ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 22. EXAMINING BOARDS Part XI. Board of Nurse Examiners Chapter 217. Licensure and Practice 22 TAC sec.217.2 The Board of Nurse Examiners adopts an amendment to sec.217.2, concerning Licensure by Examination for Graduates of Basic Nursing Education Programs, without changes to the proposed text as published in the October 31, 1995, issue of the Texas Register (20 TexReg 8957). The Board of Nurse Examiners' Advisory Committee on Education reviewed current rules regarding education which limit the number of times a candidate can retest and require reeducation. The reeducation portion was previously handled by guidelines written by the Board and the individual nursing program; however, the term "in its entirety" was confusing and was being interpreted differently by programs and students, alike. The committee received input from deans/directors who are considering developing programs of reeducation and recommended the proposed rule to the full Board. The Board concurred and authorized adoption. The adopted amendment will continue to provide protection for the people of Texas by establishing the number of times a candidate can take the NCLEX-RN and the length of time from graduation to testing without reeducation. Clarification of the reeducation requirements will assist deans/directors and applicants in interpreting and implementing the rule. There were no comments received regarding adoption of the amendment. The amendment is adopted under the Nursing Practice Act (Texas Civil Statutes, Article 4514), sec.1, which provides the Board of Nurse Examiners with the authority and power to make and enforce all rules and regulations necessary for the performance of its duties and conducting of proceedings before it. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515501 Katherine A. Thomas, MN, RN Executive Director Board of Nurse Examiners Effective date: December 22, 1995 Proposal publication date: October 31, 1995 For further information, please call: (512) 305-6811 Part XV. Texas State Board of Pharmacy Chapter 283. Licensing Requirements for Pharmacists 22 TAC sec.283.9 The Texas State Board of Pharmacy adopts an amendment to sec.283.9, concerning Fee Requirements for Licensure by Examination and Reciprocity, without changes to the proposed text as published in the September 15, 1995, issue of the Texas Register (20 TexReg 7255). The rule amendment increases the fee to retake the Texas Jurisprudence Examination from $25 to $50. The initial fees for reciprocity and relicensure would remain unchanged. No comments were received regarding the adoption of the amendment. The amendment is adopted under the Texas Pharmacy Act, Article 4542a-1, Texas Civil Statutes, sec.39, which state that the Board by rule shall establish reasonable and necessary fees so that the fees, in the aggregate, produce sufficient revenue to cover the cost of administering this Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 30, 1995. TRD-9515467 Fred S. Brinkley, Jr., R.Ph., M.B.A. Executive Director, Secretary Texas State Board of Pharmacy Effective date: December 21, 1995 Proposal publication date: September 15, 1995 For further information, please call: (512) 832-0661 Chapter 291. Pharmacies 22 TAC sec.291.6 The Texas State Board of Pharmacy adopts an amendment to sec.291.6, concerning Pharmacy License Fees, without changes to the proposed text as published in the September 15, 1995, issue of the Texas Register (20 TexReg 7255). The rule amendment will increase the total pharmacy license fee for pharmacies from $152 to $164. No comments were received regarding the adoption of the amendment. The amendment is adopted under the Texas Pharmacy Act, Article 4542a-1, Texas Civil Statutes, sec.39, which state that the Board by rule shall establish reasonable and necessary fees so that the fees, in the aggregate, produce sufficient revenue to cover the cost of administering this Act; and sec.27A(g), which specifies that the Board may add a surcharge of not more than $10 to a license or license renewal fee to fund the program to aid impaired pharmacists and pharmacy students. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 30, 1995. TRD-9515466 Fred S. Brinkley, Jr., R.Ph., M.B.A. Executive Director, Secretary Texas State Board of Pharmacy Effective date: December 21, 1995 Proposal publication date: September 15, 1995 For further information, please call: (512) 832-0661 Home and Communty Services Support Agency Pharmacy (Class F) 22 TAC sec.sec.291.111-291.115. The Texas State Board of Pharmacy adopts the repeal of sec.291.111-291.115, concerning purpose, definitions, personnel, operational standards, records, without changes to the proposed text as published in the September 15, 1995, issue of the Texas Register (20 TexReg 7256). This repeal removes existing sections which set forth standards for the operation of a Home and Community Support Services Agency Pharmacy (Class F). The repeal of this language is necessary to implement the provisions of House Bill 1408 passed by the 74th Legislature which eliminates the Class F Pharmacy license and amends the Texas Dangerous Drug Act to allow a home and community support services agency or hospice to possess sterile water and saline for injection and irrigation for administration to their patients. No comments were received regarding the adoption of the repeals. The repeals are adopted under the Texas Pharmacy Act (Article 4542a-1, Texas Civil Statutes), sec.16(a), which give the Board the authority to adopt rules for the proper administration and enforcement of the Act; and House Bill 1408 as passed by the 74th Legislature which eliminates the Class F Pharmacy license. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 30, 1995. TRD-9515468 Fred S. Brinkley, Jr., R.Ph., M.B.A. Executive Director, Secretary Texas State Board of Pharmacy Effective date: December 21, 1995 Proposal publication date: September 15, 1995 For further information, please call: (512) 832-0661 Chapter 295. Pharmacists 22 TAC sec.295.5 The Texas State Board of Pharmacy adopts an amendment to sec.295.5, concerning Pharmacist License or Renewal Fees, without changes to the proposed text as published in the September 15, 1995, issue of the Texas Register (20 TexReg 7257). The amendment will increase the total pharmacists license fee from $86 to $96 for pharmacists beginning with licensees that have an expiration date on or after January 1, 1996. No comments were received regarding the adoption of the amendment. The amendment is adopted under the Texas Pharmacy Act, Article 4542a-1, Texas Civil Statutes, sec.39, which state that the Board by rule shall establish reasonable and necessary fees so that the fees, in the aggregate, produce sufficient revenue to cover the cost of administering this Act; and sec.27A(g), which specifies that the Board may add a surcharge of not more than $10 to a license or license renewal fee to fund the program to aid impaired pharmacists and pharmacy students. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 30, 1995. TRD-9515469 Fred S. Brinkley, Jr., R.Ph., M.B.A. Executive Director, Secretary Texas State Board of Pharmacy Effective date: December 21, 1995 Proposal publication date: September 15, 1995 For further information, please call: (512) 832-0661 TITLE 30. ENVIRONMENTAL QUALITY Part I. Texas Natural Resource Conservation Commission Chapter 305. Consolidated Permits Subchapter N. Memorandum of Understanding 30 TAC sec.305.521 The Texas Natural Resource Conservation Commission (TNRCC or commission) adopts an amendment to sec.305.521, concerning the adoption by reference of a Memorandum of Understanding (MOU) between the Texas General Land Office (GLO) and the TNRCC, without changes to the proposed text as published in the October 3, 1995, issue of the Texas Register (20 TexReg 8069). The adoption allows inclusion of the stated MOU into the appropriate rule. The amendment is to facilitate funding of the Galveston Bay Program of the TNRCC by the Coastal Protection Fund of the GLO as passed by the 74th Texas Legislature, 1995, Texas General Appropriations Act for 1996-1997. The 74th Legislature specifically directed that the GLO and the jointly administer the Galveston Bay Program. The appropriation was made contingent upon the execution of a memorandum of understanding between the GLO and the TNRCC. No comments were received regarding adoption of the amendment. The amendment is adopted pursuant to the Texas Water Code, sec.5.104, which requires the TNRCC to adopt by rule any MOU that it enters into with any other state agency. The amendment is adopted under the Texas Water Code (Vernon 1992), sec.5.103, which provided the Texas Natural Resource Conservation Commission (TNRCC) with the authority to adopt any rule necessary to carry out the powers and duties of the Texas Water Code and other laws of this state. In addition, this amendment is proposed under the Texas Water Code, sec.5.104, which requires the TNRCC to adopt by rule any memorandum of understanding between the TNRCC and any other state agency. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 4, 1995. TRD-9515646 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 25, 1995 Proposal publication date: October 3, 1995 For further information, please call: (512) 239-4640 Chapter 335. Industrial Solid Waste and Municipal Hazardous Waste Subchapter Q. Pollution Prevention: Source Reduction and Waste Minimization 30 TAC sec.335.474, sec.335.476 The Texas Natural Resource Conservation Commission (TNRCC) adopts amendments to sec.335.474 and sec.335.476, concerning Pollution Prevention: Source Reduction and Waste Minimization, Source Reduction and Waste Minimization Plans, and Reporting and Recordkeeping. Section 335.474 and sec.335.476 are adopted without changes to the proposed text as published in the August 22, 1995, issue of the Texas Register (20 TexReg 6395) and will not be republished. The amendments adopted will define the Small Quantity Generators requirements (applicable to facilities that are not also TRI Facilities) for the executive summary and the certification of completeness related to Source Reduction and Waste Minimization Plans; they will also allow Small Quantity Generators (SQGs) to meet the annual reporting requirements with their annual waste summary report already required under 30 TAC sec.335.9. These amendments clarify the current rule, demonstrate the TNRCC's commitment to streamlining reporting requirements, and minimize SQG reporting requirements. One supporting comment was received from Texas Utilities Services, Inc. No opposing comments were received. The amendments are adopted under Texas Water Code, sec. sec.5.103, 5.105, and 26. 011, which provides the TNRCC the authority to adopt rules necessary to carry out its powers, duties, and policies and to protect water quality in the state. These changes are also adopted under the Health and Safety Code sec.361.024, which provides the TNRCC the authority to adopt rules necessary to manage solid waste, and under sec.361.504(b) which provides the TNRCC the authority to establish schedules for Source Reduction and Waste Minimization reports. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 4, 1995. TRD-9515617 Kevin McCalla Director, Legal Division Texas Natural Resource Conservation Commission Effective date: December 25, 1995 Proposal publication date: August 22, 1995 For further information, please call: (512) 239-1461 TITLE 31. NATURAL RESOURCES AND CONSERVATION Part I. General Land Office Chapter 9. Exploration and Leasing of Oil and Gas 31 TAC sec.9.7 The General Land Office (GLO), with the approval of the School Land Board (SLB), adopts an amendment to sec.9.7, concerning royalty and reporting obligations to the state, with changes to the proposed text as published in the August 22, 1995, issue of the Texas Register (20 TexReg 6396). Changes made to the proposed rule are in response to public comments received and are described in the summary of public comments and responses section of this preamble. The GLO adopts amendments to existing sec.9.7(b)(2)(A) to reflect earlier statutory changes to Texas Government Code, sec.404.095. To reduce the regulatory and paperwork burdens for producers of certain properties with low total annual royalty payments, the GLO also adopts amendments to existing sec.9. 7(b) to allow annual, rather than monthly, reporting and royalty payment. New sec.9.7(c) provides the details of a Marginal Properties Royalty Incentive Program, which will enable oil and gas producers of certain marginally productive properties to apply for royalty rate reductions from the state, as authorized by Senate Bill 905, 74th Legislature, 1995, to be codified at Texas Natural Resources Code, sec.32.067. Various grammatical changes are also adopted throughout sec.9.7 to simplify and clarify the intent of the rules. Adoption and implementation of the amendments will further several key objectives. The GLO's main objective is to extend the economic life of state- owned marginal properties. By preventing hydrocarbon (oil, gas, and condensate) resource waste, the GLO ultimately will increase the royalty revenue to the Permanent School Fund (PSF) by encouraging the production of hydrocarbons that might not otherwise be economic to produce. The GLO desires to give lessees on state-owned lands meaningful incentives to maintain, rather than abandon, marginal production; to encourage activities that enhance production from marginally productive properties; and to encourage the drilling of exploration wells on prospects with higher risks and/or lower potential. The GLO will further these objectives through a program that is administratively simple and streamlined for both industry and the GLO, which administers the mineral leases granted by the SLB. The economic viability of marginally productive properties is very sensitive both to the price received for the hydrocarbons and their daily production rate. Often, a marginally productive property reaches its economic limit and is abandoned while hydrocarbon production is still technologically feasible. The resultant waste of hydrocarbons is not in the best interest of this and future generations of Texas schoolchildren because it deprives the PSF of additional revenue. Extending the economic life of marginally productive properties probably will result in production of otherwise wasted hydrocarbons, thus increasing total PSF revenue. The primary way to extend the economic life of marginally productive properties is to reduce production costs. The key cost over which the SLB has control is the royalty due the state. The program provides for a sliding-scale royalty reduction based on an oil reference price and production for qualifying reservoirs with an average daily per well production of 15 barrels of oil equivalent or less, or 50 barrels of oil equivalent or less for Gulf of Mexico reservoirs. Under no circumstances will the royalty rate be less than the lowest royalty rate provided by statute for the category of property for which application is being made. 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 these rule amendments. One commenter requested that the volumes used to qualify a gas reservoir for royalty reduction be based on sales volumes as opposed to produced volumes because marginally productive leases often use a disproportionately high percentage of the produced gas for uses such as compressor fuel, separation of gas from oil, and as fuel for other treatment and transportation. Consumption of such "lease use" gas diminishes the amount of produced gas that ultimately is available for sale off the lease or unit premises. The GLO and SLB agree that gas reservoirs should qualify for reduced royalty rates based on the volume of gas available for sale off the lease or unit rather than on total gas production volumes. To clarify this policy in the rules, the definition of "Barrel of oil equivalent (BOE)" in sec.9.7(c)(1)(C) has been modified to place gas production on a more equal footing with oil production, in which the amount physically produced is very close to the amount available for sale. This change in no way alters the requirement that the lessee must pay royalty amounts due the state based on ALL hydrocarbons physically produced from a lease or unit. Royalty will continue to be due on total production volumes as opposed to sales volumes. One commenter objected to linking the available royalty relief to the cash price of West Texas Intermediate crude oil at Cushing, Oklahoma, as posted daily in the Wall Street Journal because that price is not representative of the oil production revenue for a particular lease. The commenter also stated that such price does not account for differences between various grades of Texas crude or for price adjustments reflecting variations in oil quality. The commenter recommended using the West Texas Intermediate crude average posted price. For present purposes, the selection of a reference price was based on a need for a single price that is widely disseminated and thus readily accessible to both the agency and industry. The price term merely serves as a reference royalty rate reductions. The commenter's recommended use of the West Texas Intermediate crude average posted price was not followed because such price would not meet the agency's criteria of wide dissemination and ready accessibility to both the agency and industry. These rules do not address whether West Texas Intermediate crude posted prices accurately reflect the market value of crude oil. However, the reference price, as defined in sec.9.7(c)(1)(F), is changed from the daily cash price of West Texas Intermediate crude oil at the Cushing, Oklahoma, oil terminal, as reported in the Wall Street Journal , to the five-day average spot price of West Texas Intermediate crude oil at the Midland, Texas, oil terminal as reported in The Oil Daily . This change will provide an in-state reference price which is widely disseminated and readily accessible. Regarding Relinquishment Act leases, one commenter requested the deletion of the following sentence from sec.9.7(c)(3)(C)(i): "The state's royalty rate may not be reduced unless all royalty under the lease is reduced in the same proportion." The commenter stated that the sentence is unnecessary, will cause additional administrative work, and takes away the ability to negotiate better trades with other royalty owners. The substance of the sentence cannot be deleted because it is a statutory requirement in Senate Bill 905, 74th Legislature, 1995 (to be codified at Texas Natural Resources Code, sec.32.067(d) ), the statute authorizing royalty reduction for marginal properties. However, the sentence has been modified to clarify that the state's royalty rate may be reduced even though not all of the private royalty interest owners agree to the same royalty rate reduction. Specifically, the state may reduce its royalty to a rate equal to the aggregate rate of the other royalty interest owners under the lease. For example, if there are four private undivided royalty interest owners other than the state in a given Relinquishment Act lease and only three are willing to reduce the royalty to which they are entitled from 12.5% to 10%, then the state could only reduce its royalty rate to 10.625% ((10% + 10% + 10% + 12.5%) / 4). One commenter recommended that inland bay wells be grouped with Gulf of Mexico leases instead of upland leases for purposes of applying the reduced royalty rate schedules. The commenter stated that average lease operating expenses for bay wells and Gulf of Mexico wells are similar and justify classification and reduced royalty rates in the same category. Senate Bill 905, 74th Legislature, 1995 (to be codified at Texas Natural Resources Code, sec.32. 067), which authorizes royalty reduction for certain marginal properties, defines a "qualifying Gulf of Mexico reservoir" as a reservoir that during a period established by board rule has average daily per well production equal to or less than 50 barrels of oil or barrels of oil equivalent and underlies a qualifying Gulf of Mexico property or a pooled unit that includes a qualifying Gulf of Mexico property. "Qualifying Gulf of Mexico property" means land described in the Natural Resources Code, sec.52.011(2), that is subject to a lease issued under Subchapter B, Chapter 52 of the Natural Resources Code. Section 52.011(2) refers only to the portion of the Gulf of Mexico within the jurisdiction of the state. Islands, saltwater lakes, bays, inlets, marshes, and reefs owned by the state within tidewater limits are classified in a different category, Natural Resources Code, sec.52.011(1). Therefore, there is no statutory justification for grouping bay properties with Gulf of Mexico properties. However, GLO staff will continue to review available data to determine whether differences in operational costs between marginal bay tract and upland leases justify a recommendation for further rulemaking. No change was made based on this comment. Two commenters recommended changing the proposed royalty rate schedules to simplify them. One commenter recommended prorating the royalty rate increase equally over the 4-15 barrel of oil per day range and consolidating the ten price categories into four price ranges. Another commenter objected to the use of royalty relief matrices based on production and oil prices in general and proposed simplification by using a formula based exclusively on production rate. This commenter stated that the administrative burden for operators to apply for royalty reduction, monitor, report and track the parameters under the proposed rules appears to exceed the potential benefits unless production is at a minimum. GLO staff believes that the matrix approach, using both price and production, is the most effective means of balancing the conflicting goals of providing relief and incentives for marginal oil and gas properties while not reducing the ultimate royalty paid to the PSF from properties receiving royalty relief. These rules continue to take the more conservative approach of using price and production matrices in order to best protect the PSF, to which both the SLB and the GLO have a fiduciary obligation. The decrease in royalty relief provided as prices increase allows the PSF to participate in increased prices over time. GLO staff do not believe that the matrix approach imposes an unreasonable administrative burden upon operators. The two parameters that are used to establish the royalty rate are production and reference price during the qualifying period. GLO staff will track and maintain a database of the reference price. Operators need only to track their production, something which they already must do in order to properly allocate royalty payments. Moreover, the adopted rules allow an operator to "lock-in" the reservoir's reduced royalty rate for a period of two years after qualifying. GLO staff believe that this rate lock-in mechanism, coupled with the relative ease with which the reduced royalty period may be extended, minimizes to the greatest extent practicable the administrative burden on operators for this voluntary program. No changes were made based on these comments. One commenter proposed adding the following sentence to sec.9.7(c)(2)(B): "Once the operator is notified that the application has been approved, working interest owners affected by the reduction shall be given written notice of such by the operator within thirty days." Such a requirement should be governed by private agreements between the operator and the working interest owners (e.g., operating agreements). The GLO and SLB would have no effective means to monitor or enforce such a requirement. Additionally, to put in place the means to effectively monitor and enforce such a requirement would significantly increase the administrative workload and cost of the program and would complicate, rather than simplify, the entire program. For these reasons, no change was made based on this comment. One commenter proposed simplifying the program by deleting "Except as provided in subparagraph (F) of this paragraph," from sec.9.7(c)(3)(E) and deleting sec.9.7(c)(3)(F) entirely. Subparagraph E is designed to provide an incentive for workover activities in reservoirs that have not produced for at least one year and that are not stratigraphically deeper than the deepest producing qualifying reservoir under the lease. Subparagraph F exists to prevent an operator from receiving a marginal production royalty rate reduction when the operator deepens a well and encounters a highly productive reservoir. In this scenario, granting a reduced royalty rate to non-marginal production would result in an inequity to the PSF. Under the existing wording of the rules, if the deepened well encounters marginal production, the reservoir could still qualify for a royalty rate reduction. No change was made based on this comment. One commenter proposed that the GLO create an official form to be submitted as the application for the royalty incentive program. GLO staff are in the process of creating an official application form for use in the Marginal Properties Royalty Incentive Program. No change was made based on this comment. One commenter stated that Senate Bill 905, 74th Legislature, 1995, reflects a legislative intent that royalty reduction relief be available for all production of less than 15 barrels of oil equivalent per day and that the proposed reduced royalty schedules provide far less relief than was intended by the legislation. Senate Bill 905 (to be codified at Texas Natural Resources Code, sec.32.067), authorizes but does not compel the SLB to reduce royalties for qualifying reservoirs. Permissive rather than mandatory language is used throughout Senate Bill 905 when referring to the authority to reduce royalty rates. For example, the statute provides that the "board by rule may provide for the reduction of royalty rates as provided by this section" (to be codified at Texas Natural Resources Code, sec.32.067(b) (emphasis added)). Also, the statute provides that "the royalty rate for oil and gas produced from a qualifying reservoir may be reduced to not less than ..." and "In determining whether to grant a reduction in the royalty rate, the board may consider ..." (to be codified at Texas Natural Resources Code, sec.32.067(c) (emphasis added)). Therefore, the statutory language clearly grants the SLB discretion in deciding whether or not to grant and to what degree to grant reduced royalties if the reservoir otherwise meets the minimum requirements. No change was made based on this comment. Lamar Oil and Gas, Inc. and New Horizon Exploration, Inc. submitted comments with specific recommended revisions regarding the proposed amendments without expressing an opinion in favor of or against the proposed amendments in general. The Texas Mid-Continent Oil and Gas Association submitted comments supporting the proposed amendments generally, and also submitted some specific suggested changes. No comments were received in general opposition either to the idea of annual reporting and royalty payment or reduced royalty for marginally productive properties. No other comments were received within the designated public comment period. The amendment is adopted under Texas Natural Resources Code, sec.sec.31.051, 32. 062, 32.154, and 51.201, which authorizes the SLB and the commissioner of the GLO to adopt rules which are consistent with the law; Texas Natural Resources Code, sec.52.131, which authorizes the commissioner to adopt rules regarding the submission of royalty payments, reports, or other documents; and, in particular, Senate Bill 905, 74th Legislature, 1995, to be codified at Texas Natural Resources Code, sec.32.067, which authorizes the SLB to provide by rule for the reduction of royalty rates. sec.9.7. 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 royalties. (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, 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 GLO, no royalties are payable on lease stocks until such stocks are disposed of either by sale or otherwise. 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. 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, 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 treasury. Information regarding alternative payment methods may be obtained from the GLO Royalty Management Division. Texas Government Code, sec.404.095, may require lessees who have made over $500,000 in payments to GLO during the preceding fiscal year, or who anticipate payments over $500,000 during the current fiscal year, to make such payments by electronic funds transfer. This provision applies only to payments from leases executed after January 1, 1990. For complete details, see Texas Government Code, sec.404.095. (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 royalty payment or report timely received if the payment or 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) 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 sec.9.8(c)(2) (G) of this title (relating to Discontinuing the Leasehold Relationship), 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 sec.9.8(c)(2) (G) of this title (relating to Discontinuing the Leasehold Relationship), 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 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 GLO will be held in confidence by 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 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 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, 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 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. (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 to fair market value. (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, sec.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 sec.9.8 of this title (relating to Discontinuing the Lease Relationship). (E) Reduction of penalty and/or interest. The SLB may reduce penalties and/or interest assessed under Texas Natural Resources Code, sec.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, 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 sec.9.2 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 Petroleum and Minerals Division, General Land Office, 1700 North Congress Avenue, Austin, Texas 78701. The application should be completed and returned to the Petroleum and Minerals Division of 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 Petroleum and Minerals 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, sec.51.054 or its predecessor statutes cannot be qualifying property. (I) Qualifying Gulf of Mexico property-Land described in Texas Natural Resources Code, sec.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, sec.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 sec.9.1 of this chapter (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. Figures 1-8: 31 TAC sec.9.7(c)(3)(A). (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 sec.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 rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 30, 1995. TRD-9515495 Garry Mauro Commissioner General Land Office Effective date: December 22, 1995 Proposal publication date: August 22, 1995 For further information, please call: (512) 305-9129 Part II. Texas Parks and Wildlife Department Chapter 53. Finance The Texas Parks and Wildlife Commission in a regularly scheduled public hearing, November 2, 1995, adopted the repeal of sec. sec.53.1-53.4 and new sec.sec.53.31-53.33, concerning selling price of departmental information, without changes to the proposed text as published in the September 29, 1995 issue of the Texas Register (20 TexReg 7941). Sections 53.1-53.4 were repealed and recodified at sec.sec.53.31-53.33 as part of a reorganization and simplification of Chapter 53, concerning Finance. The repeals and new rules are necessary for simplification and consistency in regulations concerning selling price of departmental information. The repeals and new rules represent only a reorganization of Chapter 53, concerning Finance; no changes were made to the rules other than renumbering. The department received no public comments concerning adoption of the repeals or the new rules. Selling Price of Departmental Information 31 TAC sec.sec.53.1-53.4 The repeals are adopted under authority of Parks and Wildlife Code, Chapter 12, Subchapter A, sec.12.006; which provides the Parks and Wildlife Commission with authority to sell information and Parks and Wildlife Code, Chapter 11, Subchapter B, sec.11.027 which provides the Parks and Wildlife Commission with authority to set fees for administration of department programs. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515371 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: September 29, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 31 TAC sec.sec.53.31-53.33 The new sections are adopted under authority of Parks and Wildlife Code, Chapter 12, Subchapter A, sec.12.006; which provides the Parks and Wildlife Commission with authority to sell information and Parks and Wildlife Code, Chapter 11, Subchapter B, sec.11.027 which provides the Parks and Wildlife Commission with authority to set fees for administration of department programs. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515370 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: September 29, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 License Fees and Boat and Motor Fees The Texas Parks and Wildlife Commission in a regularly scheduled public hearing, November 2, 1995, adopted the repeal of sec.53.7 and sec.53.8, an amendment to sec.53.10, and new sec. sec.53.1-53.8, concerning License Fees and Boat and Motor Fees. New sec.sec.53.1-53.5, and the amendment to sec.53.10 are adopted with changes to the proposed text as published in the September 29, 1995, issue of the Texas Register (20 TexReg 7942). The repeals, and new sec.sec.53.4, 53.6-53.8 are adopted without changes and will not be republished. Amendment of sec.53.1(a)(2) and (b)(2), concerning License Issuance Procedures, Fees, Possession and Exemption extends the proposed period of validity for hunting and fishing license authorizations, possessed in lieu of a "paper" license, from 14 days to 20 days from the date of purchase. The Commission believed extending the period would facilitate license procurement for persons who may be away from their home for a period in excess of 14 days. The change to sec.53.2, concerning Combination Hunting and Fishing Licenses, Packages, and Conservation Permits, alters the effective date for conservation permits. The Commission did not adopt the proposed increase in the fee for the conservation permit and the fee remains at $25. The change to sec.53.3, concerning Other Recreational Hunting and Fishing Licenses, Stamps, and Tags, increases the fee for the temporary (3-day) fishing license from $8.00 to $10, and increases the price for collector's edition stamp packages. The package was proposed at $7.00; however, public comment indicated that this fee was below market value for the stamps and that adoption of the $7.00 fee would devalue stamps which had already been purchased. The Commission set the price for this stamp package at $10 for wholesale purchase and $20 for retail purchase. The Commission did not adopt the proposed $3.00 increase in the special resident hunting and fishing licenses. The change to sec.53.5, concerning Public Land Hunting Permits and Fees, maintains the application fee for computer-selected participant hunting opportunities at $2.00 instead of the proposed $4.00 fee. The change to sec.53.10 alters the effective dates for vessel and motor fee increases. In response to public comment, the effective date for fee increases was postponed from the proposed date of January 1, 1996, and the increases will instead become effective on March 1, 1996. The repeals and new rules provide consistency and simplification of regulations concerning fees and increased revenue to continue department conservation programs. The repeals and new rules set fees for approximately 100 different fees, licenses and stamps. The new sections provide the means through which persons can acquire and possess licenses and stamps; set new fees for hunting and fishing licenses and conservation permits; commercial fishing licenses and fees; and miscellaneous wildlife licenses and permits. The department received 404 phone calls, letter and petitions concerning the proposed fee increases and all of these respondents were generally opposed to these increases. However, respondents were generally in favor of the proposals to exempt youth from hunting stamp requirements and to provide new combination license packages. In addition, nine individuals provided comments at the public hearing. Of these, six were generally opposed to the proposed increases and three were in favor of the fee increases. One respondent commented that the proposed $7.00 fee for the Collector Edition Stamp Package was too low and that a fee of about $3.00 per stamp was more appropriate. The respondent suggested that lower fees for these stamp packages would devalue packages held by collectors. Collector's Covey commented in favor of increasing the fee for Collector Edition Stamp Packages. There were no groups or organizations speaking in opposition to the proposed repeal, new rules and amendment. A random sample of 3,000 license holders was selected to receive a mail survey designed to examine willingness to pay for a proposed license fee increase. At the $6.00 increase level adopted by the Commission, 76.4% of combination license holders, 76.6% of hunting license holders, and 61.2% of fishing license holders indicated a willingness to continue purchasing licenses. Survey questions were designed to determine 1) willingness to pay for a license increase, and 2) level of avidity to help explain an individual's interest in participation. Fishing and hunting license holders were presented with one random offer from five fee increase values ($2.00 to $10, in increments of $2.00), while combination license holders were presented values from $3.00 to $15, in increments of $3.00. Combination holders were also presented with one offer of five proposed "super" license fees ($40 to $60, in increments of $5.00). Finally, space was provided for them to write comments. Surveys were mailed on July 31st, with a reminder postcard mailed one week later on August 7th. On August 21st, a second mailing was sent to those who had not responded. A total of 1,592 completed surveys were returned, for a response rate of 60. 6% (excluding nondeliverables). This breaks down to 67.3% for combination licenses, 60.1% for fishing licenses, and 54.2% for hunting licenses. All results were adjusted for nonresponse bias. About 90% of all license holders are willing to pay an extra $2.00 for their license, while about 50% of fishing license holders will pay an extra $10. About two thirds of combination license holders would pay $40 for a super license, while one-third would pay $60. Also, results indicate that willingness to pay is based on the level of support for the agency; those who regularly purchase stamps and licenses are willing to pay more than those who do not, regardless of their income or total days spent hunting and fishing. In determining the price structure for the collectors' edition stamp package, the Commission agreed that Mr. Wood was the expert in this area and agreed to adopt the $20 retail/$10 wholesale price structure. 31 TAC sec.53.7, sec.53.8 The repeals are adopted under authority of Parks and Wildlife Code Chapter 46, Subchapter A, sec.46.002 and sec.46.004 and Chapter 11, Subchapter B, sec.11.027, which provides the Parks and Wildlife Commission with authority to set fees for administration of department programs. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515372 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: September 29, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 31 TAC sec.sec.53.1-53.8, 53.10 The amendment and new sections are adopted under authority of several Parks and Wildlife Code Chapters, which provide direct fee setting authority to the Parks and Wildlife Commission. Chapter 11, sec.11.027 and sec.11.0271 provide authority to set fees for administration of department programs and application fees for public hunts. Chapter 31, sec.31.026 provides authority to set fees for license of certain vessels. Chapter 42, sec.sec.42.012-42.017 provide authority to set fees for resident hunting licenses, resident lifetime hunting licenses, all nonresident hunting licenses and duplicate hunting licenses. Chapter 43, Subchapter B, sec.43.012 provides authority to set fees for white- winged dove stamps; Chapter 43, Subchapter D, sec.43.044, provides authority to set fees for hunting lease licenses, wildlife management association area licenses, and hunting cooperative licenses; Chapter 43, Subchapter F, sec.43.0722 and sec.43.0764 provide authority, respectively, to set fees for private bird hunting area licenses and field trial permits; Chapter 43, Subchapter I, sec.43.202 provides authority to set fees for archery hunting stamps; Chapter 43, Subchapter J, sec.43.252 provides authority to set the fee for turkey stamps, Chapter 43, Subchapter K, sec.43.303 provides authority to set the fees for waterfowl stamps; Chapter 43, Subchapter L, sec.43.355 provides authority to set the fees for scientific breeder's permits, Chapter 43, Subchapter M, sec.43.403 provides authority to set the fee for saltwater fishing stamps; Chapter 43, Subchapter N, sec.43.503 provides authority to set the freshwater trout stamp; Chapter 43, Subchapter O, sec.43. 522 provides authority to set the fee for conservation permits; Chapter 43, Subchapter Q, sec.43.582, provides authority for the muzzleloading hunting stamp fee; Chapter 44, sec.44.003 provides authority to set the fee for game breeder's licenses. Chapter 45, sec.45.003 provides authority to set the fee for commercial game bird breeder's licenses. Chapter 46, Subchapter A, sec.sec.46.004-46.006 provide authority to set fees for resident fishing licenses, resident lifetime fishing licenses, all nonresident fishing licenses and duplicate fishing licenses, sec.46.0045 provides authority for tarpon and duplicate tarpon tag fees; Chapter 46, Subchapter B, sec.46.104 provides Commission authority to set the fee for the Lake Texoma fishing license. Chapter 47, Subchapter A, sec.sec.47.002 et seq provide authority to set fees for various commercial fishing licenses, fishing guide licenses, retail fish dealer's licenses, retail fish dealer's truck licenses, wholesale fish dealer's licenses, wholesale fish dealer's truck licenses, bait dealer's licenses; and menhaden fish plant licenses; Chapter 47, Subchapter B, sec.47. 031 provides authority to set fees for license transfers, duplicate licenses, and duplicate license plates for resident and nonresident commercial fishing boat licenses; and all other licenses authorized by Chapter 47. Chapter 49, sec.sec.49.003 et seq provides the authority to set fees for falconry permits. Chapter 50, sec.50.001 provides authority to set the fees for combination hunting and fishing license and stamp packages and sec.50.002 provides authority to set fees for combination hunting and fishing licenses. Chapter 62, Subchapter D, sec.62.064 provides authority to set the fees for hunting on state parks. Chapter 65, sec.65.007 provides authority to set fees for recreational and commercial alligator licenses and permits. Chapter 66, Subchapter A, sec.66.017 provides authority to set the fee for finfish import license transfers; sec.66.018 provides authority to set crab trap tag fees; and sec.66.020 provides authority to set finfish import license fees; Chapter 66, Subchapter C, sec.66.206 provides authority to set fees for saltwater trotline tags. Chapter 71, sec.71.009 provides authority to set fees related to furbearing animal licenses and permits. Chapter 76, Subchapter C, sec.76.104 provides authority to set license fees for commercial and sport oyster licenses and permits and sec.76.1031 provides authority to set transfer fees for commercial oyster licenses and duplicate license plates. Chapter 77, Subchapter C, sec.77.031-77.0351 provide authority for setting fees for commercial shrimping activities, including sec.77.031 (commercial bay-shrimp boat licenses), sec.77.033 (commercial bait-shrimp boat licenses), sec.77.035 (commercial gulf-shrimp boat licenses), sec.77.0361 (duplicate license plates), sec.77.037 (shrimp boat license transfers), sec.77.043 (bait shrimp dealer's licenses), sec.77.048 (individual bait-shrimp trawl licenses). Chapter 78, sec.sec.78.002-78.003 provide authority to set fees for resident and nonresident commercial mussel and clam fisherman's license and resident and nonresident shell buyers licenses. Chapter 81, Subchapter E, sec.81.403 provides authority to set permit fees for hunting on wildlife management areas. sec.53.1. License Issuance Procedures, Fees, Possession and Exemption Rules. (a) Hunting license possession. (1) No person may hunt deer or turkey in this state without having a valid hunting license in immediate possession. (2) No person may hunt species other than deer or turkey in this state without having a valid hunting license in immediate possession unless the person has acquired a license by telephone and has a valid authorization number in his possession. Authorization numbers shall only be valid for 20 days from date of purchase. (b) Fishing license possession. (1) No person may fish in this state without having a valid fishing license in immediate possession unless that person is exempt from holding a fishing license or has acquired a license by telephone and has a valid authorization number in possession. Authorization numbers shall only be valid for 20 days from date of purchase. (2) No person may catch and retain a red drum twenty-eight inches or more in length in this state without having a valid fishing license and red drum tag in immediate possession. (c) Issuance of licenses and stamps by telephone. (1) A person may acquire recreational hunting and/or fishing licenses by telephone from the department or its designated representatives by agreeing to pay a $3.00 convenience fee per license in addition to the normal license fee. (2) A person may acquire recreational hunting and/or fishing stamps by telephone from the department or its designated representatives by agreeing to pay a $3.00 convenience fee per stamp order in addition to the normal stamp fee(s). This fee shall not be charged if a license is acquired during the same transaction. (d) The following categories of persons are exempt from fishing license requirements and fees for the license years beginning September 1, 1995 and thereafter: (1) residents under 17 years of age; (2) non-residents under 17 years of age; (3) non-residents 65 years of age or older from Kansas and Louisiana; (4) non-residents 64 years of age or older from Oklahoma; and (5) residents whose birth date is before September 1, 1930. (e) Effective September 1, 1996 and thereafter, an administrative fee of $1.00 shall be charged for replacement of lost or destroyed licenses, stamps, or permits. This fee shall not be charged for items which have a fee for duplicates otherwise prescribed by rule or statute. sec.53.2. Combination Hunting and Fishing Licenses, Packages, and Conservation Permits. (a) Combination hunting and fishing licenses. The following license fee amounts are effective for the license year beginning September 1, 1995: (1) resident combination hunting and fishing (type 100) -$25; (2) duplicate resident combination hunting and fishing (type 130)-$6. 00; (3) lifetime resident combination hunting and fishing (type 990)-$800; (b) Combination hunting and fishing licenses. The following license fee amounts are effective for the license year beginning September 1, 1996, and thereafter: (1) resident combination hunting and fishing (type 100) -$32; (2) duplicate combination hunting and fishing (type 130) -$6.00; (3) lifetime resident combination hunting and fishing (type 990)-$1, 000; (c) Combination license packages. The following license fee amounts are effective for the license year beginning September 1, 1996, and thereafter: (1) resident super combination hunting and fishing (package includes combination hunting and fishing license plus the privileges associated with the following stamps: turkey, white-winged dove, archery hunting, state waterfowl, muzzleloader hunting, saltwater sportfishing, and freshwater trout) -$49; and (2) all purpose resident combination hunting and fishing (package includes combination hunting and fishing license; the privileges associated with the following stamps: turkey, white-winged dove, archery hunting, state waterfowl, muzzleloader hunting, saltwater sportfishing, freshwater trout, conservation permit, and annual state park entrance permit)-$100. (d) Conservation permits (type 192). The fee amount effective for the permit year beginning September 1, 1995, and thereafter is $25. sec.53.3. Other Recreational Hunting and Fishing Licenses, Stamps, and Tags. (a) Hunting licenses. The following license fee amounts are effective for the license year beginning September 1, 1995: (1) resident hunting (type 101)-$13; (2) lifetime resident hunting (type 991)-$500; (3) special resident hunting (type 102)-$6.00. Nonresident hunters who are under 17 years of age on the date of license purchase are designated as residents and may purchase a special resident hunting license; (4) duplicate hunting (type 103)-$6.00; (5) general nonresident hunting (type 105)-$250; (6) nonresident special hunting (type 107)-$100; (7) nonresident five-day special hunting (type 157) -$35; (8) nonresident spring turkey hunting (type 118)-$100; and (9) nonresident banded bird hunting (type 120)-$10; (b) Hunting licenses. The following license fee amounts are effective for the license year beginning September 1, 1996, and thereafter: (1) resident hunting (type 101)-$19; (2) lifetime resident hunting (type 991)-$600; (3) special resident hunting (type 102)-$6.00. Nonresident hunters who are under 17 years of age on the date of license purchase are designated as residents and may purchase a special resident hunting license; (4) duplicate hunting (type 103)-$6.00; (5) general nonresident hunting (type 105)-$250; (6) nonresident special hunting (type 107)-$100; (7) nonresident five-day special hunting (type 157) -$35; (8) nonresident spring turkey hunting (type 118)-$100; and (9) nonresident banded bird hunting (type 120)-$10. (c) Hunting stamps. The following stamp fee amounts are effective for the stamp year beginning September 1, 1995; and thereafter: (1) turkey (type 119)-$5.00; (2) white-winged dove (type 126)-$7.00; (3) archery hunting (type 135)-$7.00; (4) waterfowl (type 139)-$7.00; and (5) muzzleloader hunting (type 187)-$10. (d) Fishing licenses. The following license fee amounts are effective for the license year beginning September 1, 1995: (1) resident fishing (type 201)-$13; (2) lifetime resident fishing (type 992)-$400; (3) special resident fishing (type 203)-$6.00; (4) temporary (14-day) resident sportfishing (type 210) -$10; (5) nonresident fishing (type 205)-$30; (6) temporary (5-day) nonresident fishing (type 207) -$20; (7) fishing duplicate (type 206)-$6.00; and (8) Lake Texoma fishing (type 208)-$7.50. (e) Fishing licenses. The following license fee amounts are effective for the license year beginning September 1, 1996, and thereafter: (1) resident fishing (type 201)-$19; (2) lifetime resident fishing (type 992)-$600; (3) special resident fishing (type 203)-$6.00; (4) temporary (14-day) resident sportfishing (type 210) -$12; (5) temporary (3-day) resident sportfishing-$10; (6) nonresident fishing (type 205)-$30; (7) temporary (5-day) nonresident fishing (type 207) -$20; (8) fishing duplicate (type 206)-$6.00; and (9) Lake Texoma fishing (type 208)-$7.50. (f) Fishing stamps. The following stamp fee amounts are effective for the license year beginning September 1, 1995, and thereafter: (1) saltwater sportfishing (type 211)-$7.00; and (2) freshwater trout (type 212)-$7.00. (g) Fishing tags. The following tag fee amounts are effective for the license year beginning September 1, 1995, and thereafter: (1) tarpon tag (type 215)-$100; (2) duplicate tarpon tag (type 230)-$25; and (3) individual bait-shrimp trawl tag (type 334)-$23. (h) Collector's edition stamp package. (1) A collectors edition stamp package shall consist of one of each of the following stamps: (A) turkey stamp; (B) white-winged dove stamp; (C) nongame stamp; (D) archery hunting stamp; (E) state waterfowl stamp; (F) muzzleloader hunting stamp; (G) saltwater sportfishing stamp; and (H) freshwater trout stamp. (2) stamps in the package will not be valid for hunting or fishing. (3) fee for the package shall be $10 wholesale price and $20 retail price, effective September 1, 1996 and thereafter. sec.53.5. Public Land Hunting Permits and Fees. (a) Hunting permits. The following permit fee amounts are effective for the permit year beginning September 1, 1995 (fees also prescribed in sec.65.194 of this title (relating to Permit Required and Fees)): (1) annual public hunting (type 173)-$35; (2) duplicate annual public hunting (type 174)-$10; (3) limited public use (type 175)-$10; and (4) duplicate limited public use (type 176)-$5.00. (b) Hunting permits. The following permit fee amounts are effective for the permit year beginning September 1, 1996, and thereafter (fees also prescribed in sec.65.194 of this title (relating to Permit Required and Fees)): (1) annual public hunting (type 173)-$40; (2) duplicate annual public hunting (type 174)-$10; (3) limited public use (type 175)-$10; and (4) duplicate limited public use (type 176)-$5.00. (c) Special and regular permits. The following permit fee amounts are effective for the permit year beginning September 1, 1995, and thereafter (fees also prescribed in sec.65.194 of this title (relating to Permit Required and Fees)): (1) deer-$50; (2) deer-extended period-$100; (3) exotic mammal-no charge; (4) designated exotic mammal-no charge; (5) desert bighorn sheep-no charge; (6) pronghorn antelope-$50; (7) alligator-$50; (8) javelina-$25; (9) turkey-$25; (10) coyote-$25; (11) white-winged dove-$12; (12) squirrel-$6.00; (13) quail-$6.00; (14) mourning dove-$6.00; (15) woodcock-$6.00; (16) waterfowl-$6.00; (17) rails-$6.00; (18) gallinules-$6.00; and (19) snipe-$6.00. (d) Application fee (fees also prescribed in sec.65.194 of this title (relating to Permit Required and Fees)). The non-refundable application fee for individuals applying for computer-selected participant hunting opportunities is $2.00 per applicant (except no charge for applicants under 17 years of age) effective September 1, 1995, and thereafter. sec.53.10. Vessel and Motor Fees Set by Commission. (a) The following vessel and motor fee amounts are effective from September 1, 1993 through February 29, 1996: (1) expedited "quick" title to a vessel-$15; (2) expedited "quick" title to a motor-$15; (3) livery vessel-$9.00; (4) vessel-Class A-$18; (5) vessel-Class 1-$27; (6) vessel-Class 2-$36; (7) vessel-Class 3-$45; (8) vessel-transfer of ownership-$3.00; (9) vessel-duplicate certificate of number-$3.00; (10) vessel-duplicate decals-$3.00; (11) vessel-state assigned HIN-$3.00; (12) marine dealer/manufacturer number-$65; and (13) certificate of title-$10. (b) The following vessel and motor fee amounts are effective March 1, 1996, and thereafter: (1) expedited "quick" title to a vessel-$25; (2) expedited "quick" title to a motor-$25; (3) livery vessel-$15; (4) vessel-Class A-$25; (5) vessel-Class 1-$40; (6) vessel-Class 2-$55; (7) vessel-Class 3-$70; (8) vessel-transfer of ownership-$5.00; (9) vessel-duplicate certificate of number-$5.00; (10) vessel-duplicate decals-$5.00; (11) vessel-state assigned HIN-$5.00; (12) marine dealer/manufacturer number-$130; and (13) certificate of title-$15. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515373 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: September 29, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 Stamps 31 TAC sec.sec.53.14-53.16 The Texas Parks and Wildlife Commission in a regularly scheduled public hearing, November 2, 1995, adopted new sec.53.14 and sec.53.16, and an amendment to sec.53.15, concerning stamps issued by the department. Section 53.14 and sec.53.15 were adopted with changes to the proposed text as published in the September 29, 1995, issue of the Texas Register (20 TexReg 7948). Section 53.16 was adopted without changes and will not be republished. The change to sec.53.14 includes an extension authorization period for "paperless" stamps from 14 days to 20 days. The Commission extended this period to facilitate persons who might be away from their place of residence for periods in excess of two weeks. The change to sec.53.15 sets an effective date of September 1, 1996, for exemptions for acquisition and possession of stamps by those under 17 years of age purchasing special resident hunting licenses, holders of lifetime resident hunting licenses, lifetime resident combination hunting and fishing licenses, and holders of lifetime resident fishing licenses. The amendment and new rules implement provisions of House Bill 2216, as enacted by the 74th Texas Legislature. Passage of House Bill 2216 provides a mechanism through which individuals are able to purchase a "paperless" stamp. The new rules and amendment provide the means through which individuals may purchase a stamp by telephone and receive an authorization number in place of an actual paper stamp; eliminate the user signature requirements for stamps issued in an automated manner; establish hunting and fishing stamp exemptions for lifetime license purchasers and special resident hunting license purchasers under 17 years of age; and provides mechanisms for the sale of obsolete stamps and decals. The department received no public comment concerning adoption of the proposed new rules and amendment. The amendment and new rules are adopted under the authority of the Parks and Wildlife Code Chapter 11 and Chapter 43, which provide the Texas Parks and Wildlife Commission with the authority to set fees, stamp exemptions, and stamp possession requirements. sec.53.14. Stamp Purchaser Identification and Possession Requirements. (a) A person may hunt without a required state hunting stamp in immediate possession if the person has acquired a stamp by telephone and has a valid authorization number in possession. Authorization numbers shall only be valid for 20 days from purchase date. (b) A person may fish without a required fishing stamp in immediate possession if the person has acquired a stamp by telephone and has a valid authorization number in possession. Authorization numbers shall only be valid for 20 days from purchase date. (c) A state hunting or fishing stamp issued in an automated manner to a person using the stamp is valid for hunting or fishing purposes without the user's signature on its face. sec.53.15. Stamp Exemptions. (a) The commission grants the director authority to exempt persons participating in any event organized for the primary purpose of promoting participation in fishing or hunting activities from the requirement to purchase or possess the following stamps: (1)-(3) (No change.) (4) state waterfowl stamp; (5)-(7) (No change.) (b) (No change.) (c) Special resident hunting license holders who are under 17 years of age on the date of license purchase and all lifetime resident hunting license holders are exempt from requirements for acquisition and possession of the following stamps effective with the license year beginning September 1, 1996, and thereafter: (1) white-winged dove stamp; (2) turkey stamp; (3) archery hunting stamp; (4) state waterfowl stamp; and (5) muzzleloader hunting stamp. (d) All lifetime resident combination hunting and fishing license holders are exempt from requirements for acquisition and possession of the following stamps effective with the license year beginning September 1, 1996, and thereafter: (1) white-winged dove stamp; (2) turkey stamp; (3) archery hunting stamp; (4) state waterfowl stamp; (5) saltwater sportfishing stamp; (6) freshwater trout stamp; and (7) muzzleloader hunting stamp. (e) All lifetime resident fishing license holders are exempt from requirements for acquisition and possession of the following stamps effective with the license year beginning September 1, 1996, and thereafter: (1) saltwater sportfishing stamp; and (2) freshwater trout stamp. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515369 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: September 29, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 Chapter 55. Law Enforcement The Texas Parks and Wildlife Commission in a regularly scheduled public hearing, November 2, 1995, adopted the repeal of sec. sec.55.143-55.153, an amendment to sec.55.142, and new sec. sec.55.143-55.153, concerning permits for aerial management of wildlife and exotic animals. New sec.55.151 was adopted with changes to the proposed text as published in the August 1, 1995 issue of the Texas Register (20 TexReg 5699). The repeals, amendment to sec.55. 142, and new sec.sec.55.143-59.150 and 55.153 were adopted without changes and will not be republished. The change to sec.55.151 alters the effective period for landowner authorizations required for permits. The proposed one-year effective period of these permits was changed, making landowner authorizations valid for the life of the permit unless the permit expires without renewal, is suspended or revoked, or, if the landowner's authorization specifies a certain time period, then the landowner's authorization will be valid only for that time period specified. The repeals and new sections implement Senate Bill 329, enacted by the 74th session of the Texas Legislature. Beginning September 1, 1995, the Texas Parks and Wildlife Department may issue a permit to an individual, partnership or corporation for the management of wildlife and exotic animals by the use of aircraft in Texas. The new rules clearly define both wildlife and exotic animals for the purposes of aerial management. The new sections clarify the need for an aerial permit and will give landowners an additional tool whereby they can control surplus exotic animals by the use of aircraft while being in compliance with federal law. The new sections also allow multiple activities to be conducted under the provisions of a single permit. Thirteen of 53 aerial management permit holders surveyed responded by telephone to the department's request for public comment. Of the 13 who responded, 77% approved of the proposed changes and 23% disapproved. Responses in opposition to the proposals consisted of three permit holders opposed to the proposed fee. Public comment was also received from five individuals who attended a public hearing in Austin. One person opposed the fee, commenting that the fee should be differentiated between private permit holders and commercial permit holders and stated that the forms and the reports are too complicated. One person suggested that protection for cougars be added to the new rules, that the taking of dangerous, non-indigenous wild animals be prohibited and asked the Commission to define "sport hunting." Two persons opposed the taking of any animal from an aircraft. The final person was in support of the new rules as proposed. Action for Animals was opposed to the new rules and The Texas Wildlife Association was in favor of the new rules. The department responds to the preceeding comments as follows. The fee structure is based on the activity that can be performed under the new permit and the cost to administer the program. The new permit allows for all activities to be performed simultaneously under one permit for a fee of $200. Previously, a depredation permit cost $100 and a management permit cost $100, for a total cost of $200. In addition, the 74th Texas Legislature passed Senate Bill 329, which allowed the Commission to set a single fee and not a separate fee for private or commercial operators. The new rules reduce the amount of paperwork for the user and will streamline the operations of the aerial permit program. The cougar cannot be legally hunted from an aircraft because it is not listed in the new rules as an animal that can be hunted. Therefore, there is no need to give the cougar protection. The term "sport hunt" does not need to be defined because the term "hunt" is already defined in the Parks and Wildlife Code. The term "sport" simply means to amuse oneself or to engage in recreation. The animals listed in the new rules, which include non-indigenous wild animals, are defined by statute and the ability to take those animals is allowed by statute. Therefore, the Commission is only implementing the authority given to them by the 74th Texas Legislature. Furthermore, federal statutes allow for state agencies to issue permits for the management of wildlife by the use of aircraft. No changes were made as result of the comments. Subchapter E. Depredating Animal Control and Wildlife Management from Aircraft 31 TAC sec.sec.55.143-55.153 The repeals are adopted under authority of Parks and Wildlife Code, Chapter 43, Subchapter G, which authorizes the Commission to establish regulations governing the management of wildlife and exotic animals by use of aircraft. This agency hereby certifies that the sections as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515374 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: August 1, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 Subchapter E. Permits for Aerial Management of Wildlife and Exotic Species 31 TAC sec.sec.55.142-55.153 The new rules are adopted under authority of Parks and Wildlife Code, Chapter 43, Subchapter G, which authorizes the Commission to establish regulations governing the management of wildlife and exotic animals by use of aircraft. sec.55.151. Landowner Authorization. (a) Prior to managing wildlife or exotic animals, a permit holder must place on file a landowner's authorization form for each individual ownership on which wildlife or exotic animals are to be managed. The landowner's authorization form shall include: (1) the name, address, and phone number of the landowner; (2) the name, address, and phone number of the authorized landowner's agent, if applicable; (3) the name and permit number of the permittee; (4) the farm or ranch name and specific location of the property; (5) the specific kind and number of wildlife or exotic animals to be managed by use of aircraft and the reason why these animals should be managed; and (6) a trap and transplant permit number issued by the Department's Wildlife Division must be shown, if game animals or game birds are captured by the use of aircraft. (b) A landowner's authorization for the management of wildlife or exotic animals shall be valid for the life of the permit unless the permit expires without renewal, is suspended or revoked; or, if the landowner's authorization specifies a certain time period, then the landowner's authorization will be valid for that specified time. (c) A landowner's authorization for hunting shall be approved only for depredating animals and exotic animals. (d) A landowner's authorization will not be approved for non-indigenous wild animals except as authorized by the department when a specific wild animal(s) has escaped from captivity. (e) a single landowner's authorization form may be submitted by a group of landowners or by an association on behalf of such landowners. The landowner's authorization form shall have attached a list of participating landowner names, ranch names, addresses, and acreage for each participating landowner. The landowner's authorization may be signed by one authorized agent who represents the group of landowners or an association. This agency hereby certifies that the rules as adopted have been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on November 27, 1995. TRD-9515375 Bill Harvey, Ph.D. Regulatory Coordinator Texas Parks and Wildlife Department Effective date: December 20, 1995 Proposal publication date: August 1, 1995 For further information, please call: (512) 389-4642 or 1-800-792-1112, Ext. 4642 TITLE 34. PUBLIC FINANCE Part IX. Texas Bond Review Board Chapter 190. Allocation of the State's Limit on Certain Private Activity Bonds Subchapter A. Program Rules 34 TAC sec.sec.190.1-190.3, 190.6, 190.8 The Texas Bond Review Board adopts amendments to sec. sec.190.1-190.3, 190.6, and 190.8, concerning the private activity bond allocation program rules, without changes to the proposed text as published in the October 10, 1995, issue of the Texas Register (20 TexReg 8316). The rules are being amended primarily to comply with statutory changes to Texas Civil Statues, Article 5190.9a, as amended. Generally, the amendments will allow more applications to receive a reservation. The rules describe the implementation and administration of the allocation of the state's ceiling on private activity bonds. No comments were received regarding adoption of the amendments. The amendments are adopted under Texas Civil Statutes, Article 5190.9a, as amended, which give the Texas Bond Review Board the authority to adopt rules governing the implementation and administration of the allocation of the state's ceiling on private activity bonds. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 29, 1995. TRD-9515473 Albert L. Bacarisse Executive Director Texas Bond Review Board Effective date: December 21, 1995 Proposal publication date: October 10, 1995 For further information, please call: (512) 463-1741 TITLE 37. PUBLIC SAFETY AND CORRECTIONS Part I. Texas Department of Public Safety Chapter 15. Drivers License Rules Application Requirements-Original, Renewal, Duplicate, and Identification Certificates 37 TAC sec.15.34, sec.15.39 The Texas Department of Public Safety adopts amendments to sec.15.34 and sec.15.39, concerning Application Requirements-Original, Renewal, Duplicate, and Identification Certificates, without changes to the proposed text as published in the September 26, 1995, issue of the Texas Register (20 TexReg 7810). The justification for this section is to ensure that minor persons who are issued or renew a driver's license are, in fact, enrolled in school. Amendments to sec.15.34(b)(1) and sec.15.39(c) adds new language which requires that the Texas Education Agency Verification of Enrollment and Attendance Form is valid for 30 days from the date of signature during the regular semester and for 90 days from the date of signature during the summer break. Amendment to sec.15.34 adds paragraph (4) which states applicants for renewal of a license will be required to complete a DL-43, Texas Driver License Renewal Application. Amendment to sec.15.39 adds new subsection (d) which states home schoolers may submit a letter from the instructor as a substitute for the Verification of Enrollment and Attendance Form. No comments were received regarding adoption of the amendments. The amendments are adopted under Texas Civil Statutes, Article 6687b, sec.1A, which provide the Texas Department of Public Safety with the authority to adopt rules necessary to effectively administer this Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1995. TRD-9515627 James R. Wilson Director Texas Department of Public Safety Effective date: December 25, 1995 Proposal publication date: September 26, 1995 For further information, please call: (512) 465-2890 Examination Requirements 37 TAC sec.15.59 The Texas Department of Public Safety adopts an amendment to sec.15.59 concerning Examination Requirements, without changes to the proposed text as published in the September 26, 1995, issue of the Texas Register (20 TexReg 7810). The justification for this section is to inform the public of the procedures to follow when renewing a driver's license. The amendment adds paragraph (1) and (2) to subsection (c) explaining the renewal by mail process for persons who receive an invitation to renew by mail. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6687b, sec.1A, which provide the Texas Department of Public Safety with the authority to adopt rules that it determines are necessary to effectively administer this Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1995. TRD-9515625 James R. Wilson Director Texas Department of Public Safety Effective date: December 25, 1995 Proposal publication date: September 26, 1995 For further information, please call: (512) 465-2890 Reciprocity in Driver Licensing 37 TAC sec.sec.15.91-15.93 The Texas Department of Public Safety adopts amendments to sec.sec.15.91-15. 93, concerning Reciprocity In Driver Licensing, without changes to the proposed text as published in the September 26, 1995, issue of the Texas Register (20 TexReg 7811). The justification for this section is to make the public knowledgeable of the driver's license reciprocity agreements that are granted certain persons under certain conditions. Amendment to sec.15.91 subsection (c)(3) renames Federal Republic of Germany to Germany due to the German Democratic Republic (East) and the Federal Republic of Germany (West) having been reunited in 1990. Language is added to subsection (e) defining foreign diplomats as Ambassadors, Ministers, Minister Counselors, Counselors, First Secretaries, Second Secretaries, Third Secretaries, Consuls- General, Deputy Consuls-General, Consuls, and Vice Consuls. Amendment to sec.15.92(1)(A) adds Class M drivers as having reciprocity for nonresidents who are at least 16 years of age. Amendment to sec.15.93 deletes subsection (a)(4) because form DL-1 is no longer being produced and renumbers paragraphs (5)-(10) as (4)-(9). No comments were received regarding adoption of the amendments. The amendments are adopted under Texas Civil Statutes, Article 6687b, sec.1A, which provide the Texas Department of Public Safety with the authority to adopt rules that it determines are necessry to effectively administer this Act. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1995. TRD-9515624 James R. Wilson Director Texas Department of Public Safety Effective date: December 25, 1995 Proposal publication date: September 26, 1995 For further information, please call: (512) 465-2890 Chapter 16. Commercial Driver's License Licensing Requirements, Qualifications, Restrictions, and Endorsements 37 TAC sec.16.3 The Texas Department of Public Safety adopts an amendment to sec.16.3 concerning Licensing Requirements, Qualifications, Restrictions, and Endorsements, without changes to the proposed text as published in the September 26, 1995, issue of the Texas Register (20 TexReg 7812). The justification for this section is an additional exempt group of drivers under the commercial driver's license law. The amendment adds fire fighters employed by private companies to the exempt group of drivers under the commercial driver's license law. No comments were received regarding adoption of the amendment. The amendment is adopted under Texas Civil Statutes, Article 6687b-2,sec.29 and Article 6687b, sec.1, which provide the Texas Department of Public Safety with the authority to adopt rules and regulations necessary to carry out the provisions of the Texas Driver's License Act, Texas Commercial Driver's License Act, and the Federal Commercial Motor Vehicle Safety Act of 1986. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1995. TRD-9515626 James R. Wilson Director Texas Department of Public Safety Effective date: December 25, 1995 Proposal publication date: September 26, 1995 For further information, please call: (512) 465-2890 Chapter 23. Vehicle Inspection Parameter Vehicle Emission Inspection and Maintenance Program 37 TAC sec.23.91, sec.23.92 The Texas Department of Public Safety adopts new sec.23.91 and sec.23.92 concerning vehicle inspection, without changes to the proposed text as published in the September 26, 1995, issue of the Texas Register (20 TexReg 7812). The justification for this section will be improved air quality by the reduction of emissions of hydrocarbons and other pollutants from mobile sources as well as a reduction in long-term repair costs caused by misfueling. The new sections will implement the provisions of Senate Bill 178, 74th Legislature, 1995, which requires the Texas Department of Public Safety to establish a parameter motor vehicle emission inspection and maintenance program and vehicle idle emissions inspection and maintenance program. Section 23.91 establishes a parameter motor vehicle emission inspection and maintenance program for vehicles registered in Collin, Dallas, Denton, Harris, El Paso, and Tarrant Counties, because such counties do not meet national ambient air quality standards for ozone. The program will be designated to facilitate these counties compliance with the Federal Clean Air Act. Section 23.91 would require inspection of 1968 through 1979 model vehicles for thermostatic air intake system, exhaust gas recirculation system (EGR valve), PCV valves and hoses, air injection system, and evaporative emission system (canister). Beginning with the 1980 year model, vehicles would be inspected for the presence of catalysts and choke systems. In addition, 1984 and later year model passenger cars and light-duty trucks would be inspected for misfire, oxygen sensor and valves, emission-related recall, and emission-related maintenance. Section 23.92 establishes an Idle Emissions Inspection and Maintenance Program for vehicles registered in Dallas, Tarrant, and El Paso Counties in order to reduce carbon monoxide emissions from automobiles, because these counties do not meet national ambient air quality standards. The program will be designed to facilitate the compliance of these counties with the Federal Clean Air Act. This rule will require inspection of 1975 and newer model year passenger cars and light-duty trucks for excessive carbon monoxide emissions in addition to those items of inspection required in sec.23.91. The idle emissions inspection will be accomplished by use of a four-gas analyzer. An additional vehicle inspection fee is proposed and will be retained by the vehicle inspection station. No comments were received regarding adoption of the new sections. The new sections are proposed under the Health and Safety Code, Chapter 382, sec.sec.382.037, 382.038, and 382.0371, and Texas Civil Statutes, Article 6675a- 2, and Article 6701d, sec.sec.140-142, which provide the Public Safety Commission with the authority to establish a motor vehicle emissions inspection and maintenance program for vehicles in counties that do not meet National Ambient Air Quality Standards. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on November 13, 1995. TRD-9515623 James R. Wilson Director Texas Department of Public Safety Effective date: December 25, 1995 Proposal publication date: September 26, 1995 For further information, please call: (512) 465-2890 TITLE 43. TRANSPORTATION Part I. Texas Department of Transportation Chapter 1. Management Conditional Grant Program 43 TAC sec.sec.1.400-1.410 The Texas Department of Transportation adopts the repeal of sec.sec.1.400-1. 410, concerning the department's conditional grant program as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8186). Education Code, Chapter 56, Subchapter I, requires the department to establish a conditional grant program to provide financial assistance for eligible minority and female students who intend to work for the department in civil engineering or any other profession identified by the department as having a significant statistical underrepresentation of minorities or women in the department's workforce. The repealed sections are adopted to provide ease of access to all rules relating to employment practices. Repeal of these sections is necessary because the subject matter of these sections falls within Chapter 4, Employment Practices. The subject matter has been re-enacted in an amended form as amendments to sec.4.20 and sec.4.21 and new sec.4.25, concerning the department's conditional grant program, which are being contemporaneously adopted. On November 1, 1995, the department conducted a public hearing on the repeal. No written or oral comments were received concerning the proposed repeals. The repeals are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation and Education Code, Chapter 56, Subchapter I which requires the department to establish a conditional grant program. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515586 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: December 22, 1995 Proposal publication date: October 6, 1995 For further information, please call: (512) 463-8630 Chapter 4. Employment Practices Subchapter C. Employment and Education Program 43 TAC sec.sec.4.20, 4.21, 4.25 The Texas Department of Transportation adopts amendments to sec.4.20 and sec.4.21 and new sec.4.25, concerning the department's conditional grant program, without changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8186). Education Code, Chapter 56, Subchapter I requires the department to establish a conditional grant program to provide financial assistance for eligible minority students who intended to work for the department in civil engineering. Senate Bill 1154, 74th Legislature, 1995, amended Education Code, Chapter 56, Subchapter I, extending the program to female students and to other professions identified by the department as having a significant statistical underrepresentation of minorities or women in the department's workforce. Adoption of the amendments and new section are necessary to implement Senate Bill 1154, 74th Legislature, 1995, and to replace, in an amended form, the provisions of sec.sec.1.400-1.410, concerning the department's conditional grant program. Sections 1.400-1.410 are being contemporaneously repealed because the subject matter of these sections fall within Chapter 4, Employment Practices. Section 4.20 and sec.4.21, and new sec.4.25 establish the conditional grant program as expanded by Senate Bill 1154, 74th Legislature, 1995. On November 1, 1995, the department conducted a public hearing on the amendments and new section. No written or oral comments were received concerning the proposed amendments and new section. The amendments and new section are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and Education Code, Chapter 56, Subchapter I, which require the department to establish a conditional grant program. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515587 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: December 22, 1995 Proposal publication date: October 6, 1995 For further information, please call: (512) 463-8630 Chapter 11. Design Statewide Transportation Enhancement Program 43 TAC sec.sec.11.201-11.205 The Texas Department of Transportation adopts amendments to sec.sec.11.201-11. 205, concerning the department's statewide transportation enhancement program, without changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8189). Title 23, United States Code, sec.133(d)(2), sec.160(e)(2), and sec.1015(d)(2) of the Intermodal Surface Transportation Efficiency Act of 1991 (Public Law 102- 240), require that 10% of certain funds apportioned to Texas pursuant to Title 23, United States Code, sec.104(b)(3) and administered by the department be used for transportation enhancement activities as defined in Title 23, United States Code, sec.101(a). The amendments are necessary to clarify, simplify, and streamline the nomination and selection process; further emphasize the tie of statewide transportation enhancement projects to the multimodal transportation system consistent with the intent of the Intermodal Surface Transportation Efficiency Act of 1991; and prevent the loss of federal funds. On October 18, 1995, a public hearing was held to receive comments, views, or testimony concerning the proposed amendments to sec.sec.11.201-11.205 relating to the Statewide Transportation Enhancement Program. The City of Bullard and the East Texas Landowners for Private Ownership (ETLFPO) indicated that they were partly in favor of the amendments and partly against the amendments. The Texas Parks and Wildlife Department (P&W) indicated it was in favor of the amendments. ETLFPO presented oral and written comments at the public hearing and the City of Bullard joined in these comments. P&W presented oral comments. The General Land Office, the Texas Department of Commerce (TDOC), the North Central Texas Council of Governments (North Central COG), and one individual submitted written comments. Comment: ETLFPO requested that sec.11.202(a)(3), Project Eligibility, be modified to require that evidence of support from adjacent land owners and others in the project area be submitted as well as documentation from the jurisdictional government body. Response: It is the department's opinion that the present requirement that submission of a resolution from at least one governing body as well as other evidence of support from the community is sufficient. Of the approximate 500 candidate projects submitted to the Statewide Transportation Enhancement Program for consideration during the two previous calls for nominations, only two have evidenced significant public opposition. The rules provide sufficient opportunity for individuals to inform local elected officials of their opposition to a project. Section 11.204(a)(3), Selection of Projects for Funding, provides that a project can be removed from the program upon receipt of appropriate opposition documentation from any county or municipality in which a candidate project is proposed. Comment: ETLFPO commented on sec.11.203(c)(1)(I), Project Nomination, relating to the public support required for a candidate project. ETLFPO commented that the proposed amendments allow a single resolution for a project from only one jurisdictional governing body instead of a resolution or other official documentation from each jurisdictional governing body in which a candidate project will be nominated. ETLFPO stated that local elected officials can speak only for those individuals in their own jurisdictional areas and that a governing body cannot be concerned with the rights of individuals outside their geographic areas of concern. ETLFPO stated that the section should not be crafted to cater to a particular type of project at the potential sacrifice of individual property and privacy rights. Response: This concern is addressed in sec.11.204(a)(3) which states that a candidate project can be eliminated from participation in the program if, prior to the execution of the local agreement to implement the project, any municipality or county in which project activities are proposed provides appropriate notification of its opposition to the project. The department is aware of the fact that public opposition to a project can develop at any time when a candidate project is being nominated or after the project has been selected for implementation. Opposition can center on a wide range of concerns including perceived sacrifice of individual property or privacy rights. Local officials have the option of submitting a resolution or other official document in opposition to a project and petition the department to remove the project from the program. Comment: P&W commented regarding sec.11.203(c)(1)(I), and stated that it is sometimes difficult to obtain resolutions from every city and county along a linear corridor where a project of some length such as a hike-and-bike trail might be constructed. Consequently, P&W supported the opportunity to veto a proposed candidate project by resolution from a jurisdictional governing body, but suggested that this veto be considered for removing only that segment of a larger project from the program. Response: The amendments state in sec.11.304(a)(3) that the project will be removed from the program, not just that portion rejected by one governmental entity. In most cases, projects are located within an area under control of a single governmental entity, and the withdrawal of approval of the project by the governmental agency will serve to eliminate the project as a whole. In other cases, the removal of a portion of a longer project such as a hike-and-bike trail will serve to sever the project and will not allow for development as conceived by the project sponsor and nominator and as approved by the Texas Transportation Commission. Consequently, the removal of a portion of a project would detract sufficiently from the project to warrant its total removal. Comment: TDOC commented that the acquisition of a document in support of a project from each governmental entity affected by a linear-corridor project places an undue burden on the project sponsor. Response: Section 11.204(a)(3) requires a project sponsor to secure a resolution or other official documentation from only one governmental entity having jurisdiction in the project area. As most projects are found within the jurisdiction of a single governmental entity, a single document will cover the extent of the project. Comment: ETLFPO commented that sec.11.203 did not contain a clear definition of a project area and suggested definitions for project activities and project areas. Response: Definitive boundaries caused and occasioned by users of a given project are difficult to define. The department acknowledges that effects of projects often extend well outside the narrow physical boundaries and right-of- way required for construction and implementation of highway, walkway, and other transportation facilities designed for public use. Nonetheless, the department makes an effort to identify effects occasioned through implementation of proposed projects. These effects are often cited in environmental assessments and other planning documents prepared by the department in accordance with federal and state directives and circulated to governmental review agencies and jurisdictional governmental bodies. The department, however, cannot predict changes in land use or for other outside occurrences that may occur as a result of construction and use of a particular transportation facility. Comment: ETLFPO requested specific language that requires consideration of the views of adjacent property owners and others in the project area. Response: The department believes that the view of property owners and others in a given project area can be voiced to local governmental officials through usual means. The nomination for a proposed candidate project is required by sec.11.203(c)(1)(I) to include appropriate documentary evidence of community involvement of the proposed enhancement and public support for it. At a minimum, evidence submitted must include a description of any opportunities for public participation that were included in the process of selecting candidate projects. The evidence of support must contain the resolution or other document from one of the governing bodies in the project area. Opposition to a candidate project would be evidenced during this community involvement phase of the nomination process and would be acted upon by local officials. Therefore, other language is not needed in the amendments. Comment: North Texas COG commented on the elimination of sec.11.203(c)(1)(M), which requires that the nominating entity assign priority rankings to candidate projects, indicating that the elimination of this ranking removes the means of communicating levels of support and interest on behalf of local elected officials. Response: The elimination of the ranking will facilitate the nomination process for all nominating entities. The amendments contain the addition of sec.11.203(c)(4) which allows nominating entities to submit, at their discretion, a written statement of the relative priority ranking assigned by that entity to candidate projects. Comment: ETLFPO commented on new sec.11.204(a)(1)(3), regarding the ability of a community to register opposition to a candidate project. ETLFPO indicated that the department may save resources by determining the position of each community with regard to a candidate project prior to its selection for implementation. Response: When a project spans several jurisdictions, the department has found that determining each community's position on a project prior to its selection for implementation can be a costly and time-consuming process. For this reason, the amendments provide that a project may be selected on the approval of a single affected jurisdiction, while allowing other jurisdictions to register opposition to the project through the mechanism provided in sec.11. 204(a)(3). The amendments do not significantly alter the process of recording community and governmental favor or rejection of any project. Comments: TDOC commented regarding the elimination of sec.11.204(b)(1)(C)(2) and alterations to sec.11.204(b)(1)(B) and sec.11.204(b)(1)(C) concerning the changes in the scoring criteria used by the Transportation Enhancement Project Evaluation Committee. Under the present rules, each project is to be evaluated in accordance with economic, social, and environmental benefits. Under the amended rules, new criteria for evaluation are proposed and are to include the quality of the project, the geographic scope of the project's benefits, and the project's transportation enhancement value. Response: It is the department's opinion that the revised evaluation criteria contained in sec.11.204(b)(1)(B), based on quality of the project, geographic scope of the project's benefits, and the project's transportation value more truly reflect the intent of the Intermodal Surface Transportation Efficiency Act (ISTEA). Substituting new scoring criteria will provide a more adequate and equitable basis for comparing and scoring candidate projects in all categories received from all areas of the state. Comment: TDOC also commented specifically on the elimination of sec.11.204(b) (1)(C)(2)(iii), the numerical scoring system. Under the previous rules, each project received a numerical score based on the economic, social, and environmental benefits foreseen for that project. North Texas COG also commented on sec.11.204(b), the evaluation of project benefits, and specifically the elimination of portions of sec.11.204(b)(1)(B) and the elimination of sec.11.204(b)(2)(A)-(C), which contain mechanisms based on economic, social, and environmental effects together with the numerical scoring system. Response: The lack of a specific numerical scoring system will allow sufficient latitude to TEPEC to proceed with evaluations in the manner it deems most appropriate. TEPEC is composed of state agencies with a broad range of interests. These interests correspond directly with the ten categories of projects eligible under the enhancement program. Consequently, the quality, geographic scope, and transportation value of any project in any of the ten enhancement categories can be evaluated appropriately. TEPEC will specify to the Texas Transportation Commission those projects most worthy of selection for funding and implementation. Comment: TDOC commented generally that it would like to see provisions in the amendments that stimulate business investments including the use of historic buildings for retail or office space. Response: The amendments have been established in accordance with guidance furnished through ISTEA and the Federal Highway Administration. Historic buildings found eligible for participation in the program may receive some funding for restoration activities. Funds cannot be used to refurbish the interior of historic buildings unless there is a direct tie to the intermodal transportation system. Although the department is in agreement that appropriate reuse for historic buildings is desirable, retail and office uses in most cases cannot demonstrate a direct tie to transportation, so restoration of the interior of buildings with these functions would not be eligible for funding. Comment: North Texas COG objected to the deletion of sec.11.204(c)(1)(B)(ii), which states that the department will assist the commission in its selection and funding decisions by providing a statement regarding a project's consistency with the statewide long-range transportation plan and any local, metropolitan, or regional long-range transportation plan. Response: In order to be nominated under sec.11.203(c)(1)(L) of the existing rules a project must be consistent with any long-range transportation plan for the area in which it is located. Therefore, it is not necessary to provide the commission with a statement to that effect. Comment: North Texas COG objected to the elimination of sec.11.204(c)(1)(B) (iii), which states that the department will assist the commission in its selection and funding decisions by providing it with the project's benefit-cost ratio. Response: The department has determined that the benefit-cost ratio is not appropriate as a criterion to assist in selection of projects for funding. The range of scores awarded by TEPEC and the cost of projects vary greatly. Consequently, it has been determined that the benefit-cost ratio is not of assistance in selecting projects. Depending upon the cost of the project, those projects deemed most worthy of implementation might receive benefit-cost scores considerably lower than those deemed least worthy. Comment: North Texas COG objected to the elimination of sec.11.204(c)(2)(C), the consideration of the impact of candidate projects on the economies of each county in which the project is to be located, and of the municipalities within those counties. Response: The department believes that the selection process must be structured in such a way that options for selection are made as equal as possible. The substitution of the scoring criteria contained in sec.11.204(b)(1) (B), which include economic, social, and environmental effects, with criteria that include the benefit of projects based on quality, geographic scope of the project's benefits, and the project's transportation enhancement value, is an effort to equalize scoring opportunities. The concern for a project's economic benefit is contained within the realm of the project's potential benefits and includes the quality of the project together with the geographic scope of the project's benefits. Comment: The General Land Office commented regarding notification to the sponsors and nominators of the financial commitment required for candidate projects. The General Land Office requests that the department reiterate in the nomination package the importance of the financial commitment required by the amended sections. Response: The department is aware of the importance of the financial commitment required from project sponsors not only for the 20% local match, but for funds necessary to design, construct, and administer the project. The department plans to reiterate the importance of the financial commitment in the nomination package. Comment: Written comment was received from an individual who is in favor of the amendments but expressed the concern that selection of certain historic preservation projects for funding under the amendments may violate constitutional limitations on the use of funds dedicated to certain purposes under Article 8, sec.7-a and Article 8, sec.7-b of the Texas Constitution. Response: The commenter is correct in his understanding of the constitution and the rules. Sections 11.204(a)(1) 11.204(c)(B)(iv) both require that only those projects that are eligible under state law be selected, and the department intends to select projects in accordance with these provisions. The amendments are adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to promulgate rules for the conduct of the work of the Texas Department of Transportation. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515585 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: December 22, 1995 Proposal publication date: October 6, 1995 For further information, please call: (512) 463-8630 Chapter 17. Vehicle Titles and Registration Motor Vehicle Registration 43 TAC sec.17.23 The Texas Department of Transportation adopts the repeal of existing sec.17.23, concerning temporary or additional weight permits, and the simultaneously adoption of new sec.17.23, concerning temporary registration permits, with changes to the proposed text as published in the October 6, 1995, issue of the Texas Register (20 TexReg 8193). On August 31, 1995, the department adopted on an emergency basis new sec.17. 23 concerning the issuance of temporary registration permits to be recognized as legal registration for the movement of motor vehicles not authorized to travel on Texas public highways for lack of registration or for lack of reciprocity with the state or country in which the vehicles are registered. The emergency new section also provided that on or after December 18, 1995, Mexican residents traveling in the commercial zones would no longer be exempt from registration fees and would, therefore, be required to obtain temporary registration permits. In consideration of public comments from individuals, businesses, and members of the Texas legislature, and the expressed concern for the economy of certain regions of this state, the department filed the proposed version of sec.17.23 which allows the executive director of the department to enter into a written agreement with an authorized officer of a state, province, territory, or possession of a foreign country to provide for the exemption from payment of registration fees by nonresidents if residents of this state are granted reciprocal exemptions and upon the approval of the governor and the making of a determination that the economic benefits to the state outweigh all other factors considered. To continue the rulemaking process, the department finds it necessary to withdraw the original version of emergency sec.17.23 to be effective immediately upon filing and which would have expired December 30, 1995. And in order to prevent a period of time when there would have been a lapse in rules, the department is simultaneously filing emergency new sec.17.23 to read the same as the final adoption of new sec.17.23. A change has been made to exempt motor carriers from presenting evidence of financial ability if the vehicle is registered in compliance with Title 43, Texas Administrative Code, Chapter 18, Subchapter B, concerning motor carrier registration. The repeal and new section are necessary to ensure the department's proper administration of the laws concerning the issuance of temporary motor vehicle registration. Transportation Code, Chapter 502, Subchapter G, authorizes the department to carry out the provisions of those laws governing the issuance of temporary motor vehicle registration including: additional weight permits for transporting the owner's seasonal agricultural products; 72-hour permits and 144-hour permits for the movement of commercial motor vehicles, trailers, semitrailers, and motor buses owned by residents of the United States or Canada; 30-day temporary nonresident registration permits to move agricultural products produced in Texas; 30-day nonresident registration permits for nonresidents to move or harvest farm products produced outside of Texas; one-trip permits for unladen vehicles; and 30-day temporary registration permits for unladen vehicles. Transportation Code, sec.502.354 provides that the executive director may enter into a reciprocal agreement with an authorized officer of a state, province, territory, or possession of a foreign country to provide for the exemption from payment of registration fees by nonresidents. Senate Bill 981, 74th Legislature, 1995, amended Texas Civil Statutes, Article 6675a-6c, now codified as Transportation Code, sec.502.353, to authorize the department to issue annual registration permits to be recognized as legal vehicle registration for the movement of foreign commercial vehicles on Texas highways. Senate Bill 1420, 74th Legislature, 1995, amended Texas Civil Statutes 6675-6d, now codified as Transportation Code, sec.502.352, to authorize the department to issue 72/144-hour temporary permits for commercial vehicles owned by residents of Mexico. Repealed sec.17.23 provides that temporary agricultural permits or additional weight permits may not be issued to farm licensed trailers or semi-trailers. New sec.17.23 establishes the department's policies and procedures for the application and issuance of all temporary registration permits that will be recognized as legal registration for the movement of motor vehicles not authorized to travel on Texas public highways for lack of registration or for lack of registration reciprocity, including temporary agricultural permits or additional weight permits, annual registration, 72-hour registration, 144-hour registration, one-trip registration, and 30-day registration. New 17.23 also provides that the department will issue a cardboard tag or windshield validation sticker which must be displayed on the vehicle at all times; provides that the department will issue a receipt as evidence of registration; prohibits the transfer of temporary permits between vehicles and/or owners; describes the process for lost, stolen, or mutilated permits; and authorizes the executive director of the department to enter into a written reciprocal agreement with an authorized officer of a state, province, territory, or possession of a foreign country to provide for the exemption from payment of registration fees by nonresidents. The department held public hearings at the following locations and dates to receive comments, views, or testimony regarding the proposed repeal and new section: El Paso, Texas, October 23, 1995; Laredo, Texas, October 24, 1995; McAllen, Texas October 25, 1995; and Austin, Texas, October 27, 1995. Numerous oral comments were received at the hearings. Numerous written comments were submitted concerning the proposed repeal and new section. Comment: Numerous associations commented that the department should postpone or delay the adoption of proposed sec.17.23 until the 75th Texas Legislature convenes; delay implementation of Senate Bill 981, 74th Legislature, 1995, and Senate Bill 1420, 74th Legislature, 1995; and amend or extend the informal paired city understandings due to the increased trucking registration costs without such understandings. These associations include Mexico-Texas Bridge Owners Association; Brownsville Custom Brokers Association; Import-Export Produce Association; El Paso Foreign Trade Association; Border Trade Alliance; Association of Motor Carriers in Ciudad Juarez; South Texas Manufacturers Association; Hidalgo Custom Brokers Association; and McAllen Produce Terminal Market Owners Association, Inc. These comments were reiterated by numerous other individuals including: State Senator Judith Zaffirini, State Senator Eddie Lucio, State Representative Renato Cuellar, State Representative Roberto Gutierrez, State Representative Sergio Munoz, and Mayor Othal Brand, Sr., of McAllen, as well as many representatives of private firms and numerous governmental entities. Response: The department does not have the authority to delay or suspend the implementation of a state law. In addition, the North American Free Trade Agreement (NAFTA) which becomes effective at midnight, December 17, 1995, will allow Mexican motor carriers to enter and depart the United States from different ports of entry along the United States-Mexico border. These motor carriers may travel anywhere in Texas, New Mexico, Arizona, and California. Currently, the law does not provide any other registration provisions which would allow Mexican commercial vehicles the opportunity to travel in Texas except for full Texas registration. The department is responsible for providing motor vehicle registration that is recognized as legal registration for vehicles which are subject to registration in Texas and are not authorized to travel on the State's public highway system for lack of registration or registration reciprocity. The adoption of proposed sec.17.23 is necessary to provide the means for such registration, expedite cross-border service to encourage international trade and commerce in the spirit of NAFTA, and to protect the health and safety of the citizens of Texas. In response to the comments requesting that the department extend or amend the informal paired city understandings, the paired city agreements are not the subject matter of these rules. An extension or amendment is being considered and the public will be notified if such action is taken. Comment: Several commenters opposed the financial responsibility requirements in proposed sec.17.23, and stated that a 30-day term of insurance is required for the issuance of 72-hour or 144-hour temporary registration permits. Response: The department has determined that proof of financial responsibility, valid at the time of application, will be acceptable. Comment: Several commenters stated that the provisions of proposed sec.17.23 do not comply with NAFTA and will cause severe financial difficulties for Mexican commercial trucking firms. Response: sec.17.23 will apply equally to United States, Canadian, and Mexican commercial carriers in accordance with the provisions of NAFTA. Any additional financial costs will be applied equally to United States, Canadian, and Mexican commercial carriers traveling upon Texas' public highways. In addition, the department has the responsibility to implement the provisions of legislation as directed by the Texas Legislature in Senate Bills 981 and 1420. The department also has the responsibility to comply with the provisions of NAFTA which is designed to provide that the three countries are treated equally. Again, the new economic costs of eliminating the informal paired city understandings will be evaluated separately by the department when considering the possibility of extending or amending paired city understandings. Comment: The City of Del Rio passed a resolution opposing the adoption of sec.17.23, and urged adoption of proposals by the Border Trade Alliance (BTA). Other commenters submitted concerns and suggestions similar to those of the BTA. BTA suggested maintaining the proposed system of access for statewide transportation services and recognizing the Federal Interstate Commerce Commission (ICC) 24-hour and 72-hour temporary registration for Mexican motor carriers within the Border Trade Area. Response: There is currently no legislative authority for registration provisions to allow Mexican commercial vehicles to travel legally upon the public highways of Texas after NAFTA is implemented, with the exception of full Texas registration. The adoption of proposed sec.17.23 is necessary to provide the means for operation in Texas. ICC operating authority is not a surrogate for state registration. In addition, the department will consider the extension of informal paired city understandings for foreign commercial vehicles traveling within the Border Trade Areas, which would maintain the current system of access within such areas. Comment: BTA also proposed maintaining the proposed system of registration for statewide transportation services but recognizing the ICC 24-hour and 72-hour temporary registration for Mexican motor carriers within the Border Trade Area, with temporary permit entries limited to 50 entries annually per vehicle (with additional entries triggering statewide registration requirements). Response: The department does not have the authority to limit the number of uses of a temporary permit to 50 entries annually per vehicle as suggested. Current state statute does not provide this option, and a legislative mandate would be required for the department to implement such a program. Comment: BTA proposed recognition of ICC Certificate of Registration, trip lease, and trip insurance without additional state registration. Response: The ICC Certificate of Registration, which provides commercial motor vehicles with operating authority, has never exempted a vehicle from state registration. Any such exemption in the past has been provided by informal paired city understandings, which the department will consider extending. The department's authority is clear. The department has the responsibility to provide a means of legal state registration in addition to ICC operating authority. Comment: BTA proposed that the federal framework of insurance be applied within the Border Trade Area for minimum limits and for annual and trip insurance. Response: Senate Bills 1420 and 981 specify that required insurance levels for temporary registration shall be in accordance with those outlined in the Safety Responsibility Act, Transportation Code, sec.201.101. The department does not have the authority to set such levels. Other insurance levels cited by the Border Trade Alliance are a result of rules proposed under Title 43, Texas Administration Code, Chapter 18, which implement Senate Bill 3. These provisions are outside the scope of proposed sec.17.23 and this response. The department has determined that proof of financial responsibility valid at the time of application will be acceptable when applying for a temporary permit. In regard to the annual and trip insurance, the department has determined that if an applicant for a temporary permit issued under proposed sec.17.23 is also a motor carrier registered in compliance with Chapter 18 of this title, a registration listing or an international stamp indicating such registration in compliance with Chapter 18 will serve as acceptable evidence of financial responsibility under the requirements of proposed sec.17.23 because Transportation Code, sec.601.107, exempts motor carriers from the Safety Responsibility Act. Section 17.23 has been revised to reflect this exemption. Comment: BTA requests that the federal framework of insurance be applied within the Border Trade Area for insurance providers, thus allowing any United States authorized insurance carrier to issue insurance instead of limiting the insurance providers to those authorized to do business in Texas. Response: Senate Bills 981 and 1420 clearly state that an insurance provider must be authorized to do business in Texas, and the department does not have the authority to disregard this requirement. However, this requirement does not preclude any United States or foreign insurance carrier from obtaining authorization to do business in Texas. Comment: BTA requests that the department exempt the Border Trade Areas from Texas workers' compensation requirements. The Laredo United States Custom Brokers Association also made this request. Response: Proposed sec.17.23 does not have workers' compensation requirements. This comment refers to the provisions of Title 43, Texas Administration Code, Chapter 18 (relating to motor carrier operating authority) , and Senate Bill 3. Such comments are outside of the scope of this response. Comments: BTA asks the department to adopt the federal registration framework of motor carrier operating authority/permit fees within the Border Trade Area. Response: The department has the responsibility to implement the provisions of Senate Bill 1420 by providing for temporary registration of foreign commercial vehicles. ICC operating authority does not preclude state registration of commercial vehicles. Additional fees listed in this comment by the BTA refer to fees for motor carrier operating authority, which is included in Chapter 18 (relating to motor carrier operating authority), and Senate Bill 3 and do not pertain to sec.17.23. Comment: A comment suggested that registration be allowed at the port of entry via deputy county tax collectors who are bonded and employed by customs brokers as authorized by county commissioners courts. Response: House Bills 981 and 1420 did not provide for this type of registration. The Texas Motor Transportation Association commented in favor of the department's adoption of proposed sec.17.23, stating that the proposed rules will provide equal treatment to NAFTA's trading partners by insuring that the standards set for the commercial motor vehicle industry in Texas with respect to safety requirements, driver qualifications, financial responsibility, and weight requirements are expected of all commercial motor traffic, thereby protecting the public interest from unsafe equipment, financially irresponsible motor carriers, and insuring a competitive playing field. Two individuals commented in favor of the department's adoption of proposed sec.17. 23, specifically citing protection from damage to the state's highway infrastructure, and protection of the public from unsafe commercial vehicles. One individual provided comments at the request of State Senator Carlos Truan that were favorable to proposed sec.17.23 and included a detailed analysis of Texas trucking regulations. The repeal is adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, Chapter 502, Subchapter G, which authorizes the department to adopt rules to administer the issuance of temporary permits. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515590 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: December 22, 1995 Proposal publication date: October 6, 1995 For further information, please call: (512) 463-8630 The new section is adopted under Transportation Code, sec.201.101, which provides the Texas Transportation Commission with the authority to establish rules for the conduct of the work of the Texas Department of Transportation, and more specifically Transportation Code, Chapter 502, Subchapter G, which authorizes the department to adopt rules to administer the issuance of temporary permits. sec.17.23. Temporary Registration Permits. (a) Purpose and scope. Transportation Code, Chapter 502, Subchapter G, charges the department with the responsibility of issuing temporary registration permits which shall be recognized as legal registration for the movement of motor vehicles not authorized to travel on Texas public highways for lack of registration or for lack of reciprocity with the state or country in which the vehicles are registered. In order for the department to efficiently and effectively perform these duties, this section prescribes the policies and procedures for the application and the issuance of temporary registration permits. (b) Permit categories. The department will issue the following categories of temporary registration permits. (1) Additional weight permits. The owner of a truck, truck tractor, trailer, or semitrailer may purchase temporary additional weight permits for the purpose of transporting the owner's own seasonal agricultural products to market or other points for sale or processing in accordance with Transportation Code, sec.502.351. In addition, such vehicles may be used for the transportation without charge of seasonal laborers from their place of residence, and materials, tools, equipment, and supplies from the place of purchase or storage, to a farm or ranch exclusively for use on such farm or ranch. (A) Additional weight permits are valid for a limited period of less than one year. (B) An additional weight permit will not be issued for a period of less than one month or extend beyond the expiration of a license plate issued under Transportation Code, Chapter 502. (C) The statutory fee for an additional weight permit is based on a percentage of the difference between the owner's regular annual registration fee and the annual fee for the desired tonnage computed as follows: (i) one-month (or 30 consecutive days)-10% (ii) one-quarter (three consecutive months)-30% (iii) two-quarters (six consecutive months) -60% (iv) three-quarters (nine consecutive months)-90% (D) Additional weight permits are issued for calendar quarters with the first quarter to begin on April 1st of each year. (E) A permit will not be issued unless the registration fee for hauling the larger tonnage has been paid prior to the actual hauling. (F) Additional weight permits may not be issued to farm licensed trailers or semitrailers. (2) Annual permits. (A) Texas Civil Statutes, Article 6675a-6c, authorizes the department to issue annual permits to provide for the movement of foreign commercial vehicles that are not authorized to travel on Texas highways for lack of registration or for lack of reciprocity with the state or country in which the vehicles are registered. The department will issue annual permits: (i) for a 12-month period designated by the department which begins on the first day of a calendar month and expires on the last day of the last calendar month in that annual registration period; and (ii) to each vehicle or combination of vehicles for the registration fee prescribed by weight classification in Transportation Code, sec.502.162 and sec.502.167. (B) The department will not issue annual permits for the importation of citrus fruit into Texas from a foreign country except for foreign export or processing for foreign export. (C) The following exemptions apply to vehicles displaying annual permits. (i) Registered foreign semitrailers having gross weights in excess of 6,000 pounds used or to be used in combination with truck tractors or commercial motor vehicles with manufacturer's rated carrying capacities in excess of one ton are exempted from the requirement to pay the token fee and display the associated distinguishing license plate provided for in Transportation Code, sec.502.167. An annual permit is required for the power unit only. (ii) Vehicles registered with annual permits are not subject to the optional county registration fee under Transportation Code, sec.502.172 or the optional registration fee for child safety under Transportation Code, sec.502.173. (3) 72-hour permits and 144-hour permits. (A) In accordance with Transportation Code, sec.502.352, as amended, the department will issue a permit valid for 72 hours or 144 hours for the movement of commercial motor vehicles, trailers, semitrailers, and motor buses owned by residents of the United States, Mexico, or Canada. (B) A 72-hour permit or a 144-hour permit is valid for the period of time stated on the permit beginning with the effective day and time as shown on the permit registration receipt. (C) Vehicles displaying 72-hour permits or 144-hour permits are subject to vehicle safety inspection in accordance with Transportation Code, sec.548.051, except for: (i) vehicles currently registered in another state of the United States, Mexico, or Canada; and (ii) mobile drilling and servicing equipment used in the production of gas, crude petroleum, or oil, including, but not limited to, mobile cranes and hoisting equipment, mobile lift equipment, forklifts, and tugs. (D) The department will not issue a 72-hour permit or a 144-hour permit to a commercial motor vehicle, trailer, semitrailer, or motor bus apprehended for violation of Texas registration laws. Apprehended vehicles must be registered under Transportation Code, Chapter 502. (4) Temporary agricultural permits. (A) Transportation Code, sec.502.354, authorizes the department to issue a 30-day temporary nonresident registration permit to a nonresident for any truck, truck tractor, trailer, or semitrailer to be used in the movement of all agriculture products produced in Texas: (i) from the place of production to market, storage, or railhead not more than 75 miles distant from the place of production; or (ii) to be used in the movement of machinery used to harvest Texas-produced agricultural products. (B) The department will issue a 30-day temporary nonresident registration permit to a nonresident for any truck, truck tractor, trailer, or semitrailer used to move or harvest farm products, produced outside of Texas, but: (i) marketed or processed in Texas; or in Texas for shipment into Texas to market, storage, processing plant, railhead or seaport not more than 80 miles distant from Texas. (C) The statutory fee for temporary agricultural permits is one-twelfth of the annual Texas registration fee prescribed for the vehicle for which the permit is issued. (D) The department will issue a temporary agricultural permit only when the vehicle is legally registered in the nonresident's home state or country for the current registration year. (E) The number of temporary agricultural permits is limited to three permits per nonresident owner during any one vehicle registration year. (F) Temporary agricultural permits may not be issued to farm licensed trailers or semi-trailers. (5) One-trip permits. Transportation Code, sec.502.354, authorizes the department to temporarily register any unladen vehicle upon application to provide for the movement of the vehicle for one trip, when the vehicle is subject to Texas registration and not authorized to travel on the public roadways for lack of registration or lack of registration reciprocity. (A) Upon receipt of the $5.00 fee, registration will be valid for one trip only between the points of origin and destination and intermediate points as may be set forth in the application and registration receipt. (B) The department will issue a one-trip permit to a bus which is not covered by a reciprocity agreement with the state or country in which it is registered to allow for the transit of the vehicle only. The vehicle should not be used for the transportation of any passenger or property, for compensation or otherwise, unless such bus is operating under charter from another state or country. (C) A one-trip permit is valid for a period up to 15 days from the effective date of registration. (D) A one-trip permit may not be issued for a trip which both originates and terminates outside Texas. (E) A laden motor vehicle or a laden commercial vehicle cannot display a one- trip permit. If the vehicle is unregistered, it must operate with a 72-hour or 144-hour permit. (6) 30-day temporary registration permits. Transportation Code, sec.502.354, authorizes the department to issue a temporary registration permit valid for 30 days for a $25 fee. A vehicle operated on a 30-day temporary permit is not restricted to a specific route. The permit is available for: (A) passenger vehicles; (B) motorcycles; (C) private buses; (D) trailers and semitrailers with a gross weight not exceeding 10,000 pounds; (E) light commercial vehicles not exceeding a manufacturer's rated carrying capacity of one ton; and, (F) a commercial vehicle exceeding one ton, provided the vehicle is operated unladen. (c) Application process. (1) Procedure. An owner who wishes to apply for a temporary registration permit for a vehicle which is otherwise required to be registered in accordance with sec.17.22 of this title (relating to Motor Vehicle Registration) , must do so on a form prescribed by the director. (2) Form requirements. The application form will at a minimum require: (A) the signature of the owner; (B) the name and complete address of the applicant; and (C) the vehicle description. (3) Fees and documentation. The application must be accompanied by: (A) statutorily prescribed fees; (B) evidence of financial responsibility: (i) as required by Transportation Code, Chapter 502, Subchapter G, provided that all policies written for the operation of motor vehicles must be issued by an insurance company or surety company authorized to write motor vehicle liability insurance in Texas; or (ii) if the applicant is a motor carrier as defined by Section 18.2 of this title (relating to Definitions), in the form of a registration listing or an international stamp indicating that the vehicle is registered in compliance with Chapter 18, Subchapter B of this title; and (C) any other documents or fees required by law. (4) Place of application. (A) All applications for annual permits must be submitted directly to the department for processing and issuance. (B) Additional weight permits and temporary agricultural permits may be obtained by making application with the department through the county tax assessor-collectors' offices. (C) 72-hour and 144-hour permits, one-trip permits, and 30-day temporary registration permits may be obtained by making application either with the department or the county tax assessor-collectors' offices. (d) Display of registration insignia. The department will issue a specially designed cardboard tag or windshield validation sticker, upon receipt of a complete application for a permit. (1) Cardboard tags shall be displayed in a manner that is clearly visible and legible when viewed from outside of the vehicle. The tag shall be attached to or displayed in the vehicle to allow ready inspection. (2) Windshield validation stickers shall be displayed on the inside of the front windshield in the lower left corner. (3) A receipt will be issued for each registration insignia as evidence of registration to be carried in the vehicle during the time the permit is valid. If the receipt is lost or destroyed, the owner must obtain a duplicate from the department or from the county office who issued the original receipt. The fee for the duplicate receipt is the same as the fee required by Transportation Code, sec.502.179. (e) Transfer of temporary registration permits. (1) Temporary registration permits are non-transferable between vehicles and/or owners. (2) If the owner of a vehicle displaying a temporary registration permit disposes of the vehicle during the time the permit is valid, the permit must be returned to the department immediately. (f) Replacement permits. Vehicle owners displaying annual permits may obtain replacement permits if an annual permit is lost, stolen, or mutilated. (1) The fee for a replacement annual permit is the same as for a replacement number plate, symbol, tab, or other device as provided by Transportation Code, sec.502.184, as amended. (2) The owner shall apply directly to the department in writing for the issuance of a replacement annual permit. Such request should include a copy of the registration receipt and replacement fee. (g) Agreements with other jurisdictions. In accordance with Transportation Code, sec.502.054, the executive director of the department may enter into a written agreement with an authorized officer of a state, province, territory, or possession of a foreign country to provide for the exemption from payment of registration fees by nonresidents if residents of this state are granted reciprocal exemptions. The executive director may enter into such agreement only upon: (1) the approval of the governor; and (2) making a determination that the economic benefits to the state outweigh all other factors considered. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on December 1, 1995. TRD-9515592 Robert E. Shaddock General Counsel Texas Department of Transportation Effective date: December 22, 1995 Proposal publication date: October 6, 1995 For further information, please call: (512) 463-8630 Texas Department of Insurance Exempt Filing Notification Pursuant to the Insurance Code, Chapter 5, Subchapter L (Editor's Note: As required by the Insurance Code, Article 5.96 and 5. 97, the Texas Register publishes notices of actions taken by the Department of Insurance pursuant to Chapter 5, Subchapter L, of the Code. Board action taken under these articles is not subject to the Administrative Procedure Act. These actions become effective 15 days after the date of publication or on a later specified date. The text of the material being adopted will not be published, but may be examined in the offices of the Department of Insurance, 333 Guadalupe, Austin.) The Commissioner of Insurance has adopted optional endorsements to certain residential property insurance policies; an amendment to Endorsement Number HO- 170, which may be attached to a Texas Homeowners Form HO-A; and amendments to the Homeowners, Dwelling, Farm and Ranch, and Farm and Ranch Owners sections of the Texas Personal Lines Manual (Manual) to modify current coverage for tear out and replacement of building and land necessary to access, repair, or replace that part of a plumbing drain system located within or under the slab or foundation of the dwelling in the event of accidental discharge or leakage of water from such plumbing drain system. The endorsements and Manual rules were proposed by Department staff in a petition filed on October 16, 1995. Notice of the proposal (Reference Number P-1095-39-I) was published in the October 20, 1995 issue of the Texas Register (20 TexReg 8744). The endorsements and Manual rules were considered at a public hearing held on November 28, 1995, at 1:30 p.m., under Docket Number 2186 in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street in Austin, Texas. The Commissioner has adopted, with two changes to the proposal as noticed in the Texas Register, six optional endorsements which may be attached to certain residential property insurance policies. The Commissioner has adopted, with one change to the proposal as noticed in the Texas Register , an amendment to Endorsement Number HO-170 (Additional Extended Coverage), which may be attached to a Texas Homeowners Form HO-A. The Commissioner also has adopted two Manual rules, with one change to the proposal as noticed in the Texas Register, and two Manual rules without any change to the proposal as noticed in the Texas Register. The adopted endorsements are: (1) Endorsement Number HO-155 which may be attached to a Texas Homeowners Form HO-B, (2) Endorsement Number TDP-054 which may be attached to a Texas Dwelling Form TDP-2, (3) Endorsement Number TDP-055 which may be attached to a Texas Dwelling Form TDP-3, (4) Endorsement Number FRO-455 which may be attached to a Texas Farm and Ranch Owners Form FRO-B, (5) Endorsement Number TFR-054 which may be attached to a Texas Farm and Ranch Form TFR-2, and (6) Endorsement Number TFR-055 which may be attached to a Texas Farm and Ranch Form TFR-3. The adopted amendment to Endorsement Number HO-170 (Additional Extended Coverage), which may be attached to a Texas Homeowners Form HO-A, amends item 1 in the Perils Insured Against portion of the endorsement to provide the same tear-out and replacement coverage provided by the other adopted endorsements. The four adopted Manual rules are: (1) Rule IV-A-20 in the Homeowner's Section, (2) Rule IV-O in the Dwelling Section, (3) Rule IV-A-22 in the Farm and Ranch Owners Section, and (4) Rule IV-S in the Farm and Ranch Section. These rules provide for the limitation in coverage for tear out and replacement of building and land when the endorsements are attached and reference the appropriate rate chart for determining the applicable credit for the limit in coverage. Rule IV- A-20 in the Homeowner's Section and Rule IV-A-22 in the Farm and Ranch Owners Section were adopted with one change to the proposal as noticed in the Texas Register, and Rule IV-O in the Dwelling Section and Rule IV-S in the Farm and Ranch Section were adopted without changes to the proposal as noticed in the Texas Register. Based on comments on the proposal and on information provided by staff as a result of contacting plumbing contractors in various areas of Texas concerning estimated costs for accessing plumbing drain systems located within or under the slab or foundation of the dwelling, the Commissioner has adopted the six endorsements, the amendment to Endorsement Number HO-170 (Additional Extended Coverage), and two Manual rules with a change in the proposed tear-out and replacement coverage amount of "no more than a total of 5.0% of Coverage A (Dwelling) limit of liability or $2,500, whichever is greater," to a coverage amount of "no more than a total of 5.0% of Coverage A (Dwelling) limit of liability or $3,500, whichever is greater". The Commissioner has determined that this increase in the limit of coverage from $2,500 to $3,500 is necessary to provide adequate tear-out and replacement coverage for those policyholders with lower value dwellings. Also, as a result of comments on the proposal, the Commissioner has adopted four of the six endorsements with an additional change to the endorsements as proposed. Additional language was added to the four endorsements to be attached to all-risk policies (Endorsement Numbers HO-155, TDP-055, FRO-455, and TFR-055) to provide that the endorsement does not affect coverage otherwise provided in the policy for damage or loss to slabs or foundations. The Commissioner has determined that this change is necessary to clarify that these tear-out and replacement of building and land coverage endorsements only modify current coverage for tear out and replacement of building and land necessary to access, repair, or replace that part of a plumbing drain system located within or under the slab or foundation of the dwelling in the event of accidental discharge or leakage of water from such plumbing drain system and does not affect any coverage otherwise provided in the policy for damage or loss to slabs or foundations. Endorsement Numbers TDP-054 and TFR-054 were adopted without the addition of this clarifying language because the policy forms to which they attach do not provide all-risk coverage. The attachment of the adopted endorsements to the four all-risk policies, Texas Homeowners Form HO-B, Texas Dwelling Form TDP-3, Texas Farm and Ranch Owners Form FRO-B, and Texas Farm and Ranch TFR-3, adds a new limitation to the Property Coverage, Extensions of Coverage portion of the policy to provide that the during the policy period stated on the declarations page, the insurer will pay no more than a total amount of 5.0% of Coverage A (Dwelling) limit of liability or $3,500, whichever is greater, of the cost of tearing out and replacing any part of the building and land necessary to access, repair, or replace that part of a plumbing drain system located within or under the slab or foundation of the dwelling. This extension of coverage applies only in the event of accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the dwelling and does not affect any coverage provided elsewhere in the policy in the event of accidental discharge or leakage of water from a plumbing supply system, and the attachment of the endorsement does not affect coverage otherwise provided in these policies for damage or loss to slabs or foundations. The extension of coverage does not include loss to the plumbing drain system or appliance from which water escapes. This coverage is not additional insurance and does not increase the Coverage A (Dwelling) limit of liability. The attachment of the endorsements also amends item 9 in the Perils Insured Against, Coverage B (Personal Property) portion of these four policies to delete the current language concerning tearing out and replacing any part of the building and amends the non-applicability of exclusions provision in item 9 to remove the reference to the exclusion on settling, cracking, bulging, shrinkage, or expansion of foundations, walls, floors, and other specified structures. The attachment of these endorsements also amends the Section I--Exclusions or General Exclusions portions of these four policies to add a provision to provide that the insurer does not cover as part of any loss the cost of tearing out any part of the building and land necessary to access, repair, or replace that part of a plumbing drain system located within or under the slab or foundation of the dwelling, except as provided under the Extensions of Coverage part of the policy. If these endorsements are not attached to a policy, coverage is provided for accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the dwelling, including the cost of tear-out and replacement of any part of the building and land necessary to access, repair, or replace that part of the plumbing drain system up to the Coverage A (Dwelling) limit of liability if the loss is a covered cause of loss under the policy. The attachment of the adopted endorsements to Texas Dwelling Form TDP-2 and Texas Farm and Ranch Form TFR-2 amends item 8 in the Perils Insured Against portion of the policy to delete the current language concerning tearing out and replacing any part of the building and to provide that the insurer will cover the cost of tearing out and replacing any part of the building and land necessary to repair or replace the heating system, air conditioning system, plumbing supply system, or household appliance. This coverage does not include loss to the heating system, air conditioning system, plumbing supply systems, or household appliance from which the water or steam escaped. The endorsements provide that in the event of accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the dwelling, the insurer will pay, during the policy period stated on the declarations page, no more than a total amount of 5.0% of Coverage A (Dwelling) limit of liability or $3,500, whichever is greater, of the cost of tearing out and replacing any part of the building and land necessary to access, repair, or replace that part of such plumbing drain system. This coverage does not include loss to the plumbing drain system from which the water or steam escaped. The endorsements retain the provision that Exclusion 1 under the General Exclusions part of the policy does not apply to loss caused by this peril. If these endorsements are not attached to a policy, coverage is provided for accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the dwelling, including the cost of tear-out and replacement of any part of the building and land necessary to access, repair, or replace that part of the plumbing drain system up to the Coverage A (Dwelling) limit of liability if the loss is a covered cause of loss under the policy. The Commissioner has determined that these endorsements and Manual rules are necessary to clarify the coverage provided under certain residential property insurance policies (Homeowners Form HO-A with Endorsement Number 170 attached; Homeowners Form HO-B; Dwelling Forms TDP-2 and TDP-3; Farm and Ranch Owners Form FRO-B; and Farm and Ranch Forms TFR-2 and TFR-3) for tear out and replacement of building and land in the event of accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the insured dwelling. The Commissioner has further determined that these endorsements and Manual rules are necessary because the current policy language contained in these forms is ambiguous and unclear as to coverage for the cost of tear out and replacement of building or land in the event of accidental discharge or leakage of water from a plumbing drain system located within or under the slab or foundation of the insured dwelling. The existence of such ambiguous language has caused a major disruption in the claims paying process leading to excessive payments of claims by some insurers, denial of claims by other insurers, and litigation for the settlement of water damage claims. The Commissioner has further determined that the unclear language in the current policy forms has resulted in major restrictions in the writing of residential property insurance by licensed property and casualty insurers in certain areas of the state, and that these endorsements and rules are necessary to make insurance more available and affordable in these areas. The Commissioner has determined that the proposed endorsements shall be optional to allow more flexibility and competition in the marketplace. The Commissioner has determined that with the attachment of these endorsements there shall be a reduction in the applicable premium for the residential property insurance policy because the endorsements modify or limit current coverage. The Commissioner has also determined that the applicable premium credits for the tear out and replacement limitation in coverage be determined at the next residential property insurance benchmark rate hearing held pursuant to Articles 5.101 and 1.33B of the Insurance Code and that the new endorsements and rules shall be effective for all applicable policies issued on and after the effective date of the residential property insurance benchmark rates determined pursuant to such hearing. The 73rd Legislature in 1993 enacted Article 5.35-2 of the Insurance Code to require the Commissioner to adopt endorsements to residential property policies that restricted coverage for damage to foundations or slabs of insured dwellings more than ten years old, including the exclusion of damage caused by leakage from a plumbing system. These endorsements were adopted pursuant to Commissioner's Order Number 94-0840 (August 2, 1994) to be effective for all applicable policies issued on and after the effective date of the 1994 residential property insurance benchmark rate. However, because premium credits were not considered during the 1994 benchmark rate hearing, the endorsements never became effective. The 74th Legislature enacted House Bill 347 (Acts 1995, 74th Legislature, Chapter 413, sec.1, page 2987, June 8, 1995) which repealed Article 5.35-2 of the Insurance Code but did not otherwise affect the authority of the Commissioner under other provisions of the Insurance Code to promulgate policy and endorsement provisions regarding the foundation or slab of an insured dwelling. Because of the repeal of Article 5.35-2 of the Insurance Code, the Commissioner has determined that Commissioner's Order Number 94-0840 (August 2, 1994) should be repealed. The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, Articles 5.35, 5.101, 5.96, and 5.98. The endorsements and Manual rules as adopted by the Commissioner of Insurance are on file in the Chief Clerk's Office of the Texas Department of Insurance under Reference Number P-1095-39-I and are incorporated by reference by Commissioner Order Number 95-1261. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts action taken under Article 5.96 from the requirements of the Administrative Procedure Act (Government Code, Title 10, ch. 2001). Consistent with the Insurance Code, Article 5.96(h), prior to the effective date of this action, the Texas Department of Insurance will notify all insurers affected by this action. This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on December 1, 1995. TRD-9515584 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: December 23, 1995 For further information, please call: (512) 463-6327