
the current economics of the area. The board is proposing that the median
household income that is identified by the latest federal census be adjusted
using the current Consumer Price Index, so that the census figures reflect
present levels of income. This will more closely reflect the applicant's current
economic situation when comparing current rates to income level. Proposed
new §363.1102(2) defines applicant as a political subdivision that requests
financial assistance from the board so that the rule will easily identify
the requirements of the proposed new subchapter as applicable only to those
entities that request funding. Proposed new §363.1102(3) and (4) define
the term average yearly sewer and water bill, respectively, which are used
in defining disadvantaged community. The average yearly water bill is calculated
by applying the community's rate structure to the average number of gallons
of water used in-house per year by the average occupied household. Identification
of the rate on a per gallon basis accounts for the different usage rates between
water systems thereby creating a common measure when analyzing the percentage
of the water or combined water and sewer bill to the adjusted median household
income. The number identified as the average gallons used in an individual
residence for sewer and water in proposed new §363.1102(3) and (4) is
the estimated state-wide average of domestic water that enters a household
and returns via the sewer system, based on data submitted by political subdivisions
and compiled by the Texas Commission on Environmental Quality (TCEQ). These
proposed new subsections also propose to include taxes, surcharges or other
fees as part of the annual bill by including the average annual amount per
household of the fee in calculating the average yearly sewer or water bill
if such fees are used to subsidize the sewer or water service systems. Proposed
new §363.1102(5) and (8) define combined household cost factor and household
cost factor, respectively. Household affordability factors are used in proposed
new §363.1102(6) to define disadvantaged area because these factors measure
whether a project is affordable to the customers of the system. The household
affordability factors indicate the capacity of the customers to support the
cost of water and/or sewer service, including debt service, through user charges.
If the water or combined water and sewer bill exceeds a certain percentage
of the adjusted median household income, then the project would not be affordable
to the community without assistance from this program. The percentage of the
average water or combined water and sewer bill to annual median household
income, which is defined in proposed new §363.1102(1) is a methodology
used in other board programs and by other states in developing affordability
guidelines as well as the federal government in determining affordability
of projects. The 1.0% for water rates used in proposed new §363.1102(6)(B)(i)
is the percentage used by the Environmental Protection Agency in its User
Manual for the Municipality's Ability to Pay Computer Model. The 2.0% for
water and sewer rates in proposed new §363.1102(6)(B)(ii) was used because
it is recognized that the additional cost of sewer services impacts the ability
of customers to pay for a new project and is used by the board in other programs
as well as another state in developing its affordability guidelines. Proposed
new §363.1102(5) defines combined household cost factor as a combination
of the average yearly water bill with the average yearly sewer bill and divides
the total by the average median household income while proposed new §363.1102(8)
defines household cost factor as the number that is derived by dividing the
average yearly water bill by the adjusted median household income. Proposed
new §363.1102(6) uses three criteria to define a disadvantaged community:
permanent residential population; adjusted median household income; and household
affordability factors. Population is used because the board believes that
the smaller the service population for a utility provider, the harder it is
to obtain the capital necessary to complete infrastructure projects. A population
of less than 5,000 is proposed because 93% of the 616 Texas communities identified
as lacking adequate water or sewer service have a population of 5,000 or less.
The adjusted median household income is a measure of the income levels of
residents of the area. Similar income criteria are used in the Drinking Water
State Revolving Fund (DWSRF) and the Economically Distressed Areas Program
(EDAP), both of which are administered by the board, so that its use fosters
consistency between board programs. The board proposes using an income threshold
of 75% of the median state household income because it is the measure already
used by the board to establish eligibility for the EDAP as required by Water
Code §16.341(1). The household cost factors are discussed in the preceding
paragraph. Relying on the definition of a disadvantaged area, economically
distressed area is defined in proposed new §363.1102(7) as an area that
not only lacks financial resources as identified in the definition of disadvantaged
area but also as an area with inadequate water or wastewater service. In this
manner, the board has defined an economically distressed area consistent with
the statutory intent to direct this grant assistance to areas not meeting
the statewide standard for service and that also lack the financial resources
to address that need. Proposed new §363.1102(9) and (10) define inadequate
water service and inadequate sewer services, respectively, by relying on TCEQ
regulations because these standards set statewide standards for adequate sewer
and water services. Proposed new §363.1102(11) defines political subdivision
as defined in Water Code §15.001 but excludes an interstate compact commission
since that would not be a viable potential service provider.
The board proposes new §363.1103(a) to state that the board may provide
grants to a political subdivision for projects that provide adequate water
or sewer service to areas that do not currently have adequate service. The
board is providing grants because there have been indications that some small
communities have difficulty accessing board loan programs due to the interest
costs associated with a loan. Further, due to federal tax law, it is advisable
to use the funds provided for this program by the Texas Water Resources Finance
Authority in this manner. The board proposes new §363.1103(b) to identify
eligible uses of the fund as the planning, designing, or construction of a
new water or sewer service system or improvements to an existing system in
an economically distressed area, the purchase of a inadequate system so that
it can be consolidated with another system that can provide adequate service,
reduction of the interest rates loans or reduction or elimination of outstanding
indebtedness to finance a project identified in proposed new paragraphs (1),
(2), or (3) of this subsection, provided however that the loan is not from
the board or other state agency. The board may not use these funds for interest
rate reduction or refinancing of state indebtedness due to federal tax considerations.
The board proposes new §363.1103(c) to identify that the board may provide
assistance through a written agreement with the political subdivision.
The board proposes new §363.1104 to identify the information that
must be provided in an application for assistance under this proposed new
subchapter. The elements identified in this proposed new section are either
required by Water Code §15.103 or are similar to the requirements for
applications in other board programs and have proven to be the essential elements
for the board to consider prior to providing assistance. Proposed new §363.1104(1)
provides that an application must include a resolution from the applicant's
governing body requesting assistance, stating the amount of the request, and
designating a representative as the point of contact for the application.
Proposed new §363.1104(2) requires that the designated representative
provide an affidavit that states the decision to request financial assistance
was made in an open meeting, states the information in the application is
true and correct, warrants compliance with the application representations,
and states the applicant will comply with all applicable federal and state
laws. Proposed new §363.1104(3) requires copies of the consultant services
contracts be provided with the application. Proposed new §363.1104(4)
requires that the application provide the citation to the legal authority
of the applicant. Proposed new §363.1104(5) requires data from the federal
census or a survey of the residents to establish the eligibility of the area
as disadvantaged. Proposed new §363.1104(6), (7) and (8) requires an
engineering feasibility report that includes that the water or sewer service
for the area is inadequate, a preliminary environmental information, and a
water conservation plan, respectively, all of which comply with referenced
rules of the board applicable to other board programs. Proposed new §363.1104(9)
provides that if an applicant is receiving or providing water or sewer service
to another entity then a copy of the service agreement must be provided with
the application.
The board proposes new §363.1105 to identify the considerations and
findings that the board must make prior to approving an application as required
by Water Code §15.105. Proposed new §363.1105(a) provides that prior
to application approval, the board shall consider the needs of and benefits
to the project area in relation to other areas in the state, revenue available
to the applicant for project costs, overall statewide needs, the applicant's
ability to pay for the project without this assistance; and the county's efforts
to control the construction of subdivisions that lack basic utility services.
Proposed new §363.1105(b) provides that after considering these factors,
the board can approve the application if it finds that the public interest
requires state participation in the project and the revenue or taxes pledged
by the political subdivision will be sufficient to meet all the obligations
assumed by the political subdivision. These considerations and findings are
required by statute. Proposed new §363.1105(c) acknowledges that the
resolution approving the application may include any condition that the board
deems appropriate including a requirement that the applicant adopt a water
conservation plan in compliance with board rules and state statute.
The board proposes new §363.1106 to identify the amount of the grant
assistance that will be provided. Proposed new §363.1106(a)(1) provides
that when the adjusted median household income for the project area is between
75% and 60% of the median state household income, the grant will be 50% of
the amount of the financial assistance requested in the application. Proposed
new §363.1106(a)(2) provides that when the adjusted median household
is less than or equal to 60% but greater than 50% of the median state household
income, the grant will be 75% of the amount of the financial assistance requested
in the application. Proposed new §363.1106(a)(3) provides that when the
adjusted median household income is less than or equal to 50% of the median
state household income, the grant will be for 90% of the amount of the financial
assistance requested in the application. The graduated scale of grant assistance
is intended to create a means to direct the largest grants to the communities
most in need based on an analysis of the residents' ability to pay. Proposed
new §363.1106(b) provides that the amount of the financial assistance
requested in the application that is not provided as a grant shall be provided
by a loan from another board program. By this proposed new subsection, the
board proposes to require that a grant recipient under this proposed new subchapter
also receive a board loan. In this manner, the board is assured that the community
is contributing to the long-term success of the project. This proposed new
subsection also provides the board the means to monitor the ongoing viability
of the utility and insure the best use of these limited funds. Proposed new §363.1106(c)
provides that the maximum amount of grant funds made available to a single
applicant is $1 million. The board proposes this subsection in order to insure
that multiple communities may access these limited funds. Proposed new §363.1106(d)
provides that if the applicant will be providing the remaining portion of
the project costs from sources other than board programs, then the availability
of the additional funds must be established prior to the release of funds
provided under this proposed new subchapter.
The board proposes new §363.1107 to provide that the release of funds,
the construction phase, and the post-construction responsibilities for projects
funded under this proposed new subchapter will be governed by the provisions
of Division 4, Division 5, Division 6 of Subchapter A of this chapter. In
this manner, the board will manage the expenditure of these funds in the same
manner as other board programs.
Ms. Melanie Callahan, Director of Fiscal Services, has determined that
for the first five-year period the new sections, as proposed, are in effect
there will be potential fiscal implications for local governments that apply
for funding under the program. These fiscal implications would be in the form
of savings on loans for water projects. However, at this time, no reliable
estimates may be made of the amount of the potential savings.
Ms. Callahan has also determined that, for the first five years the new
sections, as proposed, are in effect the public benefit anticipated as a result
of enforcing the new sections will be that the new program will provide an
additional funding source to rural political subdivisions for developing water
resources of the state. Ms. Callahan has determined there will not be economic
costs to the State, to small businesses or individuals required to comply
with the new sections as proposed.
Comments on the proposal will be accepted for 30 days following publication
and may be submitted to Jonathan Steinberg, Deputy Counsel, General Counsel's
Office, Texas Water Development Board, P.O. Box 13231, Austin, Texas, 78711-3231,
by e-mail to jonathan.steinberg@twdb.state.tx.us or by fax at (512) 463-5580.
Statutory authority: Water Code, §§6.101, 15.001(11),
15.011, and 15.103.
Cross reference to statute: Water Code, Chapter 15, Subchapter C.
§363.1101.Scope and Purpose of Subchapter.
(a)
This subchapter shall govern the use of funds deposited
in the Water Loan Assistance Fund for the purpose of the Small Community Hardship
Program from payments made by the Texas Water Resources Finance Authority
to the board, as well as such other funds that may be made available for such
program.
(b)
The purpose of the use of the funds by the board is to
provide financial assistance to economically distressed areas as provided
in Water Code, Chapter 15 and as further specified in this subchapter.
§363.1102.Definitions of Terms.
The following words and terms, when used in this division, shall have
the following meanings, unless the context clearly indicates otherwise. Unless
defined in this subchapter, words defined in the Texas Water Code, Chapters
15, 16, or 17 shall have the meanings provided therein.
(1)
Adjusted median household income -- The annual median household
income identified in the most recent U.S. Census from the closest applicable
census tract multiplied by the current Texas Consumer Price Index divided
by the most recent decennial Texas Consumer Price Index.
(2)
Applicant -- A political subdivision that requests financial
assistance from the board.
(3)
Average yearly sewer bill -- The number that is derived
by multiplying the average number of persons per occupied household in the
service area of the applicant by 1,279 gallons multiplied by the monthly sewer
rate of the applicant multiplied by 12. The proposed monthly sewer rate shall
include the cost of the proposed project. If taxes, surcharges or other fees
are used to subsidize the sewer system, the average annual amount per household
may be included in calculating the average yearly sewer bill.
(4)
Average yearly water bill -- The number that is derived
by multiplying the average number of persons per occupied household in the
service area of the applicant by 2,325 gallons multiplied by the proposed
monthly water rate multiplied by 12. The proposed monthly water rate shall
include the cost of the proposed project. If taxes, surcharges or other fees
are used to subsidize the water system, the average annual amount per household
may be included in calculating the average yearly water bill.
(5)
Combined household cost factor -- The number that is derived
by adding the average yearly water bill with the average yearly sewer bill
and dividing by the adjusted median household income.
(6)
Disadvantaged area -- An area that:
(A)
has a permanent residential population of 5,000 or less;
and
(B)
has an adjusted median household income which is no more
than 75% of the median state household income for the most recent year for
which statistics are available; and
(i)
if the service area is not charged for sewer services,
has a household cost factor for water rates that is greater than or equal
to 1.0%; or
(ii)
if the service area is charged for water and sewer services,
has a combined household cost factor for water and sewer rates that is greater
than or equal to 2.0%.
(7)
Economically distressed area -- An area which is a disadvantaged
area and in which inadequate water or sewer services exist.
(8)
Household cost factor -- The number that is derived by
dividing the average yearly water bill by the adjusted median household income.
(9)
Inadequate water service -- Water supply services which:
(A)
from a community water system, do not provide drinking
water of a quality that meets the standards set forth by the commission in
30 TAC §§290.1 - 290.26, 30 TAC §§290.38 - 290.51, and
any applicable standards of any governmental unit with jurisdiction over such
area;
(B)
from individual wells, after treatment, do not provide
drinking water of a quality that meets the standards set forth by the commission
in 30 TAC §§290.3, 290.4, 290.10, and 290.13, and any applicable
standards of any governmental unit with jurisdiction over such area; or
(C)
do not exist or are not provided.
(10)
Inadequate sewer service -- Sewer services which:
(A)
from any organized sewage collection and treatment facilities,
do not comply with the standards and requirements set forth by the commission
in 30 TAC Chapter 305;
(B)
for on-site sewerage facilities, do not comply with the
standards and requirements set forth by the commission in 30 TAC Chapter 285
and 313; or
(C)
do not exist or are not provided.
(11)
Political subdivision -- A city, county, district or authority
created under Article III, Section 52, or Article XVI, Section 59, of the
Texas Constitution, any other political subdivision of the state, and any
nonprofit water supply corporation created and operating under Water Code,
Chapter 67.
§363.1103.Financial Assistance Available.
(a)
The board may provide financial assistance from the Water
Loan Assistance Fund to a political subdivision for a water supply or sewer
service project that provides adequate water or sewer service to an economically
distressed area.
(b)
The board may provide financial assistance by grants for
up to 90% of the amount of the financial assistance requested in the application
to:
(1)
plan, design, or construct a new water or sewer service
system in an economically distressed area, including land costs or replacement
of septic systems;
(2)
plan, design, or construct improvements to an existing
water or sewer service system in an economically distressed area, including
land costs or replacement of septic systems;
(3)
purchase or consolidate water or sewer service systems
that results in providing adequate water or sewer service to an economically
distressed area;
(4)
reduce the interest rates on loans to finance a project
identified in paragraphs (1), (2), or (3) of this subsection, provided however
that the loan is not from the board or other state agency; or
(5)
reduce or eliminate outstanding indebtedness of the project
area if the effect assists in obtaining financial assistance for a project
identified in paragraphs (1), (2), or (3) of this subsection, provided however
that the indebtedness is not from the board or other state agency.
(c)
The board may provide the financial assistance through
a written agreement executed by the executive administrator and the designated
representative of the political subdivision.
§363.1104.Application.
An application shall be in the form and numbers prescribed by the executive
administrator and, in addition to any other information that may be required
by the executive administrator or the board, the applicant shall provide:
(1)
a resolution from its governing body which shall:
(A)
request financial assistance and identify the amount of
requested assistance;
(B)
designate the authorized representative to act on behalf
of the governing body; and
(C)
authorize the representative to execute the application,
appear before the board on behalf of the applicant, and submit such other
documentation as may be required by the executive administrator or the board;
(2)
a notarized affidavit from the authorized representative
stating that:
(A)
the decision to request financial assistance from the board
was made in a public meeting held in accordance with the Open Meetings Act
(Government Code, §551.001, et seq.) and after providing all such notice
as required by such Act as is applicable to the applicant or, for a corporation,
that the decision to request financial assistance from the board was made
in a meeting open to all customers and after providing all customers written
notice at least 72 hours prior to such meeting that a decision to request
public assistance would be made during such meeting;
(B)
the information submitted in the application is true and
correct according to the best knowledge and belief of the representative;
(C)
the applicant warrants compliance with the representations
made in the application in the event that the board provides the financial
assistance; and
(D)
the applicant will comply with all applicable federal laws,
rules, and regulations as well as the laws of this state and the rules and
regulations of the board;
(3)
copies of any proposed or existing contracts for consultant
financial advisory, engineering, and bond counsel services to be used by the
applicant in applying for financial assistance or constructing the proposed
project. Contracts for engineering services should include the scope of services,
level of effort, costs, schedules, and other information necessary for adequate
review by the executive administrator;
(4)
a citation to the legal authority in the Texas Constitution
and statutes pursuant to which the applicant is authorized to provide the
service for which the applicant is receiving financial assistance as well
as the legal documentation identifying and establishing the legal existence
of the applicant as may be deemed necessary by the executive administrator;
(5)
data from the most recent federal census for the most applicable
census tract or tracts or a survey approved by the executive administrator
of a statistically acceptable sampling of the customers in the service area
completed within the last 12 months that demonstrates that the area meets
the adjusted median household income level to qualify it as a disadvantaged
area;
(6)
an engineering feasibility report in compliance with §363.13
of this title (relating to Engineering Feasibility data) and including information
satisfactory to the executive administrator that the water or sewer service
for which assistance is requested is inadequate as defined herein;
(7)
preliminary environmental information in compliance with §363.14
of this title (relating to Environmental Assessment);
(8)
a water conservation plan prepared in compliance with §363.15
of this title (relating to Required Water Conservation Plan) or a statement
identifying the applicable statutory exemption from preparation and adoption
of the water conservation program; and
(9)
if the applicant provides or will provide water supply
or treatment, or sewer treatment service to another service provider, or receives
such service from another service provider, the proposed agreement, contract,
or other documentation which legally establishes such service relationship,
with the final and binding agreements provided prior to closing.
§363.1105.Board Consideration of Applications.
(a)
Prior to approval of the application submitted of an applicant,
the board shall consider:
(1)
the needs of the area to be served by the project and the
benefit of the project to the area in relation to the needs of other areas
requiring state assistance in any manner and the benefits of those projects
to the other areas;
(2)
the availability of revenue to the applicant from all sources
for the ultimate repayment of the cost of the project, including all interest;
(3)
the relationship of the project to overall statewide needs;
(4)
the ability of the applicant to finance the project without
state assistance; and
(5)
the regulatory efforts by the county in which the project
is located to control the construction of subdivisions that lack basic utility
services.
(b)
After consideration of the factors identified in subsection
(a) of this section, the board may pass a resolution approving the application
of an eligible applicant if the board finds that:
(1)
the public interest requires state participation in the
project; and
(2)
the revenue or taxes pledged by the political subdivision
will be sufficient to meet all the obligations assumed by the political subdivision.
(c)
The resolution approving the application of an eligible
applicant may include any condition that the board deems appropriate including
a requirement that the applicant adopt a water conservation plan in compliance
with §363.15 of this title (relating to Required Water Conservation Plan).
§363.1106.Grant Assistance.
(a)
To the extent funds are available, the amount of financial
assistance provided by the board under this subchapter will be determined
as follows:
(1)
if the adjusted median household income for the project
area is less than or equal to 75% but greater than 60% of the median state
household income, the financial assistance provided by the board will be a
grant for 50% of the amount of the financial assistance requested in the application;
(2)
if the adjusted median household income for the project
area is less than or equal to 60% but greater than 50% of the median state
household income, the financial assistance provided by the board will be a
grant for 75% of the amount of the financial assistance requested in the application;
and
(3)
if the adjusted median household income for the service
area is less than or equal to 50% of the median state household income, the
financial assistance provided by the board will be a grant for 90% of the
amount of the financial assistance requested in the application.
(b)
The remaining portion of the amount of the financial assistance
requested in the application not provided as a grant shall be provided by
a loan from another board program.
(c)
The amount of grant funds provided to an applicant pursuant
to this subchapter shall not exceed one million dollars.
(d)
If the applicant will be providing the remaining portion
of the project costs from sources other than board programs, then the applicant
shall provide evidence satisfactory to the executive administrator that the
applicant has secured the additional funds prior to the release of funds provided
under this subchapter.
§363.1107.Release of Funds and Construction Activity.
To the extent not in conflict with the provisions of this subchapter,
the provisions of Subchapter A of this chapter (relating to General Provisions)
that govern the release of funds (Division 4), construction phase (Division
5), and Post-Construction Responsibilities (Division 6) shall apply to financial
assistance provided in this subchapter.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of
the Secretary of State on January 21, 2004.
TRD-200400420
Suzanne Schwartz
General Counsel
Texas Water Development Board
Proposed date of adoption: April 21, 2004
For further information, please call: (512) 475-2052
Subchapter A. INTRODUCTORY PROVISIONS
royaltie
]
to fair market value
].
Subchapter F. DISCONTINUING THE LEASEHOLD RELATIONSHIP
The assignor of any state oil and gas lease will remain liable to the state
in the event of a breach of any covenant and/or condition of the lease.
]
Chapter 10.
EXPLORATION AND DEVELOPMENT OF STATE MINERALS OTHER THAN OIL AND GAS
(1)
] Commissioner--The commissioner
of the General Land Office.
(2)
] GLO--The General Land Office.
(3)
] Land trade lands--Lands, the
surface of which have been sold or traded with mineral rights and leasing
rights retained by the state.
(4)
] Person--Any individual, partnership,
corporation, association, or other legal entity.
(5)
] PSF--The Permanent School Fund.
(6)
] PUF--The Public University
Fund.
(7)
] Relinquishment Act lands--Any
public free school or asylum lands, whether surveyed or unsurveyed, sold with
a mineral classification or reservation between September 1, 1895, and August
21, 1931. For the purposes of this chapter and for convenience, the term "Relinquishment
Act lands" shall encompass any other lands, including vacancy lands, patented
with all minerals reserved to the state and expressly made subject to the
leasing terms and procedures governing Relinquishment Act lands.
(8)
] Relinquishment Act leases--Leases
issued under the Texas Natural Resources Code, Chapter 53, Subchapter C, and §10.5
of this title (relating to Mining Leases on Relinquishment Act Lands).
(9)
] RRC--The Texas Railroad Commission.
(10)
] SLB--The School Land Board.
(11)
] TDC--The Texas Department
of Corrections.
(12)
] TPWD--The Texas Parks and
Wildlife Department.
.
]
within and including the
second degree of consanguinity or affinity.
After obtaining written approval of
the commissioner, a lease or permit issued under this chapter, except a state
agency lease or a Relinquishment Act lease may be assigned in quantities of
not less than 40 acres. If, however, less than 40 acres remain of the tract
originally leased, then the entire remaining acreage may be assigned. Assignments
shall be recorded in each county in which the state tract is located. State
agency leases and Relinquishment Act leases are not subject to these restrictions
and may be assigned at any time.
]
Part 10.
TEXAS WATER DEVELOPMENT BOARD
Chapter 384.
RURAL WATER ASSISTANCE FUND