CHAPTER 9. EXPLORATION AND LEASING OF STATE OIL AND GAS
INTRODUCTION AND BACKGROUND
The Texas General Land Office (GLO) proposes amendments to §9.11 relating to Geophysical and Geochemical Exploration Permits and §9.22 relating to Leasing Procedures. The GLO proposes the nonsubstantive amendments to §9.11(c)(6) and §9.22(2)(E)(iv), (2)(F)(xii), and (5)(C)(ii)(IV) to conform with substantive and nonsubstantive changes made to other rules in Chapter 9.
The GLO proposes amendments to §9.31 relating to General Provisions; §9.35 relating to Producing the State Lease; and §9.37 relating to Offset Well Obligations and Compensatory Royalties. The GLO proposes the deletion of §9.31(a)(3) because its provisions are no longer applicable due to subsequently amended rules; the amendment to §9.31(b)(2) to clarify the definition of "drilling operations"; the amendment to §9.31(b)(6) to clarify the definition of "producing in paying quantities"; the deletion and replacement of §9.35(a)(2) which would permit the use of full well stream meters in lieu of separators with the submittal of appropriate data and the approval of GLO staff; the deletion and replacement of §9.35(a)(3) which would clarify when GLO staff approval for surface commingling is required; the amendment to §9.37(b)(1) which would make it mandatory, rather than an option, that a person obligated to drill an offset well, who is certain that an encroaching well cannot be draining state property, send a written explanation to the GLO; and the amendment to §9.37(b)(3) which would allow the Land Commissioner to appoint a designee to send an agreement letter to a person complying with §9.37(b)(1).
The GLO proposes amendments to §9.81 relating to Pooling and Unitizing of State Property. The GLO proposes the nonsubstantive amendments to conform with substantive and nonsubstantive changes made to other rules in Chapter 9.
The GLO proposes amendments to §9.91 relating to General Provisions; §9.92 relating to Release; and §9.93 relating to Assignments. The GLO proposes the amendment to §9.91(c)(3) to delete redundant language and the amendment to §9.91(c)(5)(C) to clarify GLO authority when an operator does not comply with lease requirements. The GLO proposes the nonsubstantive amendments to §9.92(b)(2) and §9.93(a)(2) to conform with substantive and nonsubstantive changes made to other rules in Chapter 9.
FISCAL IMPACTS
Larry Laine, Chief Clerk/Deputy Land Commissioner has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal implications for state government as a result of enforcing or administering the amendments.
PUBLIC BENEFIT/COST ANALYSIS
Larry Laine, also has determined that for each year of the first five years the amendments are proposed to be in effect, the public benefit will be improved operation of the GLO and better conservation of state resources. The GLO does not anticipate incurring any additional costs as a result of administering the proposed rule amendments. There will be no fiscal implications for local governments.
SMALL BUSINESS ANALYSIS
There may be some economic cost to small businesses, micro-businesses, and individuals based on the proposed amendments. The total costs for an individual, small business, or micro-business associated with compliance will vary depending on the different situations and choices made by each individual, small business, or micro-business. Further, the GLO does not have information on these businesses' gross receipts, sales revenues, or labor costs. Therefore, the GLO is not able to determine the exact cost of compliance.
EMPLOYMENT IMPACT
Larry Laine does not anticipate any employment impact as a result of administering the proposed rule amendments.
REQUEST FOR COMMENTS BY THE PUBLIC
Comments on the proposed rulemaking may be submitted to Mr. Walter Talley, the GLO Texas Register Liaison, at Texas General Land Office, P.O. Box 12873, Austin, TX 78711-2873, facsimile number (512) 463-6311, or email to walter.talley@glo.state.tx.us.
SUBCHAPTER B. ISSUING EXPLORATION PERMITS AND OIL AND GAS LEASES
STATUTORY AUTHORITY
Texas Natural Resources Code, §§31.051(3), 32.062(a), 32.205, and 33.064.
CROSS-REFERENCE TO STATUTE
Texas Natural Resources Code, §§31.051, 32.062, and 32.205.
§9.11.Geophysical and Geochemical Exploration Permits.
(a) - (b) (No change.)
(c) Permit applications and procedures.
(1) - (5) (No change.)
(6) The application shall be accompanied by the application
fee. All other appropriate fees, as specified in §3.31 [
§1.3(b)(16)] of this title (relating to Fees), are due
and shall be paid to the GLO prior to the permit's issuance.
(7) - (8) (No change.)
(d) - (j) (No change.)
§9.22.Leasing Procedures.
State property will be leased for the exploration and development of oil and gas under these procedures.
(1) (No change.)
(2) Leasing of Relinquishment Act lands by surface owner as the state's agent.
(A) - (D) (No change.)
(E) Lease negotiation procedure.
(i) - (iii) (No change.)
(iv) The proposed lease shall be submitted to the GLO
for approval prior to recording the lease in the county records. The
proposed lease shall be accompanied by the processing fee required
by §3.31 [§1.3] of this title, (relating
to Fees).
(F) State approval and filing of lease.
(i) - (xi) (No change.)
(xii) The state's share of the bonus payment and the
filing fee prescribed by §3.31 [§1.3]
of this title, (relating to Fees) shall be submitted along with the
certified copy or copies of the lease.
(3) - (4) (No change.)
(5) Leasing of highway rights-of-way by the SLB.
(A) - (B) (No change.)
(C) Preliminary leasing procedures.
(i) (No change.)
(ii) Any outside party, including the adjacent mineral owner, may apply to lease a tract by sending the following materials to the GLO:
(I) - (III) (No change.)
(IV) the processing fee required by §3.31 [§1.3
] of this title, (relating to Fees).
(iii) - (iv) (No change.)
(D) - (E) (No change.)
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 April 28, 2009.
TRD-200901585
Trace Finley
Deputy Commissioner, Policy and Governmental Affairs
General Land Office
Earliest possible date of adoption: June 14, 2009
For further information, please call: (512) 475-1859
STATUTORY AUTHORITY
Texas Natural Resources Code, §§31.051(3), 32.062(a), 32.205, and 33.064.
CROSS-REFERENCE TO STATUTE
Texas Natural Resources Code, §§31.051, 32.062, and 32.205.
§9.31.General Provisions.
(a) Applicability of this Subchapter.
(1) - (2) (No change.)
[(3) The remaining rules
in this subchapter are largely based on the SLB's October, 1997 state
fee lease form. Consequently, these remaining rules will only apply
to leases executed on this October, 1997 lease form and to provisions
in any other state leases covering lands described in §9.21(1)-(5)
whenever the other relevant state lease provisions are substantively
equivalent to the corresponding provisions in the October, 1997 lease
form.]
(b) Definitions Applicable to this Subchapter. The following terms shall have the following meanings unless the context or express language in a rule clearly indicates a contrary meaning.
(1) (No change.)
(2) Drilling Operation. One drilling operation consists of all the activities designed and conducted in an effort to obtain initial production from a well. As long as the actual spud date of the well occurs within a reasonable time, a drilling operation begins when a RRC drilling permit has been obtained and preliminary work, such as grading roads, moving equipment, digging pits or staking locations, has started. A drilling operation continues as long as operations progress in a diligent manner toward the completion of that well. One drilling operation ends when lessee obtains production in paying quantities or when lessee abandons efforts to obtain such production. Notwithstanding the foregoing, drilling operations cease the day the well is completed or the date the completion rig is released.
(3) - (5) (No change.)
(6) Producing (or production) in paying quantities. When a lease specifically defines this term, that definition applies. If a lease contains no such definition, the following definition shall apply: a lease or a well produces in paying quantities when receipts from the sale of oil and/or gas produced from the lease or well exceeds the lease's or well's total operating expenses (including all overhead, general and administration costs traceable to the expense of operating and marketing production from said lease or well) and a reasonably prudent operator would continue to operate the well or the lease in the same manner for the purpose of making a profit and not merely for speculation. Minimum royalty payments are not revenue from actual production and will not be treated as revenue when calculating whether a lease or a well is capable of producing in paying quantities.
(7) - (11) (No change.)
§9.35.Producing the State Lease.
(a) General provisions applicable to producing oil and/or gas on state leases.
(1) (No change.)
(2) All wells producing natural gas and water
or natural gas and surface hydrocarbon liquids or natural gas, water
and surface hydrocarbon liquids must be produced through oil and gas
separators of ample capacity and in good working order. All separators
shall be of conventional type (or other equipment at least as efficient)
to provide for separation and measurement of all lease or pooled unit
gas and liquid hydrocarbon production before sale or surface commingling
with production from any other lease and/or pooled unit. All measurement
shall be in accordance with the American Gas Association (AGA) standards
and all applicable chapters of the American Petroleum Institute (API)
Manual of Petroleum Measurement Standards (MPMS). However, upon review
and approval by the GLO, a waiver granting exception to this requirement
may be provided. The lessee shall request and obtain the waiver from
GLO staff before installation of full well stream/wet gas meters in
lieu of setting a separator. Waiver requests shall be sent to the
Texas General Land Office, Attention: Mineral Leasing, 1700 N. Congress
Avenue, Austin, TX 78701-1495. [All wells producing liquids
must be produced through an oil and gas separator of ample capacity
and in good working order.]
(3) Lessee shall obtain written permission from
GLO before surface commingling state lease or state pooled-unit production
with private lease production or before surface commingling oil and/or
gas from two separate state leases and/or pooled state units. Lessee
shall obtain written permission from GLO staff before down-hole commingling
production from two or more intervals where the state's royalty interests
differ between the proposed commingled intervals. Send commingling
requests to the Texas General Land Office, Attention: Mineral Leasing,
1700 North Congress Avenue, Austin, TX 78701-1495. The requirement
to obtain GLO staff approval applies to all commingle exception applications
including new permits and amendments to existing permits. [Lessee
must obtain written permission from GLO staff before commingling state
production with private production or before commingling state oil
and/or gas from two separate leases, separate reservoirs or multiple
stratigraphic or lenticular accumulations. Send commingling requests
to the address found in §9.32(c)(3)(A) of this title, (relating
to General Responsibilities of State Lessees).]
(b) - (d) (No change.)
§9.37.Offset Well Obligations and Compensatory Royalties.
(a) (No change.)
(b) Agreement that no drainage of state hydrocarbons is possible.
(1) Application. If the person obligated to drill an
offset well is certain that an encroaching well cannot be draining
the state property, he shall [should] apply
in writing to GLO staff at the address found in §9.32(c)(3)(A)
of this title (relating to Required Activity Lessee Responsibilities).
This application should include a full explanation of why applicant
contends that no drainage of state hydrocarbons is possible and request
the commissioner to agree with this contention.
(2) - (4) (No change.)
(c) (No change.)
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 April 28, 2009.
TRD-200901586
Trace Finley
Deputy Commissioner, Policy and Governmental Affairs
General Land Office
Earliest possible date of adoption: June 14, 2009
For further information, please call: (512) 475-1859
STATUTORY AUTHORITY
Texas Natural Resources Code, §§31.051(3), 32.062(a), 32.205, and 33.064.
CROSS-REFERENCE TO STATUTE
Texas Natural Resources Code, §§31.051, 32.062, and 32.205.
§9.81.Pooling and Unitizing of State Property.
(a) (No change.)
(b) Procedure.
(1) Submit a completed pooling application and the
processing fee prescribed by §3.31 [§1.3]
of this title, (relating to Fees) to the GLO. Application forms may
be obtained from the GLO upon request. The application must be submitted
at least 14 days prior to the SLB meeting at which the application
will be considered. If not timely submitted, the application will
be considered at the next available meeting. Any proprietary information
submitted with the application shall be kept confidential as required
by law, and upon request of applicant, will be returned after examination
by GLO staff. The application should include the following information
if available:
(A) - (G) (No change.)
(2) (No change.)
(c) - (d) (No change.)
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 April 28, 2009.
TRD-200901587
Trace Finley
Deputy Commissioner, Policy and Governmental Affairs
General Land Office
Earliest possible date of adoption: June 14, 2009
For further information, please call: (512) 475-1859
STATUTORY AUTHORITY
Texas Natural Resources Code, §§31.051(3), 32.062(a), 32.205, and 33.064.
CROSS-REFERENCE TO STATUTE
Texas Natural Resources Code, §§31.051, 32.062, and 32.205.
§9.91.General Provisions.
(a) - (b) (No change.)
(c) Effect of discontinuing the leasehold relationship. When the discontinuance of a leasehold relationship becomes effective, the lessee shall be relieved of all further obligations to the state due to the lessee's ownership of the lease except for the following:
(1) - (2) (No change.)
(3) the accrual of penalty and interest, [both
in the past and in the future,] as set out in this chapter on
any delinquent royalty or report owed by the lessee;
(4) (No change.)
(5) if all oil and gas production, drilling, and rework activity has ceased on a well, the following clean-up duties:
(A) - (B) (No change.)
(C) the duty to remove all equipment, structures, machinery,
tools, supplies, and other items on the property and otherwise restore
the property to the condition it was in immediately preceding issuance
of that lease. If such is not completed within 120 days of when the
discontinuance of the leasehold relationship becomes effective, a
presumption shall arise that these items have been abandoned by the
lessee or operator and the commissioner may exercise the state's
rights pursuant to Natural Resources Code §51.302 et seq. [state shall become the owner of these items];
(D) - (E) (No change.)
(d) (No change.)
§9.92.Release.
(a) (No change.)
(b) Fees and other required information. The following must accompany each release and counterpart required to be filed in the GLO under this section:
(1) (No change.)
(2) the payment of the filing fee required by §3.31 [
§1.3] of this title, (relating to Fees) for
each state lease, as identified by its mineral file number, affected
by the release;
(3) - (5) (No change.)
(c) - (e) (No change.)
§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) (No change.)
(2) the payment of the filing fee required by §3.31 [
§1.3] of this title, (relating to Fees) for
each state lease, as identified by its mineral file number, affected
by the assignment;
(3) - (5) (No change.)
(b) - (n) (No change.)
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 April 28, 2009.
TRD-200901588
Trace Finley
Deputy Commissioner, Policy and Governmental Affairs
General Land Office
Earliest possible date of adoption: June 14, 2009
For further information, please call: (512) 475-1859