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 1. ADMINISTRATION
PART VII. State Office of Administrative Hearings
CHAPTER 159.Rules of Procedure for Administrative License
Suspension Hearings
1 TAC sec.sec.159.3, 159.19, 159.37, 159.41
The State Office of Administrative Hearings (SOAH) adopts amendments to 
sec.sec.159.3, 159.19, 159.37, and 159.41, concerning Administrative License 
Suspension Hearings, commonly known as the Administrative License Revocation 
(ALR) Program. Sections 159.3, 159.19 and 159.37 are adopted with changes to the 
proposed text as published in the July 8, 1997 issue of the Texas Register (22 
TexReg 6383). Section 159.41 concerning other Office Rules of Procedure is 
adopted without change and therefore will not be republished. 
The amended rules are necessary to update statutory citations and to more 
closely conform language in the sections to language incorporated in the Texas 
Transportation Code and to set out the issues in ALR hearings involving minors, 
pursuant to Senate Bill 35 enacted during the 75th Legislative Session, 1997. 
Amendment of sec.159.37 is necessary to more fully reflect the offices' practice 
in processing ALR appeals. Amendment to sec.159.41 is necessary pursuant to 
Senate Bill 331 also enacted during the 75th Legislative Session, 1997, which 
amended Government Code sec.2003.042 by granting SOAH judges certain sanction 
authority. Amendment of sec.159.3 and sec.159.19 is also required in order to 
implement the new provisions enacted by the 75th Texas Legislature. 
This adoption includes several changes to the proposed text as published, many 
of which were made in response to written comments. 
In sec.159.3, the adopted section corrected a statutory citation in the 
definition found at (a)5, and clarified the definition of "conviction" found at 
(a)(12) in response to comments. 
In sec.159.19(a)(1)(B)(iv), the adopted section restored the adjective, 
"proper," to modify the request of an officer who requests a breath or blood 
specimen from a driver arrested for driving while intoxicated; this was done in 
response to comments received and to maintain consistency with statutory and 
case law requirements relating to the warnings that must be given. A new 
subsection was also added to this section in response to comments to clarify 
that proof of age is not required in hearings involving adults.
In sec.159.37, the adopted section changed subsection (h) to clarify the 
procedures parties are to follow when a reviewing court issues a remand order in 
an ALR appeal. The office deemed this change necessary to inform parties of 
their specific responsibilities upon receipt of a remand order, so the office 
may be able to comply with its statutory obligations. The changes made from the 
original text also simplified money handling procedures for the office. 
No public hearing was requested or held on the proposed amendments. Written 
comments were received by SOAH through August 7, 1997. Written comments were 
received from Lawrence G. Boyd, Attorney at Law in private practice and from 
Angela Parker, Director of Hearings (ALR) with the Texas Department of Public 
Safety. Following is a summary of the substantive comments and includes SOAH's 
responses. 
COMMENTS RELATING TO sec.159.3: One commenter noted that defining a deferred 
adjudication as a "conviction" could be unfair because of flaws in the 
underlying plea bargain, etc., and that the second sentence in the definition of 
conviction could be interpreted to apply to adults also. SOAH declines to delete 
"deferred adjudications" from the definition of conviction as to minors because 
the legislature expressly included them in the definition. In response to the 
latter concern, SOAH added clarification in the second sentence to indicate the 
deferred adjudications to be considered convictions related to those received by 
minors only. 
The same commenter also objected to the definition of peace officer. SOAH 
disagrees that the definition creates confusion. The definition was simply 
renumbered; there was no change from the text as originally adopted and SOAH has 
not encountered parties who were confused by the definition. 
Another commenter pointed out an error in a subsection of the statutory citation 
in the definition of "Alcohol-related or drug-related enforcement contact." SOAH 
agrees, and made the correction. 
The same commenter stated the definition of "Intoxicated" found at subsection 19 
included superfluous language which would lead to confusion. The commenter 
misunderstood SOAH's intent which was to change the definition of intoxicated to 
"Has the meaning assigned by Texas Penal Code, sec.49.01(2)." For that reason, 
SOAH made no change to the proposed amendment. 
COMMENTS RELATING TO sec.159.19: One commenter noted that the deletion of 
"proper" as a modifying term from the phrase, "upon proper request of the 
officer" was inconsistent with established case law, see Erdman v. State, 861 
S.W. 2d 890 (Tex. Crim. App. 1993, reh. den.), which requires an officer who 
requests a breath or blood specimen to give the driver very specific warnings 
and information. SOAH agrees with this comment and retained the modifier. 
Another commenter noted that the inclusion of "and" in sec.159.19(a)(1)(A)(i) 
and in sec. 159.19(a)(1)(B)(i) was incorrect as the applicable Transportation 
Code sections provide the issues are whether "reasonable suspicion "or" probable 
cause to arrest the person existed and whether "reasonable suspicion "or" 
probable cause existed to stop "or" arrest the person," respectively. The 
commenter urged the same position as to the new subsections involving minors. 
SOAH disagrees with the commenter's position inasmuch as numerous cases have 
interpreted the cited provisions in some situations to require proof of both 
reasonable suspicion to stop "and" probable cause to arrest. See Townsend v. 
State, 813 S.W. 2d 181 (Tex. App.--Houston [14th Dist] 1991, pet. ref'd), 
Johnson v. State, 658 S.W. 2d 626 (Tex. Crim. App. 1983) and Texas Dept. of 
Public Safety v. Rodriguez, Number 03-96-00533-CV, (Tex. App.--Austin, [3rd 
Dist], 1997). SOAH therefore disagrees with the comment and will keep the text 
as published. 
The same commenter pointed out that the heading in sec.159.19(a)(1) could be 
interpreted to mean that a driver's age had to be proved in ALR cases involving 
adults. We agree the heading could be read in this manner and have added a 
subsection to clarify that unless the department is proceeding against a minor 
under the provisions of Senate Bill 35, age is not an element requiring proof. 
The commenter also argued that the 75th legislature had not changed the issues 
under sec. 724.042 and consequently SOAH should not change the issues that are 
required to authorize suspension of a minor's driver's license if the minor 
refused to provide a specimen of breath or blood. SOAH disagrees with this 
comment. While the legislature may not have changed the issues set out under 
sec.724.042, it did amend the Implied Consent Law, Chapter 724 of the 
Transportation Code to include within its coverage persons under 21 years of age 
who may be arrested for an offense under sec.106.041 of the Alcoholic Beverage 
Code, see Transportation Code, sec.724.011 and sec.724.012, as amended. The 
legislature also amended the statutory warning that must be given to minors and 
provided for a different suspension period than that for adults, see sec.724.015 
of the Transportation Code. So, even though the legislature may not have 
explicitly changed the issues that apply in minor refusal cases, its action in 
changing the provisions of the Implied Consent Law necessarily requires the 
issues in minor refusal cases to be different. For that reason, SOAH 
incorporated specific sections of the Transportation Code, supra, and retains 
the issues under sec.159.19(a)(2)(B) as proposed.
COMMENTS RELATING TO sec.159.37: SOAH staff reconsidered the proposed amendment 
and made several minor changes to further clarify the procedures a party who 
obtains a remand hearing is to follow in order to have the office schedule a 
hearing on remand and to forward any additional evidence that is taken at that 
hearing to the remanding court. 
The amendments are adopted under Transportation Code sec.524.002 and sec.724.003 
which authorize SOAH to promulgate rules for the administration of Chapters 524 
and 724 of the Transportation Code. 
The following statutes are affected by the proposed amendments: Texas 
Transportation Code, Chapters 524 and 724; Texas Government Code sec.2001 and 
sec.2003; Penal Code, Chapter 49; Texas Alcoholic Beverage Code sec.106.041, and 
Texas Family Code, Title 3 sec. 51.02.

sec.159.3.Definitions.
(a) In this chapter, the following terms have the meaning indicated:
(1) "Administrative Law Judge" or "Judge" - An individual appointed by the Chief 
Administrative Law Judge of the State Office of Administrative Hearings under 
the Texas Government Code, Chapter 2003 and Texas Transportation Code, Chapters 
524 and 724. 
(2) "Adult" - An individual 21 years of age or older.
(3) "ALR Suspension" - Pursuant to Texas Transportation Code, Chapters 522, 524 
or 724 means an administrative driver's license suspension under the 
Administrative License Revocation (ALR) Program which is the subject of this 
chapter. 
(4) "Alcohol concentration" - As defined in Penal Code sec.49.01(1) means: 
(A) the number of grams of alcohol per 100 milliliters of blood; 
(B) the number of grams of alcohol per 210 liters of breath; or 
(C) the number of grams of alcohol per 67 milliliters of urine.
(5) "Alcohol-related or drug-related enforcement contact" - As defined in Texas 
Transportation Code, sec.524.001(3) means a driver's license suspension, 
disqualification, or prohibition order under the laws of this state or another 
state following: 
(A) a conviction of an offense prohibiting the operation of a motor vehicle 
while intoxicated, while under the influence of alcohol, or while under the 
influence of a controlled substance; 
(B) a refusal to submit to the taking of a blood or breath specimen following an 
arrest for an offense prohibiting the operation of a motor vehicle while 
intoxicated, while under the influence of alcohol, or while under the influence 
of a controlled substance; or 
(C) an analysis of a blood or breath specimen showing an alcohol concentration 
of the level specified in sec.49.01(2), of the Penal Code, following an arrest 
for an offense prohibiting the operation of a motor vehicle while intoxicated. 
(6) "APA" - The Texas Administrative Procedure Act, Texas Government Code, 
Chapter 2001. 
(7) "Certified Breath Test Technical Supervisor" - A person who has been 
certified by the department to maintain and direct the operation of a breath 
test instrument used to analyze breath specimens of persons suspected of driving 
while intoxicated. 
(8) "Child" - As defined in sec.51.02, of the Texas Family Code, means a person 
who is: 
(A) 10 years of age or older and under 17 years of age; or
(B) 17 years of age or older and under 18 years of age who is alleged or found 
to have engaged in delinquent conduct or conduct indicating a need for 
supervision as a result of acts committed before becoming 17 years of age. 
(9) "Commercial Driver's License" - As defined in Texas Transportation Code, 
sec. 522.003(3), means a license issued to an individual that authorizes the 
individual to drive a class of commercial motor vehicle. 
(10) "Commercial Motor Vehicle" - As defined in Texas Transportation Code, 
sec.522.003(5), means a motor vehicle or combination of motor vehicles used to 
transport passengers or property that: 
(A) has a gross combination weight rating of 26,001 or more pounds including a 
towed unit with a gross vehicle weight rating of more than 10,000 pounds; 
(B) has a gross vehicle weight rating of 26,001 or more pounds;
(C) is designed to transport sixteen or more passengers, including the driver; 
or 
(D) is transporting hazardous materials and is required to be placarded under 49 
C.F.R. Part 172, Subpart F. 
(11) "Contested Case" - A proceeding brought under Texas Transportation Code, 
Chapter 522 Subchapter I, Chapter 524 Subchapter D, or Chapter 724 Subchapter D. 
(12) "Conviction," - When involving minors, includes an adjudication under Title 
3 of the Texas Family Code for conduct constituting an offense under 
sec.106.041, Alcoholic Beverage Code or under sec.sec.49.04, 49.07, 49.08, of 
the Penal Code. An order of deferred adjudication received by a minor for an 
offense alleged under the aforementioned sections is also considered a 
conviction. 
(13) "Defendant" - One who holds a license as defined in paragraph (20) of this 
subsection and whose legal rights, duties, statutory entitlement, or privileges 
may be affected by the outcome of a contested case under this chapter. 
(14) "Denial" - The non-issuance of a license or permit, and loss of the 
privilege to obtain a license or permit, as defined in paragraph 20 of this 
subsection. 
(15) "Department" - The Department of Public Safety. 
(16) "Disqualification" - As defined in Texas Transportation Code, 
sec.522.003(9), means a withdrawal of the privilege to drive a commercial motor 
vehicle and includes the suspension, cancellation, or revocation of that 
privilege as authorized by a state or federal law. 
(17) "Driver" - A person who drives or is in actual physical control of a motor 
vehicle. 
(18) "Final Decision" - The decision issued by a Judge who hears the contested 
case and who is authorized under Texas Transportation Code, Chapter 522, 
Subchapter I, Chapter 524, Subchapter D, or Chapter 724, Subchapter D to issue 
final decisions in driver's license suspension cases.
(19) "Intoxicated"- Has the meaning assigned by Penal Code, sec.49.01(2). 
(20) "License" - A driver's license or other license or permit as provided in 
Texas Transportation Code sec.521.001(a)(6) to operate a motor vehicle issued 
under, or granted by, the laws of this state. 
(21) "Minor" - An individual under 21 years of age. 
(22) "Nonresident" - A person who is not a resident of this state. 
(23) "Office" - The State Office of Administrative Hearings.
(24) "Operate" - To drive or be in actual physical control of a motor vehicle. 
(25) "Peace Officer" - As used in Texas Transportation Code, Chapters 522, 524 
and 724, means a person elected, employed, or appointed as a peace officer under 
Article 2.12, Code of Criminal Procedure, or other law. A peace officer may also 
be referred to as an arresting officer. 
(26) "Public Place" - Any place to which the public or a substantial group of 
the public has access and includes, but is not limited to, streets, highways, 
and the common areas of schools, hospitals, apartment houses, office buildings, 
transport facilities, and shops. 
(27) "Test" - Pursuant to Texas Transportation Code, Chapter 724, Subchapter B, 
or Chapter 522, Subchapter I, means the following: 
(A) one or more specimens of a person's breath for the purpose of analysis to 
determine the alcohol concentration; or 
(B) one or more specimens of a person's blood for the purpose of analysis to 
determine the alcohol concentration or the presence in his body of a controlled 
substance, drug, dangerous drug or other substance; or 
(C) one or more specimens of a person's urine for the purpose of analysis to 
determine the alcohol concentration or the presence in his body of a controlled 
substance, drug, dangerous drug or other substance.
(b) (No change.)

sec.159.19.Issues.
(a) The Judge, in determining the merits of the case, shall consider whether the 
department proved the elements of the following issues by a preponderance of the 
evidence: 
(1) Hearings Involving Adults 
(A) If the hearing is under Texas Transportation Code, Chapter 524, Subchapter 
D, (test failed): 
(i) whether reasonable suspicion to stop and/or probable cause to arrest the 
person existed; and 
(ii) whether the person had an alcohol concentration of a level specified in 
Penal Code sec. 49.01(2), while operating a motor vehicle in a public place. 
(B) If the hearing is under Texas Transportation Code, Chapter 724, Subchapter 
D, (test refused): 
(i) whether reasonable suspicion to stop and/or probable cause to arrest the 
person existed; and 
(ii) whether probable cause existed to believe that the person was operating a 
motor vehicle in a public place while intoxicated; and 
(iii) whether the person was placed under arrest by the officer and was 
requested to submit to the taking of a specimen under Texas Transportation Code 
Chapter 724; and 
(iv) whether the person refused to submit to the taking of a specimen on proper 
request of the officer. 
(2) Hearings Involving Minors 
(A) If the hearing is under Texas Transportation Code, Chapter 524, Subchapter 
D, sec. 524.035, as amended, (test failed): 
(i) whether the person is a minor, and 
(ii) whether reasonable suspicion to stop and/or probable cause to arrest or 
take the minor into custody existed, and 
(iii) whether the minor had any detectable amount of alcohol in the minor's 
system while operating a motor vehicle in a public place.
(B) If the hearing is under Texas Transportation Code, Chapter 724, Subchapter 
D, as amended, (test refused): 
(i) whether reasonable suspicion to stop and/or probable cause to arrest or take 
the minor into custody existed; and 
(ii) whether probable cause existed to believe that the minor was operating a 
motor vehicle in a public place while intoxicated, or while having any 
detectable amount of alcohol in the minor's system; and 
(iii) whether the minor was placed under arrest or taken into custody and was 
requested to submit to the taking of a specimen under Texas Transportation Code 
Sections 724.011, 724.012 and 724.015, as amended; and
(iv) whether the minor refused to submit to the taking of a specimen on proper 
request of the officer. 
(b) Nothing in subsection (a)(1) of this section shall be interpreted to require 
proof of a person's age. 
(c) If the Judge finds the department proved each of the required elements by a 
preponderance of the evidence, the Judge will grant the department's petition 
and authorize the department to suspend or deny the license. If the Judge does 
not find that the department proved all of the necessary elements, the Judge 
will deny the petition, and the department shall not be authorized to suspend or 
deny the defendant's license.

sec.159.37.Appeal of Judge's Decision. 
(a) Pursuant to Texas Transportation Code, sec.sec.522.105(d), 524.041 et seq., 
or 724.047, a person whose driver's license has been suspended after a hearing 
under this section may appeal the suspension by filing, within thirty days after 
the date the Judge's final determination is issued, a petition in a county court 
at law in the county where the person was arrested or, if there is no county 
court at law in the county, in the county court of the county. Review shall be 
based on the substantial evidence rule as set forth in Government Code, Chapter 
2001, sec.2001.174. 
(b)-(c) (No change.) 
(d) A person who appeals shall send by certified mail a copy of the person's 
petition, certified by the clerk of the court in which the petition is filed, to 
the Office at its main office in Austin, and to the opposing party at its 
address of record. 
(e) On appeal, review is on the record as certified by the Office with no 
additional testimony, except after remand as provided by subsection (h) of this 
section. The record shall consist of the following: 
(1) the first file-marked or stamped copy of all parties' motions or other 
pleadings; 
(2) all written orders or decisions issued by the Judge and any evidence of 
transmittal to the parties; 
(3) all exhibits admitted into evidence; 
(4) all exhibits not admitted into evidence, but made a part of the record by a 
party as an offer of proof or bill of exceptions;
(5) a transcription of the proceedings electronically recorded by the Office. 
(f) A person who appeals a suspension may obtain a transcript of the 
administrative hearing by sending a written request to the Office within ten 
days of filing the appeal and paying the applicable fees. The fees shall not 
exceed the actual cost of preparing or copying the transcript, and upon payment 
thereof, the Office shall promptly furnish the reviewing court and both parties 
a certified copy of the record. The transcription of the electronic recording 
made by the Office constitutes the official record for appellate purposes, 
provided however, that the original recording of proceedings shall be maintained 
by the Office, and a copy of this recording shall be available for review by the 
parties or a reviewing court if necessary.
(g) (No change.) 
(h) On appeal, any party may apply to the court for leave to present additional 
evidence, and the court, if satisfied that additional information is material 
and that there were good reasons for the failure to present it in the hearing 
before a Judge, may remand the case with instructions that the additional 
evidence be taken before a Judge on conditions determined by the court. 
(1) If a case is remanded for taking of additional evidence, the appellant must 
file with the office, within ten days of the signing of the reviewing court's 
remand order, a request for relief, including the setting of a hearing on 
remand; 
(2) The request must include a copy of the remand order and an estimate of the 
time required to present the additional evidence, if a hearing is requested. 
(3) If a remand hearing is held and testimony is given and/or exhibits are 
introduced, the office will file a certified copy of the record of the hearing 
with the reviewing court. A transcription of the remand hearing will be filed 
with the reviewing court, provided the party who sought the remand hearing pays 
the fees, as determined by the office, required to prepare the transcript and/or 
exhibits. 
(i)-(j) (No change.) 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 26, 1997.
TRD-9711296
Phillip A. Holder
Deputy Chief Administrative Law Judge
State Office of Administrative Hearings
Effective date: September 15, 1997
Proposal publication date: July 8, 1997
For further information, please call: (512) 475-4993

TITLE 4. AGRICULTURE
PART I. Texas Department of Agriculture
CHAPTER 1.General Procedures
SUBCHAPTER H.Requests for Public Information
4 TAC sec.1.401
The Texas Department of Agriculture adopts an amendment to sec.1.401, concerning 
requests for public information, without changes to the proposed text as 
published in the July 15, 1997, issue of the Texas Register (22 TexReg 6510). 
The amendment is adopted to make the section consistent with changes made to the 
Open Records Act, the Government Code, Chapter 552 by House Bill 951, 75th 
Legislature, 1997. The amendment changes the time for producing public 
information for inspection or duplication from ten calendar to ten business 
days. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Texas Agriculture Code, sec.12.016, which 
provides the Texas Department of Agriculture with the authority to adopt rules 
to administer the Code; and, the Texas Government Code, sec.2001.004, which 
provides the department with the authority to adopt rules of procedure, and the 
Government Code, sec.552.230 which provides the department with the authority to 
adopt rules of procedure for inspection of public information.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711275
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 463-7541

CHAPTER 18.Organic Standards and Certification
4 TAC sec.18.2
The Texas Department of Agriculture (the department), adopts the amendment to 
sec.18.2, concerning organic certification period. Section 18.2 is adopted 
without changes to the proposed text as published in the July 15, 1997 issue of 
the Texas Register (22 TexReg 6511) and will not be republished. 
The amendment is adopted to change the current certification period from a 
fiscal year to a calendar year. The amendment will make the rule consistent with 
changes made to the Texas Agriculture Code, Chapter 18 as amended by HB 372 
during the 75th Legislative Session, 1997, and will allow applicants to complete 
new and/or renewal applications during a more appropriate time of the growing 
season. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Texas Agricultural Code,  sec.18.002, which 
provides the Texas Department of Agriculture with the authority to adopt rules 
as necessary for administration of the Code, Chapter 18.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 21, 1997.
TRD-9711081
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Effective date: September 10, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 463-7541

CHAPTER 23.Rose Grading
4 TAC sec.23.2, sec.23.3
The Texas Department of Agriculture (the department) adopts amendments to 
sec.23.2, concerning application for a certificate of authority, and sec.23.3, 
concerning fees without changes to the proposed texas as published in the July 
15, 1997, issue of the Texas Register (22 TexReg 6512). The amendments are 
adopted to make the rule consistent with changes made to the Texas Agriculture 
Code, Chapter 121 as amended by House Bill 372 during the 75th Legislative 
Session, 1997. The amendment will require obtaining a certificate of authority 
from the department only for those who grade or influence the grade of rose 
plants and not for those who sell rose plants. 
No comments were received regarding adoption of the amendments. 
The amendments are adopted under the Texas Agriculture Code, Chapter 121, which 
provides the Texas Department of Agriculture with the authority to adopt rules 
and prescribe procedures for the inspection, grading, and labeling of all rose 
plants sold or offered for sale within this state.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711276
Dolores Alvarado Hibbs
Deputy General Counsel
Texas Department of Agriculture
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 463-7541

TITLE 7. BANKING AND SECURITIES
PART II. Texas Department of Banking
CHAPTER 15. Corporate Activities
SUBCHAPTER A. Fees and Other Provisions of General Applicability 
7 TAC sec.15.1
The Finance Commission (the commission) adopts an amendment to sec.15.1, 
concerning definitions relating to provisions of general applicability, with 
nonsubstantive changes to the text as proposed in the July 8, 1997, issue of the 
Texas Register (22 TexReg 6384).
The recision of the banking commissioner's capital maintenance policy resulted 
in the need for this amendment to provide uniformity with federal law.
Pursuant to this amendment, an "eligible bank" must be "well capitalized" as 
defined in 12 Code of Federal Regulations, sec.325.103, and the definition of 
"well capitalized" will comport with criteria established for national banks. 
(An "eligible bank " qualifies for expedited treatment of certain applications.) 
The amendment will provide consistency in state and federal regulations 
regarding the definition of "well capitalized" and its effect on banks. 
Because the Texas Banking Act is being repealed in connection with its 
codification into the Finance Code, by Act of May 24, 1997, House Bill 10, 
sec.1, 75th Legislature, effective September 1, 1997, the citations to statutes 
in the introductory paragraph of this section as well as within the definitions 
of "accepted filing," "public notice," and "submitted filing" have been modified 
to correctly cite to the Finance Code. No amendments were proposed for these 
provisions. 
The agency received no comments on the proposal. 
The section is adopted pursuant to the Act, sec.1.012(a), which provides that 
the commission may adopt rules "to accomplish the purposes of this Act," 
including rules that "implement and clarify" the Act. 
As required by the Act, sec.1.012(b), the commission considered the need to 
promote a stable banking environment, provide the public with convenient, safe, 
and competitive banking services, preserve and promote the competitive parity of 
state banks with national banks and other depository institutions in this state 
consistent with the safety and soundness of state banks and the state bank 
system, and allow for economic development within this state.

sec.15.1. Definitions. 
Words and terms used in this chapter that are defined in the Finance Code, Title 
3, Subtitle A, have the same meanings as defined in the Finance Code. The 
following words and terms, when used in this chapter, shall have the following 
meanings, unless the context clearly indicates otherwise.
Accepted filing--Includes any application, request, notice, or protest filed 
under the Finance Code, Title 3, Subtitle A, this chapter, or any rule or 
regulation adopted pursuant to the Finance Code, in which the banking 
commissioner has received sufficient information to reach an informed decision, 
the appropriate fee has been paid pursuant to sec.15.2 of this title (relating 
to Filing Fees and Cost Deposits), and the banking commissioner has notified the 
person or entity who submitted the filing, in writing, that the submission is 
complete and has been accepted for filing.
Eligible bank--A state bank that:
(A) is well capitalized as defined in 12 Code of Federal Regulations, 
sec.325.103, or is operating in compliance with a capital plan approved in 
writing by the banking commissioner; 
(B)-(E) (No change) 
Public notice--Any matter including an application, request, notice, or protest, 
whether by proclamation or declaration, required or authorized to be published 
in a newspaper of general circulation by the Finance Code, Title 3, Subtitle A, 
this chapter, or any rule or regulation adopted pursuant to the Finance Code, or 
required to be published by the banking commissioner.
Submitted filing--Includes any initial application, request, notice, or protest 
filed under the Finance Code, Title 3, Subtitle A, this chapter or any rule or 
regulation adopted pursuant to the Finance Code, that is neither an accepted 
filing nor been abandoned. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 22, 1997.
TRD-9711163
Everette D. Jobe
General Counsel
Texas Department of Banking
Effective date: September 15, 1997
Proposal publication date: July 8, 1997
For further information, please call: (512) 475-1300

SUBCHAPTER F. Applications for Merger, Conversion, and Purchase or Sale of 
Assets
7 TAC sec.sec.15.101-15.117
The Finance Commission of Texas (the commission) adopts new sec.sec.15.101-
15.117, concerning applications for merger, conversion, share exchange, and 
purchase or sale of assets by or involving state banks and bank holding 
companies subject to regulation by the Banking Commissioner of Texas (the 
commissioner), with non-substantive changes to the text as proposed in the July 
8, 1997, issue of the Texas Register (22 TexReg 6385). 
The adopted sections comprise new Subchapter F entitled Applications for Merger, 
Conversion, and Purchase or Sale of Assets. The sections set out when an 
application is necessary and the information that must be included in the 
application, set publications standards, establish parameters for required 
opinions of counsel, define confidentiality provisions, and clarify the role of 
the commissioner in the approval process. The new subchapter is necessary 
because of the enactment of the now repealed and re-codified Texas Civil 
Statutes, Articles 342-1.001 et seq. In addition, new sec.sec.15.101 to 15.117 
are adopted to reduce regulatory burden and to make Texas law compatible with 
federal regulations to the extent possible. 
Because the Act is being repealed in connection with its codification into the 
Finance Code, by Act of May 24, 1997, House Bill 10, sec.1, 75th Legislature, 
effective September 1, 1997, citations to statutes in the sections as adopted 
have been non-substantively modified to correctly cite to the Finance Code. No 
comments were received regarding adoption of the new subchapter. 
The new sections are adopted under the Act, sec.1.012(a) (Finance Code, 
sec.31.003(a), effective September 1, 1997), which authorizes the commission to 
adopt rules to accomplish the purposes of the Act, to implement and clarify the 
Act, to preserve the safety and soundness of state banks, and to grant the same 
rights and privilege to state banks that are or may be granted to national banks 
domiciled in Texas. As required by the Act, sec.1.012(b) (Finance Code, 
sec.31.003(b), effective September 1, 1997), the commission considered the need 
to promote a stable banking environment, provide the public with convenient, 
safe, and competitive banking services, preserve and promote the competitive 
parity of state banks with national banks and other depository institutions in 
this state consistent with the safety and soundness of state banks and the state 
bank system, and allow for economic development within this state. 

sec.15.101. Definitions. 
(a) Words and terms used in this subchapter that are defined in the Finance 
Code, Title 3, Subtitle A, have the same meanings as defined in the Finance 
Code. 
(b) The following words and terms, when used in this subchapter, shall have the 
following meanings unless the context clearly indicates the contrary. 
(1) Annual report--Formal financial statements and accompanying narrative of 
management issued yearly for the benefit of shareholders and other interested 
parties. 
(2) Chartering agency--A government authority that has chartering jurisdiction 
over an entity involved in a transaction under this subchapter. 
(3) Conversion--The conversion of a state bank into a successor form of 
financial institution pursuant to the Finance Code, sec.32.501, or the 
conversion of a financial institution into a state bank pursuant to the Finance 
Code, sec.32.502. 
(4) Corporation or domestic corporation--A corporation for profit subject to the 
provisions of the Texas Business Corporation Act, except a foreign corporation. 
(5) CRA--The federal Community Reinvestment Act, 12 United States Code, 
sec.sec.2901 et seq. 
(6) Current financial statements-- Audited financial statements dated as of a 
date not more than 180 days prior to the date of submission of an application, 
or unaudited financial statements dated as of a date not more than 90 days prior 
to the date of submission of an application. 
(7) Financial institution--A bank, savings association, savings bank, or credit 
union. 
(8) Foreign corporation--A corporation for profit organized under laws other 
than the laws of this state. 
(9) Low-quality asset--An asset as defined in 12 United States Code, 
sec.371c(b)(10), currently an asset that falls in any one or more of the 
following categories: 
(A) an asset classified as "substandard," "doubtful," or "loss," or treated as 
"other loans especially mentioned" in the most recent report of examination or 
inspection of an affiliate prepared by either a federal or state supervisory 
agency; 
(B) an asset in a nonaccrual status; 
(C) an asset on which principal or interest payments are more than thirty days 
past due; or 
(D) an asset whose terms have been renegotiated or compromised due to the 
deteriorating financial condition of the obligor. 
(10) Material administrative proceeding--A past or pending proceeding by a 
state, federal, or foreign regulatory agency against the applicant or other 
person involved in a transaction under this subchapter that resulted in or could 
result in the issuance of a cease and desist, removal, enforcement action, 
determination letter or other order, including an order of supervision or 
conservatorship; excluding, however, a past proceeding that resulted in an 
order, other than a removal order, that has been satisfied or otherwise 
terminated more than five years prior to the date the application or notice 
requesting such information is submitted. 
(11) Material legal proceeding-- 
(A) a past or pending criminal proceeding against the applicant or other person 
involved in a transaction under this subchapter that resulted or may result in 
conviction of the applicant or other person of a crime under a state or federal 
law or the law of a foreign country relating to banks, other financial 
institutions, securities, financial instrument reporting, or another crime 
involving moral turpitude; or 
(B) a past or pending proceeding that has or may result in a judgment against 
the applicant or other person or entity involved in a transaction under this 
subchapter and the loss contingency must be disclosed in the financial 
statements of the entity under generally accepted accounting principles, or is 
otherwise material. 
(12) Merger--A transaction that is: 
(A) the division of a financial institution into two or more new financial 
institutions or into a surviving financial institution or one or more new 
financial institutions, domestic or foreign corporations, or other entities, at 
least one of which is a state bank or is not a financial institution; or 
(B) the combination of one or more financial institutions with one or more 
financial institutions, domestic or foreign corporations, or other entities, at 
least one of which is a state bank, resulting in: 
(i) one or more surviving financial institutions, domestic or foreign 
corporations, or other entities; 
(ii) the creation of one or more new financial institutions, domestic or foreign 
corporations, or other entities; or 
(iii) one or more surviving financial institutions, domestic or foreign 
corporations, or other entities and the creation of one or more new financial 
institutions, domestic or foreign corporations, or other entities; or 
(C) another transaction involving a financial institution or other entity, at 
least one of which is a state bank, which is considered a merger under the Texas 
Business Corporation Act, Article 1.02(12)(g).
(13) Other entity--An entity, whether or not organized for profit, other than a 
financial institution or a domestic or foreign corporation, including without 
limitation a not-for-profit corporation, limited or general partnership, joint 
venture, joint stock company, cooperative, association, insurance company, trust 
company, or other legal entity organized pursuant to the laws of this state or 
another state or country to the extent such laws or the constituent documents of 
that entity, consistent with such laws, permit that entity to enter into a 
merger or share exchange subject to this subchapter. 
(14) Principal executive officer--An officer primarily responsible for the 
execution of board policies and operation of the bank in accordance with the 
Finance Code, sec.33.106. 
(15) Purchase of assets--The purchase other than in the ordinary course of 
business of all, substantially all, or a part of the assets of a state bank or 
another entity. 
(16) Regulatory restriction--A memorandum of understanding, determination 
letter, notice of determination, order to cease and desist, or other state or 
federal administrative enforcement order issued by a state or federal banking 
regulatory agency, or another limitation imposed on a financial institution by a 
state or federal banking regulatory agency that restricts its ability to act 
without authorization from the regulatory agency imposing the condition. 
(17) Resulting state bank--A state bank subject to the provisions of this 
subchapter that is a surviving entity in a merger.
(18) Sale of assets--The sale, lease, exchange, or other disposition of 
substantially all of the assets of a state bank other than in the ordinary 
course of business. 
(19) Share exchange--A transaction by which one or more financial institutions, 
domestic or foreign corporations, or other entities acquire all of the 
outstanding shares of one or more classes or series of one or more state banks 
under the authority of the Finance Code, sec.32.008, and the Texas Business 
Corporation Act, Article 5.02. 
(20) Substantially all of the assets--More than 50% of the assets or assets 
sufficient to materially impact the net earnings of a state bank involved in a 
transaction under this subchapter. 
(21) Verified--Documents submitted by the applicant that have been attested to 
as true and correct. Attested documents filed pursuant to this subchapter are 
not required to be notarized. 

sec.15.102. General. 
Without the prior written consent of the banking commissioner, a state bank may 
not consummate a merger, conversion, sale of assets, purchase of assets, or 
share exchange. Except as otherwise provided in the Finance Code, Chapter 32, 
Subchapters D, E, and F, or in this subchapter, an application must be filed 
with the banking commissioner for review and consideration of the proposed 
transaction. 

sec.15.103. Expedited Filings.
(a) A financial institution that would be an eligible bank as defined in 
sec.15.1 of this title (relating to Definitions) if it was a state bank may file 
an expedited filing in lieu of an application required under sec.15.104 of this 
title (relating to Application for Merger or Share Exchange), sec.15.105 of this 
title (relating to Application for Authority to Purchase Assets of Another 
Financial Institution), or sec.15.108 of this title (relating to Conversion of a 
Financial Institution into a State Bank), and simultaneously tender the required 
filing fee pursuant to sec.15.2 of this title (relating to Filing Fees and Cost 
Deposits). 
(b) An expedited filing consists of a letter application including, except to 
the extent waived by the banking commissioner, the following items:
(1) a summary of the transaction; 
(2) a current proforma balance sheet and income statement for all parties to the 
transaction, with adjustments, reflecting the proposed transaction as of the 
most recent quarter ended immediately prior to the filing of the application, 
demonstrating th at each resulting state bank is well capitalized as defined in 
12 Code of Federal Regulations, sec.325.103;
(3) an executed opinion of counsel conforming to the requirements of the section 
of this subchapter that would apply had the applicant not filed an expedited 
filing; 
(4) copies of all other required regulatory notices or filings submitted 
concerning the transaction; and 
(5) a copy of the public notice published in conformity with the section of this 
subchapter that would apply had the applicant not filed an expedited filing. 
(c) The banking commissioner shall notify the applicant on or before a date that 
is 15 days after receipt of the application if expedited filing treatment is not 
available under this section for any reason. Such notification must be in 
writing and must indicate the reason expedited treatment is not available. 
Notification is effective when mailed by the banking commissioner and is not 
subject to appeal. 
(d) The banking commissioner may deny expedited filing treatment to an otherwise 
eligible applicant, in the exercise of discretion, if the banking commissioner 
finds that the application involves one or more of the following: 
(1) the proposed transaction involves significant policy, supervisory, or legal 
issues; 
(2) approval of the proposed transaction is contingent on additional statutory 
or regulatory approval by the banking commissioner or another state or federal 
regulatory agency; 
(3) the proposed transaction contemplates a resulting entity that is not a 
financial institution; 
(4) the proposed transaction involves a financial institution or other entity 
that is not domiciled in Texas; 
(5) the proposed transaction would cause the assets of a resulting state bank to 
increase more than: 
(A) 100% if it had total assets of one billion dollars or less prior to the 
transaction; or 
(B) 35% if it had total assets of more than one billion dollars prior to the 
proposed transaction. 
(6) the proposed transaction involves a state bank that has experienced, since 
the last commercial examination by a state or federal regulatory agency, asset 
growth, through acquisition or otherwise, greater than: 
(A) 100% if it had total assets of one billion dollars or less at the last 
examination; or 
(B) 35% if it had total assets of more than one billion dollars at the last 
examination. 
(e) The banking commissioner shall approve or deny an expedited filing on or 
before a date that is 30 days after the date the expedited filing is accepted 
for filing pursuant to sec.15.4 of this title (relating to Required Information 
and Abandoned Filings). The banking commissioner may, in the exercise of 
discretion, before the expiration of the period for decision, give the applicant 
written notice that the banking commissioner will convene a hearing to obtain 
evidence related to the application, and the decision will thereafter be made in 
accordance with sec.15.113 of this title (relating to Approval; Conditional 
Approval; Denial of Application; Hearings). 
(f) The applicant bears the burden to supply all material information necessary 
to enable the banking commissioner to make a fully informed decision regarding 
the expedited filing. 

sec.15.104. Application for Merger or Share Exchange.
(a) Scope. This section governs an application for merger or share exchange 
pursuant to the Finance Code, sec.sec.32.301-32.303 and 32.008. This section 
does not apply to a merger, reorganization, or conversion of a state bank into 
another form of financial institution pursuant to the Finance Code, sec.32.501, 
governed by sec.15.107 of this title (relating to Notice of Merger, 
Reorganization, or Conversion of a State Bank Into Another Form of Financial 
Institution). 
(b) Form of application. The applicant shall submit a fully completed, verified 
application on a form prescribed by the banking commissioner and simultaneously 
tender the required filing fee pursuant to sec.15.2 of this title (relating to 
Filing Fees and Cost Deposits). The application must, except to the extent 
waived by the banking commissioner, include the following information: 
(1) a summary of the proposed transaction; 
(2) a copy of all agreements related to the proposed transaction executed by an 
authorized representative of each party to the merger or share exchange; 
(3) articles and plan of merger or share exchange in accordance with the Texas 
Business Corporation Act, Part V, which must include the following:
(A) a current draft of the articles of merger or share exchange, and such number 
of additional copies equal to the number of surviving, new, or acquired 
entities, executed and acknowledged by an authorized officer for each party to 
the merger or share exchange; 
(B) the plan of merger or share exchange; 
(C) the restated articles of association of each resulting state bank; 
(D) the restated articles of incorporation or association, or other constitutive 
documents, of each surviving entity other than the resulting state bank; 
(E) the articles of incorporation or association, or other constitutive 
documents, of each new resulting entity; 
(F) if a party to a merger is an entity required to file documents with the 
Texas secretary of state before the transaction can be legally consummated, a 
provision in the articles of merger conditioning the merger upon the approval of 
the banking commissioner, containing wording substantially as follows, as 
applicable: This merger shall become effective upon the final approval and 
filing of the articles of merger by the Secretary of State of Texas and with the 
Banking Commissioner of Texas which shall be on or before _________ (date), 
which is the 90th day after the date of filing of such articles of merger with 
the Secretary of State; 
(4) for each party to the merger or share exchange, a certified copy of those 
portions of the minutes of board meetings and shareholder or participant 
meetings at which action was taken regarding approval of the merger or share 
exchange, or a certificate of an officer verifying the action taken by the board 
of directors and the shareholders or participants approving the merger or share 
exchange, or an explanation of the basis for concluding such action was not 
required; 
(5) for each resulting state bank, an assessment of its future prospects, 
proposed officers and directors, and proposed branches and other locations; 
(6) an assessment of the current regulatory and financial condition of each 
party to the transaction; 
(7) if a merger or share exchange will change the existing CRA delineated 
community of a resulting state bank, a copy of a map depicting the proposed 
delineated community of the resulting state bank; 
(8) a copy of current financial statements for each entity involved in the 
proposed transaction, accompanied by an affidavit of no material change dated no 
earlier than 30 days prior to the date of submission of the application; 
(9) a copy of the latest annual report for each financial institution and bank 
holding company involved in the proposed transaction;
(10) a copy of that portion of the most recent watch list for each financial 
institution involved in the proposed transaction that identifies low-quality 
assets; 
(11) a description of the due diligence review conducted by or for a state bank 
that is a party to the transaction and a summary of findings; 
(12) a description of all material legal or administrative proceedings involving 
any party to the merger or share exchange; 
(13) an opinion of legal counsel that conforms with sec.15.109 of this title 
(relating to Opinion of Legal Counsel), concluding the following:
(A) the merger or share exchange has been duly authorized by the board and 
shareholders or participants of each participating state bank in accordance with 
the Finance Code, sec.32.301, and the Texas Business Corporation Act; 
(B) the merger or share exchange will not cause or result in a material 
violation of the laws of this state relative to the organization and operation 
of state banks; 
(C) all deposit and other liabilities of every state bank that is a party to the 
merger or share exchange will be discharged or otherwise assumed or retained by 
a financial institution that is authorized by law to do so; 
(D) each surviving, new, or acquiring entity that is not a financial institution 
will not be engaged in the unauthorized business of banking, and each resulting 
state bank will not be engaged in a business other than banking or a business 
incidental to banking; and 
(E) all conditions with respect to the merger or share exchange that have been 
imposed by the banking commissioner have been satisfied or otherwise resolved 
or, to the best knowledge of legal counsel, no such conditions have been 
imposed; 
(14) a copy of each filing or application regarding the proposed merger or share 
exchange that is required to be made with another governmental authority, 
complete with all related attachments, exhibits, and correspondence; 
(15) a current pro forma balance sheet and income statement for each party to 
the transaction, with adjustments, reflecting the proposed merger or share 
exchange as of the most recent quarter ended immediately prior to the filing of 
the application; 
(16) a copy of the strategic plan that complies with the department's Memorandum 
1009, including projections of the balance sheet and income statement of each 
resulting state bank as of the quarter ending one year from the date of the pro 
forma financial statement required by paragraph (15) of this subsection; 
(17) an explanation of compliance with or nonapplicability of provisions of 
governing law relating to rights of dissenting shareholders or participants to 
the merger or share exchange; 
(18) a copy of all securities offering documents, proxy statements, or other 
disclosure materials delivered or to be delivered to shareholders or 
participants of a party concerning the merger or share exchange;
(19) an explanation of the manner and basis of converting or exchanging any of 
the shares or other evidences of ownership of an entity that is a party to the 
merger or share exchange into shares, obligations, evidences of ownership, 
rights to purchase securities, or other securities of one or more of the 
surviving, acquiring, or new entities, into cash or other property, including 
shares, obligations, evidences of ownership, rights to purchase securities, or 
other securities of another person or entity, or into a combination of the 
foregoing; 
(20) for antitrust purposes, an analysis of the anticipated competitive effect 
of the proposed transaction in the affected markets and a statement of the basis 
of the analysis of the competitive effects, or alternatively, a copy of the 
analysis of competitive effects of the proposed transaction addressed in the 
companion federal regulatory agency application; and 
(21) such other information that the banking commissioner, in the exercise of 
discretion, requires to be included in the particular application as considered 
necessary to an informed decision to approve or deny the proposed merger or 
share exchange. 
(c) Applicant's duty to disclose. The applicant bears the burden to supply all 
material information necessary to enable the banking commissioner to make a 
fully informed decision regarding the application. 
(d) Public notice. Within 14 days prior to or after submission of the initial 
application, the applicant shall publish notice in accordance with the 
requirements of sec.15.5 of this title (relating to Public Notice) in the 
specified communities where th e home office of the applicant, the target 
entity, and the resulting bank are or will be located. 
(e) Approval by the banking commissioner and filings with a chartering agency. 
(1) The banking commissioner shall approve a merger or share exchange only if 
the application indicates substantial compliance with all conditions of the 
Finance Code, sec.32.302(b). 
(2) If a party is required to file articles of merger or exchange with its 
chartering agency after acceptance for filing pursuant to sec.15.4(b) of this 
title (relating to Required Information and Abandoned Filings), an applicant for 
merger or share exchange shall file the original articles of merger or exchange 
as certified by the chartering agency with the banking commissioner. 
(3) After approval of an application under this section by the banking 
commissioner, the articles of merger or exchange previously filed with the 
chartering agency, if applicable, will be accepted and a certificate of merger 
or exchange will be issued by the banking commissioner who shall perform the 
duties required by the Finance Code, sec.32.302(c). With respect to a 
transaction that requires filing with the Texas secretary of state, if the 
banking commissioner does not approve the articles of merger or exchange on or 
before the 90th day after the filing of the articles of merger or exchange with 
the Texas secretary of state, the applicant shall refile the articles of merger 
or exchange with both the Texas secretary of state and with the banking 
commissioner. 
(4) After issuance of the certificate of merger or exchange by the banking 
commissioner, the applicant shall file a statement with the chartering 
authority, if applicable, certifying as to the date that each future event upon 
which the effectiveness of the merger was conditioned has been satisfied. 
(5) The date of issuance of the certificate of merger by the banking 
commissioner is the date of approval unless the merger agreement provides for a 
later effective date approved by the banking commissioner pursuant to the 
Finance Code, sec.32.302(d). 

sec.15.105. Application for Authority to Purchase Assets of Another Financial 
Institution.
(a) Scope. This section governs an application for the purchase of assets 
pursuant to the pursuant to the Finance Code, sec.sec.32.001(c) and 32.401-
32.404. 
(b) Form of application. The applicant shall submit a fully completed, verified 
application on a form prescribed by the banking commissioner and simultaneously 
tender the required filing fee pursuant to sec.15.2 of this title (relating to 
Filing Fees an d Cost Deposits). The application must, except to the extent 
waived by the banking commissioner, include the following information: 
(1) a summary of the proposed transaction, including a description of the types 
and total dollar amounts of liabilities and obligations expressly assumed; 
(2) a copy of all agreements related to the proposed transaction executed by an 
authorized representative of each party to the transaction;
(3) for each party to the transaction, a certified copy of those portions of the 
minutes of board meetings and shareholder or participant meetings at which 
action was taken regarding approval of the transaction, or a certificate of an 
officer verifying the action taken by the board of directors and the 
shareholders or participants approving the transaction, or an explanation of the 
basis for concluding such action was not required;
(4) an assessment of the applicant's future prospects, proposed officers and 
directors, and proposed branches and other locations;
(5) an assessment of the current regulatory and financial condition of each 
party to the transaction; 
(6) if the proposed transaction will change the existing CRA delineated 
community of the applicant, a copy of the proposed CRA map depicting the 
proposed delineated community of the applicant; 
(7) a copy of current financial statements for each entity involved in the 
proposed transaction, accompanied by an affidavit of no material change dated no 
earlier than 30 days prior to the date of submission of the application; 
(8) a copy of the latest annual report for each financial institution and bank 
holding company involved in the proposed transaction;
(9) a copy of that portion of the most recent watch list for the applicant and 
that portion of the watch list of the selling party that identifies low-quality 
assets being acquired or liabilities being assumed;
(10) a description of the due diligence review conducted by or for the applicant 
and a summary of findings; 
(11) a description of all material legal or administrative proceedings involving 
the applicant; 
(12) an opinion of legal counsel that conforms with sec.15.109 of this title 
(relating to Opinion of Legal Counsel), concluding the following:
(A) the transaction will not cause or result in a material violation of the laws 
of this state relative to the organization and operation of state banks; 
(B) the liabilities and obligations of the purchasing bank will be limited to 
those expressly assumed under the purchase agreement, unless otherwise required 
by law; and 
(C) all conditions with respect to the transaction imposed by the banking 
commissioner have been satisfied or otherwise resolved or, to the best knowledge 
of legal counsel, no such conditions have been imposed;
(13) a copy of each filing regarding the proposed transaction that is required 
to be made with another governmental authority, complete with all related 
attachments, exhibits, and correspondence; 
(14) a current pro forma balance sheet and income statement of the applicant, 
with adjustments, reflecting the proposed transaction as of the most recent 
quarter ended immediately prior to the filing of the application;
(15) a copy of the applicant's strategic plan that complies with the 
department's Memorandum 1009, including projections of the balance sheet and 
income statement of the applicant as of the quarter ending one year from the 
date of its current pro forma financial statement required in accordance with 
paragraph (14) of this subsection; 
(16) an explanation of the manner and basis of valuing any of the shares or 
other evidences of ownership of an entity that is to constitute part of the 
consideration used to acquire assets; 
(17) the location of each new branch of the applicant that will result from the 
transaction, 
(18) for antitrust purposes, an analysis of the anticipated competitive effect 
of the proposed transaction in the affected markets and a statement of the basis 
of the analysis of the competitive effects, or alternatively, a copy of the 
analysis of competitive effects of the proposed transaction addressed in the 
companion federal regulatory agency application, if applicable; and 
(19) such other information that the banking commissioner, in the exercise of 
discretion, requires to be included in the particular application as considered 
necessary to an informed decision to approve or deny the proposed transaction. 
(c) Applicant's duty to disclose. The applicant bears the burden to supply all 
material information necessary to enable the banking commissioner to make a 
fully informed decision regarding the application. 
(d) Public notice. Within 14 days prior to or after submission of the initial 
application, the applicant shall publish notice in accordance with the 
requirements of sec.15.5 of this title (relating to Public Notice) in the 
specified communities where th e home offices of the applicant and other 
financial institutions involved in the transaction are located. 

sec.15.106. Application for Authority to Sell Assets.
(a) Scope. This section governs an application for the sale of assets pursuant 
to the Finance Code, sec.32.405. Subsection (e) of this section specifically 
addresses a sale of assets without shareholder approval under the Finance Code, 
sec.32.405(a). 
(b) Form of application. A state bank seeking to sell all or substantially all 
of its assets after obtaining approval of its shareholders shall submit a plan 
of voluntary dissolution and liquidation to the banking commissioner for 
approval under the Finance Code, sec.sec.32.405(c) and 36.101 et seq, and such a 
transaction is outside the scope of this section. A state bank that seeks to 
continue engaging in the business of banking after selling substantially all of 
its assets, as that term defined in sec.1 5.101(b)(19) of this title (relating 
to Definitions), may not consummate the sale of assets without the written 
approval of the banking commissioner. The applicant shall submit a fully 
completed, verified application on a form prescribed by the banking commissioner 
and simultaneously tender the required filing fee pursuant to sec.15.2 of this 
title (relating to Filing Fees and Cost Deposits). The application must, except 
to the extent waived by the banking commissioner, include the following 
information: 
(1) a summary of the proposed transaction, including a description of the types 
and total dollar amounts of assets and liabilities transferred;
(2) a copy of all agreements related to the proposed transaction executed by an 
authorized representative of each party to the transaction;
(3) for each party to the transaction, a certified copy of those portions of the 
minutes of board meetings and shareholder or participant meetings at which 
action was taken regarding approval of the transaction, or a certificate of an 
officer verifying the action taken by the board of directors and the 
shareholders or participants approving the transaction, or an explanation of the 
basis for concluding such action was not required;
(4) an assessment of the continuing viability of the applicant, including a 
description of its future prospects, proposed officers and directors, and 
proposed branches and other locations; 
(5) an assessment of the current regulatory and financial condition of each 
party to the transaction; 
(6) if the proposed transaction will change the existing CRA delineated 
community of the applicant, a copy of the proposed CRA map depicting the 
proposed delineated community of the applicant; 
(7) a copy of current financial statements for each entity involved in the 
proposed transaction, accompanied by an affidavit of no material change dated no 
earlier than 30 days prior to the date of submission of the application; 
(8) a copy of the latest annual report for each financial institution and bank 
holding company involved in the proposed transaction;
(9) that portion of the watch list of the applicant that identifies low-quality 
assets being sold or related liabilities being transferred;
(10) a description of all material, legal or administrative proceedings 
involving the applicant; 
(11) an opinion of legal counsel that conforms with sec.15.109 of this title 
(relating to Opinion of Legal Counsel), concluding the following:
(A) the sale of assets by the applicant has been duly authorized by the board 
and shareholders or participants of the applicant in accordance with the Texas 
Business Corporation Act, or that such authorization is not required, stating 
the basis for that conclusion; 
(B) the transaction will not cause or result in a material violation of the laws 
of this state relative to the organization and operation of state banks; 
(C) all deposit liabilities transferred in the transaction will be discharged or 
otherwise assumed or retained by a financial institution that is authorized by 
law to do so; 
(D) each purchasing entity that is not a financial institution will not be 
engaged in the unauthorized business of banking; and 
(E) all conditions with respect to the transaction imposed by the banking 
commissioner have been satisfied or otherwise resolved or, to the best knowledge 
of legal counsel, no such conditions have been imposed;
(12) a copy of each filing regarding the proposed transaction that is required 
to be made with another governmental authority, complete with all related 
attachments, exhibits, and correspondence; 
(13) a current pro forma balance sheet and income statement of the applicant, 
with adjustments, reflecting the proposed sale of assets as of the most recent 
quarter ended immediately prior to the filing of the application; 
(14) a copy of the applicant's strategic plan that complies with the 
department's Memorandum 1009, including projections of the balance sheet and 
income statement of the applicant as of the quarter ending one year from the 
date of its current pro forma financial statement required in accordance with 
paragraph (13) of this subsection; 
(15) an explanation of compliance with or nonapplicability of the provisions of 
governing law relating to the rights of dissenting shareholders;
(16) an explanation of the manner and basis of valuing any of the shares or 
other evidences of ownership of a party that will constitute part of the 
consideration received for the sold assets; 
(17) for antitrust purposes, an analysis of the anticipated competitive effect 
of the proposed transaction in the affected markets and a statement of the basis 
of the analysis of the competitive effects, or alternatively, a copy of the 
analysis of competitive effects of the proposed transaction addressed in the 
companion federal regulatory agency application, if applicable; and 
(18) such other information that the banking commissioner, in the exercise of 
discretion requires to be included in the particular application as considered 
necessary to an informed decision to approve or deny the proposed transaction. 
(c) Applicant's duty to disclose. The applicant bears the burden to supply all 
material information necessary to enable the banking commissioner to make a 
fully informed decision regarding the application. 
(d) Public notice. Within 14 days prior to or after submission of the initial 
application, the applicant shall publish notice in accordance with the 
requirements of sec.15.5 of this title (relating to Public Notice) in the 
community where its home office is located and in such other communities as the 
banking commissioner may direct. 
(e) Sale of assets without shareholder approval under the Finance Code, 
sec.32.405(a). The board of a state bank, with the prior written approval of the 
banking commissioner, may cause a bank to sell all or substantially all of its 
assets without shareholder or participant approval if the banking commissioner 
finds the interests of depositors and creditors are jeopardized because of 
insolvency or imminent insolvency and that the sale is in their best interest. 
(1) To obtain approval of the banking commissioner under this subsection, the 
applicant shall submit a verified application on a form prescribed by the 
banking commissioner and simultaneously tender the required filing fee pursuant 
to sec.15.2 of this title. The application must, except to the extent waived by 
the banking commissioner under sec.15.112 of this title (relating to Waiver of 
Requirements), include the following information:
(A) a copy of each filing regarding the sale that is required to be made with 
another governmental authority, complete with all related attachments, exhibits, 
and correspondence; 
(B) a copy of the transaction agreement executed by an authorized representative 
of each party to the transaction, which must include an assumption and promise 
by the buyer to pay or otherwise discharge: 
(i) all of the applicant's liabilities to depositors; 
(ii) all of the applicant's liabilities for salaries of the applicant's 
employees incurred before the date of the sale; 
(iii) obligations incurred by the banking commissioner arising out of the 
supervision or sale of the applicant; and 
(iv) fees and assessments due the department; 
(C) for each party to the transaction, a certified copy of those portions of the 
minutes of board meetings and, with respect to the purchaser, shareholder or 
participant meetings at which action was taken regarding approval of the 
transaction or a certificate of an officer verifying the action taken by the 
board of directors and the shareholders or participants approving the 
transaction, or in the alternative, an explanation of the basis for concluding 
such action was not required; 
(D) a copy of current financial statements for each entity involved in the 
proposed transaction, accompanied by an affidavit of no material change dated no 
earlier than 30 days prior to the date of submission of the application; 
(E) that portion of the most recent watch list of the applicant that identifies 
low-quality assets; 
(F) a description of all material legal or administrative proceedings involving 
the applicant; and 
(G) such other information that the banking commissioner, in the exercise of 
discretion, requires to be included in the particular application as considered 
necessary to an informed decision to approve or deny the proposed transaction. 
(2) The banking commissioner shall expedite processing of an application under 
this subsection to the extent required to protect the interests of the 
depositors and creditors of the applicant. An application under this subsection 
is not subject to the notice and publication requirements of sec.15.5 of this 
title except as may otherwise be required by the banking commissioner. 

sec.15.107. Notice of Merger, Reorganization, or Conversion of a State Bank Into 
Another Form of Financial Institution.
(a) Scope. This section governs notice of the merger, reorganization, or 
conversion of a state bank into another form of financial institution pursuant 
to the Finance Code, sec.32.501. 
(b) Form of notice. A state bank does not cease to be subject to the 
jurisdiction of the banking commissioner until the banking commissioner is given 
written notice of intent to merge, reorganize, or convert before the 31st day 
preceding the date of the proposed transaction and the merger, reorganization, 
or conversion has otherwise become effective. The notice must, except to the 
extent waived by the banking commissioner, include the following information: 
(1) a summary of the proposed transaction; 
(2) a copy of all agreements or other documentation related to the proposed 
transaction executed by an authorized representative of the applicant and other 
parties, if any; 
(3) a copy of each filing regarding the proposed transaction that is required to 
be filed with another governmental authority, complete with all related 
attachments, exhibits, and correspondence; 
(4) a certified copy of those portions of the minutes of board meetings and 
shareholder or participant meetings at which action was taken regarding approval 
of the merger, reorganization, or conversion, or a certificate of an officer 
verifying the action taken by the board of directors and the shareholders or 
participants approving the merger, reorganization, or conversion; 
(5) Opinion of legal counsel. An opinion of legal counsel that conforms with the 
requirements of sec.15.109 of this title (relating to Opinion of Legal Counsel), 
concluding the following: 
(A) the merger, reorganization, or conversion of the state bank has been duly 
authorized by its board and shareholders or participants in accordance with the 
Finance Code, sec.32.501(b), and the Texas Business Corporation Act; 
(B) all deposit and other liabilities of the state bank will be discharged or 
otherwise retained by the successor financial institution; and 
(C) all conditions with respect to the merger, reorganization, or conversion 
imposed by the banking commissioner have been satisfied or otherwise resolved 
or, to the best knowledge of legal counsel, no such conditions have been 
imposed; 
(6) a publisher's certificate showing publication of notice as required by 
subsection (c) of this section; and 
(7) an explanation of compliance with the provisions of the Texas Business 
Corporation Act relating to rights of dissenting shareholders or participants. 
(c) Notices, publication, and certificate of authority. 
(1) The applicant shall submit a copy of the published notice of the proposed 
transaction required by the successor regulatory authority or shall publish 
notice as required by sec.15.5 of this title (relating to Public Notice). 
Submission of such notice, with the publisher's certificate required by 
subsection (b)(6) of this section, is considered notice of the transaction in 
accordance with the Finance Code, sec.32.501(c)(2). The banking commissioner may 
require, upon written notice to the applicant, such other publication 
requirements at such times and places and in such manner as considered 
appropriate. 
(2) Within 14 days after receipt of the certificate of authority to do business, 
or such other document issued by the successor regulatory authority authorizing 
the consummation of the merger, reorganization, or conversion, the successor 
financial institution shall provide written notice to the banking commissioner 
of the effective date and a copy of the certificate of authority or other 
document. 
(d) Filing fees. A filing fee is not required in connection with notice under 
this section. 

sec.15.108. Conversion of a Financial Institution into a State Bank. 
(a) Scope. This section governs the application for conversion of a financial 
institution into a state bank pursuant to the Finance Code, sec.32.502. 
(b) Form of application. The applicant shall submit a fully completed, verified 
application on a form prescribed by the banking commissioner and simultaneously 
tender a filing fee in the amount required for the filing of an application for 
a new bank charter pursuant to sec.15.2 of this title (relating to Filing Fees 
and Cost Deposits). The application must, except to the extent waived by the 
banking commissioner, include the following information:
(1) a summary of the proposed transaction; 
(2) a statement explaining whether the proposed state bank will be in compliance 
with each standard detailed in the Finance Code, sec.32.502(b), certified by the 
principal executive officer of the applicant;
(3) a copy of the plan of conversion executed by an authorized representative of 
the applicant; 
(4) articles of conversion, including the following: 
(A) the plan of conversion; 
(B) the articles of association of the proposed state bank;
(C) a provision conditioning the conversion upon the approval of the banking 
commissioner; 
(5) a certified copy of those portions of the minutes of board meetings and 
shareholder or participant meetings at which action was taken regarding approval 
of the conversion, or a certificate of an officer verifying the action taken by 
the board of directors and the shareholders or participants approving the 
conversion; 
(6) an assessment of the future prospects, proposed officers and directors, and 
proposed branches and other locations of the proposed state bank; 
(7) an assessment of the current regulatory and financial condition of the 
applicant; 
(8) if the conversion changes the existing CRA delineated community, a copy of a 
map depicting the proposed delineated community of the resulting state bank; 
(9) a copy of the latest annual report for the applicant and, if applicable, its 
holding company; 
(10) a copy of that portion of the most recent watch list for the applicant that 
identifies low-quality assets; 
(11) a description of all material legal or administrative proceedings involving 
the applicant or an officer, director, or principal shareholder of the 
applicant; 
(12) an opinion of legal counsel that conforms with sec.15.109 of this title 
(relating to Opinion of Legal Counsel), concluding the following:
(A) the conversion of the applicant has been duly authorized by its board and 
shareholders in accordance with governing law, and the applicant has in all 
material respects complied with the procedures prescribed by the federal, state, 
or foreign laws governing the exit of the applicant from its current regulatory 
system; 
(B) the conversion will not cause or result in any material violation of the 
laws of this state concerning the organization and operation of state banks; 
(C) the proposed state bank will not be engaged in a business other than banking 
or a business incidental to banking; and 
(D) all conditions with respect to the conversion imposed by the banking 
commissioner have been satisfied or otherwise resolved or, to the best knowledge 
of legal counsel, no such conditions have been imposed;
(13) a copy of each filing regarding the proposed conversion that is required to 
be made with another governmental authority, complete with all related 
attachments, exhibits and related correspondence;
(14) a current pro forma balance sheet and income statement of the applicant, 
with adjustments, reflecting the proposed conversion as of the most recent 
quarter ended immediately prior to the filing of the application;
(15) a copy of the applicant's current strategic plan with a comparison to the 
strategic plan requirements contained in the department's Memorandum 1009, 
including projections of the balance sheet and income statement of the resulting 
state bank as of the he quarter ending one year from the date of the pro forma 
financial statement required by paragraph (14) of this subsection; 
(16) an explanation of compliance with or nonapplicability of the provisions of 
governing law relating to rights of dissenting shareholders to the conversion; 
(17) a copy of all securities offering documents, proxy statements, or other 
disclosure materials delivered or to be delivered to shareholders in connection 
with the proposed conversion; 
(18) an explanation of the manner and basis of converting any shares or other 
evidences of ownership of the applicant into shares, obligations, evidences of 
ownership, rights to purchase securities or other securities of the proposed 
state bank, into cash or other property, including shares, obligations, 
evidences of ownership, rights to purchase securities or other securities of 
another person or entity, or into any combination of these; and 
(19) such other information that the banking commissioner requires, in the 
exercise of discretion, to be included in the particular application as 
considered necessary to an informed decision to approve or deny the proposed 
conversion. 
(c) Applicant's duty to disclose. The applicant bears the burden to supply all 
material information necessary to enable the banking commissioner to make a 
fully informed decision regarding the application. 
(d) Public notice. Within 14 days prior to or after submission of an initial 
application under this section, the applicant shall publish notice in accordance 
with sec.15.5 of this title (relating to Public Notice) in the specified 
communities where the home office of the applicant is located, and where the 
home office of the proposed state bank will be located, if different. 
(e) Approval by the banking commissioner. The banking commissioner shall approve 
a conversion only if the application indicates substantial compliance with all 
conditions of the Finance Code, sec.32.502(b). 

sec.15.109. Opinion of Legal Counsel. 
(a) An opinion of legal counsel required by this subchapter must be addressed to 
the banking commissioner and state the opinions expressed, the specific 
documents reviewed and the matters considered of both law and fact, as legal 
counsel has considered necessary or appropriate in the exercise of professional 
judgment for the opinions expressed, and the assumptions, qualifications, 
limitations, and exceptions made or taken with respect to the opinions 
expressed. A draft opinion may be submitted with an application under this 
chapter provided a final, signed opinion is delivered to the banking 
commissioner prior to final action on the application. Any variation in the 
final opinion from the draft version must be specifically called to the 
attention of the banking commissioner. 
(b) An opinion letter required under this subchapter will be governed by and 
interpreted in accordance with the Third Party Legal Opinion Report, Including 
the Legal Opinion Accord, of the Section of Business Law (American Bar 
Association, 1991), available in pamphlet form as reprinted from the November 
1991 issue of The Business Lawyer (Volume 47, Number 1, Page 167), (the Accord), 
or a successor document officially promulgated by an appropriate authority. 
(c) Unless specifically noted in the opinion, the department will assume that 
the opinions expressed are based upon and subject to the assumptions, 
qualifications, limitations and exceptions set forth in the Accord, provided the 
Accord is incorporated by reference. In addition, whether or not stated in the 
Accord, if specifically noted in the opinion, counsel:
(1) need not express an opinion as to the laws of the United States or a foreign 
jurisdiction, except as required by sec.15.108(b)(12)(A) of this title (relating 
to Conversion of a Financial Institution into a State Bank), or the laws of a 
state jurisdiction other than this state; 
(2) may assume that the parties to the transaction have engaged only in 
activities provided in their respective constitutive documents, and that all 
surviving parties to the transaction will engage only in activities provided in 
their respective constitutive documents; 
(3) may assume that the transaction will be consummated in accordance with its 
terms as disclosed in the application; and 
(4) may qualify the opinions given as opinions solely for the benefit of the 
department that may not be quoted in whole or in part or otherwise referred to 
in another document or report, and that may not be furnished to a person or 
entity other than the department and its representatives without the written 
consent of counsel, except as may be permitted or required by law, including the 
Finance Code, sec.31.303, and the Government Code, Chapter 552. 
(d) Legal counsel shall specifically notify the banking commissioner of any 
substantive deviation from the assumptions, qualifications, limitations and 
exceptions allowed in this section and the Accord, and any substantive deviation 
from the opinion requirements of the section of this subchapter that governs a 
particular application. Deviations may result in a processing delay of the 
application to the extent additional analysis is required to understand the 
purpose of the deviation. A substantive deviation from the requirements of this 
subchapter applicable to legal opinions that is not brought to the attention of 
the banking commissioner will be considered a material misrepresentation in the 
application. 
(e) Legal counsel rendering an opinion under this subchapter shall be an 
attorney in good standing admitted to practice before the highest court of a 
state, territory or district of the United States. However, legal counsel shall 
be well versed and professionally competent in applicable Texas law, or should 
seek the advice and opinion of an attorney in good standing admitted to practice 
before the highest courts in this state if legal counsel may not properly and 
ethically render opinions regarding applicable Texas law. An opinion of local 
legal counsel must be disclosed if relied on by legal counsel. 
(f) Legal counsel rendering an opinion under this subchapter shall be 
independent of the applicant, the notice provider, or another person or entity 
required to submit an opinion of counsel pursuant to this section. Legal counsel 
is considered independent if able to exercise independent professional judgment 
and render candid advice, whether in private practice or employed by an 
applicant. 

sec.15.110. Rights of Dissenting Shareholders. 
The rights of dissenting shareholders or participants to a merger, share 
exchange, or conversion under this subchapter are governed by the Finance Code, 
sec.32.303, and the Texas Business Corporation Act or other applicable law 
relating to the rights of dissenters, and applicants shall provide evidence of 
compliance with or inapplicability of such provisions of law. 

sec.15.111. Investigation of Application. 
(a) Authority. An application under this subchapter is subject to such 
investigation as considered necessary, in the banking commissioner's sole 
discretion, in order to make an informed decision regarding an application.
(b) Costs and fees. An applicant under this subchapter shall pay reasonable 
costs incurred in the investigation including the cost of a required 
examination, as provided by sec.3.36(h) of this title (relating to Annual 
Assessments and Speciality Examination Fees) and sec.15.2(e) of this title 
(relating to Filing Fees and Cost Deposits). 
(c) Examinations. The banking commissioner may consider the following factors in 
determining whether to require an examination of one or more of the entities to 
the transaction: 
(1) a question exists regarding the solvency or potential solvency of the 
applicant or one or more of the financial institutions or other entities 
involved in the proposed transaction; 
(2) a financial institution involved in the transaction has not been examined by 
a state, federal, or foreign regulatory agency within the 18 month period 
immediately preceding the date of submission of the application;
(3) a financial institution involved in the proposed transaction has numerous 
substantive violations cited in its last examination report, or has a less than 
satisfactory regulatory rating; 
(4) a question exists regarding the experience, ability, standing, 
trustworthiness, or integrity of the existing or proposed officers, directors, 
managers or managing participants of a party involved in the proposed 
transaction; 
(5) a question exists whether a resulting state bank will operate in compliance 
with the law; 
(6) a question exists whether a resulting state bank will be free from improper 
or unlawful influence or interference from its principal shareholders with 
respect to operation in compliance with the law; 
(7) a question exists whether a resulting state bank will have adequate 
capitalization; 
(8) one or more of the parties to the transaction is under a regulatory 
restriction; or 
(9) such other factors as determined in the sole discretion of the banking 
commissioner. 

sec.15.112. Waiver of Requirements. 
The banking commissioner, in the exercise of discretion, reserves the right to 
waive a requirement in this subchapter, unless specifically required by the 
Finance Code, Title 3, Subtitle A, or other applicable provision of federal or 
state law. 

sec.15.113. Approval; Conditional Approval; Denial of Application; Hearings. 
(a) Approval, conditional approval, or denial. Except for expedited filings 
governed by sec.15.103 of this title (relating to Expedited Filings), the 
banking commissioner shall approve or deny an application filed under this 
subchapter on or before a date that is 60 days after the date the application is 
accepted for filing pursuant to sec.15.4 of this title (relating to Required 
Information and Abandoned Filings). 
(b) Pre-decision hearing. The banking commissioner may, in the exercise of 
discretion, before the expiration of the initial period for decision provided by 
subsection (a) of this section, give the applicant written notice that the 
banking commissioner will convene a hearing to obtain evidence related to the 
application. Such notice by the banking commissioner suspends the specified 
period for approval or denial of an application, and the banking commissioner 
shall approve or deny the application on or before a date that is 30 days after 
the date the final proposal for decision resulting from the hearing is provided 
to the banking commissioner and the applicant. 
(c) Acceptance of conditional approval. The banking commissioner may give the 
applicant written notice that the application has been approved subject to 
certain conditions. The applicant shall provide the banking commissioner with 
written confirmation of acceptance of the conditions on or before a date that is 
10 days after the date of notification to the applicant of the conditional 
approval. An agreement between the applicant and the banking commissioner 
concerning conditional approval is enforceable against the applicant. In the 
event an applicant who has received conditional approval does not provide the 
banking commissioner with written confirmation as required by this subsection, 
consummation of the transaction constitutes confirmation of acceptance of the 
conditions imposed by the banking commissioner and is considered for all 
purposes an agreement enforceable against the applicant.
(d) Requests for hearing. An applicant may request a hearing on or before a date 
that is 30 days after the effective date of notice of denial or conditional 
approval of an application under this subchapter by the banking commissioner. 
The request for hearing must be in writing and state with specificity the 
reasons the applicant alleges that the decision of the banking commissioner is 
in error. The applicant has the burden of proof for each issue specified in the 
request for hearing. The request for hearing and the banking commissioner's 
decision to deny or condition the application will be made a part of the record. 
(e) Hearings on denial of applications. Requests for hearing under this 
subchapter will be forwarded to the administrative law judge who shall enter 
appropriate orders and conduct the hearing on or before a date that is 60 days 
after the date the request for hearing was received, or as soon after that as is 
reasonably possible, under Chapter 9 of this title (relating to Rules of 
Procedure for Contested Case Hearings, Appeals, and Rulemaking) and the 
Government Code, Chapter 2001. A proposal for decision, exceptions and replies 
to such proposal for decision, the final decision of the banking commissioner, 
and motions for rehearing are governed by Chapter 9 of this title. An applicant 
may not appeal denial of an application or conditional approval of an 
application until a final order is issued. After a hearing and final order, the 
applicant may appeal the final order as provided in the Finance Code, 
sec.31.202. 

sec.15.114. Consummation of a Transaction. 
A transaction under this subchapter must be consummated as proposed in the 
application, in the agreement concerning conditional approval, or as provided in 
a final order. An approved transaction under this subchapter must be consummated 
within 12 months after the date of approval by the banking commissioner unless 
an extension is granted in writing. Until a transaction is consummated, the 
banking commissioner may alter, suspend, or withdraw approval should an interim 
development warrant such action. 

sec.15.115. Notification. 
A notification by the banking commissioner under this subchapter may be by 
registered or certified mail, return receipt requested, and is complete when the 
notification is deposited in the United States mail postage prepaid, return 
receipt requested, mailed to the address furnished in the application. 
Notification may also be made in person to the applicant, or to another person, 
financial institution, foreign corporation or domestic corporation, or other 
entity subject to this subchapter, by agent-receipted delivery or by courier-
receipted delivery to the address furnished in the application, or by telephonic 
document transfer to the applicant's telecopier number as furnished in the 
application. Notice by telephonic document transfer served after 6:00 p.m. local 
time of recipient is considered as notice served on the following day. 

sec.15.116. Abandoned Filing. 
The banking commissioner may determine an application under this subchapter to 
be abandoned pursuant to sec.15.4 of this title (relating to Required 
Information and Abandoned Filings). 

sec.15.117. Confidentiality. 
Information obtained by the banking commissioner under this subchapter is 
presumed to be public information unless such information is confidential under 
the Finance Code, sec.31.301 et seq, and sec.3.111 of this title (relating to 
Confidential Information), or under exceptions contained in Government Code, 
Chapter 552. The applicant has the burden to request confidential treatment for 
specified information, to segregate and mark documents claimed to be 
confidential, and to specifically reference the pro vision of law that allows 
confidential treatment. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 22, 1997.
TRD-9711162
Everette D. Jobe
General Counsel
Texas Department of Banking
Effective date: September 15, 1997
Proposal publication date: July 8, 1997
For further information, please call: (512) 475-1300

CHAPTER 29. Sale of Checks Act
7 TAC sec.29.3
The Finance Commission of Texas (the commission) adopts new sec.29.3, concerning 
exemption from licensing under the Sale of Checks Act, Texas Civil Statutes, 
Article 489d (the Act), with nonsubstantive changes to the text as proposed in 
the July 8, 1997, issue of the Texas Register (22 TexReg 6398). 
Pursuant to the Act, sec.4(b) (Finance Code, sec.152.103, effective September 1, 
1997), new sec.29.3 provides that a person engaged in commercial transactions in 
interstate commerce, providing certain financial services that facilitate the 
provision of c ash, goods, or services to motor carriers and their employees 
through the ancillary sale of checks, and who is not engaged in the business of 
selling checks to the public, can be exempt from the licensing requirements of 
the Act. An application accompanied by a $100 filing fee to offset the cost of 
processing is required to claim the exemption.
Because the Act is being repealed in connection with its codification into the 
Finance Code, by Act of May 24, 1997, House Bill 10, sec.1, 75th Legislature, 
effective September 1, 1997, citations to statutes in the sections as adopted 
have been non-substantively modified to correctly cite to the Finance Code. The 
commission received no comments on the proposal. 
Adoption of this section is made under the Act, sec.9E (Finance Code, 
sec.152.102(a), effective September 1, 1997), which authorizes the commission to 
adopt rules necessary for the enforcement and administration of the Act. As 
required by the Act, sec.4(b) (Finance Code, sec.152.103(2), effective September 
1, 1997), the banking commissioner has determined that proposed new sec.29.3 is 
in the public interest. 

sec.29.3. Exemption For Commercial Transactions. 
(a) Definitions. Words and terms used in this section that are defined in the 
Finance Code, sec.152.002, have the same meanings as defined in the Finance 
Code. The following words and terms, when used in this section, shall have the 
following meanings, unless the context clearly indicates otherwise: 
(1) Ancillary--Incidental or secondary to a person's regular trade or business. 
(2) Interstate commerce--The transportation of goods between Texas and other 
states located in the United States or the transaction of commerce between 
persons residing in different states. 
(3) Motor carrier--A state or federally licensed person that controls, operates, 
or directs the operation of one or more vehicles that transport goods over a 
road or highway. 
(4) Public--A person other than a person that has assets of $25 million or more 
or that is owned or controlled by a corporation or entity with assets of $25 
million or more.
(b) Exemption. In accordance with the Finance Code, sec.152.103, a person who 
facilitates the provision of cash, goods, and services through the ancillary 
sale of checks or other payment devices is exempt from the licensing 
requirements of the Finance Code, Chapter 152, if the person:
(1) sells checks or other payment devices solely to or for the benefit of a 
motor carrier and its employees; and: 
(A) the motor carrier is engaged in interstate commerce; or
(B) the sale of checks or other payment devices occurs in interstate commerce; 
and 
(2) does not engage in the business of selling checks to the public. 
(c) Application and fee. A person requesting an exemption under this section 
must file a written application with the banking commissioner, accompanied by a 
filing fee of $100, demonstrating that the person qualifies for the exemption 
and undertakes to engage only in activities consistent with continued 
eligibility. The banking commissioner shall grant the exemption if the banking 
commissioner finds that the applicant meets the requirements of this section. If 
the exemption is granted, the banking commissioner shall mail a certificate of 
exemption to the applicant. 
(d) Representation of purchaser. In determining compliance with the terms of the 
exemption provided by this section, a seller may rely on the representations of 
a purchaser regarding the purchaser's assets unless the seller knows or 
reasonably should know that the representation is false.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 22, 1997.
TRD-9711161
Everette D. Jobe
General Counsel
Texas Department of Banking
Effective date: September 15, 1997
Proposal publication date: July 8, 1997
For further information, please call: (512) 475-1300

TITLE 10. COMMUNITY DEVELOPMENT
PART V. Texas Department of Commerce
CHAPTER 174.Defense Economic Adjustment Assistance Grant Program
10 TAC sec.sec.174.1-174.11
The Texas Department of Commerce (department), on behalf of the Texas Department 
of Economic Development, adopts new sec.sec.174.1-174.11, implementing the 
Defense Economic Adjustment Assistance Grant Program authorized by the 75th 
Legislature in Senate Bill (SB) 227 through the addition of Texas Government 
Code, Chapter 486. Sections 174.1-174.11 are being adopted without changes to 
the proposed text as published in the July 15, 1997, issue of the Texas Register 
(22 TexReg 6521), and will not be republished. 
The rules are being adopted in order to implement the Defense Economic 
Adjustment Assistance Grant Program in compliance with SB 227, which became 
effective on June 18, 1997. Section 486.002(d) requires the Texas Department of 
Commerce Policy Board to adopt rules for the implementation of the grant program 
established by SB 227. The Defense Economic Adjustment Assistance Grant Program 
was created by the 75th Legislature to provide state funding for the purposes of 
acquiring federal grant assistance or for sharing in the cost of redevelopment 
of communities that have been adversely affected by defense downsizing. The 
rules are designed to provide standards of eligibility and procedures for 
obtaining assistance under the program. 
Section 174.1 sets forth the purpose of and definitions for the program. Section 
174.2 establishes the period of time during which grant funds may be expended. 
Section 174.3 sets forth grant eligibility criteria. 
Section 174.4 describes acceptable source documentation for establishing grant 
eligibility. 
Section 174.5 sets forth minimum and maximum award amounts, the percentage of 
project investment that may be provided by grant funds, and the certification 
required from local governments applying for grants, documenting their attempts 
to acquire funding from various sources and/or their inability to acquire 
adequate matching funds or investments. 
Section 174.6 provides that the department may develop a formal application form 
and sets forth the minimum contents for an application. 
Section 174.7 sets forth a process for submission and review of applications, 
including provisions for the appointment by the department's executive director 
of a five-member review panel to be appointed by the executive director to 
review, evaluate, and make recommendations regarding grant applications to the 
governing board. 
Section 174.8 sets forth the circumstances under which program funds will be 
committed or encumbered, subject to fund availability. The section provides for 
notification to applicants in the event of non-availability of funds. Section 
174.9 sets forth the minimum contractual assurances that will be required of 
grant awardees prior to the receipt of program funds. 
Section 174.10 sets forth department responsibilities to solicit applications 
and publicize the grant program, to establish and conduct the evaluation and 
award process, to develop contracts containing adequate controls and performance 
measures, and to minimize repetitive and unnecessary reporting. 
Section 174.11 provides for written reports from grant awardees as required by 
the department. 
The department received comments regarding the proposed rules from the Alamo 
Community College District. The comments are summarized, along with the 
department's responses, as follows: 
Comment: Section 174.1(b) of the rules states that the "primary goal is to 
increase employment opportunity to dislocated defense workers." Educational 
institutions will not be in a position to provide employment opportunity, but 
rather prepare defense workers for gainful employment in which they may earn 
wages to sustain or improve their present standard of living. The rules and 
regulations do not address how educational institutions may submit an 
application through a local governmental entity -- a municipality or county 
governmental body or regional planning commission. 
Response: The department does not agree with the comment. Senate Bill 227 
emphasizes assistance for defense worker job loss. The department thinks that 
reemployment of defense workers through community development was the primary 
goal of the bill. However, an educational institution may be a subrecipient of 
grant funds as long as the use of the grant proceeds is permitted by SB 227, 
sec.1, to be codified at Government Code, sec.486.005, Use of Proceeds: "The 
local governmental entity may use the proceeds of the grant for the purchase of 
property from the department of defense or its designated agent, new 
construction, rehabilitation, or renovation of facilities or infrastructure, or 
purchase of capital equipment or insurance." 
Further, SB 227, sec.1, to be codified at Government Code, sec.486.003, 
Eligibility for Grant, provides that municipalities, counties, and regional 
planning commissions are the only local governmental entities authorized to 
submit grant applications and receive grant funds. It is the department's 
understanding that the legislature intentionally narrowed the field of eligible 
applicants to these local governmental entities so that funding priorities would 
be resolved at the local level, rather than at the state level. Therefore, the 
department does not believe it is in a position to determine priorities for 
local communities, and the rules do not address the process or the criteria by 
which local funding priorities are to be decided. However, according to SB 227, 
sec.1, to be codified at Government Code, sec.486.005(b), Use of Proceeds, a 
local governmental entity may deliver grant funds to other local institutions, 
which the department thinks may include educational institutions, for use 
consistent with the legislation. 
Comment: Section 174.3(c) of the rules specifies that "applicants for the grant 
must provide adequate documentation of defense workers job loss." This language 
does not address the need to train workers for suitable employment prior to 
defense workers losing their jobs. It would be difficult for a defense worker to 
seek training while being unemployed. Ideally, the training should be provided 
while defense workers are still employed. 
Response: The department does not agree with the comment. Both the statute and 
the rules address proposed as well as actual facility realignment and closure, 
and expected as well as actual job loss. As long as job loss can be documented 
adequately, either projected or actual past defense worker job loss may be 
acceptable to establish eligibility under the rules. 
Comment: Section 174.5(b) of the rules would make it difficult for non-profit 
organizations, such as educational institutions, to come up with a percentage of 
the amount of matching funds required. Our understanding of the intent of SB 227 
was to make funds available for use as matching funds for federal grants. 
Response: The department does not agree with the comment. The percentages set 
forth at sec.174.5(b) of the rules are statutory and are also found in sec.1 of 
SB 227, to be codified at Government Code, sec.486.004(b). The department's 
understanding of the legislative intent was to ensure that local governmental 
entities were also financial participants in funding projects through the 
program. 
The rules are proposed under the authority of the Texas Government Code, 
sec.481.0044(a), which requires the Texas Department of Commerce Policy Board to 
adopt rules for programs administered by the department, SB 227, enacting 
Government Code, sec.486.002(d), which requires the Policy Board to adopt rules 
to implement the Defense Economic Adjustment Assistance Grant program, and the 
Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, 
which prescribes the standards for agency rulemaking.
Texas Government Code, Chapter 486, is affected by this proposal. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711322
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 936-0181

CHAPTER 175.Defence Economic Readjustment Zones
10 TAC sec.sec.175.1-175.9
The Texas Department of Commerce (department), on behalf of the Texas Department 
of Economic Development, adopts new sec.sec.175.1-175.9, implementing the 
Defense Economic Readjustment Zone Program authorized by the 75th Legislature in 
Senate Bill (SB) 226 through the addition of Texas Government Code, Chapter 
2310. Sections 175.1-175.9 are being adopted without changes to the proposed 
text as published in the July 15, 1997, issue of the Texas Register (22 TexReg 
6525), and will not be republished.
The rules are being adopted in order to implement the Defense Economic 
Readjustment Zone Program in compliance with SB 226, which became effective on 
May 19, 1997. Section 2301.051(c) requires the Texas Department of Commerce 
Policy Board to adopt rules for the implementation of the readjustment zone 
program established by SB 226. The Defense Economic Readjustment Zone Program 
was created by the 75th Legislature to establish a process to identify areas 
that have been adversely affected by defense downsizing and to provide 
regulatory and tax incentives to encourage business to locate or expand in those 
areas. The rules are designed to provide standards of eligibility and procedures 
for obtaining readjustment zone and readjustment project designation under the 
program. 
Section 175.1 sets forth the purpose of and definitions for the program, 
provides for suspension of rules, and sets forth the procedure for communicating 
with the department. 
Section 175.2 sets forth the procedure and criteria for application for 
readjustment zone designation and the documentation required to establish job 
loss that must accompany an application. 
Section 175.3 sets forth readjustment project eligibility criteria and provides 
that the department may designate at least one readjustment project off of the 
defense facility. 
Section 175.4 requires a readjustment zone application to be in writing and 
describes the contents of the application. 
Section 175.5 requires the readjustment project application to be in writing and 
describes the contents of the application. 
Section 175.6 sets forth the process for filing readjustment zone and 
readjustment project applications; the process for requesting refunds, tax 
reductions, new job certifications, or other benefits encouraged under the 
program; filing fees; the process for staff review and notification of 
applications and certification requests; and the effective date for readjustment 
project designation. 
Section 175.7 sets forth additional requirements for readjustment project 
designation. 
Section 175.8 sets forth final approval standards for readjustment zone 
designation, the period for which the designation is in effect, the period for 
which a readjustment project is in effect, and the process for removal of 
designation as a readjustment zone or readjustment project. 
Section 175.9 sets forth annual reporting requirements for the program.
No comments were received concerning the proposed rules. 
The rules are adopted under the authority of the Texas Government Code, 
sec.481.0044(a), which requires the Texas Department of Commerce Policy Board to 
adopt rule for programs administered by the department, SB 226, enacting 
Government Code, sec.2310.051(c), which requires the Policy Board to adopt rules 
to implement the Defense Economic Readjustment Zone Program, and the 
Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, 
which prescribes the standards for agency rulemaking.
Texas Government Code, Chapter 2310, is affected by this proposal. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711323
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 936-0181

CHAPTER 186.Smart Jobs Fund Program
SUBCHAPTER A.General Provisions
10 TAC sec.sec.186.101, 186.103, 186.104, 186.106
The Texas Department of Commerce (department), on behalf of the Texas Department 
of Economic Development, adopts proposed amendments to sec.sec.186.101, 186.103, 
186.104, and 186.106, relating to Subchapter A, General Provisions, for 
administration of the Smart Jobs Fund Program. Section 186.104 is adopted with 
changes to the proposed text as published in the June 20, 1997, issue of the 
Texas Register (22 TexReg 5877). Sections 186.101, 186.103, and 186.106 are 
adopted without changes and will not be republished. 
The amendments are being adopted in order to comply with changes made to the 
Smart Jobs program by Senate Bill (SB) 932 of the 75th Texas Legislature and to 
clarify the meanings of terms. Section 186.104, concerning Definitions, adds 
definitions for consortium, class-room training, and on-the-job training that 
were not previously defined. The new definitions are being added to clarify the 
meaning of the terms for the public. Section 186.104 also adds definitions for 
local labor market and prevailing wage, since the amended sec.481.155(d) of the 
Smart Jobs Fund Program Act (the Act) references these terms. Changes are being 
made to the definition for contract to clarify the different entities which can 
be a party to a Smart Jobs Fund grant contract. Changes are being made to the 
definition of full-time employment to delete the phrase "for a period of 25 
consecutive weeks," because it is not needed in administering the program. 
Changes are being made to the definition of minority employer status for 
application purposes to delete reference to meeting the qualifications for 
certification as a historically underutilized business and to reflect the 
amended definition of minority group member contained in sec.35 of SB 932. 
Changes are being made to the definitions of department and governing board to 
reflect statutory revisions made by the 75th Legislature. Section 186.104 also 
deletes definitions for emerging occupation, and manufacturing occupation since 
those terms are now defined in sec.35 of SB 932.
The definition of smart job is being modified, and the modified definition is 
being added back into sec.186.104 in response to comments received by the 
department. Including the modified definition does not change program 
administration or current program practices. 
Section 186.106, concerning Modifications, is being amended to be applicable 
only to micro-businesses with twenty employees or fewer due to amendments to 
sec.481.155 of the Act set forth in sec.37 of SB 932. 
The department received one comment regarding the proposed amendments. The 
comment recommended that the department retain the definition of Smart Job in 
sec.186.104 in order to reflect legislative intent that the Smart Jobs Fund 
program target the creation and retention of high-wage jobs. 
The department agrees in part and disagrees in part with the comment. The 
definition was deleted because the department thought it did not add value and 
could be misleading. The term "smart job" was not used elsewhere in the rules or 
the statute except for the title of the program. Therefore, the department did 
not think the definition was necessary. In addition, the department thought that 
the definition could be misleading because employers might think that the 
program was more limited than was intended. While the definition referred to 
jobs requiring "high-level thinking, reasoning, and technical skills," these 
terms were not defined elsewhere and were applied subjectively by various 
employers. Further, the terms "family-wage jobs" and "high-level thinking, 
reasoning, and technical skills," are relative terms, as what is considered to 
be a high-skill, high-wage job in one area of the State may not be considered 
high-skill and/or high-wage in another area. Finally, the definition of smart 
job did not include demand jobs, jobs in manufacturing, and jobs in emerging 
occupations, all of which are defined in the legislation authorizing the program 
and intended to be included as smart jobs. 
However, the department agrees that the portion of the definition that describes 
a smart job as a family wage job is useful in understanding the intent of the 
program. Therefore, the department has retained that portion of the definition 
of smart job and added language to clarify that demand jobs, jobs in 
manufacturing, and jobs in emerging occupations are also considered to be smart 
jobs. The definition as modified reflects current program practices and does not 
affect program administration. 
The comment was received from the office of Senator David Sibley. 
The amendments are adopted under the authority of Texas Government Code, 
sec.sec.481.153 and 481.0044(a), which require the Texas Department of Commerce 
to adopt rules to implement the Smart Jobs Fund program, and the Administrative 
Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, Rulemaking, 
which prescribes the standards for agency rulemaking. 
Texas Government Code, Chapter 481, Subchapter J, is affected by the amended 
rules. 

sec.186.104.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the context clearly indicates otherwise.
Classroom training--Training provided by an instructor to a group of trainees on 
a predetermined structured curriculum.
Consortium--A group that undertakes a training project in which all or most of 
training will be the same for each employer. A lead entity will normally assume 
responsibility for preparing and submitting the grant application and for being 
the grant administrator. The lead entity may be one of the employers, a provider 
or other entity acceptable to the department. 
Contract--The written legally binding obligation between the department, each 
employer, providers, guarantors, and administrative entities which may serve as 
a fiscal agent.
Department--The Texas Department of Economic Development.
Governing Board--The existing board of the Texas Department of Economic 
Development.
Local labor market--One of many geographic areas of the State for which 
standardized occupational wage data is available from the Texas Workforce 
Commission.
Minority employer status for application purposes--Minority group members 
include African-Americans, American Indians, Asian-Americans, Mexican-Americans 
and other Americans of Hispanic origin, and women.
On-the-job training--Structured training by instruction and supervision during a 
period of time a trainee works on the job.
Prevailing wage--The average hourly wage paid for a specific occupation within a 
local labor market area and is based on the most current information provided by 
the Texas Workforce Commission.
Smart Job--A job that is a family wage job, a demand job, a job in 
manufacturing, or a job in an emerging occupation.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 26, 1997.
TRD-9711325
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: June 20, 1997
For further information, please call: (512) 936-0181

SUBCHAPTER B.Methodologies for Determining Certain Variables 
10 TAC sec.sec.186.201-186.203
The Texas Department of Commerce (department), on behalf of the Texas Department 
of Economic Development, adopts proposed amendments to sec.sec.186.201-186.203, 
relating to Subchapter B, Methodologies for Determining Certain Variables, for 
administration of the Smart Jobs Fund Program. The proposed amendments were 
published in the June 20, 1997, issue of the Texas Register (22 TexReg 5878). 
Sections 186.201-186.203 are adopted without changes and will not be 
republished.
The amendments are being adopted in order to comply with changes made to the 
Smart Jobs program by Senate Bill (SB) 932 of the 75th Texas Legislature, to 
make the rules internally consistent, and to accurately reflect current program 
practices. Section 186.201, concerning State Average Weekly Wage; Regional 
Variances, is being amended to delete the reference to state average weekly wage 
and to replace it with a reference to prevailing occupational wage due to 
statutory revisions made by the 75th Legislature in SB 932. Section 186.202, 
concerning Full-Time Employment, is being amended to delete any reference to 
waiving this section due to the definition of job in sec.481.151(10) which 
defines a job as employment on a basis customarily considered full-time for the 
applicable occupation and industry. Section 186.203, concerning Maintenance of 
Effort, is being changed to correct sec.186.203(b)(2) such that it applies to 
employers with 20 employees or less, rather than less than 20 employees. No 
comments were received regarding the proposed amendments. 
The amendments are adopted under the authority of Texas Government Code, 
sec.sec.481.153 and 481.0044(a), which require the Texas Department of Commerce 
to adopt rules to implement the Smart Jobs Fund program, and the Administrative 
Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, Rulemaking, 
with prescribes the standards for agency rulemaking. 
Texas Government Code, Chapter 481, Subchapter J, is affected by the amended 
rules. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711326
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: June 20, 1997
For further information, please call: (512) 936-0181

SUBCHAPTER C.Application for Grants
10 TAC sec.sec.186.301-186.303, 186.306-186.308
The Texas Department of Commerce (department), on behalf of the Texas Department 
of Economic Development, adopts proposed amendments to sec.sec.186.301-186.303 
and sec.sec.186.306-186.308, relating to Subchapter C, Application for Grants, 
for administration of the Smart Jobs Fund Program. The proposed amendments were 
published in the June 20, 1997, issue of the Texas Register (22 TexReg 5879). 
Sections 186.301-186.303 and sec.sec.186.306-186.308 are adopted without 
changes, and, therefore, will not be republished. 
The amendments are being adopted in order to comply with changes made to the 
Smart Jobs program by Senate Bill (SB) 932 of the 75th Texas Legislature, to 
more accurately reflect current program practices, and to clarify aspects of the 
application process that may have been misleading or confusing. Section 186.301, 
Concerning Eligibility, is being amended to delete the maximum cost per job for 
a large business based on statutory changes made by the 75th Legislature in SB 
932. This section is also being amended to clarify that the cost per job is 
derived from the total project cost instead of the total Smart Jobs Fund grant 
amount. This section is also being amended to establish a maximum grant amount 
in any fiscal year per single employer based on statutory changes made by the 
75th Legislature in SB 932. The statutory changes also provide that the maximum 
grant amount may be exceeded if any one of six conditions is met pursuant to 
sec.481.155(a) of the Smart Jobs Fund Program Act (the Act). 
Section 186.302, concerning Application Requirements, is being amended to delete 
sec.sec.186.302(a)(1-3) based on new definitions added to sec.481.151 of the Act 
by SB 932. This section is also being amended to delete job descriptions and, 
for existing jobs, the wage on the date a training project will begin because 
neither is needed to approve a grant award. This section also adds the 
requirement that a grant applicant shall indicate if it is a small or micro-
business so that the department can determine if any exceptions will apply such 
as wage modifications and greater attrition, and deletes women as a separate 
category based on statutory changes made to the definition of minority group 
member in sec.481.151 of the Act by sec.35 of SB 932, such that women are now 
included in the definition of minority group member. This section also deletes 
recruiting and curriculum design costs as reimbursable costs on the basis that 
these costs are not directly related training costs as compared to tuition, 
instructor wages, classroom books and materials and such costs. This section has 
been amended to provide that the Smart Jobs Fund will reimburse small and micro-
businesses nominal and reasonable costs incurred in having a third party prepare 
the Smart Jobs Fund grant application. The provision is intended to permit more 
small and micro-businesses to access the program. This section is being amended 
to place a grant application on inactive status if requested information is not 
received by the Smart Jobs Fund within 30 business days. This change is 
necessary to decrease the time involved in processing grant applications and to 
reduce the overall processing time involved in awarding a grant to the 
applicant. 
Section 186.303, concerning Technical Assistance, is being amended to add local 
workforce development boards as sources of technical assistance based on 
sec.2308.303(9) of the Labor Code. Section 186.306, concerning Funding 
Priorities, is being amended to delete the mandatory targets for small and 
micro-businesses and to conform to amendments to the Act made by SB 932. An 
amendment is also being proposed to reflect the Legislature's stated intent, as 
set out in sec.37 of SB 932, that the department spend money from the Smart Jobs 
Fund in all areas of the State. Section 186.307, concerning Provider 
Eligibility, is being amended to delete the requirement that a provider must 
demonstrate to the department that it has been in business for at least one 
year. This should provide greater flexibility to employers making decisions 
about who will be providing training. 
Section 186.308, concerning Contracts and Contract Amendments, is being amended 
to clarify the contract performance expected from the employer in order to 
receive maximum reimbursement under a training grant. The amendment also 
clarifies that the maximum amount which an employer will receive is the amount 
of allowable expenditures, which may be less than the original grant award. This 
section is also being amended to permit the executive director to approve a 
higher attrition rate for micro-businesses using one of the same conditions for 
wage modification pursuant to sec.186.106 due to statutory changes made to 
sec.481.155(e) of the Act by sec.37 of SB 932. This should provide more micro-
businesses an opportunity to access the Smart Jobs Fund. The department received 
comments regarding the proposed amendments, which are summarized, with the 
department's responses, as follows: 
Comment: Do not delete the language specifically referring to recruiting as a 
permissible cost related to direct training in sec.186.302(f)(3)(a), Application 
Requirements. Maintaining funds for the recruitment and screening of job 
applicants is extremely important to the success of recruiting new companies, 
especially during times of low employment. Reasonable costs of recruiting 
expenses should be considered if Texas is to compete with other areas of the 
country for jobs. 
Response: The department does not agree with the comment. The reference to 
recruitment as an allowable cost of pre- and post-training participant 
assessment was deleted because of past experience with employers who submitted 
applications for large fund amounts with most of the costs associated with 
recruitment. The intent of the program is to provide grant money to improve the 
skill level of employees and to increase the ability of the employer to compete 
in a global economy. Use of the funds primarily for recruiting does not comply 
with legislative intent. 
In addition, the primary language regarding reasonable costs for pre- and post-
training assessment has been retained. Some recruitment costs may still be 
considered on a nominal basis under the primary language. However, this type of 
cost is not considered to be a direct training cost and thus should receive a 
lower priority. Removing the express language regarding recruitment as an 
allowable cost clarifies the intent to fund costs directly related to job 
training. 
Finally, the department notes that the rules permit waivers to program 
requirements that are not statutorily imposed. On a showing of compelling 
circumstances, the department may still permit recruiting costs as a reasonable 
cost of the program. 
Comment: The proposed amendment to sec.186.302(f)(3)(E), Application 
Requirements, would reverse current policy to allow the use of program funds to 
reimburse small and micro-businesses for the nominal and reasonable costs 
associated with hiring a third party to prepare a grant application. While the 
rule modification represents a good faith effort to improve small and micro-
business participation in the program, there are alternative means of increasing 
small business participation. (1) A streamlined application process should 
mitigate the need for outside assistance with application preparation and avoid 
the problem of diverting program dollars to an administration function. (2) 
Application preparation assistance is already available to small business owners 
from Smart Jobs staff. Additional funding for the program in the upcoming 
biennium should enable Smart Jobs staff to provide hands-on assistance to small 
business owners and to train regional entities to provide similar assistance at 
the local level. (3) Application assistance is available from regional entities 
that receive state funding, including Small Business Development Centers (SBDC) 
and Texas Manufacturing Assistance Centers (TMAC). Improving relationships with 
regional partners is an excellent way to stimulate small business participation. 
The department should enter into performance-based contracts with SBDC and TMAC 
and train regional partners, such as local chambers of commerce, local workforce 
development boards, utilities, etc., to assist small businesses in preparing 
grant applications. 
Response: The department does not agree with the comment. In order to comply 
with legislative intent, the department must attempt to allocate 50% of 
available program dollars to small businesses during the next fiscal year. Based 
on current appropriation levels and historical averages, the department 
estimates 1200 small business participants in the program during the next fiscal 
year, compared to 60 small business participants during the fiscal year ending 
August 31, 1997. 
The department has no additional full-time employees to commit to program 
administration. Therefore, while attempts are continually being made to 
streamline the application process, the increased participation by small 
businesses will dramatically reduce the amount of time that Smart Jobs staff can 
spend on each application. Without the availability of administrative dollars to 
pay for assistance with the application process, the department thinks that some 
small businesses will be discouraged for applying for funds. In addition, the 
problem of dealing with incomplete and incorrect applications will further 
burden the Smart Jobs staff. 
While contracts with other entities receiving state funding could provide for 
some assistance with the application process, there are costs associated with 
these contracts. Many small and micro-businesses might be discouraged from 
participating in the program because of lack of staff and/or expertise needed to 
complete the application process. The department intends to increase small 
business participation, in part, by providing an incentive that will increase 
the number of entities who will market the program to small businesses locally 
and assist them in applying for grant dollars. This is a value-added service 
that is critical to the department if it is to achieve the level of 
participation mandated by the legislature. 
Comment: Add language to sec.186.302(g)(4), Application Requirements, to require 
the executive director to consult with the Local Workforce Development Board 
before acting on an application. This will ensure that Smart Jobs funds are 
distributed in a manner that is harmonious with the goals of the appropriate 
Local Workforce Development Board and maximizes the impact of the funds and 
other programs administered by the Boards and will assist the Board in its 
responsibility to review applications for funds under the program. 
Response: The department does not agree with the comment. While the department 
recognizes the importance of working closely with Local Workforce Development 
Boards, the appropriate role of the Boards is in marketing the program and 
providing technical assistance to local businesses. The legislation enacting the 
Smart Jobs Fund Program does not mention Board involvement. Adding Board review 
to the application process will add a layer of bureaucracy that will probably 
delay action on pending applications. In addition, Board review may require 
additional staffing and expertise at the local level, possibly driving up the 
cost of the program to local communities. 
Comment: One comment expressed support for the proposed amendments to 
sec.186.303, Technical Assistance. 
Response: The department agrees with the comment. 
Comment: Retain the requirement that all Smart Jobs applications meet a minimum 
scoring threshold under sec.186.306(b), Funding Priorities. Although the 
proposed change appears to be driven by the goal of increasing small business 
participation in the program, the minimum standards should be met by all 
applicants for state grants and should be retained. 
Response: The department does not agree with the comment. The rule change to no 
longer require small businesses to meet minimum scoring thresholds is intended 
to eliminate unnecessary paperwork, consistent with streamlining the application 
process. The small business participants must still meet statutory program 
eligibility requirements, such as remaining current on state tax obligations, 
having been in existence for at least one year, and employing at least one 
employee. Removing small businesses from the scoring process will ensure that 
more small businesses receive grants under the program.
Under the old scoring process, most small businesses met the threshold test 
simply by virtue of being a small business, because 25 points toward the 35 
point threshold were awarded if the applicant had fewer than 100 employees. In 
order to continue to encourage small business participation, eliminate 
unnecessary paperwork, and ensure funding of large businesses in accordance with 
legislative intent, the department will use a scoring process only for large 
businesses beginning in fiscal year 1998. The scoring mechanism for use with 
large businesses in fiscal year 1998 incorporates legislative funding priorities 
by awarding points to large businesses for factors such as manufacturing, 
location in an enterprise zone, or minority ownership. 
Comment: Add a new sec.186.306(b)(5), Funding Priorities, to adjust the scoring 
mechanism to include the goals and plans of the Local Workforce Development 
Board in the priority funding criteria. The purpose of this proposed addition is 
to align priorities for funding applications with goals of the Boards.
Response: The department does not agree with the comment. The Smart Jobs Fund 
Program promotes employer-driven, customized job training in connection with 
program funding priorities. The priorities are based on the legislation 
establishing the program; there is no statutory basis for adding the suggested 
priority. Therefore, adding additional priorities would place additional 
requirements on employers that might not be harmonious with the intent of the 
legislation. In addition, adding priorities would add more bureaucracy without 
adding value and without a predictable outcome and would increase the time 
needed to process applications. The express legislative mandate is to streamline 
the application process. 
The department thinks that the Local Workforce Development Boards should provide 
their goals and plans to the Smart Jobs Fund staff for the staff to review for 
appropriateness and include as necessary. The staff currently works with Boards 
and the Texas Workforce Commission to determine the best way to interface and 
coordinate with the Boards. The department does not think that this cooperation 
needs to be mandated by rule. 
Comment: Add language in sec.186.306 to make high-wage jobs a funding priority. 
Response: The department agrees in part and disagrees in part with the comment. 
The funding priorities set out in sec.186.306(a) are statutory. The funding 
priorities set out in sec.186.306(b) for use in the department's scoring process 
for large businesses already make high-wage jobs a priority by including a 
priority for "the quality of jobs, including . . . wage levels." Further, the 
department must balance assistance to employers providing high-wage jobs with 
assistance to employers providing demand jobs. The department and the 
legislation creating the Smart Jobs Fund Program recognize that the term "high-
wage" has different meanings in different areas of the state. The legislation 
requires the starting wage for a new job created through the project to be equal 
to or greater than the prevailing wage for that occupation in the local labor 
market area and ties the amount of a wage increase to the prevailing wage for an 
occupation in the local labor market. The department thinks that too much 
emphasis on high wage jobs could conflict with other program goals. 
However, the department also recognizes that the program is intended to require 
employers to pay a living wage. Therefore, the department has added a revised 
definition of smart job back into sec.186.104 that includes the term "family-
wage job" in order to reflect legislative intent to create higher-than-average 
wages through the program. 
Comment: Add a sentence at the end of sec.186.308(a) to read, "a summary of 
contracts and contract amendments shall be submitted to the appropriate Local 
Workforce Development Board," in order to ensure that the Local Workforce 
Development Boards are aware of Smart Jobs Contracts in their Local Workforce 
Development Areas. 
Response: The department does not agree with the comment. The department has 
acquired a mailing list of local board contacts and intends to keep the local 
boards informed of pending applications and applications approved for their 
areas. However, the department wants to maintain flexibility in administering 
the program and thinks an additional rule requiring submission of contracts and 
contract amendments is unnecessary, adds bureaucracy, and is not consistent with 
the legislative intent to streamline the program. 
The department received three comments about the rules generally: 
Comment: Adopt a rule that would prohibit the use of Smart Jobs dollars for 
projects that involve intra-state job transfers. This would prevent the program 
from using state tax dollars to shift jobs around the State. The department 
could permit intra-state job movement by waiver. 
Response: The department does not agree with the comment. The department's 
practice has been not to approve the use of the smart jobs fund program to 
assist a business in moving from one part of the state to another. In effect, a 
longstanding policy exists that state level incentives should not be used for 
intra-state competition. The department would not approve a smart jobs grant 
award if the grant was a determining factor in whether or not to transfer 
employees to another part of the State. 
The department recognizes, however, that a situation might arise in which 
transferring employees would be permissible under the program. For example, the 
department would consider awarding a smart jobs fund grant to an employer who 
wished to expand into an enterprise zone or a defense readjustment zone. Rather 
than add a rule that could be waived to address a situation that has not arisen, 
the department prefers to maintain the flexibility to address such situations, 
if and when they arise, on a case-by-case basis. 
Comment: The department should reserve a portion of the Smart Jobs Funds 
appropriated for the 1997-98 biennium for use for certain targeted training 
projects. Examples could include projects that create or retain high wage jobs 
and projects undertaken in enterprise zones or defense readjustment zones. The 
reserve could also be used to create a rainy day fund for use in case of an 
economic downturn. 
Response: The department does not agree with the comment. The department 
recognizes that it might be wise to establish a rainy day fund; however, the 
legislature increased the funding of the Smart Jobs program to provide more 
funding for job training. The department intends to be judicious and prudent 
with fund administration. The eligibility requirements and funding priorities 
required by law serve as controls over fund administration that ensure 
appropriate distribution of program dollars. 
Comment: Maintain or reduce current levels of administrative spending on Smart 
Jobs. 
Response: The department does not agree with the comment. As noted in the 
response to the comment on sec.186.302(f)(3)(E), above, the department intends 
to minimize administration costs by streamlining the application process. In 
addition, the department has no additional full-time employees to commit to 
program administration. 
However, in order to comply with legislative intent, the department must attempt 
to allocate 50% of available program dollars to small businesses during the next 
fiscal year. Based on current appropriation levels and historical averages, the 
department estimates 1200 small business participants in the program during the 
next fiscal year, compared to 60 small business participants during the fiscal 
year ending August 31, 1997. 
Finally, the department notes that the statute authorizing the Smart Jobs Fund 
Program caps expenditures for program administration at 5.0% of the total funds 
deposited in the smart jobs fund in that year. 
Comments were received from the office of Senator David Sibley, the Houston-
Galveston Area Council, and the Texas Economic Development Council, Inc. 
The amendments are adopted under the authority of Texas Government Code, 
sec.sec.481.153 and 481.0044(a), which require the Texas Department of Commerce 
to adopt rules to implement the Smart Jobs Fund program, and the Administrative 
Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, Rulemaking, 
with prescribes the standards for agency rulemaking. 
Texas Government Code, Chapter 481, Subchapter J, is affected by the amended 
rules. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711327
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: June 20, 1997
For further information, please call: (512) 936-0181

CHAPTER 187.Capital Access Program
10 TAC sec.sec.187.1-187.18
The Texas Department of Commerce, on behalf of the Texas Department of Economic 
Development, adopts new sec.sec.187.1-187.18 implementing the Capital Access 
Program enacted by the 75th Legislature in Senate Bill (SB) 266 through the 
addition of Texas Government Code, Chapter 481, Subchapter BB. Sections 187.2, 
187.3, 187.8, 187.13, and 187.16 are adopted with changes to the proposed text 
as published in the July 15, 1997, issue of the Texas Register (22 TexReg 6533). 
Sections 187.1, 187.4-187.7, 187.9-187.12, 187.14, and 187.15 are adopted 
without changes to the proposed text and will not be republished.
The Capital Access Program was created by the 75th Legislature to provide access 
to capital for small and medium-sized businesses and nonprofit organizations 
that may otherwise fall outside conventional lending guidelines. Special 
consideration is given to small or medium-sized businesses and nonprofit 
organizations that are either located in an established enterprise zone or 
operate or propose to operate a day-care center or group day-care home.
Section 187.1 sets forth the authority to administer the program and the 
program's purpose. 
Section 187.2 sets forth the definitions of commonly used terms associated with 
the program. Comments received during the public comment period suggested that 
the department make the partial enrollment of loans more explicit. As a result, 
the department has added language to the definition of a capital access loan to 
address partial enrollment. In order to further clarify that partial enrollments 
are permissible under the program, a definition of partial enrollment has been 
added to sec.187.2. 
Section 187.3 establishes eligible uses and costs for loans received under the 
program and sets forth restricted uses of capital access loan proceeds. Loans 
considered ineligible for enrollment in the program include construction or 
purchase of residential housing, simple real estate investments, excluding that 
occupied by the applicant's business, refinancing of existing loans not 
originally enrolled under the program, and inside bank transactions as defined 
in sec.187.2. During the public comment period, a comment suggested that the 
department allow for a separate legal entity to own real estate as long as the 
business being financed occupies 51% of the usable space and guarantees the 
loan. In addition, comments suggested that the rules explicitly allow for the 
enrollment of loans that have been refinanced from other institutions. As a 
result, language has been added to this section to allow for the use of a 
separate real estate owning entity and the refinancing of loans from other 
institutions.
Section 187.4 sets forth provisions previously unmentioned relating to capital 
access loans, allows for consortium participation in the program, restricts the 
sale of program loans on the secondary market, limits the liability of the state 
to reserve proceeds only, allows for loans enrolled under the program to be 
refinanced, allows loans not originally enrolled in the program to be partially 
enrolled if refinanced in an amount that exceeds the original loan amount, and 
establishes that the participating institution, not the department, shall 
determine such aspects as the recipient of a loan, the amount of a loan, and the 
interest rate of a loan enrolled under the program.
Section 187.5 sets forth the parameters for reserve contributions and renewals 
of lines of credit to be used under the program. 
Section 187.6 sets forth the application procedure for financial institutions to 
become eligible to participate in the program and sets forth the items to be 
included in the participation agreement. 
Section 187.7 describes the process through which eligible applicants may obtain 
capital access loans. 
Section 187.8 sets forth how loans made by participating financial institutions 
are enrolled into the program and describes the information required on the 
enrollment form. Language in sec.187.8(c)(7) was changed in response to comments 
received during the public comment period to request a description of "use of 
loan proceeds" rather than "project description." In addition, new sec.187.8(d) 
was added, stating that lenders need only rely on the truthfulness of borrowers 
statements provided on the enrollment form, and subsequent sections were 
relettered accordingly. 
Section 187.9 outlines the procedure for the review of enrollment form 
information and program fund availability by the department. 
Section 187.10 sets forth the purpose of the reserve account, where the reserve 
shall reside and in what type of an account the reserve will be held.
Section 187.11 describes how each party involved in the capital access loan 
transaction contributes to the reserve account and provides for an increase in 
contributions by the department when the business or nonprofit organization is 
located in an enterprise zone or is a child-care provider. 
Section 187.12 sets forth the limits on the department's contribution to a 
financial institution's reserve. The department's maximum reserve contribution 
is $35,000 on each capital access loan with no one applicant receiving more than 
$150,000 during a three year period. 
Section 187.13 sets forth the provisions and process for withdrawals made by 
financial institutions from their established capital access reserves. It also 
provides details of the claim form and that the department may reject a claim 
due to misleading or false information or because the financial institution's 
records do not substantiate the claim. In response to comments received, the 
department has added language to sec.187.13(b), to allow lenders additional 
flexibility with respect to pursuit of collection of charged-off loans. The 
department also added new sec.187.13(e), stating that partially enrolled loan 
amounts and enrolled loans sharing collateral or guarantees will be subordinated 
to unenrolled portions and loans for purposes of claim subsequent to charge-off. 
Language was also added at sec.187.13(g)(6), to provide for the allowance of 
claims to be delayed in an effort to recover additional loan proceeds. 
Subsequent subsections within sec.187.13 were relettered and renumbered 
accordingly. 
Section 187.14 establishes that all money and interest accrued in a reserve 
account under the program is property of the state, allows for withdrawals by 
the state from reserve accounts that exceed 33% of the financial institution's 
outstanding capital access loan balance, and allows complete withdrawal of 
reserves from institutions whose participation agreement has lapsed where the 
institutions have no outstanding capital access loans and have not made a loan 
under the program within 24 months. 
Section 187.15 sets forth that the state's liability under the program is 
limited to the proceeds within the financial institution's established reserve. 
Section 187.16 details the annual reporting requirement from participating 
financial institutions to the department. In response to comments, the 
department added language stating that additional information required in 
reports will be consistent with the objectives of the program. The department 
has deleted language requiring information regarding the type and size of 
businesses and nonprofit organizations with capital access loans and language 
requiring gender and ethnicity information. 
Section 187.17 provides the name, address, and telephone number for the division 
within the department that should be addressed concerning the Capital Access 
Program. 
Section 187.18 allows the executive director or governing board of the 
department to waive any provision in the rules not statutorily imposed upon a 
showing of good cause. 
The department received comments regarding the proposed rules, which are 
summarized, with the department's responses, as follows: 
Comment: The permissibility of partial enrollments (when less than 100% of a 
loan is enrolled in the program) should be made more explicit. Although partial 
enrollments are clearly implied in several place in the proposed rules, the 
rules should explicitly mention and partial enrollments. 
Response: The department agrees with the comment. The department has added 
language to sec.187.2, of this title, Definitions, so that the definition of a 
capital access loan specifically includes partial enrollments. 
Comment: More precise language should be added to sec.187.3(c)(2), Eligible and 
Restricted Uses of Capital Access Loans, pertaining to occupancy requirements. A 
small or medium-sized business might occupy 51% or more of commercial space, but 
its owners may form a real estate owning entity to be the legal owner of the 
property, which leases back to the operating business. To more precisely address 
such situations, the rules should adopt the U.S. Small Business Administration's 
(SBA) approach to such alter ego financing. The SBA requires that the operating 
business occupy at least 51% of the usable space and that the operating company 
and its principals guarantee the loan that has been made to the real estate 
owning entity. 
Response: The department agrees with the comment. Language has been added to 
sec.187.3(c)(2) to more precisely address occupancy requirements and to allow 
for a separate legal entity to own real estate as long as the business being 
financed occupies 51% of the usable space and guarantees the loan.
Comment: While it is entirely and appropriately clear that a lender cannot 
refinance its own pre-existing debt under the program (unless there is new money 
lent, in which case only the new money can be enrolled), the program is silent 
on whether one bank refinancing another bank's debt constitutes a prohibited use 
of the program. The language of sec.187.3(c)(3), Eligible and Restricted Uses of 
Capital Access Loans, should explicitly allow for the enrollment of loans that 
have been refinanced from other institutions.
Response: The department agrees with the comment. Language has been added to 
sec.187.3(c)(3) to explicitly provide that taking over or refinancing the 
indebtedness of eligible borrowers held at unrelated financial institutions will 
be eligible to be enrolled in the program. 
Comment: Add language to sec.187.4(d), Other Provisions Relating to Capital 
Access Loans, to state that where the amount of a loan that is refinanced 
exceeds the original amount and the excess is not enrolled in the program, the 
refinanced loan will be a partial enrollment and by definition, less than 100% 
enrolled. 
Response: The department agrees in part and does not agree in part with the 
comment. The language of sec.187.4(d) currently states that additional reserve 
contributions can be made on the amount of the loan as refinanced that exceeds 
the original loan amount. The subsection does not mandate that the excess 
portion be enrolled. The loan will then be termed a partial enrollment. However, 
in order to clarify that partial enrollments are permissible under the program, 
a definition of partial enrollment has been added to sec.187.2.
Comment: In sec.187.8(c), Enrollment of Loans into the Program, add the word 
"reasonably" to state that the enrollment form shall include certain enumerated 
information, "as well as such information as the department may reasonably 
require." In sec.187.8(c)(7), change the phrase "project description" to "use of 
loan proceeds." Research the ethnicity and gender requirement under 
sec.187.8(c)(10) to determine if it is permitted under Regulation B of the 
federal banking rules. Add language following sec.187.8(c)(16) stating that 
financial institutions may rely on the truthfulness of certain representations 
made by borrowers. 
Response: The department agrees in part and disagrees in part with the comment. 
The department does not agree with the suggestion to add the qualifier 
"reasonably" to describe additional information the department may require on 
its enrollment form, because the department thinks the language could open the 
provision to subjective interpretation regarding what information the department 
may request. The department has no intention, and does not anticipate that it 
will have any need, to request information that is not essential to the 
program's integrity. The department agrees that the suggested language, "use of 
loan proceeds" is more precise than "project description," and has substituted 
the suggested language in sec.187.8(c)(7). 
Further, Regulation B of the federal banking rules (12 CFR 202.5) does not 
compel a rule change, and the department has not changed proposed 
sec.187.8(c)(10), which includes the ethnicity and gender of borrower as 
information the department may require. Regulation B, sec.202.5-Rules Concerning 
Taking of Applications, provides for an exception to the general prohibition on 
asking for such information where it is required by state regulation. 
Finally, the department agrees with the comment requesting the addition of 
language following sec.187.8(c)(16), stating that financial institutions may 
rely on the truthfulness of certain representations made by borrowers on the 
enrollment form, and has added the suggested language. 
Comment: Add language at sec.187.13(b), Withdrawals from Reserves by 
Participating Institutions, to give lenders flexibility in the timing of 
processing claims for reimbursement. 
Response: The department agrees with the comment in part and disagrees in part. 
While the department agrees to allow for additional out-of-pocket expenses as 
necessary for further collection, we believe that the accrued interest on the 
charged-off loan should be capped at 180 days subsequent to charge-off. The 
placement of interest accrual restrictions is necessary to discourage protracted 
collection efforts. The program wishes to encourage lenders to continue 
collection efforts if further collection can be reasonably expected; thus, the 
180 interest accrual allowance is deemed essential. Therefore, the language 
suggested by the comment has been added, along with additional language capping 
the accrual of interest on the charged off loans. 
Comment: Expand sec.187.13(d) to detail that partially enrolled loan amounts and 
enrolled loans sharing collateral or guarantees shall be subordinated to 
unenrolled portions and loans. 
Response: The department agrees with the comment. The department added language 
providing that enrolled portions of loans will be subordinated to unenrolled 
portions. 
Comment: Modify sec.187.13(f) to allow for a notification of charge-off within 
30 days but with a request to delay reimbursement until a later time.
Response: The department agrees with the comment. Language was added at 
sec.187.13(g)(6) to allow a financial institution to indicate on the claim form 
whether it intends to claim against reserves as outlined on the form or continue 
collection efforts and submit a claim at a later date. 
Comment: Add a standard of reasonableness to describe the additional information 
the department can require in annual reports from lenders. Address the 
requirement that financial institutions include a breakdown of ethnicity and 
gender of eligible borrowers. 
Response: The department agrees with the comment. Section 187.16(4) and (5), 
requiring this information, has been deleted from the final rule. 
Comments were received from Wells Fargo Bank and Small Business United of Texas. 
The rules are proposed under the authority of Texas Government Code, 
sec.sec.481.0044(a) and 481.406, which direct the department to adopt and 
enforce necessary rules for the administration of the program and the 
Administrative Procedure Act, Government Code, Chapter 2001, Subchapter B, 
Rulemaking, which sets forth the process to be followed by state agencies in 
proposing and adopting rules. 
Texas Government Code, Chapter 481, Subchapter BB, is affected by these rules. 

sec.187.2.Definitions.
The following words and terms, when used in this section, shall have the 
following meanings, unless the context indicates otherwise.
Capital access loan--A loan, or portion of a loan, that is entitled to be 
secured by the fund.
Child-care provider--A small or medium size business or a nonprofit organization 
that operates or proposes to operate a day-care center or group day-care home, 
as those terms are defined by Human Resources Code, sec.42.002.
Department--The Texas Department of Economic Development or any successor 
agency.
Eligible applicant--A small or medium size business or nonprofit organization.
Enrollment form--A form remitted to the department, by a participating financial 
institution, subsequent to loan funding by the financial institution, to receive 
the state's contribution to the institution's reserve account.
Enterprise Zone--A geographic area designated by a city or county, through an 
application to the department, as economically distressed pursuant to Chapter 
2303, Texas Government Code. 
Financial institution--A bank, trust company, banking association, savings and 
loan association, mortgage company, investment bank, credit union, or 
nontraditional financial institution.
Fund--The capital access fund.
Governing Board--The governing board of the department.
Inside bank transactions--Loans to insiders of the financial institution as 
defined by federal laws and regulations concerning insider transactions 
including the Financial Institutions Regulatory and Interest Rate Control Act of 
1978, as amended, and applicable implementing regulations; the 1982 Banking Act, 
as amended, and applicable implementing regulations and the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989, as amended, and 
applicable implementing regulations.
Loan--Includes a line of credit and must meet the requirements of Government 
Code, sec.481.405(e).
Medium business--A corporation, partnership, sole proprietorship, or other legal 
entity that:
(A) is domiciled in this state or has at least 51% of its employees located in 
this state; 
(B) is formed to make a profit; 
(C) is independently owned and operated; and 
(D) employs 100 or more but fewer than 500 full-time employees.
Money market fund--An open-ended management investment company regulated under 
the Investment Company Act of 1940, as amended, which values its securities 
pursuant to sec.270, 2a-7 of Title 17 of the Code of Federal Regulations.
Nonprofit organization--A private, nonprofit, tax-exempt corporation, 
association, or organization listed in sec.501(c )(3), Internal Revenue Code of 
1986, that is domiciled in this state or has at least 51% of its members located 
in this state.
Partial enrollment--A loan which is not 100% enrolled into the program.
Participation agreement--The agreement between the financial institution and the 
department which allows the financial institution to participate in the program. 
Participating financial institution--A financial institution participating in 
the program, after entering into a participation agreement with the department.
Program--The capital access program.
Reserve account--An account established at a participating institution on 
approval of the department in which the money is deposited to serve as a source 
of additional revenue to reimburse the financial institution for losses on loans 
enrolled in the program.
Small business--A corporation, partnership, sole proprietorship, or other legal 
entity that:
(A) is domiciled in this state or has at least 51% of its employees located in 
this state; 
(B) is formed to make a profit; 
(C) is independently owned and operated; and 
(D) employs fewer than 100 full-time employees. 

sec.187.3.Eligible and Restricted Uses of Capital Access Loans.
(a) To qualify as a capital access loan, a loan must be made to a small or 
medium size business or to a nonprofit organization and be used by the business 
or nonprofit organization for any project, activity, or enterprise in this state 
that is in furtherance of economic development. 
(b) The eligible applicant must apply the capital access loan to working capital 
or to the purchase, construction, or lease of capital assets, including 
buildings and equipment used by the business or nonprofit organization. Working 
capital uses include the cost of exporting, accounts receivable, payroll, 
inventory, and other financing needs of the business or organization. 
(c) A loan is not eligible to be enrolled under this subchapter for: 
(1) construction or purchase of residential housing; 
(2) simple real estate investments, excluding the development or improvement of 
commercial real estate occupied by the applicant's business or organization. The 
purchase or development of commercial real estate will be considered a "simple 
real estate investment" unless the eligible borrower occupies at least 51% of 
the usable space of the property being financed. Should the owners of the 
eligible business wish the commercial real estate to be owned by a separate 
legal entity, such ownership structure will be allowed so long as the eligible 
business occupies 51% of the usable space and the eligible business guarantees 
the real estate loan. 
(3) refinancing of existing loans not originally enrolled under, Chapter 481, 
Government Code, Subchapter BB. Taking over or refinancing the indebtedness of 
eligible borrowers held at unrelated financial institutions will not be defined 
as refinancing under this section; or 
(4) inside bank transactions. 

sec.187.8.Enrollment of Loans into the Program.
(a) Reserve deposits will not be remitted by the department to the reserve 
account of participating financial institution until the receipt of an 
enrollment form by the institution. 
(b) An enrollment form shall be sent to the department within 15 days of loan 
origination. Origination is considered to be the earlier of the date the loan 
documents have been executed or the date the loan proceeds are first forwarded 
to the eligible borrower. 
(c) The enrollment form submitted by participating institutions, developed by 
the department, shall include at least the following information as well as 
other information the department may require; 
(1) name, address, phone and contact of the participating financial institution; 
(2) name, address, phone and contact of the eligible borrower;
(3) certification that to the best of the participating institution's knowledge 
the borrower is eligible under program guidelines;
(4) the total loan amount being made by the financial institution to the 
borrower; 
(5) the amount of the loan being enrolled in the program;
(6) business description; 
(7) description of use of loan proceeds; 
(8) employment information of the eligible borrower; 
(9) gross sales of the eligible borrower for the past twelve months; 
(10) ethnicity and gender of borrower; 
(11) whether borrower is a certified State of Texas historically underutilized 
business; 
(12) if applicable, verification of status as a project within an enterprise 
zone, or for day-care center or group day-care home;
(13) amount of participating financial institution's deposit to reserve; 
(14) amount of eligible borrower's deposit to reserve;
(15) calculation of the department's contribution to reserve;
(16) execution of the certification on behalf of the participating financial 
institution by an authorized officer, which shall include the officer's name, 
title and the date of execution. 
(d) Execution of the enrollment form shall imply that all information provided 
on this form is true and correct, and that the lender is relying on the 
representation of the borrower for the following numbered items of the 
enrollment form: (2),(3),(6),(7),(8),(9),(10),(11), and (12). 
(e) The department, may, but is not required, to notify participating financial 
institutions when proceeds available in the fund soon may not be sufficient to 
meet the demand for reserve contributions. 
(f) If proceeds within the fund are insufficient to provide reserve 
contributions to participating financial institutions, those institutions may 
still enroll loans without the additional state contribution, subject to normal 
enrollment guidelines. 

sec.187.13.Withdrawals from Reserves by Participating Institutions. 
(a) In the event a loan enrolled under this program is charged-off, the 
participating financial institution may withdraw from its established reserve 
account an amount necessary to cover the anticipated loss. 
(b) A participating financial institution may withdraw from its established 
reserve immediately subsequent to loan charge-off, or the institution may choose 
to attempt further collection proceedings before withdrawal. So long as the 
lender has notified the department of the charge-off of an enrolled loan within 
the allowed 30 day time frame and the reserves are adequate to cover the charge-
off at the time of notification, the lender shall not be limited to how long 
they may delay a claim for reimbursement. However, accrual of interest on 
charged-off loans will only be allowed for a time period of 180 days subsequent 
to charge-off. Recovery of all other expenses, as is reasonable and necessary, 
shall be allowed to be recovered by the lending institution through its 
established reserve account. 
(c) Only non-recoverable losses, plus reasonable and customary expenses may be 
removed from the reserve account. Money taken in excess of this amount must be 
returned immediately to the reserve account. 
(d) The reserve account shall be used by the financial institution only to cover 
any losses arising from a charge-off of a capital access loan, or that portion 
of a partially enrolled loan that is enrolled under the program, made by the 
financial institution. 
(e) Partially enrolled loan amounts and enrolled loans sharing collateral or 
guarantees shall be subordinated to unenrolled portions and loans for purposes 
of claim subsequent to charge-off. 
(f) The financial institution shall maintain records substantiating the non-
recoverable losses, plus reasonable and necessary expenses, for 12 months 
following withdrawal from the program. 
(g) A claim form, signed and dated by an authorized officer of the financial 
institution, must be remitted to the department detailing the charged-off 
program loan within 30 days of the charge-off. Claim forms will contain the 
following information: 
(1) borrower's name; 
(2) loan number used by the bank to identify the loan;
(3) date of charge-off; 
(4) amount of claim, broken down to include: 
(A) customer principal; 
(B) accrued/ unpaid interest; 
(C) out-of-pocket expenses; and 
(D) total claim amount. 
(5) statement of intent by the financial institution concerning its continued 
efforts to recover the charged-off loan; 
(6) statement of intent by the financial institution on whether to claim against 
the reserves as outlined on the form submitted or to continue collection efforts 
and pay claim at a later date. 
(7) authorized signature, title, date and phone number of officer of the 
submitting financial institution. 
(h) The department may reject a claim when the representations and warranties 
provided by the participating financial institution at the time of enrollment 
have been determined to be misleading or false or if the records of the 
financial institution do not substantiate the claim. 

sec.187.16.Annual Reporting and Auditing Requirements. 
A participating financial institution shall remit an annual report to the 
department containing the information required by Chapter 481, Subchapter BB, 
sec.481.411. The report must:
(1) provide information with regard to outstanding capital access loans, capital 
access loan losses, and any other information consistent with the objectives of 
the program the department considers appropriate;
(2) state the total amount of loans for which the department has made a 
contribution from the fund under the program; and 
(3) include a copy of the institution's most recent financial statement. 
(4) include information regarding the type and size of businesses and nonprofit 
organizations with capital access loans; and 
(5) provide a breakdown of the ethnicity and gender of eligible applicants 
enrolled in the program during the year being reported.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 26, 1997.
TRD-9711324
W. Lane Lanford
Chief Administrative Officer
Texas Department of Commerce
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 936-0181

TITLE 13. CULTURAL RESOURCES
PART III. Texas Commission on the Arts
CHAPTER 31.Agency Procedures
13 TAC sec.31.10
The Texas Commission on the Arts adopts by reference an amendment to sec.31.10, 
concerning the application forms and instructions for the Financial Assistance 
Application Form, without changes to the proposed text as published in the July 
25, 1997, issue of the Texas Register (22 TexReg 6911). 
The section was amended in order to be consistent with changes to programs and 
services of the commission as outlined in the Texas Arts Plan as amended 
September 1997. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Government Code, sec.444.009, which provides 
the Texas Commission on the Arts with the authority to make rules and 
regulations for its government and that of its officers and committees.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711244
John Paul Batiste
Executive Director
Texas Commission on the Arts
Effective date: September 15,1997
Proposal publication date: July 25, 1997
For further information, please call: (512) 463-5535

CHAPTER 35.Texas Arts Plan
13 TAC sec.35.1
The Texas Commission on the Arts adopts by reference an amendment to sec.35.1, 
concerning the Texas Arts Plan, which outlines the activities of the Commission, 
without changes to the proposed text as published in July 25, 1997, issue of the 
Texas Register (22 TexReg 6911). 
The section was amended in order to be consistent with changes to programs and 
services of the commission as outlined in the Texas Arts Plan as amended 
September 1997. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Government Code, sec.444.009, which provides 
the Texas Commission on the Arts with the authority to make rules and 
regulations for its government and that of its officers and committees.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711243
John Paul Batiste
Executive Director
Texas Commission on the Arts
Effective date: September 15, 1997
Proposal publication date: July 25, 1997
For further information, please call: (512) 463-5535

CHAPTER 37.Application Forms and Instructions for Financial Assistance
13 TAC sec.sec.37.23, 37.24, 37.26,
The Texas Commission on the Arts adopts by reference amendments to 
sec.sec.37.23, 37.24, and 37.26, concerning the application forms and 
instructions for the Arts in Education Program - Sponsors, the Texas Touring 
Arts Program - Company/Artist, and Texas Touring Arts Program - Sponsors, 
without changes to the proposed text as published in the July 25, 1997, issue of 
the Texas Register (22 TexReg 6911). However, Form IV, which is adopted by 
reference in sec.37.24 and sec.37.26 is adopted with a date change from February 
16 to February 17. February 16 is a holiday, therefore, the Texas Commission on 
the Arts extended the deadline date to February 17. The language contained in 
sec.37.24 and sec.37.26 is not being changed from the proposal. 
The amendments are being adopted in order to be consistent with changes to 
programs and services of the commission as outlined in the Texas Arts Plan as 
amended September 1997. 
No comments were received regarding adoption of the amendments.
The amendments are adopted under the Government Code, sec.444.009, which 
provides the Texas Commission on the Arts with the authority to make rules and 
regulations for its government and that of its officers and committees.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711242
John Paul Batiste
Executive Director
Texas Commission on the Arts
Effective date: September 15, 1997
Proposal publication date: July 25, 1997
For further information, please call: (512) 463-5535

TITLE 16. ECONOMIC REGULATION
PART I. Railroad Commission of Texas
CHAPTER 3. Oil and Gas Division
Conservation Rules and Regulations
16 TAC sec.3.37
The Railroad Commission of Texas adopts an amendment to sec.3.37, regarding well 
spacing, with changes to the proposed text as published in the April 25, 1997, 
issue of the Texas Register (22 TexReg 3696). The amendment is adopted to remove 
an unnecessary regulatory burden associated with well spacing exceptions by 
reducing the class of persons presumed to be affected by an exception 
application. Only if a mineral interest owner's property is closer to an 
applied-for "exception" location than it would be to a "regular" location (for 
which no notice is required), is that person presumed to be affected. 
The commission has made changes to the amendments as proposed. The changes are 
in subsection (a)(2)(A) and (B) and clarify that mineral interest owners of 
offset tracts that are within the distance of potential drainage implied by 
either the lease-line or between-well spacing rules are given notice of an 
exception application. 
The following is a summary of comments received: 
BMNW Resources, LLC and North Texas Oil & Gas Association (NTOGA) filed comments 
supporting the amendments. 
Edward J. Carpenter (Carpenter) filed comments supporting the amendments but 
suggested expanding the class of persons presumptively affected to include the 
owners of offset leased mineral interests, i.e., lessor/royalty owners and 
nonoperating lessees. The commission declines to make these changes because 
royalty owners (who do not own a possessory interest) and nonoperating mineral 
interest owners are considered, by virtue of their contracts or leases, to be 
represented by the designated operator of the tract. Carpenter also suggested 
that the provision of the rule specifying the minimum notice be extended to 20 
days instead of 10 days. The commission declines to make this change. The time 
period is the minimum required and does not preclude longer notice. The 
commission rarely gives less than 21 days' notice under the current rule. 
Furthermore, a party that is prejudiced by too little notice may request a 
continuance. Not changing the rule gives the commission the flexibility to use 
the shorter notice period if warranted. 
Union Pacific Resources Company filed comments generally supporting the 
amendments but seeking additional changes that: (1) purport to determine the 
class of affected persons, (2) require notice to only those offset interests 
closer than the minimum lease-line spacing instead of half the between-well 
spacing, (3) define "reasonable compliance" mathematically, and (4) adopt 
clerical procedures for submission of information. The commission declines to 
make the first change for the following reasons. It is well recognized law that 
all persons whose property rights are, or may be, affected by an administrative 
determination are entitled to notice and an opportunity to participate in the 
decision process. The commission cannot, in a rule of general applicability, 
determine all affected persons when application of the general rule encompasses 
innumerable fact situations involving surface ownership, severed or divided 
mineral ownership, cotenancy, heterogeneous geology, etc. The confluence of 
these and many unmentioned parameters often create unique situations which 
cannot be known to the commission and which may, and will, cause the class of 
affected persons to vary. To attempt to limit the class of affected persons in a 
rule would be a disservice to the industry because it would give a false sense 
of security to those persons who relied on the rule to limit notice. Such 
reliance, in the face of a judicial challenge in which an unnoticed person was 
shown to be affected, would not prevent revocation of the permit irrespective of 
the permittee's detrimental reliance. 
The commission agrees that the issues raised in (2) warrant change from the 
published language. This issue is addressed below in conjunction with other 
commenters' suggestions on the same subject. 
The commission declines to make the third change which relates to the level of 
exactitude required when drilling a well at a particular permitted location. 
This issue is better addressed in Statewide Rule 11 (16 T.A.C. sec.3.11) which 
requires wells generally be drilled vertically, rather than in the rule being 
amended. The commenter suggests that a well drilled within 10% of its permitted 
location be deemed in compliance with its permit. The commission declines to 
make this change because it would substitute a mathematic calculation for a 
multivariable, reasoned determination. For instance, a well permitted 1867 feet 
from a lease line that is drilled through many faults and steeply dipping strata 
to a low permeability reservoir at 20,000 feet depth may be considered to be in 
compliance if it is within 20% (i.e., 1493.6 feet or further from the lease 
line). However, a well permitted as a Rule 37 exception location 50 feet from a 
lease line that is drilled through horizontal strata to a high permeability 
reservoir at a 2000-foot depth may not be considered reasonable in compliance if 
it bottoms 45 feet from the lease line. Even if the commission considers a well 
to be drilled in compliance with its permit and requires nothing more from an 
operator, some third party with knowledge not available to the commission, may 
seek to prove, after notice and hearing, that a drilled well was not drilled in 
reasonable compliance with its permit. It would unduly prejudice such a person 
to have a rule precluding such an action. The commission deems it necessary to 
have the flexibility to consider all variables in making such a determination. 
The fourth recommendation requiring an applicant to supply address labels or a 
diskette in ASCII format, relates to internal clerical procedures and should not 
be made part of this rule. Furthermore, requiring operators to file either 
labels or computer diskette would prejudice small operators without the 
necessary manpower (and knowledge of ASCII formatting) or equipment. The 
commission believes this should best be left as an option and not a rule 
requirement. 
Texas Mid-Continent Oil & Gas Association (TMOGA) filed comments generally 
supporting the amendments but suggesting changes that (1) purport to determine 
the class of affected persons, and (2) require notice to only those offset 
interests closer than the minimum between-well spacing instead of half the 
between-well spacing. For the reasons stated above, the commission declines to 
attempt to limit the class of affected persons by rule. 
The distance within which offset mineral interest owners are presumed to be 
affected persons was the subject of two comments: one commenter sought a change 
that would, in many cases, decrease this distance and one sought a change that 
would increase it. The required between-well distance and the required lease-
line offset are related to the anticipated drainage area of a well and to the 
latitude required for locating wells (to avoid surface obstructions, etc.). In 
the absence of special field rules, the statewide spacing distances are 467 feet 
lease-line offset and 1200 feet between-well spacing. Presumably, the 1200-foot 
between-well spacing (which connotes a well draining at least 600 feet) is 
larger than the 467-foot lease-line offset requirement to allow greater 
flexibility in wellsite selection in undeveloped or sparsely developed areas and 
to allow drainage in the "corners" of tracts. Rules for specific fields are 
determined after the requesting operator presents data on the local geology that 
substantiate the appropriateness of spacing requirements that differ from the 
statewide requirements. The stated purpose of the proposed amendment is to 
exclude from rule-required notice those persons who would be as, or more, likely 
to be affected by a regularly located well as they would be by an applied-for 
exception well. Requiring notice to offset tracts within the between-well 
spacing requirements would, in some cases, result in notice of an exception 
application being required to an offset tract that would be more affected by a 
regularly located well. If regularly located wells will adversely affect offset 
tracts, then the proper remedy is to amend the field rules. With that in mind, 
the distance in question must be related to the anticipated drainage for the 
target field. If half of the between-well spacing is greater than the lease-line 
spacing, then it must control because it contemplates, at least, the possibility 
of the greater drainage distance. The reverse is also true and the rule has been 
changed from the published version to require notice to offsets within the 
greater of the lease-line or half the between- well spacing. While this change 
is slightly more burdensome than the proposed text, it does not enlarge the 
class of persons who must comply with the rule and it significantly reduces the 
burden of complying with the rule as currently written. Additionally the 
preamble of the proposed rule stated: 
Those persons who would be more or equally affected by a regularly permitted 
well will not be presumed to be affected by an exception application. The 
correlative rights of persons potentially more or equally affected by a 
regularly located well as by an exception location are presumed to be protected 
by the spacing rule and therefore do not fall into the presumed affected class. 
As explained above, the referenced correlative rights protection from regularly 
permitted wells subsumes both the between-well distance and lease-line spacing. 
The amendment is adopted pursuant to the Texas Natural Resources Code 
sec.sec.81.051, 81.052, 85.201 - 85.202, 86.041 and 86.042, which authorize the 
commission to adopt rules for the following purposes: to govern and regulate 
persons and their operations under the jurisdiction of the commission; to issue 
permits for oil and gas wells and to prevent waste and prevent injury to 
adjoining property. 
The Texas Natural Resources Code, sec.sec.81.051, 81.052, 85.201 - 85.202, 
86.041 and 86.042 are affected by the amendments. 

sec.3.37. Statewide Spacing Rule.
(a) Distance requirements. 
(1) (No change.) 
(2) When an exception to this section is desired, application shall be made by 
filing the proper fee as provided in sec.3.76 of this title (relating to Fees 
Required To Be Filed) and the appropriate form according to the instructions on 
the form, accompanied by a plat as described in subsection (c) of this section. 
A person acquainted with the facts pertinent to the application shall certify 
that all facts stated in it are true and within the knowledge of that person and 
that the accompanying plat is accurately drawn to scale and correctly reflects 
all pertinent and required date. 
(A) When an exception to only the minimum lease- line spacing requirement is 
desired, the applicant shall file a list of the mailing addresses of all 
affected persons, who, for tracts closer to the well than the greater of one-
half of the prescribed minimum between-well spacing distance or the minimum 
lease-line spacing distance, include: 
(i) the designated operator; 
(ii) all lessees of record for tracts that have no designated operator; and 
(iii) all owners of record of unleased mineral interests. 
(B) When an exception to the minimum between-well spacing requirement of this 
section is desired, the applicant is required to file the mailing addresses of 
those persons identified in subparagraph (A)(i) - (iii) of this paragraph for 
each adjacent tract and each tract nearer to the well than the greater of one-
half the prescribed minimum between-well spacing distance or the minimum lease-
line spacing. 
(3) (No change.) 
(b)-(m) (No change.) 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711318
Mary Ross McDonald
Deputy General Counsel, Office of General Counsel
Railroad Commission of Texas
Effective date: September 15, 1997
Proposal publication date: April 25, 1997
For further information, please call: (512) 463-7008

16 TAC sec.3.101
The Railroad Commission of Texas adopts an amendment to sec.3.101, concerning 
certification for severance tax exemption or reduction for certain high-cost 
natural gas, with changes to the proposed text as published in the March 21, 
1997, issue of the Texas Register (22 TexReg 2948). The amendment is adopted in 
response to House Bill 398, 74th Legislature, 1995, which provides that 
producers of natural gas may receive, upon certification by the Railroad 
Commission that the gas is high- cost, either a severance tax exemption or 
severance tax reduction. The amendment also clarifies and refines the 
application procedure and the criteria for obtaining high-cost certification. 
Since publication of proposed sec.3.101 on March 21, 1997, the 75th Legislature 
enacted, and the Governor signed, Senate Bill 862, which provides that an 
application for certification of gas as high-cost by the commission may be made 
at any time after the first day of production. Senate Bill 862 becomes effective 
on September 1, 1997. Therefore, sec.3.101 will be adopted to incorporate this 
most recent legislature enactment without further publication, because it does 
not enlarge the scope of those persons affected by the rule and lessens the 
burden on the regulated industry. Further, the adopted rule will be made 
effective on the same date Senate Bill 862 becomes effective, September 1, 1997. 
Adoption of this section will effectuate the actions of the 74th and 75th 
Legislatures. In addition, the amended section will provide a more consistent 
approach to review of applications for high-cost gas certification and will 
result in more efficient processing of such applications. 
All groups and associations making comments favored adoption of the proposed 
section. The comments recommended changes to the text of the published section. 
Several commenters objected to specific language in the definition of "data-
point well" and requested that the words "pre-stimulation" be added to the 
definition and to subsection (e)(5)(G). The commission agrees that the proposed 
changes are necessary to make the definition of "data-point well" consistent 
with use of the term elsewhere in the section and to clarify that only pre-
stimulation flow rates should be considered. 
Several commenters suggested the language in subsection (d)(1) be made more 
specific. The commission agrees and has clarified that any additional 
information requested will be for the purpose of clarifying, explaining, and 
supporting the required attachments. 
Several commenters objected to identification of and elimination from area 
designation those drilling or proration unit areas surrounding data-point wells 
whose permeabilities and flow rates are equal to or greater than the limits 
listed in the section. The commission agrees. Subsections (e)(5)(C), 
(f)(3)(A)(i) and (g)(3) have been appropriately amended while subsection (g)(4) 
has been deleted. 
Several commenters objected to the definition of "first day of production." The 
commission disagrees. The definition is consistent with 34 Texas Administrative 
Code sec.3.21, Natural Gas Production Tax (a Comptroller of Public Accounts 
rule). In addition, the deliverability test (Form G-10) referenced in the 
definition requires that a flowline/salesline be in place; therefore, the 
potential for a substantial lapse of time between the deliverability test and 
the first month of production does not exist. 
Two commenters request that the term "drilling unit" be defined. The commission 
disagrees that the term needs to be defined in this section. Such definition is 
outside the scope of notice of the proposed section. The meaning of the term is 
self- evident and has been used in the commission's statewide rules without 
confusion to mean the area enclosed within the boundaries of the plat attached 
to the drilling application (Form W-1). If the term is to be defined, the 
definition should be placed in 16 Texas Administrative Code sec.3.69 where 
pervasive terms found throughout the rules are defined. 
Two commenters suggested that redundant language in subsection (f)(3)(A)(i) be 
deleted. The commission agrees. A well that has been tested or completed in the 
proposed interval had to penetrate it. Therefore, the phrase "...tested, or are 
currently completed in" has been deleted. 
One commenter requested a clarification of the phrase "in and around" in 
subsection (f)(3)(A)(i). No change was made in response to this comment, because 
if the formation extends beyond the "requested area" referenced in the 
subsection, the map, also referenced, should outline no more than the requested 
area. 
The same commenter requested that the Director of the Oil and Gas Division be 
given authority to approve administratively individual well certification 
applications. Subsection (g)(2), as published, already gives the Director this 
authority. Therefore, no change was made in regard to this comment. Another 
commenter suggested that because subsection (e)(5)(C) does not require the 
application for a new well producing inside the tight formation designated area 
to include test results or other data showing permeability and flow-rate values, 
the commission should clarify whether such requirement exists. The commenter 
would be correct to assume that because the subsection prescribes no such 
requirement, none exists. 
The same commenter requested that the commission clarify when an explanation of 
failure to provide permeability data under subsection (f)(3)(B)(i) is required 
for those wells that have been tested and/or completed in the proposed tight 
formation area. The commenter also requested that the commission require an 
explanation only in those cases for which no data is available. The commission 
declines to change the subsection in response to this comment. As subsection 
(f)(3)(B)(i) states, an explanation is required only when no permeability data 
has been provided for wells tested and/or completed in the proposed tight 
formation area. The commission considers an explanation to be most critical in 
those cases when no permeability data has been provided but may be available. 
One commenter expressed concern that under the language of subsection (e), 
paragraphs (1)(B), (2)(B), (3)(B), (4)(B), (5)(B) and (6)(B), the commission 
could impose burdensome filing requirements that would delay an individual well 
certification. The commenter suggests providing only copies of the G-1 forms 
filed for an individual well. The commission declines to change the section in 
response to this comment. What the commenter proposes is what the section now 
requires, i.e., only copies of all G-1 forms ever filed for the well for which 
the operator seeks certification. 
The same commenter objected to the provision in subsection (g)(3) whereby an 
operator must request a hearing to have the application for a tight formation 
area designation considered, if it is found to be incomplete, or indicates the 
area does not qualify, or if a protest is filed. The concern is that virtually 
all applications could be brought to hearing before being approved, even though 
only minimal additional explanations are necessary. The commission declines to 
change the section in response to this comment. Hearings on incomplete 
applications will be held only after relevant data supporting the application 
have been requested by the staff and have not been provided within a reasonable 
time, the application has been dismissed, and the applicant requests the 
hearing. 
The same commenter expressed concern that subsection (h) requires all revenue 
interest owners to individually apply for the tax exemption or reduction. No 
change to the proposed subsection has been made in response to this comment. 
Subsection (h) is included merely to inform operators of certain of the 
Comptroller's procedures for making application. The commission has no authority 
to determine who may or may not file with the Comptroller. 
One commenter requested that the commission broaden the definition of high-cost 
gas to include gas produced under such conditions as the commission determines 
to present extraordinary risks or costs. No change is made to the definition in 
response to this comment. When sec.201.057 of the Tax Code was enacted in order 
to provide a tax exemption for high-cost gas, the Texas Legislature incorporated 
the definition of high-cost gas found in 15 U.S.C. sec.3317. The Legislature 
specifically limited the definition of high-cost gas to that contained in 
sec.3317(c) as of January 1, 1989. The Legislature did not give the commission 
authority to expand the definition. The federal law referenced by the 
Legislature gave the Federal Energy Regulatory Commission (not state agencies) 
the discretion to define additional categories of high-cost gas. One commenter 
requested that an "abbreviated" procedure be adopted for approving an 
application for an "extension" to a designated area when a well is drilled 
outside the designated area but within 2 1/2 miles of a previously approved 
designated area boundary. No change is made in response to this comment. 
Subsection (f) as published already addresses the situation described. If a new 
well is drilled outside an approved designated area, an application for a newly 
designated area must be filed. Because of the new area's proximity to the 
approved designated area, reference may be made to the already approved area's 
docket/order. However, the new area application will require the same basic 
information specified in the section. 
The following groups or associations commented and supported adoption of the 
rule with changes: North Texas Oil & Gas Association, Mobil Exploration & 
Producing U.S. Inc., Shell Western E & P Inc., Amoco Exploration and Production, 
and Texas Mid-Continent Oil & Gas Association. There were no comments opposing 
the proposed rule. 
The amendment is adopted pursuant to the Texas Natural Resources Code, 
sec.81.052, which authorizes the commission to adopt all necessary rules for 
governing and regulating persons and their operations under the jurisdiction of 
the commission, and pursuant to the Tax Code, sec.201.057, which gives the 
commission authority to require an applicant for high-cost gas certification to 
provide to it any relevant information necessary to administer the section. 

sec.3.101. Certification for Severance Tax Exemption or Reduction for Gas 
Produced from High-Cost Gas Wells. 
(a) Purpose. To provide a procedure by which an operator can obtain a Railroad 
Commission of Texas certification that natural gas from a particular gas well 
qualifies as high-cost natural gas under the Texas Tax Code, Chapter 201, 
Subchapter B, sec.201.057(a)(2)(A) and that such gas is exempt from or eligible 
for a reduction of the severance tax imposed by the Texas Tax Code, Chapter 201. 
(b) Definitions. The following words and terms, when used in this section, shall 
have the following meanings, unless the context clearly indicates otherwise. 
(1)-(4) (No change.) 
(5) Data-point well--A well that has been tested and/or produced in the proposed 
tight gas formation; and, from the test results or other data, applicant 
provides a measured or calculated in situ permeability and/or a measured or 
calculated pre-stimulation stabilized flow rate against atmospheric pressure. 
(6) Director--The director of the Oil and Gas Division or the director's 
delegate. Any authority given to the director in this section is also retained 
by the commission. Any action taken by the director pursuant to this section is 
subject to review by the commission. 
(7) First day of production--The first day of the month following the earlier of 
the month of the deliverability test as reported on the commission designated 
form or the production month as indicated on the first production report filed 
showing a gas disposition code other than "lease or field fuel use" or "vented 
or flared." 
(8) High-cost gas--Natural gas which the commission finds to be: 
(A) produced from any gas well, if production is from a completion which is 
located at a depth of more than 15,000 feet; 
(B) produced from geopressured brine; 
(C) occluded natural gas produced from coal seams; 
(D) produced from Devonian shale; or 
(E) produced from designated tight formations or produced as a result of 
production enhancement work. 
(9) Operator--The person responsible for the actual physical operation of a gas 
well. 
(10) Spud date--The date of commencement of drilling operations, as shown on 
commission records. 
(c) Applicability. 
(1) A severance tax exemption is available for high- cost gas produced from a 
well that is spudded or completed between May 24, 1989, and September 1, 1996. 
Eligible high-cost gas will be exempt from the tax imposed by the Texas Tax 
Code, Chapter 201, during the period from September 1, 1991, through August 31, 
2001. 
(2) A severance tax reduction is available for high-cost gas produced from a 
well that is spudded or completed after August 31, 1996, and before September 1, 
2002. Eligible high-cost gas will be entitled to a reduction of the tax imposed 
by the Texas Tax Code, Chapter 201, for the first 120 consecutive calendar 
months beginning on the first day of production or until the cumulative value of 
the tax reduction equals 50 percent of the drilling and completion costs 
incurred for the well, whichever occurs first. The amount of tax reduction is 
determined pursuant to the Texas Tax Code, Chapter 201, Subchapter B, 
sec.201.057(c) . 
(3) The plug back or deepening of an existing wellbore qualifies as a completion 
under this section. When the plug back or deepening is completed prior to 
September 1, 1996, the gas produced may qualify for a tax exemption. When the 
plug back or deepening is completed after August 31, 1996, the gas produced may 
qualify for a tax reduction. The plug back or deepening qualifies as a 
completion if: 
(A) it is the initial completion in a commission-designated or newly discovered 
field that has not been previously produced from that wellbore; or 
(B) the operator can demonstrate that the strata between the former completion 
and the new completion contain a minimum of 20 vertical feet of impermeable 
strata; or 
(C) the operator submits the results of bottom hole pressure surveys, gas 
analyses or other methods or calculations comparing the new completion with 
previous completions in the wellbore that were in existence prior to May 24, 
1989. The application shall include an explanation of the engineering 
principles, calculations, and reasoning to show that the gas to be produced from 
the applied-for completion could not have been produced from any completion in 
existence prior to May 24, 1989. 
(4) If the operator determines that a gas well previously certified as producing 
high-cost gas no longer produces high-cost gas or if the operator takes any 
action or discovers any information that affects the eligibility of gas for an 
exemption or tax reduction under Texas Tax Code, sec.201.057, the operator must 
notify the commission in writing within 30 days after such an event occurs. 
(5) If the commission determines that a gas well previously certified as 
producing high-cost gas no longer produces high-cost gas or if the commission 
takes any action or discovers any information that affects the eligibility of 
gas for an exemption or tax reduction under Texas Tax Code, sec.201.057, the 
commission will notify within 48 hours, in writing, the comptroller and the 
operator. 
(d) Application procedure. 
(1) An application for a state severance tax exemption or tax reduction for a 
gas well may be made only by the operator of that well. The operator shall file 
one copy of the required application form, one copy of the required attachments 
specified in subsection (e)(1)-(6) of this section and any additional 
information deemed necessary by the commission to clarify, explain and support 
the required attachments. Submission of legible copies of required attachments 
will comply if the application includes a statement, signed by the operator, 
that the attachments are true and correct copies of the documents originally 
filed with the commission. However, the commission may require an operator to 
file certified copies of required attachments or other documents from commission 
files if necessary for a certification. 
(2) (No change.)
(e) Application requirements for individual well certifications. To qualify for 
the severance tax exemption or tax reduction, the operator must prove that the 
gas produced is high-cost gas by providing the following information: 
(1) Applications for wells producing deep high-cost gas shall include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well. 
(2) Applications for wells producing geopressured brine shall include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well; 
(C)-(D) (No change.) 
(3) Applications for wells producing coal seam gas shall include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well if the gas is produced through a 
wellbore, or a detailed description of the production process if the gas is not 
produced through a wellbore; 
(C) (No change.) 
(D) evidence to establish that the natural gas was produced from coal seams. 
(4) Applications for wells producing Devonian shale gas shall include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well; 
(C)-(F) (No change.) 
(5) Applications for wells producing designated tight formation gas shall 
include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well; 
(C) specific reference to the commission docket number assigned to the 
applicable designated tight formation area certification along with a copy of 
the map with the subject well location shown, which outlines the designated 
tight formation area approved by the commission. 
(6) Applications for wells producing production enhancement gas shall include: 
(A) (No change.) 
(B) copies of all Gas Well Back Pressure Test, Completion or Recompletion 
Reports and Logs ever filed on the subject well; 
(C) -(I) (No change.) 
(f) Application requirements for tight formation area certifications.
(1) If justification for an individual well application is based on a tight 
formation certification and the well is not located within a geographical area 
that has been previously certified as a designated tight formation area or the 
well is not completed in a formation interval that has been previously certified 
as a designated tight formation by the Federal Energy Regulatory Commission 
under the Natural Gas Policy Act or by the Railroad Commission of Texas, the 
operator must first apply for a tight formation area designation. 
(2) An applicant requesting a tight formation area designation must submit a 
written request to the High-Cost Gas Severance Tax Section, at the address given 
in subsection (d)(2) of this section, for a certification that a named formation 
or a specific portion thereof is a tight formation. The applicant must supply a 
list of the names and addresses of all affected persons. For purposes of this 
subsection, "affected persons" means all operators of all wells listed on the 
current proration schedule for the applicable field or fields located within the 
proposed designated area. The applicant shall mail or deliver a copy of the 
prescribed, completed notice of application form to all affected persons, and if 
required, shall publish the notice of application in accordance with 16 Texas 
Administrative Code sec.1.46 of this title (relating to notice by publication in 
oil and gas and surface mining and reclamation nonrulemaking proceedings), as 
found in the commission's General Rules of Practice and Procedure (16 Texas 
Administrative Code, Chapter 1). Notice of application forms may be obtained by 
contacting the Railroad Commission of Texas, P. O. Box 12967, Austin, Texas 
78711-2967, Attention: High-Cost Severance Tax Section. Before the application 
may be approved, the applicant shall submit a letter certifying that all 
affected persons were sent a copy of the notice of application, and the date on 
which the notice of application was sent. 
(3) In addition to the written request and list of affected persons, the 
applicant must submit the following information in duplicate:
(A) a geographical and geological description of the formation, including: 
(i) a map with an outline of the geographical limits of the formation in and 
around the requested area, with the proposed designated areal boundaries shown, 
with counties, surveys and abstracts identified and with the locations clearly 
identified for all wells inside the requested area that have penetrated the 
proposed formation; all wells (i.e. those that penetrated the proposed 
formation) shown on the map inside the requested area shall include either the 
commission's gas well identification number or the API number (if available); 
(ii) a list of the counties involved, abstract numbers, survey names, geologic 
formation markers, and any other descriptive information that will aid in 
identifying the subject formation including an estimate of the number of acres 
within the requested area; and 
(iii) a structure map contoured on the top of the formation and a cross-section 
to depict upper and lower limits of the proposed formation, or specific portion 
thereof. 
(B) engineering and geological exhibits, including a written explanation of 
each, to establish the following:
(i) that the in situ permeability throughout the proposed formation or specific 
portion thereof is 0.1 millidarcies or less, as determined by geometric mean or 
median analysis of available data from all wells that either have been tested or 
are completed in the proposed formation within the requested area. If no in situ 
permeability estimates are provided for wells that are in the requested area and 
have been tested and/or are completed in the proposed formation, an explanation 
must be provided; 
(ii) that the pre-stimulation stabilized production rate against atmospheric 
pressure at the wellhead, as determined by a geometric mean or median analysis 
of available data from all wells within the requested area that either have been 
tested and/or are completed in the proposed formation or specific portion 
thereof, does not exceed the production rate listed in the following table: 
Figure: 16 TAC 3.101(f)(3)(B)(ii) 
(iii) that no well drilled into the formation is expected to produce, without 
stimulation, more than five barrels of crude oil per day; and, 
(iv) that the requested designated area does not extend beyond a two and one-
half (2 1/2) mile radius drawn from any data point well. 
(g) Commission action on applications for individual well certifications and for 
tight formation area designations. 
(1) Each application, for an individual well certification, will be assigned a 
docket number identifying it as a severance tax application. A notice of receipt 
will be sent to the applicant, indicating the assigned docket number and receipt 
date. All further correspondence shall include this docket number. 
(2) The director may administratively approve the individual well certification 
applications if the forms and information submitted by the operator establish 
that the gas qualifies as high-cost gas eligible for the severance tax exemption 
or tax reduction. If the director denies administrative approval, the applicant 
shall have the right to a hearing. 
(3) If commission staff finds that the data submitted with the tight formation 
area designation applications are complete and comply with the requirements set 
out in subsection (f)(3) of this section and if no protest to the application is 
filed within 21 days of the notice, the application will be presented to the 
commission for approval. If commission staff finds the data submitted are 
incomplete, or indicate the area does not qualify, or if a protest is filed 
within the 21-day notice period, the applicant must request a hearing to have 
the application considered. If the applicant does not request such a hearing or 
if the applicant fails to appear at a requested hearing, the application shall 
be dismissed. Any such hearing shall be held only after at least 10 days' notice 
by the commission to all affected persons as defined in subsection (f)(2) of 
this section. If no protestant appears at the hearing, and/or if the application 
and any evidence presented at the hearing establishes that the subject formation 
meets the requirements for a tight formation certification, the application 
shall be presented to the commission for approval. 
(h) Reporting. To qualify for the exemption or tax reduction provided by Texas 
Tax Code, sec.201.057(a)(2)(A), all persons responsible for paying the tax must 
apply with the comptroller after receiving a copy of the commission's 
certification letter. The application shall contain the commission's letter 
certifying that the well produces or will produce high-cost gas, a completed 
copy of the commission's application for certification form and a completed copy 
of the applicable Comptroller of Public Accounts' form. To obtain the maximum 
tax exemption or tax reduction, the application must be filed with the 
comptroller at the later of the 180th day after the first day of production or 
the 45th day after the certification by the commission. If the application is 
not filed by the applicable deadline, the tax exemption or reduction will be 
reduced by 10% for the period beginning on the 180th day after the first day of 
production and ending on the date on which the application is filed with the 
comptroller. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711320
Mary Ross McDonald
Deputy General Counsel, Office of General Counsel
Railroad Commission of Texas
Effective date: September 15, 1997
Proposal publication date: March 21, 1997
For further information, please call: (512) 463-7008

CHAPTER 9. Liquefied Petroleum Gas Division
SUBCHAPTER A. General Applicability and Requirements
16 TAC sec.sec.9.2, 9.4, 9.5, 9.6
The Railroad Commission of Texas adopts amendments to sec.sec.9.2, 9.4, 9.5, and 
9.6, relating to definitions; categories of licenses and related fees; licensing 
requirements; and examination requirements and renewal of certified status, 
without changes to the proposed text as published in the July 15, 1997, Texas 
Register (22 TexReg 6539). The Commission adopts the amendments to implement 
Senate Bill 634 (S.B. 634) enacted by the 75th legislature and effective 
September 1, 1997. The bill creates new LP-gas license Category P for portable 
cylinder exchange, as well as adds the alternative for self-insurance for LP-gas 
licensees; rules relating to the self-insurance provision will be proposed in a 
separate rulemaking. 
The adopted amendment to sec.9.2 adds the definition for "portable cylinder," as 
defined in S.B. 634. In sec.9.4, the original and renewal fees for a Category P 
license are added to Table 1, and new subsection (d)(16) is added to describe 
the Category P license. Other amendments adopted in subsection (d),(6), (9) and 
(10), show the separation between cylinder filling activities (permitted by 
Category F, I, and J licenses) and cylinder exchange only (permitted by new 
Category P). New subsection (e) specifies that existing licenses including 
cylinder exchange activities will be converted to a new Category P license upon 
the next renewal date. 
In sec.9.5, the only adopted amendment is the addition of Category P to those 
licenses listed in subsection (i)(3) which states attendance at a course of 
instruction is not required for company representatives and supervisors. Section 
9.6(a)(1) includes the adopted addition of a sentence clarifying that 
management-level examinations are offered for all categories of licenses. The 
new table shows the addition of a column for Category P in the list of licenses, 
but the corresponding rows in the Category P column are left blank because no 
employee-level examinations are offered for Category P. Another sentence is 
added to sec.9.6(a)(4) to indicate that the back of LPG Form 16 includes a study 
guide for the examinations. 
In addition, sec.9.6(f) is amended to indicate that the requalification 
seminars, previously suspended until February 28, 1998, in an earlier rulemaking 
(adopted in the May 10, 1996, issue of the Texas Register at page 4014) are 
permanently suspended, and to add the requirement that applicants must comply 
with other applicable Commission rules regarding training. 
The Commission received no comments concerning the proposal. 
The amendments are adopted under the Texas Natural Resources Code, sec.113.051, 
which authorizes the Commission to adopt rules relating to any and all aspects 
or phases of the LP-gas industry that will protect or tend to protect the 
health, welfare, and safety of the general public. Texas Natural Resources Code, 
sec.113.051, is affected by the adopted amendments. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711321
Mary Ross McDonald
Deputy General Counsel, Office of General Counsel
Railroad Commission of Texas
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 463-7008

PART II. Public Utility Commission of Texas
CHAPTER 23.Substantive Rules
Customer Service and Protection
16 TAC sec.sec.23.40, 23.42, 23.43, 23.45, 23.46
The Public Utility Commission of Texas (commission) adopts new sec.23.40, 
relating to Prepaid Local Telecommunications Service (PLTS), and adopts 
amendments to sec.23.42 relating to Refusal of Service, sec.23.43 relating to 
Applicant and Customer Deposit, sec.23.45 relating to Billing and sec.23.46 
relating to Discontinuance of Service with changes to the texts as published in 
the April 11, 1997, issue of the Texas Register (22 TexReg 3358). 
The new rule, sec.23.40, requires dominant certificated telecommunications 
utilities (DCTUs) to provide prepaid local telecommunications service to 
eligible customers as a one-time alternative to disconnection for nonpayment of 
services. The new rule defines terms, sets forth notification requirements and 
accounting practices, and establishes deadlines and procedures necessary to 
implement the requirements of the rule. The amendments to sec.sec.23.42, 23.43, 
23.45, and 23.46 seek to make these rules consistent with new sec.23.40. The 
public benefit anticipated by implementation of this rule is enhancement of 
universal access to basic local service by limiting the ability of DCTUs to 
refuse to provide basic local service to customers for nonpayment of charges 
incurred for services other than basic local service. 
To meet these objectives, the rule provides that customers who would be 
otherwise disconnected for nonpayment of charges may subscribe to a prepaid 
local only service. Such a customer will have access to local services on a 
prepaid basis but will be prohibited from incurring usage-sensitive charges, 
such as toll charges, that would increase the customer's debt to the DCTU and/or 
other carriers. 
Workshops were held on January 10, 1997 and March 4, 1997 prior to publication 
of the proposed rule. The following parties filed initial comments in response 
to the proposed rule published in the April 11, 1997 issue of the Texas Register 
(22 TexReg 3358): AT&T Communications of the Southwest, Inc. (AT&T); jointly 
filed comments of Center of Economic Justice and Consumers Union (CEJ/CU); 
jointly filed comments by Choctaw Communications, E.Z. Talk, L.C., Fast 
Connections, Inc., Metroconnection, Inc. and U.S. Telco, Inc. (collectively 
referred to as "Choctaw"); Dell Telephone Cooperative; La Ward Telephone 
Exchange, Inc.; Ganado Telephone Company; Fort Bend Telephone Company (Fort 
Bend); GTE Southwest Incorporated (GTE-SW); MCI Telecommunications Corporation 
(MCI); Southwestern Bell Telephone Company (SWBT); United Telephone Company of 
Texas, Inc. and Central Telephone Company of Texas (collectively referred to as 
Sprint), Texas Association of Long Distance Telephone Companies (TEXALTEL); 
Texas Statewide Telephone Cooperative, Inc. (TSTCI); and the Texas Telephone 
Association (TTA). Reply comments were filed by AT&T, GTE-SW, SWBT, TEXALTEL, 
and TSTCI. 
A public hearing was held on May 22, 1997. GTE-SW, TSTCI, CEJ, and SWBT offered 
oral comments which have been summarized to the extent they vary from the 
written comments. 
Most commenters recommended changes to specific provisions of the rule. CEJ/CU 
was strongly in favor of adoption of the proposed rule and amendments. AT&T, and 
SWBT offered conditional support. Choctaw, GTE-SW, TSTCI, TEXALTEL, MCI, TTA, 
and Sprint opposed the adoption of the PLTS rule. Dell Telephone Cooperative, La 
Ward Telephone Exchange, Inc., Ganado Telephone Company, and Fort Bend Telephone 
Company expressed concerns about the cost incurred by compliance with this rule. 
As a result of the comments received during the comment period and at the public 
hearing, certain revisions have been made to the proposed rule. Discussion of 
the comments will refer to the sections of the rule as published in the Texas 
Register.
The commission invited parties to identify benefits of the proposed rule. MCI 
and Choctaw commented that there are no significant benefits resulting from 
PLTS. AT&T commented that the benefits of the proposed rule could not be 
substantiated with detailed documentation and supporting workpapers. AT&T stated 
that it is difficult to measure the level of demand for PLTS because no person 
has presented any demand projections for the proposed PLTS service. 
Nevertheless, AT&T suggested that unquantifiable benefits associated with PLTS 
service should not be ignored. SWBT commented that the benefits of the proposed 
rules which create a service that is unique in the nation are hard to measure in 
monetary terms but arise more from the fact that customers may be able to remain 
on the network for basic service at affordable rates which is consistent with 
the overarching principle of universal service. CEJ/CU opined that the proposed 
rule is a "textbook example of good regulation." CEJ/CU commented that the rule 
assures the availability of a basic necessity to consumers with little or no 
competitive power, benefits all consumers by moving closer to the goal of 
universal service, and eliminates an unfair advantage to DCTUs in the 
competitive billing and collection market. CEJ/CU suggested that the proposed 
rule benefits those who are currently without service and those who are in 
danger of losing service, but it also benefits current subscribers and society 
as a whole. CEJ/CU contended that basic local telephone service is a necessity 
for daily life and that the current rules conflict with the universal service 
goals and make DCTUs more attractive as billing and collection entities. CEJ/CU 
concluded that the proposed rule correctly breaks the link between two different 
services: basic local telecommunications and long distance services. CEJ/CU 
asserted that the proposed rule correctly distinguishes debt for basic local 
telecommunications service from all other charges. 
As previously stated, the commission anticipates that the benefits from the 
adoption of this rule will include the enhancement of universal service. By 
allowing customers who are capable and willing to pay for local services to 
receive such service, the number of Texans who have access to local service 
should increase. The commission recognizes that the PLTS plan is intended to be 
restrictive. The rule minimizes the impact on uncollectibles of 
telecommunication carriers by blocking access to toll and other discretionary 
services and by not diminishing the incentive for PLTS customers to make 
payments on past due charges for toll and services, other than basic local 
service, before the customer may access such services. 
The commission invited parties to submit information, that could be 
substantiated with detailed documentation and supporting workpapers, relating to 
the anticipated economic costs to parties who are required to comply with the 
proposed sections of the rules. 
In its comments, SWBT stated that it has not completed its cost analysis. SWBT 
offered that it knows that the following functional areas will be impacted by 
the proposed rule language: Customer Record Information System (CRIS), service 
order rating, reconciliation, CASH and adjustments, treatment, usage, billing, 
journals, uncollectibles, taxes, tables, bill format, special programs, and 
conversions. SWBT stated that its preliminary estimate of person days to 
implement PLTS is approximately 795 person days for information services and 
approximately 300 person days for finance. 
GTE-SW filed its calculations concerning its systems development costs in 
complying with the proposed rule. In its initial comments, it estimated that 
compliance would cost approximately $2.8 million dollars. In its reply comments, 
GTE-SW estimated an additional $600,000 for training and personnel costs would 
be incurred. These costs take into account the estimated impact on GTE-SW's 
billing and processing systems, as well as GTE-SW's operations. GTE-SW further 
estimated that the proposed rule will have economic costs of $115,000 associated 
with the training of customer contact representatives; economic costs of $5,175 
associated with training credit management personnel to handle the outstanding 
balances; economic costs of $6,075 for training personnel in the Off-line 
Contact Center. In addition, GTE-SW estimated that its ongoing annual labor 
costs will increase by $500,000 to handle the increased customer contact 
associated with complying with the proposed rules. GTE-SW questioned how DCTUs 
that have elected under incentive regulation would recover costs associated with 
PLTS. GTE-SW also raised the issue that DCTUs should receive reimbursement of 
implementation costs from the state universal service fund. SWBT also commented 
that the Federal Communications Commission's (FCC's) universal service order, 
unlike the proposed rule, provides a cost-recovery mechanism. AT&T objected to 
the recovery of PLTS-related costs through the state universal service fund. 
Dell Telephone Cooperative, Inc., and La Ward Telephone Exchange, Inc. did not 
specifically determine their costs but commented that the implementation of the 
proposed rule would be extremely expensive and burdensome. While Ganado 
Telephone, Inc. did not substantiate its economic costs with work papers, it 
estimated that its costs would be at a minimum, $100,000, the costs associated 
with a billing system modification to manage voluntary toll limits. Sprint did 
not substantiate its associated costs to implement this rule; however, it 
estimated that its costs would be $108,026 per year. This estimate did not 
include any billing system programming that it believed would be needed and will 
prove to be the greatest cost of implementation. 
The commission notes that DCTUs will not be required to implement this rule 
until the first quarter of 1998, at the earliest. All DCTUs may pursue cost 
recovery through rate case filings pursuant to the Public Utility Regulatory Act 
of 1995 (PURA95) and commission rules. In cases where the DCTU has elected under 
Subtitle H in September 1995, the DCTU can apply for a rate increase in 
September 1999 under PURA95. The commission finds that the interim period 
between implementation of this rule and September 1999 will be necessary to 
develop a test year to demonstrate cost associated with compliance with this 
rule. 
The commission asked for cost justification in this rulemaking both to verify 
the existence of costs and to judge the rule's projected benefits in light of 
the estimated costs. GTE-SW, the only carrier to provide cost justification, 
suggests that the rule specify that such costs be recovered by DCTUs through the 
universal service fund. The commission rejects GTE-SW's suggestion that DCTUs 
should be allowed to recover costs from the state universal service fund in 
light of our determination that DCTUs can apply for cost recovery through a rate 
case filing. 
Staff noted at the May 22, 1997 public hearing that compliance with the FCC's 
Report and Order 96-45, paragraphs 384-402, would require companies that receive 
universal service support to incur administrative costs and upgrade existing 
billing systems and switches, by January 1, 1998, in order to provide services 
to low income consumers. SWBT, TSTCI and AT&T commented that it was not 
appropriate to compare the costs of implementing PLTS with the cost of 
implementing the FCC's order because the FCC's order only applies to Lifeline 
customers while the proposed rule applies to any customer who is faced with 
disconnection for nonpayment of charges. 
The commission concludes that cost estimates relating to modifications of 
billing systems and switch upgrades may include costs that are likely to be 
incurred through compliance with the FCC's Order 96-45 and therefore are not 
attributable to the requirements of this rule. 
TTA concluded that the proposed rule imposes substantial costs in terms of 
employee time and associated costs in modifying information systems, billing and 
collection systems, and providing the notices required by the rule. According to 
TTA, a DCTU will be required to establish procedures to query and track 
throughout its customer base and former records for those customers that meet 
the consumer profile of an eligible PLTS customer, as well as those customers 
who are ineligible for PLTS. TTA asserted that the proposed rule appears to 
override or even ignore the current "hands on" informal collection practices 
followed by many small incumbent local exchange carriers (ILECs). Lastly, TTA 
argued that the proposed rule subjects small ILECs to high compliance costs 
relative to the small proportion of the customer base to be served under PLTS 
offerings. Dell Telephone Cooperative, Inc., La Ward Telephone Exchange, Inc. 
and Ganado Telephone Company also commented that they work closely with their 
customers when there are payment problems. 
The commission disagrees with TTA's general analysis of the proposed rule. The 
notice requirements in the rule are necessary to inform customers of the PLTS 
option as an alternative to disconnection for nonpayment of charges other than 
charges for basic local service. The proposed rule neither overrides nor ignores 
the "hands on" and informal collection practices implemented by many DCTUs. On 
the contrary, to the extent that such a collection practice can alleviate the 
need to suspend or disconnect a customer, customers will not have the need to 
subscribe to PLTS. Finally, concerning TTA's comment that the implementation 
costs outweigh the benefits to be received by PLTS customer, the commission 
disagrees. This rule provides a compromise position that only narrowly impacts a 
DCTU's disconnection practices while expanding access to local telephone 
services. 
AT&T did not quantify the effect of the proposed rule on it but maintained that 
the commission should be aware that there are costs involved with PLTS that are 
not directly tied to "implementation of the proposed new section and 
amendments." AT&T stated that its failure to substantiate such costs with 
detailed documentation does not mean that such implementation costs can be 
ignored. 
MCI anticipated that it will incur indirect costs in the form of uncollectibles. 
Although MCI did not substantiate its costs with supporting workpapers, it noted 
that it had estimated costs in Project Number 12334, Amendment of Substantive 
Rule sec.23.46, Discontinuance of Service, Regarding Disconnection of Local 
Telephone Service, ranging from $134 million to $179 million and suggested that 
the potential costs of $179 million, the bulk of which is increased 
uncollectibles revenue for both local exchange carriers (LECs) and interexchange 
carriers (IXCs), will be borne by other rate payers at a cost of approximately 
$1.48 per access line per month. MCI estimated that its direct costs of 
implementing the toll block and voluntary limit system for PLTS would be $53 
million.
The commission rejects MCI's and AT&T's argument regarding increases in 
uncollectibles and implementation costs as a result of this rule. As a threshold 
matter, the commission does not find the cost estimates provided in Project 
Number 12334 to be persuasive because the rule is far narrower that the proposed 
rule in Project Number 12334. The commission notes that other states have found 
that even if substantial increases in uncollectible expenses are, in fact, one 
predictable result of policies limiting or prohibiting disconnection of local 
service for nonpayment of toll charges, such increases should be seen as part of 
the normal cost of doing business especially now that competition is burgeoning. 
In adopting this rule, the commission, at this time, strikes an appropriate 
balance between promoting universal service and minimizing IXC uncollectibles by 
not outright prohibiting disconnection for nonpayment of toll but creating PLTS 
as an alternative to disconnection. Furthermore the commission is of the opinion 
that such "potential uncollectibles" do not outweigh the public benefits that 
are envisioned to result from this rule. This rule is not intended to affect the 
DCTUs' or the IXCs' ability to take other measures to limit their exposure to 
uncollectibles such as conducting credit checks, establishing deposit practices, 
and pursuing other avenues to recover uncollectibles consistent with federal and 
state laws and regulations.  
With respect to MCI's cost estimates related to the implementation of toll 
blocking technology, the commission finds that the proposed rule does not impose 
a requirement that IXCs implement toll blocking. However, to the extent that 
IXCs choose to implement toll blocking to limit their exposure to 
uncollectibles, that decision is a voluntary business decision. 
Choctaw concluded that the costs associated with implementation of PLTS will be 
the loss of choice for consumers. Choctaw suggested that the loss of competition 
that will result from a mandated offering of PLTS will result in fewer choices 
of providers for Texas consumers. 
The commission disagrees with Choctaw's assertion that PLTS will cause limited 
competition in the local exchange market. On the contrary, the commission 
believes that competition is likely to be enhanced because the provision of PLTS 
by DCTUs will encourage competitors to offer similar services at competitive 
prices to consumers. The commission notes that at present, the only option 
available to customers who have been disconnected or are at risk of 
disconnection of local service by the DCTU is to seek service from competitors 
of DCTUs.  
At the May 22, 1997 public hearing, the staff also requested comments on whether 
any aspect of the proposed rule needs to be modified to reflect the provisions 
of the FCC's Report and Order 96-45. SWBT suggested that if the commission's 
concern in this area is limited to Lifeline consumers, then it should reevaluate 
the PLTS rule in light of this recent FCC development. AT&T offered that it may 
be appropriate to include a provision in the rule indicating that Lifeline 
customers may not be required to subscribe to PLTS in order to retain local 
service. 
The commission disagrees with the suggestion of SWBT. The universal service 
concerns being addressed by this rule are not limited to Lifeline customers. 
Instead, the concern the commission addresses in this rule is ensuring that 
customers who are able and willing to pay for local services have an opportunity 
to receive such service. The commission notes that PLTS is available to all 
customers including Lifeline customers but no customer is required to subscribe 
to PLTS. DCTUs should inform Lifeline customers of all options to retain local 
service, including those consistent with the FCC's and commission's rules.  
In the preamble to the proposed rule, the commission requested comments on 
whether the timing of customer notification about PLTS should occur before or 
after suspension of telephone service and whether the service restoral charge 
should be waived for PLTS customers as proposed under sec.23.40 subsections 
(d)(2)(H) and (f)(1)(C)(ii) in lieu of notifying customers of PLTS prior to 
suspension of their telephone service. 
SWBT and AT&T supported the proposed rule on the issues of notice requirements 
and the deferral of service restoral charges. AT&T commented that the commission 
should avoid making all DCTUs rearrange their operations to conform to a single 
billing practice and thereby increase the costs of implementation. MCI 
recommended that DCTUs should provide notification to DCTU customers about PLTS 
in the manner that is most cost-efficient and is consistent with current 
notifications provided by the DCTU. 
This rule properly balances the needs of the customer and the DCTU's need for 
flexibility. The rule sets forth those notification requirements that are 
necessary to inform customers of the existence of PLTS as well as the customer's 
rights and responsibilities when subscribing to PLTS. The commission notes that 
special customer notice is necessary for this service because it is available as 
a one-time option, has unique restrictions, and is subject to disconnection 
without notice. The rule provides flexibility in the delivery of notice by 
allowing for varied timing of notice depending on whether a particular DCTU 
suspends service for non-payment of charges before disconnecting service. The 
commission agrees with AT&T and notes that the notice requirements in the rule 
are to a large extent compatible with the current billing practices of the 
ILECs. 
MCI suggested that if the DCTU provides a suspension notice, notice should be 
provided with such service suspension and if the DCTU provides notice of 
disconnection prior to disconnection, notice for PLTS should be provided with 
the disconnection notice. MCI did not support waiving service restoral charges 
because it would be discriminatory against customers of non-DCTUs who have to 
pay service restoral charges. MCI contended that if service restoral charges 
could be paid through the deferred payment plan under PLTS, it would minimize 
the financial burden on customers. 
The commission disagrees with MCI's argument. Deferral of service restoral 
charges is appropriate when a customer does not receive direct notice of PLTS 
eligibility prior to suspension because the customer does not have the 
opportunity to avoid incurring the restoral charge. Since the customer has 
notice of PLTS eligibility after suspension from basic local service, the 
customer should only be required to pay a restoral charge when that customer 
returns to basic local service. 
TTA commented that customers should not be notified of PLTS prior to being 
suspended from service because suspension of service prior to disconnection is 
intended to give customers an opportunity to pay for services that the customer 
has received prior to disconnection of telephone service. TTA did not take a 
position on whether the service restoral charge should be temporarily waived in 
lieu of notification prior to suspension of service. Choctaw also argued that 
notice of PLTS should not be provided so long as customers have the opportunity 
to incur additional toll charges. 
The rule meets TTA's and Choctaw's concerns. If a DCTU's standard practice is to 
suspend service for non-payment of charges before disconnection of service, the 
DCTU is not required to provide notice of PLTS until after suspension of 
service.
At the May 22, 1997 public hearing, the staff asked parties to comment on 
whether a DCTUs implementation of a toll limitation or credit management system 
should affect the timing of the notice of the availability of PLTS. TSTCI was 
not clear about the staff's interpretation of "credit management system" and was 
unable to respond to this question. 
SWBT noted that it does not believe that the notification provisions of PLTS in 
the proposed rule warrant modification. SWBT reiterated its position that the 
toll limitation collection tool and PLTS are separate matters. SWBT noted that 
the toll limitation tool would hopefully prevent customers from reaching the 
point of needing PLTS. SWBT concluded that both mechanisms should be able to 
operate independently to serve the common goal of helping keep customers on the 
network. AT&T stated that the commission's comments at the May 13, 1997 Open 
Meeting clearly indicate that issues concerning DCTUs' credit management systems 
and the issues involved in PLTS are not related. AT&T suggested that PLTS may be 
viewed as the "cure" to a customer's problems with high bills, but a credit 
management system is "preventive medicine" designed to avoid the occurrence of 
high bills in the first instance. 
The commission agrees with AT&T and SWBT that a DCTU's implementation of a toll 
limitation or credit management system is compatible with the overall goals of 
PLTS and, therefore, should not affect the timing of the notice regarding 
availability of PLTS. The commission finds that the proposed rule appropriately 
permits notice of PLTS to occur after suspension or disconnection of service 
because the delay in notice would allow DCTUs greater leverage to collect 
delinquent payments owed by customers. The commission believes that any burden 
on a customer associated with temporary suspension or disconnection of service 
before a customer receives notice of the PLTS program are outweighed by the 
potential abuse of the system by consumers. 
However, the commission notes that the rationale behind deferring service 
restoral charges when notice is delayed until after suspension is equally 
applicable to the deferral of service connection charges when notice is delayed 
until after disconnection. The commission, therefore, has addressed this issue 
by modifying proposed subsection (f)(1)(C)(i) {renumbered as subsection 
(f)(1)(B)(i)} as discussed in the commission response to comments concerning 
proposed subsection (d)(1)(B). 
Proposed subsection (a) explained which LECs must comply with the rule. The 
first sentence of proposed subsection (a) required all DCTUs to comply with the 
rule, unless specifically indicated otherwise. MCI requested that the words 
"unless specifically indicated otherwise" be deleted from proposed subsection 
(a) because such language could be read to imply that the proposed rule attempts 
to impose some obligations on non-DCTUs. 
The commission disagrees with MCI's request. The words "unless specifically 
indicated otherwise" should not be read to imply that the rule imposes 
obligations on non- DCTUs. Instead, those words are used to note that the rule 
may not apply to all DCTUs, e.g., a DCTU that obtains a waiver.
Proposed subsection (a) also prohibited a DCTU from refusing to provide PLTS to 
an applicant because the applicant is indebted to any DCTU or other 
telecommunications carrier for telecommunication services, including long 
distance services where the DCTU bills for such services pursuant to tariffs or 
contracts. MCI requested that this sentence be deleted because it disagrees with 
the premise of the rule, i.e., that a customer should have an opportunity to 
remain on the network on a local-only basis even if that customer does not agree 
to make payments on past due toll charges. 
The commission disagrees with MCI's request because, as a condition of service, 
a customer who wishes to receive a local-only service should only be required to 
pay past due local charges of the type the customer will receive in the future. 
Companies may seek collection of past due debts in the same manner that 
companies seek collection in other industries. 
TSTCI argued that proposed subsection (a) should create an exemption for small 
LECs so that the provisions of the rule would not apply to a LEC that serves 
less than 31,000 access lines or is a cooperative corporation. TSTCI pointed to 
individual company efforts to reduce disconnects from the network and the costs 
that would be incurred by small LECs if they are required to comply with the 
proposed rule. In its reply comments, AT&T agreed with TSTCI's proposed 
revision. AT&T argued that the high costs to small DCTUs associated with the 
implementation of the PLTS offering and the fact that there has not been a 
proliferation of new service providers offering local service at rates above the 
basic local service rates of the DCTUs in small LEC areas justified TSTCI's 
proposed limitation, at least for the near future. The commission disagrees with 
the argument of TSTCI. Commission rules currently permit local exchange 
companies the remedy of disconnecting customers from local service for 
nonpayment of other charges, including toll charges. The commission considered 
withdrawing the remedy; however, the commission determined that the prepaid 
local-only alternative is an appropriate compromise solution to promote 
universal service in all areas of this state without unduly exacerbating the 
impact on the telecommunication carriers. 
Proposed subsection (b) set forth the definitions. 
Proposed subsection (b)(3)(J) incorporated non-published service and non-listed 
service as services available to customers subscribing to PLTS. GTE-SW and MCI 
urged the deletion of proposed subsection (b)(3)(J). It is their position that 
since non-published service and non-listed service are discretionary services, 
these services should not be available to PLTS customers. 
The commission disagrees with the suggestion of GTE-SW and MCI. Although as a 
general rule, PLTS customers will not have access to services other than basic 
local services, the commission finds that, for public safety concerns, an 
exception is warranted for non-published service and non-listed service. The 
commission notes that a PLTS customer who chooses to subscribe to such service 
would be required to pay under proposed subsection (f)(1)(A)(ii), as part of the 
customer's PLTS service, the tariffed rate for non-published service and non-
listed service. 
Proposed subsection (c) set forth the customer eligibility requirements. Under 
proposed subsection (c)(1), former customers who would otherwise be refused 
service because of the existence of undisputed indebtedness to any DCTU or other 
telecommunications carrier, would be eligible to receive PLTS. CEJ/CU requested 
that the reference to "undisputed" indebtedness be deleted from proposed 
subsection (c)(1). It is their position that the word "undisputed" is 
unnecessary and creates ambiguity in the rule. SWBT agreed with CEJ/CU that the 
word "undisputed" should be deleted from the proposed subsection. 
The commission agrees that the word "undisputed" should be deleted from proposed 
subsection (c)(1). 
Under proposed subsection (c)(2), current residential customers who have 
received a notice following suspension or disconnection of service for non-
payment for services are eligible to receive PLTS. CEJ/CU and Choctaw argued 
that customers who are disconnected are not current customers; rather they fall 
within the category of former customers. Therefore, they recommended that the 
words "or disconnection of service for non-payment for services" in proposed 
subsection (c)(2) be deleted. SWBT opposed the suggested deletion. 
The commission agrees that subsection (c)(2) should be clarified. Therefore, to 
clarify the rule, the commission inserts the words "has not been disconnected 
from the network but who" before the word "has" and deletes the words "or 
disconnection" in subsection (c)(2). 
Under proposed subsection (c)(3), an applicant who was previously disconnected 
from PLTS by a DCTU would not be eligible to receive PLTS from that DCTU again. 
MCI argued that PLTS should be available to the customer only once, as opposed 
to being a one-time option with a particular DCTU. It recommended that the 
phrase "from that DCTU" be deleted. CEJ/CU, on the other hand, recommended the 
deletion of proposed subsection (c)(3) for a different reason. They argued that 
a customer disconnected from PLTS for nonpayment, but who subsequently pays all 
outstanding basic local telecommunications service and PLTS debt, should be 
eligible for PLTS service again. SWBT opposed CEJ/CU's suggestions. It argued 
that the PLTS offering should be limited to a one-time option. The commission 
disagrees with the suggestions offered by MCI and CEJ/CU. PLTS is intended to 
provide a one-time option from a particular DCTU for customers to promote 
universal service. It becomes the PLTS customer's responsibility to comply with 
the terms of PLTS. The DCTU should not be required to repeatedly offer PLTS to 
customers who do not carry out their responsibilities. However, other DCTUs are 
neither prohibited nor excused from offering PLTS to such customers. 
Under its discussion regarding subsection (c)(3), MCI suggested that subsection 
(k) be modified to require DCTUs to identify former PLTS customers to any non-
DCTU seeking information about such customer's credit status. 
The commission disagrees with the suggestion of MCI. Notification to IXCs under 
subsection (k) is necessary to provide IXCs information necessary to block toll 
calls from PLTS customers at their switches. The commission rejects MCI's 
suggestion to extend notification requirements to any non-DCTU. The commission 
believes it would be inappropriate to expand the notification requirements to 
any non-DCTU beyond the purpose of IXCs limiting potential toll fraud.  
MCI suggested that a new subsection (c)(4) be added to the rule to clarify that 
PLTS will not be available to business customers. 
The commission does not believe that additional language is necessary to clarify 
that PLTS will not be available to business customers. However, to avoid any 
ambiguity in the rule, the commission adds the following language as new 
subsection (c)(4): "Business customers shall not be eligible for PLTS." Proposed 
subsection (d) set forth customer notification requirements.
CEJ/CU argued that proposed subsections (d)(1)(B) and (f)(1)(C)(i) should be 
modified to either require notice of PLTS at least 10 days before disconnection 
of service or require waiver of the connection charges for those customers who 
apply for PLTS service within 30 days after disconnection. It argued that 
ideally consumers should receive notice of PLTS before suspension or notice. 
However, it noted that the proposed (d)(1)(A) allows DCTUs that suspend service 
to notify customers of the PLTS option after suspension but requires recovery of 
the service restoral charge to be deferred until the customer returns to basic 
local telecommunications service. CEJ/CU suggested that a similar deferral be 
permitted for the service connection charges to ensure that customers of DCTUs 
that disconnect service receive the same protections as customers of DCTUs that 
suspend service before disconnection. SWBT opposes waiving non-recurring service 
connection charges. 
The commission has defined the terms "suspension of service", "disconnection of 
service", "service restoral charge", and "service connection charge" in 
subsection sec.23.40(b) relating to definitions. Service connection charges are 
those charges applied by the DCTU to connect service to a customer's telephone 
line after it has been disconnected by the DCTU. The service restoral charges 
are those charges applied by the DCTU to restore service to a customer's 
telephone line after it has been suspended by the DCTU. 
The commission agrees with CEJ/CU. The commission has modified proposed 
subsection (f)(1)(C)(i) {renumbered as subsection (f)(1)(B)(i)} to permit a 
deferral of service connection charges if a customer subscribes to PLTS within a 
certain period. Specifically, if a DCTU does not suspend basic local service 
customers prior to disconnection, the customer should receive notice of the 
availability of PLTS after disconnection. Service connection charges should be 
deferred until the customer returns to basic local service if the customer 
promptly subscribes to PLTS. The commission has determined that a customer must 
subscribe to PLTS within 10 days from the date the DCTU mailed a termination 
notice containing notification of PLTS if the customer is to receive a deferral 
of service connection charges. 
MCI suggested that the requirement in proposed subsection (d)(1)(B) that a DCTU 
notify a customer of the availability of PLTS within three days after the date 
of disconnection imposes an unwarranted expense on DCTUs given that DCTUs are 
required to educate customers of PLTS annually through bill inserts and the 
white pages directory. Instead, MCI recommended that this requirement be deleted 
and the burden placed on the eligible customer to contact the DCTU regarding 
PLTS. 
The commission disagrees with MCI's suggestion. Rapid notification is necessary 
for the rule to meet the universal service goals of the commission. If a DCTU 
could delay notifying a customer of PLTS eligibility for an extended period of 
time after disconnection, the commission's attempt to enhance universal access 
to basic local telephone service would be frustrated. 
MCI also recommended that if DCTUs are required to provide notice about the 
availability of PLTS in the notice of disconnection required by sec.23.46, DCTUs 
would not have to incur additional costs. 
The commission agrees with MCI and notes that DCTUs that do not suspend service 
prior to disconnection are permitted, under the rule, to notify customers after 
disconnection of service rather than in the notice of disconnection in order to 
accommodate concerns that notification of PLTS in the disconnection notice would 
jeopardize the DCTU's current ability to collect delinquent payments owed by 
customers. 
Proposed subsection (d)(2) set forth the content of the notice provided by a 
DCTU offering PLTS. The commission inserts subparagraph (B) in subsection (d)(2) 
for reasons described in the commission response to comments regarding proposed 
subsection (f)(1)(A). The remaining subparagraphs are, therefore, renumbered. 
Proposed subsection (d)(2)(C) {renumbered as subsection (d)(2)(D)} required that 
the notice about PLTS include information about a customer's responsibility to 
make the initial deferred payment, in the third billing cycle and every month 
thereafter, for up to 12 months. CEJ/CU suggested that the words "if 
applicable," be inserted before the words "in the third billing cycle" in 
proposed subsection (d)(2)(C). SWBT did not object to this suggestion. 
The commission agrees with the suggestion of CEJ/CU and inserts the words "if 
applicable," before the words "in the third billing cycle" in proposed 
subsection (d)(2)(C) {renumbered as subsection (d)(2)(D)}. 
Proposed subsection (d)(2)(G) {renumbered as subsection (d)(2)(H)} limited PLTS, 
with some exceptions, to be a one-time option. CEJ/CU suggested that proposed 
subsection (d)(2)(G) be deleted. They argued that a customer disconnected from 
PLTS for nonpayment, but who subsequently pays all outstanding basic local 
telecommunications service and PLTS debt, should be eligible for PLTS service 
again. SWBT opposed such a deletion. 
The commission disagrees with the suggestions of CEJ/CU. PLTS is intended to 
provide a one-time option from a particular DCTU for customers to promote 
universal service. It becomes the PLTS customer's responsibility to comply with 
the terms of PLTS. The DCTU should not be required to repeatedly offer PLTS to 
customers who do not meet their responsibilities. 
GTE-SW, Choctaw, and MCI argued that proposed subsections (d)(2)(H) {renumbered 
as subsection (d)(2)(I)} and (f)(1)(C)(ii) {renumbered as subsection 
(f)(1)(B)(ii)}, relating to temporary waiver of service restoral charges, be 
deleted. GTE-SW and MCI note that the customer has ample opportunity to initiate 
discussions with the DCTU prior to suspension because the proposed rule provides 
for annual billing inserts and publication in the white pages. Therefore, GTE-SW 
and MCI concluded that customers should not receive a deferral of restoral 
charges when subscribing to PLTS. MCI and Choctaw argued that it is 
inappropriate to defer the restoral charge because such a deferral would give 
DCTUs an unfair competitive advantage. Specifically, Choctaw argued that 
competitive local exchange carriers (CLECs) wishing to provide service on a 
resale basis to a customer who has been suspended by a DCTU must issue an order 
of disconnect and pay the full nonrecurring charges for installation. 
The commission disagrees with the arguments of GTE-SW, Choctaw, and MCI 
concerning the suspension of restoral charges when subscribing to PLTS. The 
commission believes that the proposed rule appropriately delayed notice 
requirements concerning PLTS until after a customer is suspended to prevent the 
customer from incurring a large toll debt prior to suspension of service. The 
customer therefore does not receive direct, imminent notice of PLTS until after 
suspension. But for the delay in notice, customers would have a greater 
opportunity to avoid restoral charges by subscribing to PLTS prior to 
suspension. Second, there is no discriminatory treatment between PLTS and 
customers receiving basic local services. Under the provisions of this rule, all 
suspended customers must pay restoral charges when they return to basic local 
telephone service. A customer subscribing to PLTS, however, does not return to 
basic local service until that customer is converted from PLTS to basic local 
service at a future date. The commission, however, modifies proposed subsection 
(d)(2)(H) {renumbered as subsection (d)(2)(I)} to reflect the requirements in 
subsection (f)(1)(C) {renumbered as subsection (f)(1)(B)} regarding deferral of 
non-recurring charges.  
TSTCI contended that the notice requirements in the proposed rule, as a whole, 
are extensive and therefore burdensome for the DCTUs to comply with. Instead of 
requiring a DCTU to notify the customer of the options available to return to 
basic local telecommunications service once the customer has met certain 
obligations, TSTCI suggested that such notice be included in the initial notice 
provided to customers regarding the PLTS plan. Specifically, TSTCI suggested 
that a new subparagraph (J) be added under proposed subsection (d)(2) to state 
that "The customers eligibility to return to basic local telecommunications 
service after satisfying requirements described in subsection (g)(1) of this 
section." 
The commission disagrees with TSTCI's suggestion. As the party with greater 
resources and greater knowledge concerning commission rules and regulations, the 
DCTU should bear the responsibility to inform customers of their option to 
return to basic local service after the customer has met the necessary 
obligations required under the proposed rule. 
Proposed subsection (e)(2) required a DCTU to mail confirmation letters to 
customers subscribing to PLTS. TSTCI noted that the confirmation letter contains 
the same information as the initial notice sent to customers about PLTS. TSTCI, 
therefore, suggested that instead of requiring DCTUs to provide a confirmation 
letter to a PLTS subscriber stating the customer's rights and responsibilities, 
proposed subsection (e)(2) should merely require that the DCTU inform the 
customer, upon enrollment into the PLTS plan, of the rights and responsibilities 
under PLTS and the rates, terms and condition of service under the PLTS plan as 
described in the initial notice previously sent to the customer. 
The commission disagrees with the suggestion of TSTCI. Because PLTS is a one- 
time option for customers, it is necessary that customers receive sufficient 
notice of their rights and responsibilities. A standard confirmation letter from 
the DCTU to the subscribing PLTS customer demonstrates that PLTS customers are 
notified of their responsibilities and provides the DCTU with evidence that it 
has complied with the commission's rules. 
Proposed subsection (f)(1) set forth the rates applicable to PLTS. 
Proposed subsection (f)(1)(A)(ii) would allow a DCTU to charge a PLTS customer 
the tariffed rate for non-listed and non-published service, if the PLTS customer 
requests those services. GTE-SW expressed a concern that proposed subsection 
(f)(1)(A)(ii) is potentially inconsistent with proposed subsection (b)(3)(J) 
since non-listed and non- published service under proposed subsection (b)(3)(J) 
is listed as a mandatory service under proposed subsection (b)(3)(J) but 
proposed subsection (f)(1)(A)(ii) authorizes a separate charge for these 
services. GTE-SW recommended modifying proposed subsection (f)(1)(A)(ii) to 
authorize tariffed charges for other vertical local services, if applicable.
The commission believes this concern is not warranted. The commission notes that 
proposed subsection (b)(3)(J) was not intended to create a free offering of non-
published and non-listed services to PLTS customers. Instead, the commission's 
intent was to create an exception for these services from the general rule that 
PLTS customers be prohibited from accessing vertical services. Proposed 
subsection (b)(3)(J) requires the DCTU to provide non-published and non-listed 
service to a PLTS customer who requests it and proposed subsection (f)(1)(A)(ii) 
states that the customer will be charged the rates listed in the DCTU's tariffs. 
The commission declines to adopt GTE-SW's recommendation because the rule 
creates an exception for non-published and non-listed services and is not 
intended to apply to all vertical services. 
MCI suggested that proposed subsection (f)(1)(A) be clarified to state that the 
rates for PLTS include a charge for toll blocking. 
The commission does not find it necessary to adopt MCI's suggestion. In proposed 
subsection (f)(1)(A), the commission authorizes DCTUs to charge PLTS customers 
for toll blocking. Specifically, the monthly rate for PLTS includes the 
residential tariffed rate (or Lifeline rates, if applicable) for services 
included in the definition of PLTS. Since toll blocking is a service included in 
PLTS, the DCTU is allowed to charge the PLTS customer the tariffed rate for toll 
blocking. The commission, however, believes that potential PLTS customers should 
be informed about the features, charges, and options of a PLTS plan in the 
initial notice provided by a DCTU offering PLTS. The commission, therefore, 
inserts subparagraph (B) in subsection (d)(2) to ensure that a description of 
the PLTS plan including its features, charges, and options is included in the 
initial PLTS notice provided by a DCTU. The remaining subparagraphs under 
subsection (d)(2) have been renumbered. 
Proposed subsection (f)(1)(B) required a DCTU to offset the monthly rate for 
PLTS, as defined by (f)(1)(A), by the value of the directory assistance calls 
included in the DCTU's basic local telecommunications service. SWBT, GTE-SW, 
TEXALTEL, TTI, TSTCI and Fort Bend recommended that proposed subsection 
(f)(1)(B) be deleted. SWBT argued that the monthly rate offset contemplated by 
proposed subsection (f)(1)(B) would, in effect, be a commission ordered rate 
reduction in violation of PURA95 sec.3.352(d). SWBT also argued that such a 
provision would be an unlawful ratemaking or rate changing in a rulemaking. SWBT 
and GTE-SW both suggested that a monthly rate offset misconstrues the purpose of 
the directory assistance call allowance. SWBT pointed out that customers 
receiving service under SWBT's basic local telecommunications tariff do not 
receive a credit if they do not use their entire directory assistance call 
allowance. GTE-SW suggested that the pricing of directory assistance calls was 
developed to continue offering the service at no cost to consumers for casual 
use, while discouraging indiscriminate use by service abusers. GTE-SW also 
argued that it is unfair to require a credit for the loss of a directory 
assistance call allowance in light of the front-end systems costs DCTUs will 
incur to develop and provide PLTS. TEXALTEL stated that proposed subsection 
(f)(1)(B), as written, is vague and inappropriate. Fort Bend argued that such an 
offset puts it in a disadvantaged position since it currently provides directory 
assistance services to its customers at a loss. 
The commission agrees with the arguments of SWBT, GTE-SW, TEXALTEL, and Fort 
Bend. While an argument can be made that PLTS customers are not receiving the 
full complement of basic services without access to directory assistance, the 
commission notes that PLTS service is designed as a last chance to subscribe to 
local service and toll blocking is a critical component of the PLTS offering. 
The commission recognizes that the lack of directory assistance is tied to the 
technology used by DCTUs to block toll calls. However, in balancing the 
equities, the loss of directory assistance is outweighed by the availability of 
toll blocking which makes PLTS possible. The commission, therefore, deletes 
subsection (f)(1)(B). 
Proposed subsection (f)(2)(A) delineated the components of the initial payment 
that a PLTS customer is required to make. Specifically, proposed subsection 
(f)(2)(A)(ii) requires that a PLTS customer pay the non-recurring service 
connection charges pursuant to paragraph (1)(C) of subsection (f), where 
authorized. CEJ/CU suggested that the citation to "paragraph (1)(C)" in proposed 
subsection (f)(2)(A)(ii) be changed to "paragraph (1)(C)(i)" to more accurately 
reflect the location of the non-recurring service connection charges in the 
proposed rule. Without the proposed modification, CEJ/CU commented that a PLTS 
customer would have to pay the non-recurring service restoral charge described 
in paragraph (1)(C)(ii) as part of the initial payment when the proposed rule 
has deferred the payment of the service restoral charge until the PLTS customer 
returns to basic local telecommunications service. SWBT did not oppose this 
suggestion.  
The commission agrees with the suggestion of CEJ/CU but notes that the rule as 
modified allows DCTUs to assess service connection charges if the customer fails 
to subscribe to PLTS within 10 days from the date the DCTU mailed a termination 
notice containing notification of PLTS eligibility. The commission, therefore, 
modifies proposed subsection (f)(2)(A)(ii) to clarify that applicable service 
connection charge may be assessed pursuant to renumbered subsection (f)(1)(B). 
Under proposed subsection (f)(2)(B), relating to subsequent monthly payments for 
PLTS, the monthly payments made by a PLTS customer after the initial payment 
could not exceed the amounts described in subsection (f)(1)(A)-(B) for one month 
of PLTS service and the due date of such monthly payments was required to be 
based on the DCTU's regular monthly billing cycle. TEXALTEL suggested that the 
references to the word "payments" in proposed subsection (f)(2)(B) should be 
replaced with the word "bills". It argued that a customer should have the 
flexibility to make larger payments; it is the bill from the DCTU that should be 
regulated. 
The commission agrees with TEXALTEL that a customer should have the flexibility 
to make larger payments. However, instead of replacing the references to 
"payments" by the word "bills" as suggested by TEXALTEL, the commission 
addresses TEXALTEL's concern by modifying the language in proposed subsection 
(f)(2)(B) so that a DCTU shall not require that a PLTS customer make subsequent 
monthly payments that exceed the amount prescribed in proposed subsection 
(f)(2)(B). The commission also deletes the reference to subsection (f)(1)(B) in 
this subparagraph to reflect the deletion of the provision related to the 
directory assistance offset. 
Proposed subsection (f)(4) set forth a limited deferred payment plan for past 
due local charges that a DCTU may require as a condition of a customer's 
subscribing to PLTS. GTE-SW commented that proposed subsection (f)(4) should be 
broadened to allow DCTUs to require customers to enter into a deferred payment 
plan for charges other than those incurred for basic local services as a 
condition of subscribing to PLTS. GTE-SW posited that past due toll charges are 
receivables that are owned and billed by the DCTU and the prohibition against 
collection of debts for non-basic local charges places DCTUs at a disadvantage 
and encourages the use of outside collection processes. MCI and TSTCI similarly 
urged that the language should be modified to allow DCTUs to require PLTS 
customers to enter into a deferred payment plan for past due toll charges. MCI 
asserted that the proposed deferred payment requirements would raise long 
distance rates for all customers and incent IXCs to seek collection avenues 
other than contracting with DCTUs. TSTCI, Dell Telephone Cooperative, Inc., La 
Ward Telephone Exchange, Inc. and Ganado Telephone Company contended the 
proposed language placed a significant portion of the small company's revenues 
at risk and appeared to discriminate against the non-PLTS customers who choose 
to stay on the network by entering into a deferred payment plan agreement to pay 
off all the debts owed to the DCTU. 
The commission disagrees with the comments of GTE-SW, MCI and TSTCI. It is the 
intent of the commission, in promulgating this rule, to promote universal 
service by providing access to local services to those customers capable and 
willing to pay for such service while minimizing the impact on 
telecommunications carriers doing business in this state. In balancing these 
interests, the commission created PLTS as an alternative to prohibiting 
disconnection of basic local service for nonpayment of toll charges. The 
commission finds that when a customer is placed on PLTS, which is a basic local-
only service, the customer should only be required to enter into a deferred 
payment plan for the same basic local services that the customer will receive 
under PLTS.
Proposed subsection (f)(4)(A)(ii) required a DCTU to apply any undesignated 
partial payment made by the customer before subscribing to PLTS, to past debt 
owed to the DCTU for the category of services included in PLTS. TEXALTEL 
recommended that proposed subsection (f)(4)(A)(ii) be narrowed to only apply to 
the customer's last payment to the DCTU for telephone services prior to the 
customer's subscription to PLTS. TEXALTEL argued that this subsection, as 
proposed, would encourage the payment for LEC services and reverse past payments 
collected on behalf of IXCs. TEXALTEL also commented that DCTUs would have to 
invest considerable amount of time researching a customer's payment history to 
determine the credit and debit requirements for the entire duration that the 
customer has had service and thereby, incur substantial implementation costs. 
TTA argued that the procedure for allocating partial payments in the proposed 
rule is contrary to the established practices of many LECs. In its reply 
comments, AT&T suggested that the proposed rule's requirement to allocate 
partial payment in a particular manner only apply after a delinquency notice is 
mailed. 
The commission finds that there is no evidence on whether DCTUs would incur 
substantial costs to make a post ante allocation of customer payments. The 
commission notes that in FCC Report and Order, CC Docket Number 96-45 sec.393, 
the FCC requires ILECs to allocate the payments of Lifeline customers in a 
manner similar to that required by this rule. To the extent, a DCTU incurs costs 
to make a post ante allocation of customer payments and all or part of such 
costs are not attributable to the requirements of FCC Order 94-95, the DCTU may 
pursue cost recovery through rate filings pursuant to PURA95 and commission 
rules. Although the commission disagrees with the solutions suggested by 
TEXALTEL and AT&T, the commission finds that TEXALTEL and AT&T have raised a 
valid concern. Outstanding balances should be tied to the debt creating the 
delinquency. It was the commission's intent that the undesignated partial 
payment be fully applied only to the amount due at the time the undesignated 
partial payment is made and therefore, adds proposed subsection (f)(4)(A)(iii): 
"not reallocate any undesignated partial payments assigned under clause (ii) of 
this subparagraph to amounts yet to be incurred for basic local 
telecommunications service." 
Proposed subsection (f)(4)(B)(i) required that the monthly payments under the 
deferred payment plan shall not exceed the greater of $10 per month or one-
twelfth of the outstanding debt as determined in the proposed rule. CEJ/CU 
suggested that the maximum deferred payment be reduced from $10 to $5. It is 
their opinion that a PLTS customer may not have the financial ability to pay 
more than $5.00 a month towards a deferred payment agreement. SWBT opposed the 
change. 
The commission disagrees with the suggestion of CEJ/CU. It is not unreasonable 
to require customers to pay $10.00 a month towards a deferred payment agreement. 
Moreover, to the extent that a deferred payment agreement can be completed in 
less than twelve months, the administrative burden on DCTUs may be lessened. MCI 
recommended that proposed subsection (f)(5)(C) be modified to expressly state 
that PLTS is not available to business customers. 
The commission addressed this concern by adding new subsection (c)(4) to the 
rule. 
Proposed subsection (f)(6)(A) set forth the conditions under which a DCTU must 
notify a PLTS customer that the customer is being disconnected. TSTCI contended 
that a DCTU should be allowed to disconnect PLTS customers without notice 
because customers on the PLTS plan are already aware of their responsibilities 
as a PLTS customer and of the reasons that could lead to the possible 
disconnection of service. 
The commission disagrees with the suggestion of TSTCI. It is important that 
customers be made aware of any changes in their status as a DCTU customer. 
Moreover, it may be more costly for a DCTU to respond to numerous customer 
inquiries after disconnection from PLTS then to send a standardized letter to 
such customers. 
TEXALTEL commented that sec.23.46(d) permits disconnection of basic service 
without notice if a dangerous condition exists. It suggested that proposed 
subsection (f)(6)(A)(iii) be modified to reflect a similar provision for PLTS 
customers if a dangerous condition exists. 
The commission agrees with the argument of TEXALTEL. A DCTU should have the 
ability to disconnect customers without notice if a dangerous condition is 
created by keeping the PLTS customer on the network. Therefore, the commission 
modifies proposed subsection (f)(6)(B) to permit disconnection of PLTS customers 
without notice where a known dangerous condition exists for as long as the 
condition exists or where service is connected without authority by a person who 
has not applied for the service or who has reconnected service without authority 
following termination of service for nonpayment. 
MCI recommended that a new subsection (f)(6)(A)(iv) be added to expressly state 
that a PLTS customer will be disconnected after notice if the customer incurs 
toll charges that are billed to the customer's telephone number. It suggested 
the following language, "upon the placement or receipt of calls, including long 
distance for which additional charges are billed to the customer's number by the 
DCTU through tariffs or contracts, by the PLTS customer."
The commission declines to adopt MCI's suggestion because MCI's concern is 
addressed by the more stringent language in proposed subsection (f)(6)(B)(i) 
which permits a DCTU to disconnect PLTS customers without notice if the customer 
accrues billable charges for toll or other services. 
Proposed subsections (f)(6)(C) limited PLTS, with some exceptions, to be a one-
time option. CEJ/CU suggested that proposed subsections (f)(6)(C) be deleted. 
They argued that a customer disconnected from PLTS for nonpayment, but who 
subsequently pays all outstanding basic local telecommunications service and 
PLTS debt, should be eligible for PLTS service again. SWBT opposed such a 
deletion. 
The commission disagrees with the suggestions of CEJ/CU. PLTS is intended to 
provide a one-time option from a particular DCTU for customers to promote 
universal service. It becomes the PLTS customer's responsibility to comply with 
the terms of PLTS. The DCTU should not be required to repeatedly offer PLTS to 
customers that do not carry out their responsibilities. 
TSTCI argued that it is unnecessary for a DCTU to notify PLTS customers after 
they have been disconnected from PLTS for violating PLTS terms and conditions. 
TSTCI believes that the customer is, or should be, aware of their violations of 
the PLTS terms and conditions and the consequences of such violations.  
The commission disagrees. It is in the public interest for customers to be 
informed when there are substantial changes in the terms and conditions of the 
services being provided to such customer. This includes disconnection. It is 
anticipated that the cost associated with the mailing of a form letter to a 
disconnected PLTS customer would be less than the costs associated with 
responding to customer calls and complaints. 
Proposed subsection (g)(2)(A) through (C) set forth the conditions by which a 
PLTS customer may return to basic local telecommunications service. These 
provisions also outline the specific notice requirements by which a DCTU must 
inform PLTS customers of their eligibility for and option to return to basic 
local telecommunications service. TSTCI asserted that the PLTS customer should 
already be aware of the requirements that must be fulfilled prior to requesting 
a return to basic local telecommunications service. TSTCI argued that the 
proposed notice requirement is, therefore, unnecessary. 
The commission disagrees with TSTCI and finds that the notice requirements are 
necessary to ensure that customers are fully educated about their options. 
Proposed subsection (g)(2)(A) required a DCTU to notify the customer of 
eligibility requirements for returning to basic local telecommunications 
services without restriction. MCI commented that the phrase "without 
restriction", referenced in subsection (g)(2)(A) was too broad and that more 
appropriate language would read, "in accord with commission rules or the DCTU's 
tariffs." MCI also asserted that DCTUs should be permitted to impose the current 
deposit requirements of sec.23.43 on the former PLTS customers. 
The commission clarifies the rule by replacing the phrase "without restriction" 
in proposed subsection (g)(2)(A) with the phrase "without PLTS restrictions". 
The commission's intent in including the phrase "without restriction" was to 
ensure that former PLTS customers returning to basic local telecommunications 
service are not subject to the restrictions imposed as a condition of 
subscribing to PLTS. With respect to deposit requirements, the commission agrees 
with MCI that former PLTS customers should be subject to the same deposit 
requirements to which a non-PLTS customer subscribing to basic local 
telecommunications service would be subject. The commission notes that the 
proposed subsection does not prohibit a DCTU from applying the commission rules 
and regulations regarding deposit requirements and therefore declines to modify 
the proposed subsection to address MCI's concern. 
MCI also posited that DCTUs should also be required to impose commission- 
approved mandatory or voluntary toll-limit programs to former PLTS customers. 
The commission does not see the need to require DCTUs to impose mandatory or 
voluntary toll limits on former PLTS customers because those customers have paid 
off all indebtedness for past due toll charges as a condition to returning to 
basic local service. The commission restates its position that this rulemaking 
is not the appropriate forum to address the toll limit issue given that these 
issues are currently being addressed in other proceedings. MCI recommended that 
additional language be added to proposed subsection (g)(2)(B) to clarify that a 
customer's return to basic local telecommunications service does not confer the 
availability of toll service; but rather such availability for service is 
subject to the credit standards of IXCs.
The commission concludes that once a customer has met the conditions for 
returning to basic local telecommunications service, that customer is entitled 
to the full array of services, including access to toll, that accompany basic 
local telecommunications service pursuant to commission substantive rules and 
regulations. The customer regains access to all local services, including access 
to toll. This rule does not place any obligations on IXCs to provide toll 
services to customers. 
Proposed subsection (h), relating to consumer education, outlined the means by 
which DCTUs would be required to notify customers about the PLTS plan. The 
proposed language required DCTUs to notify customers about PLTS annually through 
bill inserts and the white page directory section on customer's rights. TSTCI 
strongly disagreed with these consumer education notice requirements and 
proposed that subsection (h) be deleted. TSTCI argued that such public notice 
"invites" customers to incur high long distance bills and then request 
participation in the PLTS plan. Overall, TSTCI found the amount of notice 
required by the proposed rule to be unnecessary and burdensome. TSTCI asserted 
that the initial notice provided to "at-risk" customers is adequate. 
The commission disagrees with TSTCI's assertions. The commission notes that 
DCTUs routinely notify customers through bill inserts, about new services, 
changes in services, tariffs or rule changes. Furthermore, the commission finds 
that because the nature of this rule is to promote access and subscribership to 
local service for universal service reasons, the benefits gained by educating 
customers about PLTS outweighs any burden imposed on DCTUs in providing such 
education. 
Proposed subsection (i) set forth the provisions for toll and usage sensitive 
blocking capabilities. MCI noted that there was an absence of language relating 
to the cost recovery issue for toll and usage sensitive blocking at the tariffed 
rate in proposed subsection (i)(1)(A). MCI contended that DCTUs should be 
permitted to charge the tariffed rate, if they so desire, for toll and usage 
sensitive blocking as part of the subscribership costs for PLTS. 
The commission finds that MCI's concern is without merit because proposed 
subsection (f)(1)(A)(i) already allows DCTUs to recover toll blocking charges at 
the tariffed rate. With regards to MCI's concern about cost recovery for usage 
sensitive blocking, no party has presented evidence or comments in this 
proceeding that DCTUs have tariffed rates applicable to usage sensitive 
blocking. Moreover, no DCTU has raised the cost recovery issue relating to usage 
sensitive blocking. For these reasons, the rule does not authorize a charge to 
PLTS customers for usage sensitive blocking. 
Dell Telephone Cooperative, La Ward Telephone Exchange and Ganado Telephone 
Company commented that they do not have access to the third number and collect 
call services provided by IXCs that are billed to a customer's line number. They 
pointed out that mandatory billed number screening which could prevent most of 
the third number and collect charges was not a requirement in the proposed rule. 
The commission's intent in including requirements relating to toll/usage 
sensitive blocking and notification to IXCs about PLTS was to ensure that toll 
services and usage sensitive services will be blocked by the DCTU, to the extent 
technically capable, and that IXCs will themselves be able to take measures to 
block toll calls with the information they receive about PLTS customers through 
Customer Access Record Exchange (CARE) or similar reports and Line 
Identification Database (LIDB). The commission declines to mandate the use of 
billed number screening by carriers for purposes of blocking a PLTS customer's 
access to telephone services. However, nothing in the proposed rule precludes 
carriers from using various methods, including billed number screening, to 
protect themselves from toll fraud. 
TTA found the waiver provision in proposed subsection (j), granted on a wire 
center by wire-center basis, to be inadequate and self-defeating. It contended 
that a DCTU that was able to obtain waivers for specific wire centers pursuant 
to proposed subsection (j) would still have to incur substantial costs by 
offering PLTS in the rest of its serving area. TTA recommended that the waiver 
provisions in proposed subsection (j) should be modified to address the 
inability of specific companies to offer the PLTS plan on a company-wide basis. 
The commission's intent in requiring all DCTUs to provide PLTS is to promote 
universal service in all areas of this state without subjecting 
telecommunications carriers to toll fraud. The waiver provision in proposed 
subsection (j) is, therefore, narrowly tailored to address situations where 
DCTUs lack the technical capability to block access to toll services and/or 
usage sensitive services in specific wire-center(s). The commission rejects 
TTA's recommendation because customers located in wire-centers where a DCTU can 
meet the blocking requirements delineated in the rule should not be deprived of 
the choice to subscribe to PLTS. With respect to TTA's argument regarding the 
substantial costs imposed on DCTUs by the proposed rule, the commission notes 
that the notification and other requirements in the rule have been developed to 
reflect the current procedures and practices of the DCTU, to the extent 
possible, in order to minimize the costs of implementation. As discussed 
earlier, DCTUs are not precluded from requesting the recovery of any additional 
costs associated with implementation of the rule by filing a rate case pursuant 
to PURA95 and commission regulations. 
Proposed subsection (k) set forth the interexchange carrier notification 
requirements. Under proposed subsection (k), a DCTU is required to include a 
notice in both CARE and LIDB indicating that the customer is subscribed to PLTS 
with mandatory toll restriction. In its comments, SWBT stated that the 
commission does not need to regulate this business practice. SWBT also stated 
that CARE should not be the vehicle for such notification as CARE is limited in 
access to the customer's presubscribed IXC and CARE contains sensitive customer 
information. In the public hearing held on May 22, 1997, SWBT clarified that 
CARE is developed to deal with customer account information and is only 
available to a customer's presubscribed long distance carrier. SWBT added that 
CARE is not universally accessible and is processed on a less than real-time 
basis as compared to LIDB which is processed on a real-time basis. AT&T 
commented that the IXCs need to be able to implement their own toll blocking or 
monitoring program to prevent PLTS customers from bypassing the toll blocking 
imposed by DCTUs. AT&T asserted that IXCs will need timely notification 
regarding whether a customer is subscribing to PLTS and whether the customer's 
toll service is blocked. AT&T contended that the proposed requirement for DCTUs 
to include information concerning the customer's subscription to PLTS in 
databases and to make that information available to IXCs serving the area, is 
important in protecting the IXCs from possible additional costs resulting from 
uncollectibles. AT&T stated that it had reached an agreement with SWBT that 
reference to the CARE database could be deleted from proposed subsection  (k), 
if DCTUs remain subject to providing the information through LIDB within 24 
hours. 
The commission concludes that DCTUs shall include notice of customer 
subscribership to PLTS with mandatory toll restriction in both the CARE and LIDB 
database. The commission finds that in order to help alleviate or even eliminate 
toll fraud, it is important for IXCs to be notified about PLTS customers in a 
timely fashion. The commission notes that the concerns about privacy issues 
surrounding the use of the CARE database for IXC notification are adequately 
addressed because information contained in CARE is only available to the 
customer's presubscribed carrier. 
MCI contended that DCTUs should also be required to provide notification, upon 
request, to any non-DCTU about former and current PLTS customers. MCI also urged 
the commission to specify a time frame for the provision of notice to IXCs and 
recommended that such notice should be no later than the notice that the DCTU 
would provide its long distance affiliate or itself as a provider of long 
distance service. MCI commented that the IXC notification requirements should 
also extend to exchanges served by cooperative corporations. 
The commission believes that MCI's concern regarding a specific timeframe for 
the provision of notice to IXCs is adequately addressed by the requirement in 
the proposed rule that IXC notification should be provided by DCTUs within 24 
hours after a customer subscribes to PLTS. The commission disagrees with MCI's 
suggestion regarding notification to non-DCTUs about former and current PLTS 
customers. The IXC notification requirements in proposed subsection (k) was 
designed to prevent PLTS customers from engaging in toll fraud. A non-DCTU, on 
the other hand, has the responsibility to determine the credit worthiness of 
potential customers including those that are current PLTS customers or were 
former PLTS customers. The commission declines to extend the applicability of 
proposed subsection (k) to cooperative corporations as suggested by MCI. DCTUs 
serving less than 31,000 access lines and cooperative corporations are not 
required to comply with the interexchange notification requirements because they 
indicated in comments, prior to publication of the proposed rule that they did 
not possess the technical capability to provide such notification expeditiously 
and would have to incur substantial costs to acquire such technical capability. 
TEXALTEL suggested that the references to the "CARE" database may be limited to 
only SWBT's databases and that other ILECs may have similar reports under 
different names. TEXALTEL recommended adding the language "or similar report" 
after each reference to CARE. In its reply comments, TEXALTEL explained that 
smaller IXCs that issue proprietary calling cards and 800 numbers that are 
billed by the LEC billing have not found it necessary to use LIDB validation on 
the calling card calls. Limiting IXC notification about PLTS customers to LIDB 
databases could prove costly and infeasible for such IXCs because their networks 
lack the sophistication to launch LIDB queries and even if they are technically 
capable of performing LIDB queries, the costs and therefore, their rates would 
increase substantially if these carriers have to query LIDB on every calling 
card call in order to block the calling card calls of PLTS customers. TEXALTEL 
recommended that DCTUs offering PLTS could be identified through a reporting 
mechanism that is available to all IXCs.
The commission modifies proposed subsections (k)(1) through (2), and (k)(4) to 
address TEXALTEL's concern to include the phrase " or similar report if 
developed by the DCTU," where appropriate. To address SWBT's concern regarding 
privacy, the commission adds subsection (k)(5) as follows: "This subsection 
should not be interpreted as expanding access to CARE, or similar report, to 
IXCs other than the customers' presubscribed carriers." IXCs that do not receive 
CARE, or similar reports, as presubscribed carriers but wish to be notified 
about PLTS customers have the option to perform queries on the LIDB databases. 
Proposed subsection (l)(1) through (3) outlines the filing requirements that 
DCTUs are subject to under the proposed rule. Specifically, proposed subsection 
(l)(1) requires DCTUs to file tariffs pursuant to sec.23.24 of this title 
(relating to Form and Filing of Tariffs). Proposed subsection (l)(2) further 
requires DCTUs to file tariffs in accordance with a specific schedule. Fort Bend 
Telephone Company, a company serving less than 31,000 access lines, expressed 
concern about the required filing dates and effective date of the proposed rule. 
Because Fort Bend "outsources" its billing software system, it may take longer 
and prove costly to make the billing system changes to accommodate local only 
customers. Fort Bend Telephone Company suggested that the commission consider a 
slightly longer compliance period or waiver period for billing system changes. 
TTA concurred with Fort Bend's statements and suggested that the implementation 
schedule is far too short for all the DCTUs, regardless of size. TTA claimed 
that the proposed rule will require many DCTUs to undergo "wholesale changes to 
comply." TTA recommends that the timelines set forth in the rulemaking should be 
eliminated and the PLTS plan be made optional. 
AT&T, in its reply comments, surmised that the unrealistic compliance schedule 
in the proposed rule would cause DCTUs to file requests for good cause waivers 
or to simply fail to comply and face possible enforcement action by the 
commission. AT&T suggested that smaller DCTUs should be exempted from the 
requirements of the rule and larger DCTUs should be required to file tariff 
filings within 90-120 days. AT&T recommended that the effective date of the 
tariffs could be extended to a later date, such as 150 days after the tariff is 
approved. GTE-SW commented that it is unlikely, if not impossible for GTE-SW or 
any other DCTU to define system changes, develop test systems, and implement the 
service within its required 120 day time frame. GTE-SW asserted that a project 
implementing a new service of this magnitude would take between 18 and 24 months 
to accomplish. GTE-SW recommended that the "minimum timeline" for it to complete 
its implementation of PLTS would be one year from the effective date, with 
provisions for extension of time should unforeseen circumstances arise. SWBT 
contended that implementing PLTS was going to require massive changes to its 
billing, customer service and collection systems/practices and databases and 
therefore it should be allowed at least 150 days to file compliance tariffs. In 
its reply comments, TSTCI stated that many of its member companies are dependent 
on the schedules of outside vending sources for the development and 
implementation of systems needed for the provision of PLTS and therefore, 
required additional time to implement PLTS. 
The commission addresses the concerns expressed by Fort Bend, TTA, GTE-SW, SWBT, 
and AT&T by extending the filing date for compliance tariffs in proposed 
subsection (l). DCTUs with 50,000 or more access lines are required to file 
compliance tariffs no later than 150 days from the effective date of the rule. 
DCTUs with fewer than 50,000 access lines must file compliance tariffs no later 
than 180 days from the effective date of the rule. Because this rulemaking is 
intended to promote universal service, the commission disagrees with TTA's 
suggestion and notes that it would be inappropriate to make PLTS an "optional" 
offering. 
CEJ/CU recommended the addition of a new subsection (m) to prohibit any 
"redlining" or other unfair discrimination in the application of sec.23.40. 
Specifically, they suggested the following language: "The DCTU shall offer basic 
local telecommunications service and PLTS to customers and potential customers 
in a manner that is not unreasonably preferential, prejudicial, or 
discriminatory. The DCTU shall comply with this section (23.40) in a manner that 
is not unreasonably preferential, prejudicial, or discriminatory." SWBT 
contended that the new section prohibiting discrimination is unnecessary because 
PURA95 sec.3.202 would require DCTUs to apply rates in a manner that is not 
unreasonably preferential, prejudicial, or discriminatory, but instead is 
sufficient, equitable, and consistent in application to each class of customers. 
However, SWBT was not opposed to adding this standard regulatory treatment in 
this rule. 
The commission does not find it necessary to adopt CEJ/CU's recommended language 
because DCTUs are prohibited by PURA95 from engaging in discriminatory or 
redlining practices in the provision of any service, including PLTS.
With respect to the proposed amendments to rule sec.23.42, relating to refusal 
of service, AT&T suggested that references to the term "Dominant Certificated 
Telecommunications Utility" (DCTU) is unnecessary and duplicative and should be 
deleted. AT&T stated that the existing rule already applies to the dominant 
carriers and that the proposed language does not clarify the rule. TEXALTEL 
raised another issue concerning the term " DCTU." TEXALTEL pointed out that the 
result of changing the term "utility" to "DCTU" would be to allow the DCTU to 
deny service to an applicant who has an unpaid bill to another DCTU but would 
not permit them to deny service to an applicant who has an unpaid bill to a non-
dominant CTU. TEXALTEL asserted that this discrepancy is clearly discriminatory 
and anti-competitive. 
The commission agrees with AT&T and TEXALTEL's suggestions and replaces 
references to the term "DCTU" with the term "utility." The commission also finds 
that sec.23.42 is intended to both electric and telecommunications utilities and 
therefore, the use of the term "utility" is more appropriate than the term 
"DCTU". 
Proposed amendments to sec.23.46, relating to discontinuance of service, 
modifies subsection (c), addressing disconnection with notice to include cross-
references to sec.23.40. MCI requested clarification of the proposed language 
which, in its opinion, does not permit disconnection without notice "where a 
known and dangerous condition exists" or "where service is connected without 
authority."  
The commission declines to clarify the proposed language because it has 
previously addressed this issue under subsection (f)(6)(B) of sec.23.40. In 
adopting this section, the commission makes other minor modifications for the 
purposes of clarifying its intent. All comments, including any not specifically 
referenced herein, were fully considered by the commission. The new section and 
amendments are adopted under the Public Utility Regulatory Act of 1995 as 
amended (PURA95), Texas Revised Civil Statutes Annotated, Article 1446c-0 
(Vernon 1997), sec.1.101, which provides the commission with the authority to 
make and enforce rules reasonably required in the exercise of its powers and 
jurisdiction; sec.3.051 which authorizes the commission to adopt rules, 
policies, and procedures to protect the public interest and to provide equal 
opportunity to all telecommunications utilities in a competitive marketplace. 
Cross Index to Statutes: Public Utility Regulatory Act of 1995, sec.1.101, and 
sec.3.051. 

sec.23.40.Prepaid Local Telephone Service.
(a) Applicability. The provisions of this section shall apply to all dominant 
certificated telecommunications utilities (DCTUs) unless specifically indicated 
otherwise. A DCTU shall provide Prepaid Local Telephone Service (PLTS) pursuant 
to the requirements of this section. A DCTU shall not refuse to provide PLTS to 
an applicant for such service because the applicant is indebted to any DCTU or 
other telecommunications carrier for telecommunication services, including the 
carriage charges of interexchange carriers where the DCTU bills those charges 
pursuant to tariffs or contracts. 
(b) Definitions. The following words and terms when used in this section shall 
have the following meanings unless the context clearly indicates otherwise. 
(1) Basic Local Telecommunications Service - That definition given in sec.3.002 
of the Public Utility Regulatory Act of 1995. 
(2) Disconnection of telephone service - That period after which a customer's 
telephone number is deleted from the central office switch and databases. 
(3) Prepaid Local Telephone Service (PLTS) - Prepaid Local Telephone Service 
means: 
(A) voice grade dial tone residential service consisting of flat rate service or 
local measured service, if chosen by the customer and offered by the DCTU; 
(B) if applicable, mandatory services, including extended area service, extended 
metropolitan service, or expanded local calling service;
(C) tone dialing service; 
(D) access to 911 service; 
(E) access to dual party relay service; 
(F) the ability to report service problems seven days a week;
(G) access to business office; 
(H) primary directory listing; 
(I) toll blocking service; and 
(J) non-published service and non-listed service at the customer's option. 
(4) Service connection charge - A charge applied by the DCTU to connect service 
to a customer's telephone line after it has been disconnected by the DCTU. 
(5) Service restoral charge - A charge applied by the DCTU to restore service to 
a customer's telephone line after it has been suspended by the DCTU. 
(6) Suspension of telephone service - That period during which the customer's 
telephone line does not have dial tone but the customer's telephone number is 
not deleted from the central office switch and databases.
(7) Toll blocking - Blocking of a customer's access to toll providers and toll 
services. 
(8) Usage sensitive blocking - Blocking of a customer's access to services which 
are charged on a usage sensitive basis for completed calls. Such calls shall 
include, but not be limited to, call return, call trace, and auto redial. 
(c) Eligible customers. 
(1) Former customers. In cases where a DCTU would refuse to provide service to 
an applicant for residential telephone service because of the existence of 
indebtedness to any DCTU or other telecommunications carrier, such applicant is 
eligible to receive PLTS pursuant to the requirements of this section. 
(2) Current customers. A current residential customer who has not been 
disconnected from the network but who has received a notice following suspension 
of service for non-payment for services is eligible to receive PLTS pursuant to 
the requirements of this section. 
(3) Applicant previously disconnected from PLTS by a DCTU. Notwithstanding any 
other provisions in this section, any applicant who was previously disconnected 
from PLTS by a DCTU, pursuant to subsection (f)(6) of this section, does not 
have the right to receive PLTS from that DCTU again.
(4) Business customers shall not be eligible for PLTS.
(d) Requirements for notifying customers about PLTS. A DCTU shall provide notice 
to its customers about PLTS according to the requirements of this subsection. 
(1) Timing of notice. 
(A) Notice following suspension of service. If the DCTU's standard practice is 
to suspend a customer's service for non- payment of charges before disconnecting 
service, it shall notify such customer of the availability of PLTS in the 
correspondence notifying the customer that their service has been suspended. 
(B) Notice following disconnection of service. If the DCTU's standard practice 
is to disconnect a customer's service without a period of suspension, the DCTU 
shall notify such customer of the availability of PLTS within three days after 
the date of disconnection. 
(2) Content of notice. The notice provided by a DCTU offering PLTS shall be 
reviewed in the DCTU's compliance filing. In the notice, a DCTU offering PLTS 
shall notify customers of the rates, terms, and conditions of PLTS, as described 
in subsection (f) of this section, including, but not limited to, the following 
information: 
(A) A customer's eligibility to enter into the PLTS plan;
(B) A description of the PLTS plan including its features, charges, and options; 
(C) A customer's responsibility to make an initial payment for PLTS and any 
applicable service connection charges, as defined in subsection (f)(2)(A) of 
this section; 
(D) A customer's responsibility to make the initial deferred payment, if 
applicable, in the third billing cycle and every month thereafter, for up to 
twelve months; 
(E) A customer's responsibility not to incur additional charges for calls, 
including intraLATA and interLATA long distance or other usage-sensitive 
services that will be charged on the local telephone bill, nor to subscribe to 
any services from the DCTU other than those included in PLTS, as defined in 
subsection (b)(3); 
(F) A customer's violation of the terms and conditions of the PLTS plan may 
result in disconnection; 
(G) When a DCTU disconnects a customer from PLTS for violation of the terms and 
conditions of the PLTS plan, a DCTU has the right to retain and apply any credit 
in the PLTS account to the customer's outstanding balances for 
telecommunications services; 
(H) If a DCTU disconnects a customer for violation of the terms and conditions 
of the PLTS plan, that customer does not have the right to receive PLTS from 
that DCTU again; and 
(I) The customer's responsibility to subscribe to PLTS within a certain time 
period in order to receive a deferral of payment of service restoral charges or 
service connection charges as described in subsection (f)(1)(B). 
(e) Subscription into PLTS. 
(1) Customer request to subscribe to PLTS. In order to subscribe to PLTS, the 
eligible customer (per subsection (c) of this section) must contact the DCTU 
during the DCTU's regular business hours to request PLTS. 
(2) Confirmation letter. Within 24 hours of a customer-initiated inquiry in 
which the customer subscribes to the PLTS plan, the DCTU shall mail the customer 
a confirmation letter explaining the details of the PLTS plan as described in 
subsection (d)(2)(A)-(I) of this section, including, but not limited to, the 
customer's rights and responsibilities upon enrollment and information about the 
rates, terms and conditions of service under the PLTS plan. 
(f) Rates, terms and conditions of PLTS. A DCTU shall offer PLTS under the 
following terms and conditions: 
(1) Rates for PLTS. 
(A) Monthly rate. The monthly rate for PLTS shall include only the following: 
(i) the applicable residential tariffed rate (or lifeline rates, if applicable), 
for services included in the PLTS definition in subsection (b)(3)(A) - (I) of 
this section; 
(ii) tariffed charges for non-listed and non-published service, if requested by 
the customer; and 
(iii) surcharges and fees established or authorized by a governmental entity 
that are billed by the DCTU, including but not limited to 911, subscriber line 
charge, sales tax, and municipal fees. 
(B) Non-recurring rates. 
(i) Service connection charges. If a DCTU does not suspend basic local service 
prior to disconnection, the DCTU must defer recovery of tariffed service 
connection charges until the subscribing customer leaves PLTS to return to basic 
local telecommunications service pursuant to subsection (g) of this section. 
However, if a customer does not subscribe to PLTS within 10 days from the date 
the DCTU mailed a termination notice containing notification of PLTS eligibility 
to that subscriber, the DCTU may charge service connection charges to that 
subscriber when subscribing to PLTS. 
(ii) Service restoral charges. If a DCTU suspends basic local service prior to 
disconnection, the DCTU must defer recovery of the tariffed service restoral 
charges until the subscribing customer leaves PLTS to return to basic local 
telecommunications service pursuant to subsection (g) of this section. 
(C) Late charges. The DCTU shall not assess late charges on a customer of PLTS. 
(2) Payments under PLTS. 
(A) Initial payment for PLTS. A DCTU may require the residential customer of 
PLTS to make an initial payment for service, which shall not exceed: 
(i) the rates as described in paragraph (1)(A) of this subsection for up to two 
months of service under the PLTS plan; and 
(ii) applicable non-recurring service connection charges pursuant to paragraph 
(1)(B) of this subsection. 
(B) Subsequent monthly payments for PLTS. A DCTU shall not require subsequent 
monthly payments for PLTS that exceed the rates as described in paragraph (1)(A) 
of this subsection for one month of service under PLTS. The due date of such 
monthly payments shall be based on the DCTU's regular monthly billing cycle. 
(C) Payments under the deferred payment plan. A customer may be required to make 
payments under the deferred payment plan pursuant to paragraph (4) of this 
subsection. 
(3) Toll blocking. A customer who subscribes to the PLTS shall have mandatory 
toll blocking and usage sensitive blocking placed on the customer's telephone 
line. 
(A) Customer responsibility. A customer subscribing to PLTS shall not place or 
receive calls, including intraLATA and interLATA long distance or other usage-
sensitive services, for which additional charges are billed to the customer's 
telephone number by the DCTU, through tariffs or contracts nor subscribe to any 
services from the DCTU other than those included in PLTS, as defined in 
subsection (b)(3). 
(B) DCTU responsibility. During the customer-initiated inquiry regarding PLTS 
and in the subsequent confirmation letter described in subsections (d) and (e) 
of this section, the DCTU shall notify the customer of their responsibilities 
pursuant to subparagraph (A) of this paragraph. 
(4) Deferred payment plan under PLTS. As a condition of subscribing to PLTS, the 
DCTU may require an applicant to enter into a deferred payment plan for any 
outstanding debt owed to the DCTU for the services previously received under 
basic local telecommunications service and now subscribed to under PLTS. The 
DCTU shall not require an applicant for PLTS to enter into a deferred payment 
plan to pay any outstanding debt for any services that will not be received by 
the customer under PLTS including, but not limited to, intraLATA and interLATA 
long distance services. If the DCTU is unable to determine the amount of 
outstanding debt owed for the services previously received under basic local 
telecommunications service and now subscribed to under PLTS, the DCTU shall not 
require an applicant to enter into any deferred payment plan. 
(A) Determination of deferred payment plan amount. To determine the deferred 
payment plan amount, the DCTU shall: 
(i) determine the amount the customer owes for the services previously received 
under basic local telecommunications service and which the customer subscribes 
to under PLTS; 
(ii) apply any undesignated partial payment made by the customer prior to the 
customer's subscription to PLTS to past debt which was owed to the DCTU for the 
services previously received under basic local telecommunications service and 
which the customer subscribes to under PLTS; and 
(iii) not reallocate any undesignated partial payments assigned under clause 
(ii) of this subparagraph to amounts yet to be incurred for basic local 
telecommunications service. 
(B) Monthly payments under the deferred payment plan. 
(i) A deferred payment plan for past due charges under this paragraph shall not 
require the applicant to make monthly payments which exceed the greater of $10 
per month or one-twelfth of the outstanding debt as determined in subparagraph 
(A) of this paragraph. 
(ii) If the DCTU and PLTS customer enter into a deferred payment under this 
paragraph, the initial deferred payment shall be billed beginning with the third 
billing cycle after initiation of service and shall be billed on a monthly basis 
thereafter. 
(5) Customer deposit. No deposit shall be required from any residential 
applicant for PLTS. 
(6) Disconnection of PLTS. 
(A) Disconnection with notice. A DCTU may disconnect PLTS after notice for any 
of the following reasons: 
(i) failure to comply with the terms of a deferred payment plan for PLTS; 
(ii) upon conclusion of all periods for which an advance payment has been 
applied to the PLTS account and when the customer's PLTS account has a zero 
balance; or 
(iii) violation of the DCTU's rules pertaining to the use of PLTS in a manner 
which interferes with the service of others or the operation of nonstandard 
equipment, if a reasonable attempt has been made to notify the customer and the 
customer is provided with a reasonable opportunity to remedy the situation. 
(B) Disconnection without notice. Notwithstanding any other provision of this 
chapter, a DCTU may immediately disconnect PLTS without notice: 
(i) if the customer accrues new billable charges for toll or other services on 
their telephone bill as described in paragraph (3) of this subsection; 
(ii) where a known dangerous condition exists for as long as the condition 
exists; or 
(iii) where service is connected without authority by a person who has not 
applied for the service or who has reconnected service without authority 
following termination of service. 
(C) Notice after disconnection. If a PLTS customer is disconnected under 
subparagraph (A) or (B) of this paragraph, a DCTU shall send a final notice 
stating that the customer is permanently disconnected from PLTS and that the 
customer shall not be eligible for PLTS from that DCTU. That notice shall also 
state the terms and conditions that the customer must satisfy before the 
customer can return to basic local telecommunications service.
(g) Return to basic local telecommunications service. 
(1) Customer's option to return to basic local telecommunications service. A 
customer subscribing to PLTS may return to basic local telecommunications 
service provided the customer: 
(A) has paid all outstanding debt to the DCTU in full, including indebtedness 
for the carriage charges of interexchange carriers where the DCTU bills those 
charges pursuant to tariffs or contracts; and 
(B) has paid all bills for PLTS. 
(2) Notice of eligibility to return to Basic Local Telecommunications Service. 
Upon customer's completion of the obligations identified in paragraph (1) of 
this subsection, a DCTU shall: 
(A) notify the customer of the eligibility requirements for returning to basic 
local telecommunications services without PLTS restrictions;
(B) notify the customer of the option of receiving basic local 
telecommunications service with toll blocking and/or usage sensitive blocking 
pursuant to the DCTU's tariffed rate, if applicable, and such toll restriction 
and usage sensitive blocking can be removed at any time, upon the customer's 
request; and 
(C) notify the customer of the need to contact the DCTU if the customer wants to 
return to basic local telecommunications service. 
(3) Customer obligations after receiving notice. In addition to fulfilling the 
requirements of paragraph (1) of this subsection, in order to subscribe to basic 
local telecommunications service, the customer shall: 
(A) request subscription to basic local telecommunications service from the 
DCTU; and 
(B) pay the service restoral or service connection charges as described in 
subsection (f)(1)(B) of this section, if applicable and assessed by the DCTU. 
(h) Consumer education. 
(1) The commission shall provide information about the PLTS plan to customers. 
(2) A DCTU subject to the requirements of this section shall provide information 
about the PLTS plan annually in the customers' bills and such information shall 
be subject to review during the DCTU's compliance filing. 
(3) A DCTU or its affiliate publishing a white pages directory, on behalf of the 
DCTU, shall disclose in clear language the availability, terms, and conditions 
of the PLTS plan in the same part of its telephone directory in which it 
provides information in the section of the directory delineating the rights of a 
customer. 
(i) Toll and usage sensitive blocking capability. 
(1) The DCTU shall provide toll blocking and usage sensitive blocking to its 
maximum technical capability. 
(A) If the DCTU's tariffs reflect its maximum technical capability, it shall 
provide toll blocking and usage sensitive blocking as stated in those tariffs. 
(B) If the DCTU's tariffs does not reflect its maximum technical blocking 
capability, it shall inform the commission of the maximum level of blocking it 
is required to provide under PLTS in its compliance filings.
(C) If the DCTU does not have a tariff for toll blocking or usage sensitive 
blocking but has such technical capability, it shall inform the commission of 
the maximum level of blocking it is required to provide under PLTS in its 
compliance filings. 
(D) As the DCTU's blocking capability increases, it shall notify the commission 
of such enhancements and provide such enhanced blocking under PLTS. 
(2) Where technically capable, toll blocking shall not deny access to 1-800 or 
1-888 calls. 
(3) When imposing a toll block or usage sensitive services block, the DCTU shall 
do so in a manner that is not unreasonably preferential, prejudicial or 
discriminatory. 
(j) Waiver request. 
(1) A DCTU may request a waiver to exempt it from the requirements of this 
section, on a wire-center by wire-center basis, if it cannot meet the toll 
blocking and/or usage sensitive requirements stated in subsection (i)(1) of this 
section. 
(2) A DCTU requesting a waiver under paragraph (1) of this subsection shall 
fully document in its compliance filings the technical reasons for its inability 
to toll block and/or usage sensitive block and indicate when such technical 
capability will be available in the wire center. 
(3) A waiver received pursuant to this subsection shall expire when the DCTU 
acquires the technical capability to block toll services and/or usage sensitive 
services or when the DCTU is required to acquire the technical capability to 
toll block and/or usage sensitive block by federal or state law or regulations, 
whichever comes first. The DCTU shall notify the commission in writing within 30 
days of acquiring such technical capability or within 30 days of being required 
to acquire such technical capability.
(k) Interexchange carrier (IXC) notification. A DCTU serving 31,000 or more 
access lines and that is not a cooperative corporation shall:
(1) Within 24 hours after a customer subscribes to PLTS, the DCTU shall include 
a notice in the Customer Access Record Exchange (CARE) or similar report if 
developed by the DCTU, and the Line Identification Database (LIDB) indicating 
that the customer is subscribed to PLTS with mandatory toll restriction; 
(2) Additionally, the DCTU shall include a notice in CARE, or similar report if 
developed by the DCTU, and LIDB, within 24 hours, indicating any number change 
associated with a customer who subscribes to PLTS; 
(3) Access to the information contained in LIDB shall be available to all IXCs 
serving the customer's area; 
(4) If CARE, or similar report if developed by the DCTU, and LIDB are not 
available, the DCTU shall specify in its tariffs a comparable method of 
providing such notice to IXCs serving the area indicating a customer's 
subscription to PLTS; and 
(5) This subsection should not be interpreted as expanding access to CARE, or 
similar report if developed by the DCTU, to IXCs other than the customers' 
presubscribed carriers. 
(l) Filing requirements. 
(1) A DCTU subject to this section shall file tariffs in compliance with this 
section, pursuant to sec.23.24 of this title (relating to Form and Filing of 
Tariffs). 
(2) Tariff filings to implement provisions of this section shall be filed 
according to the following schedule: 
(A) DCTUs with 50,000 or more access lines shall file no later than 150 days 
from the effective date of this section. 
(B) DCTUs with fewer than 50,000 access lines shall file no later than 180 days 
from the effective date of this section. 
(3) The proposed effective date for tariff filings submitted pursuant to 
paragraph (2) of this subsection shall be no later than 30 days after the filing 
date, unless suspended. 

sec.23.42.Refusal of service.
(a) (No change.) 
(b) Compliance by applicant. Any utility may decline to serve an applicant until 
such applicant has complied with the state and municipal regulations and 
approved rules and regulations of the utility on file with the commission 
governing the service applied for or for the following reasons:
(1) (No change.) 
(2) For indebtedness. Except as provided in sec.23.40 of this title (relating to 
Prepaid Local Telephone Service), if the applicant is indebted to any utility 
for the same kind of service as that applied for, including only the carriage 
charges of interexchange carriers where a local exchange carrier bills those 
charges pursuant to its tariffs; provided, however, that in the event the 
indebtedness of the applicant is in dispute, the applicant shall be served upon 
complying with the deposit requirement in sec.23.43 of this title (relating to 
Applicant and Customer Deposit). In the event that the appropriate federal 
authority prohibits payment of interstate carriage charges of interexchange 
carriers as a condition of local exchange service or prohibits disconnection of 
local exchange service for failure to pay interexchange carriage charges, 
payment of intrastate carriage charges of interexchange carriers shall not be a 
condition for local exchange service . 
(3) (No change.) 
(c)-(d) (No change.) 

sec.23.43.Applicant and Customer Deposit.
(a) (No change.) 
(b) Establishment of credit for permanent residential applicants.
(1)-(3) (No change.) 
(4) An initial deposit may not be required from residential customers unless the 
customer has more than one occasion during the last 12 consecutive months of 
service in which a bill for utility service was paid after becoming delinquent 
or if the customer's service was disconnected for nonpayment. Except as provided 
in sec.23.40 of this title (relating to Prepaid Local Telephone Service), a 
deposit required pursuant to this section shall not exceed an amount equivalent 
to one-sixth of annual billings including the carriage charges of interexchange 
carriers only where a local exchange carrier's tariffs provide for billing for 
the interexchange carrier. Such deposit may be required to be made within ten 
days after issuance of written termination notice and requested deposit. In lieu 
of initial deposit, the customer may elect to pay the current bill by the due 
date of the bill, provided the customer has not exercised this option in the 
previous 12 months. The customer may furnish in writing a satisfactory guarantee 
to secure payment of bills in lieu of cash deposit. In the event the appropriate 
federal authority prohibits inclusion of interstate charges for an interexchange 
carrier in the determination of the deposit amount, or prohibits payment of 
interexchange carriage charges as a condition for local exchange service or 
reason for disconnection of local exchange service, intrastate carriage charges 
of an interexchange carrier shall not be included in the determination of the 
deposit amount. 
(5) (No change.) 
(c)-(k) (No change.) 

sec.23.45.Billing.
(a)-(o) (No change.) 
(p) To the extent any provisions of this section are applied to customers 
subscribing to Prepaid Local Telephone Service and are inconsistent with the 
rates, terms, and conditions of sec.23.40 of this title (relating to Prepaid 
Local Telephone Service), the provisions of sec.23.40 shall apply.  

sec.23.46.Discontinuance of Service.
(a)-(b) (No change) 
(c) Disconnection with notice. Utility service may be disconnected after proper 
notice for any of the following reasons: 
(1) except as provided in sec.23.40 of this title (relating to Prepaid Local 
Telephone Service), failure to pay a delinquent account for utility service or 
failure to comply with the terms of a deferred payment agreement including only 
the carriage charges of interexchange carriers where a local exchange carrier's 
tariff provides for billing for those carriers. In the event the appropriate 
federal authority prohibits disconnection of local exchange telephone service 
for failure to pay the interstate charges of an interexchange carrier or 
prohibits payment of interexchange carriage charges as a condition of local 
exchange telephone service, intrastate carriage charges of an interexchange 
carrier shall not be a cause for disconnection of local exchange telephone 
service. 
(2)-(3) (No change.) 
(d) Disconnection without notice. Except as provided in sec.23.40 of this title 
(relating to Prepaid Local Telephone Service), utility service may be 
disconnected without notice where a known dangerous condition exists for as long 
as the condition exists or where service is connected without authority by a 
person who has not made application for service or who has reconnected service 
without authority following termination of service for nonpayment or in 
instances of tampering with the utility company's meter or equipment, bypassing 
the same, or other instances of diversion as defined in sec.23.47 of this title 
(relating to Meters). Where reasonable, given the nature of the hazardous 
condition, a written statement providing notice of disconnection and the reason 
therefor shall be posted at the place of common entry or upon the front door of 
each affected residential unit as soon as possible after service has been 
disconnected. 
(e)-(n) (No change.) 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711237
Rhonda Dempsey
Rules Coordinator
Public Utility Commisison of Texas
Effective date: September 15, 1997
Proposal publication date: April 11, 1997
For further information, please call: (512) 936-7308

TITLE 22. EXAMINING BOARDS
PART IX. Texas State Board of Medical Examiners
CHAPTER 163.Licensure
22 TAC sec.163.14
The Texas State Board of Medical Examiners adopts an amendment to sec.163.14, 
concerning licensure, with changes to the proposed text as published in the July 
1, 1997, issue of the Texas Register (22 TexReg 6171). 
The amendment removes the ability for an applicant who is a graduate of a 
medical school located outside the United States or Canada, to practice medicine 
in the state without holding a valid ECFMG certificate. 
One comment was received from American Osteopathic Association. This 
organization commented that the Advisory Board for Osteopathic Specialists was 
reorganized in 1993 and was renamed the Bureau of Osteopathic Specialists, and 
the organization requested that this name change be reflected in the rule. The 
board agrees and the change has been made. 
The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act.

sec.163.14.Temporary Licensure of Primary Care Physicians for Practice in Rural 
Counties or Medically Underserved Areas in Texas.
(a) (No change.) 
(b) If the executive director of the board determines that it is in the best 
interest of the public and that the health and welfare of the public will not be 
endangered, but will be served, the executive director of the board may, at his 
discretion, issue a temporary license to an endorsement applicant: 
(1)-(2) (No change.) 
(3) who has met all requirements for licensure, except certification by a 
specialty board that is a member of the American Board of Medical Specialties or 
the Bureau of Osteopathic Specialists, if such certification is required for 
licensure; 
(4)-(5) (No change.) 
(c)-(e) (No change.) 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711259
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

CHAPTER 167.Reinstatement
The Texas State Board of Medical Examiners adopts the repeal of sec.167.2 and 
new sec.167.2 and sec.167.3, concerning, reinstatement, without changes to the 
proposed text as published in the July 1, 1997, issue of the Texas Register (22 
TexReg 6172). 
The repeal and new sections will allow due process for reinstatement 
applications. The language contained in the existing sec.167.2 is being moved to 
new sec.167.3. 
Two individuals commented on the proposed rules. One individual commented that 
the rule would encourage settlement of reinstatement cases, save both Board and 
applicant resources and provide a mechanism for informal disposition. The 
process would also help expedite cases. Board expertise could be used in an 
informal setting and appropriate resolutions may be available. Another 
individual commented that the rule would expedite the reinstatement process and 
would be a cost saver for both the Board and applicants. The Informal Settlement 
Conference mechanism is more appropriate to resolve certain cases than a 
contested hearing process. The Board agreed with the comments. 

22 TAC sec.167.2
The repeal is adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711258
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

22 TAC sec.167.2, sec.167.3
The new sections are adopted under the Medical Practice Act, Texas Civil 
Statutes, Article 4495(b), sec.2.09(a), which provides the Texas State Board of 
Medical Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711257
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

CHAPTER 175.Schedule of fees and Penalties
22 TAC sec.175.1
The Texas State Board of Medical Examiners adopts an amendment to sec.175.1, 
concerning schedule of fees and penalties, without changes to the proposed text 
as published in the July 1, 1997, issue of the Texas Register (22 TexReg 6174). 
The amendment will establish reasonable fees so that the fees produce sufficient 
revenue to cover the cost of administering the program. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711256
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

CHAPTER 177.Certification of Non-Profit Organizations
22 TAC sec.177.11
The Texas State Board of Medical Examiners adopts an amendment to sec.177.11, 
concerning certification of non-profit organizations, without changes to the 
proposed text as published in the July 1, 1997, issue of the Texas Register (22 
TexReg 6175). 
The amendment will assure compliance with requirements that the physicians of 
sec.5.01(a) non-profit health organizations are not unduly influenced by the 
non-physician member(s) of the organization. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711255
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

CHAPTER 183.Acupuncture
22 TAC sec.sec.183.2, 183.7, 183.20, 183.22
The Texas State Board of Medical Examiners adopts amendments to sec.sec.183.2, 
183.7, 183.20, and 183.22, concerning acupuncture. Section 183.2 is adopted with 
changes to the proposed text as published in the July 1, 1997, issue of the 
Texas Register (22 TexReg 6175). Sections 183.7, 183.20 and 183.22 are adopted 
without changes and will not be republished. 
The amendments will require licensure applicants to pass a herbology section of 
the NCCA examination; outline disciplinary guidelines to provide guidance for 
administrative law judges and board members; clarify correct title of master 
degrees; outline procedures for implementation of continuing acupuncture 
education requirements. 
Changes were made to sec.183.2, regarding the definition for "Full NCCA 
examination" to incorporate a January 1, 1998 effective date for the Chinese 
Herbology Exam. 
The Texas Student Acupuncture Association commented that the rule requiring the 
herbology portion of the NCCA examination has created an undue hardship on 
acupuncture students and constitutes over-regulation of the profession. They 
went on to comment that they did not commit to herbology when they enrolled in 
acupuncture school and that they oppose the herbology exam requirement because 
students are receiving an acupuncture license, not an herbologist's license. 
The following are the reasons why the Board disagrees with the submissions and 
proposals set forth above: The practice of herbology is within the scope of 
practice for licensed Texas acupuncturists and the Board wanted to ensure that 
licensure applicants had proved a minimum competency level in herbology. 
Currently, Acupuncture Board rules mandate that students must have 450 hours of 
herbal studies in order to apply for a Texas license. Consequently, the 
requirement of the herbology portion of the exam is not unduly burdensome. The 
amendments are adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act.

sec.183.2.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings, unless the content clearly indicates otherwise.
Full NCCA examination-The National Commission for the Certification of 
Acupuncturists' examination, consisting of the Comprehensive Written Exam (CWE), 
the Clean Needle Technique Portion (CNTP), and the Practical Examination of 
Point Location Skills (PEPLS), and, effective January 1, 1998, the Chinese 
Herbology Exam. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 25, 1997.
TRD-9711254
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

CHAPTER 185.Physician Assistants
22 TAC sec.sec.185.4, 185.6, 185.7, 185.14, 185.19, 185.20, 185.24 
The Texas State Board of Medical Examiners adopts amendments to sec.sec.185.4, 
185.6, 185.7, 185.14, 185.19, 185.20, 185.24, concerning physician assistants. 
Section 185.4(e) is adopted with a non-substantive change to the proposed text 
as published in the July 1, 1997, issue of the Texas Register (22 TexReg 6178). 
In the proposal a section site was listed incorrectly as sec.185.8. The correct 
reference is sec.185.7 of this title (relating to Temporary License). Sections 
185.6, 185.7, 185.14, 185.19, 185.20, and 185.24 are adopted without changes and 
will not be republished. 
The amendments will add documentation requirements for licensure; will provide 
an explanation of carryover of continuing medical education hours; clarify time 
frame for issuance of temporary licenses; clarify procedural rules for 
publication of the notice of adjudicative hearings. 
No comments were received regarding the amendments. 
The amendments are adopted under the Medical Practice Act, Texas Civil Statutes, 
Article 4495(b), sec.2.09(a), which provides the Texas State Board of Medical 
Examiners with the authority to make rules, regulations, and bylaws not 
inconsistent with this Act as may be necessary for the governing of its own 
proceedings, the performance of its duties, the regulation of the practice of 
medicine in this state, and the enforcement of this Act, and the Physician 
Assistant Licensing Act, Texas Civil Statutes, Article 4495b-1, sec.23, which 
authorizes the Texas State Board of Physician Assistant Examiners to adopt 
reasonable and necessary rules for the performance of its duties. 

sec.185.4.Procedural Rules for Licensure Applicants. 
(a)-(c) (No change.) 
(d) All physician assistant applicants shall provide sufficient documentation to 
the board that the applicant has, on a full-time basis, actively practiced as a 
physician assistant or has been a student at an acceptable approved physician 
assistant program or has been on the active teaching faculty of an acceptable 
approved physician assistant program, within each of the last two years 
preceding receipt of an application for licensure. The term "full-time basis," 
for purposes of this section, shall mean at least 20 hours per week for 40 weeks 
duration during a given year. Applicants who do not meet the requirements of 
subsections (a) and (b) of this section may, in the discretion of the board, be 
eligible for an unrestricted license or a restricted license subject to one or 
more of the following conditions or restrictions as set forth in paragraphs (1)-
(4) of this subsection: 
(1) current certification by the National Commission on the Certification of 
Physician Assistants; 
(2) completion of specified continuing medical education hours approved for 
Category I credits by a CME sponsor approved by the American Academy of 
Physician Assistants; 
(3) limitation and/or exclusion of the practice of the applicant to specified 
activities of the practice as a physician assistant;
(4) remedial education; 
(5) such other remedial or restrictive conditions or requirements which, in the 
discretion of the board are necessary to ensure protection of the public and 
minimal competency of the applicant to safely practice as a physician assistant. 
(e) Applicants for licensure: 
(1) whose documentation indicates any name other than the name under which the 
applicant has applied must furnish proof of the name change;
(2) whose application for licensure which has been filed with the board office 
and which is in excess of two years old from the date of receipt, shall be 
considered inactive. Any fee previously submitted with the application shall be 
forfeited. Any further application procedure for licensure will require 
submission of a new application and inclusion of the current licensure fee; 
(3) who in any way falsify the application may be required to appear before the 
board; 
(4) on whom adverse information is received by the board may be required to 
appear before the board; 
(5) shall be required to comply with the board's rules and regulations which are 
in effect at the time the completed application form and fee are filed with the 
board; 
(6) may be required to sit for additional oral or written examinations that, in 
the opinion of the board, are necessary to determine competency of the 
applicant; 
(7) must have the application of licensure complete in every detail 20 days 
prior to the board meeting in which they are considered for licensure. 
Applicants may qualify for a Temporary License prior to being considered by the 
board for licensure, as required by sec.185.7 of this title (relating to 
Temporary License); 
(8) who previously held a Texas health care provider license may be required to 
complete additional forms as required. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 25, 1997.
TRD-9711253
Bruce A. Levy, M.D., J.D.
Executive Director
Texas State Board of Medical Examiners
Effective date: September 15, 1997
Proposal publication date: July 1, 1997
For further information, please call: (512) 305-7016

PART XVII. Plumbing Examiners
CHAPTER 361.Administration
Fees
22 TAC sec.361.6
The State Board of Plumbing Examiners adopts amendment to sec.361.6, Fees, 
without changes to the proposed text as published in the June 20, 1997, issue of 
the Texas Register (22 TexReg 5882). The amendment sets the inspector's fees to 
take the Medical Gas or Water Protection Specialist Endorsement examination, to 
become licensed or to renew a license. 
No comments were received regarding the adoption of the amendment.
The rule amendment is adopted under Texas Civil Statutes, Article 6243-101, 
which provide the Texas State Board of Plumbing Examiners with the authority to 
adopt rules consistent with this Act to carry out its duties in administering 
this Act.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority.
Issued in Austin, Texas, on August 26, 1997.
TRD-9711293
Ernest Pereya, CPA
Chief Fiscal Officer
Plumbing Examiners
Effective date: September 15, 1997
Proposal publication date: June 9, 1997
For further information, please call: (512) 458-2145

PART XXV. Structural Pest Control Board
CHAPTER 593.Licenses
22 TAC sec.593.23, 593.24
The Structural Pest Control Board adopts amendments of 22 TAC 593.23 and 593.24 
with changes to the proposed text published June 27, 1997 in the 22 TexReg 6089 
issue of the Texas Register. 593.23 is adopted without change. 593.24 is adopted 
with changes. The changes create a requirement for the course sponsor to grade 
the examination. The proctors are required to be certified applicators. 
Justification for the rule are the amendments facilitate compliance with 
structural pest control regulations by allowing certified applicators to obtain 
some of their recertification credits through self-study.. 
The rule will function in that the amendments allow for a maximum of two (2) 
credits per year through self-study. They also establish criteria for evaluation 
and approval of self-study courses. 
Several commenters were concerned about the qualifications of exam proctors. A 
few did not feel that self-study credits were necessary. 
The groups or associations making comments for and/or against the rule were the 
Texas Pest Control Association. They were in favor of the rule with changes to 
the proctor requirement which was adopted. 
The agency agreed with the need for qualifying exam proctors. The requirements 
were changed to make proctors certified applicators. The agency believes self-
study allows greater flexibility to certified applicators in meeting their 
requirements. The examination requirement is a sufficient safeguard that 
education is taking place. 
The amendment is adopted under Article 135b-6, which provides the Structural 
Pest Control Board with the authority to license and regulate the structural 
pest control industry.

sec.593.24 Criteria and Evaluation of Continuing Education 
(a) Each continuing education program submitted for approval shall contain the 
following: 
(1) a brief statement giving the learning objective(s), and information to be 
gained; 
(2) the procedure to be used in verifying the participant's comprehension of 
subject matter presented. These methods may include, but are not limited to, 
examination and post-activity questionnaires, practical applications, field 
demonstrations, in-class workbooks, or any other recognized educational 
technique that would assure mastery of subject matter; 
(3) a copy of handout materials, if any, which will be distributed to 
participants during the course; 
(4) inclusive length of time of the course stated in hours, and minutes except 
for self-study courses: 
(5) first date of presentation or examination for self-study courses or if 
unknown, agreement to provide two (2) weeks notice of the first date of 
presentation or examination to the Executive Director; 
(6) category(ies) and number of points in which continuing education units are 
requested; and 
(7) a detailed course outline which will indicate the scope of the course and 
learning objectives. 
(b) The minimum requirements to qualify as a speaker, course presenter or self-
study course provider are: 
(1) a degree from a recognized institution of higher learning which pertains to 
the course being taught; or 
(2) five years experience as an applicator certified by the Structural Pest 
Control Board with a current license in the speciality to be taught; or 
(3) verifiable proof of training and teaching experience within the preceeding 
three years; or 
(4) a combination of education, work related training, and teaching experience 
which, in the opinion of the Board, would be equivalent to two of the three 
requirements as previously stated. 
(c) Each continuing education program submitted for approval shall be 
accompanied by the following information on each speaker, course presenter and 
self-study course provider; 
(1) name, address, telephone number and company, organization or institution of 
higher learning affiliation; 
(2) a resume' which includes, but is not limited to, the following information: 
(A) formal education-degrees held and granting institutions;
(B) industry-related technical experience which relates to the subject matter to 
be taught; 
(C) industry-related teaching experience which relates to the subject matter to 
be taught; 
(D) address and telephone number of at least three references;
(E) membership in trade associations and/or professional organizations; and 
(F) publications as sole or junior author. 
(d) Each continuing education program submitted for approval will be accompanied 
by: 
(1) a means or system which verifies that participants attended the training 
program throughout its stated length or completed the self-study program. These 
systems may include, but are not limited to, sign-in-sign-out rosters, course 
completion certificates, or the system may be incorporated into the means to 
verify the participant's comprehension of a subject matter presented. 
(2) a certificate of completion. This document must include at least the 
following information: 
(A) certified applicator name and certified applicators assigned number; 
(B) name of sponsor or sponsoring agency, company or organizations;
(C) number and category of continuing education points awarded;
(D) date and location of training event or verification test.
(3) a statement that the sponsor agrees to maintain course completion records 
for two years and that a list of participants will be forwarded to the Board 
within 14 days of completion of the training course.
(4) a non-refundable annual fee of $60 for consideration of the course for 
approval and monitoring for the calendar year. Non-profit organizations are 
exempt from this fee if the course is presented as a part of the legally 
mandated function of the organization. 
(e) For purposes of this section, a course is defined as any number of points of 
instruction presented by any one sponsor, company, or organization in any one 
category of license recertification. 
(f) Videotapes, slides or other media presentations shall not be approved by the 
Board unless accompanied by a qualified speaker and course outline, as required 
by subsections (a) and (c)of this section or unless approved as a self-study 
course under subsection (h) of this section. 
(g) Personnel of the Texas Structural Pest Control Board are exempt from any fee 
charged for a continuing education program if they are monitoring the program as 
a part of their duties of their employment. 
(h) A course may be approved as a self-study course if it meets the following 
additional criteria: 
(1) attendees must take an examination designed to verify their knowledge of the 
material provided in the course. The course sponsors must grade the examination 
and keep records for a minimum of two (2) years. 
(2) the attendees grade on the examination must be at least 70% correct to 
obtain credit for the course. 
(3) the examination must be proctored by the course provider or person 
responsible to the course provider. The examination location must be made 
available and accessible to Structural Pest Control Board staff.
(4) A self-study course Examination Monitor must be a certified applicator 
licensed by the Structural Pest Control Board.. Anyone serving as an Examination 
Monitor may not take a Verification Exam for credit while serving as a Monitor. 
(i) "Sponsor" means the person, company or organization that compiles, 
organizes, writes and/or produces training courses submitted to the Structural 
Pest Control Board for approval as a continuing education program for 
recertification points. The sponsor is responsible for establishing procedures 
for verification of completion and comprehension of its courses, and for 
awarding Course Completion Certificates. The Sponsor shall be responsible for 
the qualifications, competence and performance of the Authors, Speakers, 
Presenters, or Instructors who produce or present its courses, and for 
performance of Self-Study Course Examination Monitors.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 22, 1997.
TRD-9711108
Benny M. Mathis, Jr.
Executive Director
Structural Pest Control Board
Effective date: September 11, 1997
Proposal publication date: June 27, 1997
For further information, please call: (512) 451-7200

TITLE 28. INSURANCE
PART I. Texas Department of Insurance
CHAPTER 9.Title Insurance
SUBCHAPTER A.Basic Manual of Rules, Rates and Forms for the
Writing of Title Insurance in the State of Texas
28 TAC sec.9.1
The Texas Department of Insurance adopts an amendment to sec.9.1, with one 
change to the proposed text as published in the June 27, 1997, issue of the 
Texas Register (22 TexReg 6091). The rules and forms proposed were considered at 
the 1996 Texas Title Insurance Biennial Rule and Form Hearing held on March 25, 
1997, at 9:00 a.m., under Docket Number 2278 in Room 100 of the Texas Department 
of Insurance Building, 333 Guadalupe Street in Austin, Texas. 
The amendment concerns the adoption by reference of certain amendments to the 
Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the 
State of Texas (the Basic Manual). The amended section is necessary to reflect 
amendments to the Basic Manual, which the section adopts by reference.
The amendments to the Basic Manual are necessary to facilitate the 
administration and regulation of title insurance in this state by adopting new 
rules and forms and by modifying or replacing currently existing rules and 
forms. The amendments to the Basic Manual clarify and standardize the rules and 
forms which regulate title insurance. Section 9.1 was adopted with one change to 
the text as it was published in the proposal. The effective date of the section 
as published in the proposal was September 1, 1997, however the effective date 
as adopted has been changed to October 1, 1997. Item 96-4 was withdrawn by 
Roland Chamberlin, Jr. at the 1996 Biennial Rule and Form Hearing and, 
therefore, was not adopted. Item 96-5 as submitted by the Texas Land Title 
Association (TLTA) was adopted by reference. Item 96-5 as originally submitted 
by Barton R. Bentley and Roland Chamberlin, Jr. to adopt a new procedural Rule 
P-9.b (11) authorizing a Downdate Endorsement was amended on March 24, 1997 by a 
submission by Thomas Rutledge on behalf of Texas Land Title Association (TLTA). 
The TLTA submission proposed new procedural rule P-43 which specified the 
requirements that would apply to the issuance of a new Limited Pre-Foreclosure 
Policy and new Limited Pre-Foreclosure Policy Downdate Endorsement. The TLTA 
proposal for new Procedural Rule P-43 was adopted. Item 96-6 as submitted by 
TLTA was adopted by reference. Item 96-6 as originally submitted by Barton R. 
Bentley and Roland Chamberlin, Jr. proposed a new endorsement form to authorize 
the issuance of a Downdate Endorsement after the issuance of a Mortgagee Title 
Policy, by utilizing Endorsement Form T-3 with new endorsement instructions to 
be added as a new Section IX. On March 21, 1997, Item 96-6 was amended by a 
submission by Thomas Rutledge on behalf of TLTA. The TLTA submission amends 
Section II of the Basic Manual, Insuring Forms, by adding a new policy form 
entitled "Limited Pre-Foreclosure Policy" and by adding a new endorsement form 
entitled "Limited Pre-Foreclosure Policy Downdate Endorsement." This new policy 
form and endorsement is necessary to provide new insurance products which will 
bridge the gap between the date of the original mortgagee's policy and the 
mortgagee's post-foreclosure ownership period. Item 96-7 was withdrawn by Roland 
Chamberlin, Jr. at the 1996 Biennial Rule and Form Hearing and, therefore, was 
not adopted. Item 96-8 was adopted as by reference. Item 96-8 is a submission by 
the Staff of the Texas Department of Insurance to make four amendments to the 
Minimum Escrow Accounting Procedures and Internal Controls in Section V of the 
Basic Manual in order to strengthen accounting controls over trust funds held by 
the industry. The amendments to Section V are as follows: 
1) In Number 6 the word "tickets" is being substituted for the word "slips".
2) In Number 7, new subsection D is being added to require title agents to 
maintain a control ledger identifying all interest bearing accounts and 
requiring that the interest be posted to the account within seven days after 
receipt of the statement or other documentation reporting the interest. This new 
requirement will take effect 90 days after its adoption in order to allow title 
agents sufficient time to set up such ledgers. This amendment is needed to 
require title agents to maintain adequate records for interest bearing accounts. 
3) Number 13 is amended to eliminate a duplication of the requirement that trust 
funds received by escrow agents be deposited within three business days of 
receipt because this requirement is adequately addressed in Procedural Rule P-
27. The amendment also requires written notice to a seller within seven days in 
the event an earnest money check is returned to the escrow agent due to 
insufficient funds. This amendment is necessary to address the problems that 
have arisen in cases where a title agent failed to promptly notify a seller when 
the earnest money check was dishonored by the bank due to insufficient funds.
4) Number 15 is amended to add a requirement that voided checks must be shown on 
the disbursement sheet if the funds were credited back to the account. This 
amendment is needed to provide a more complete audit trail. Item 96-9 was 
adopted by reference. Item 96-9 is a submission by the Staff of the Texas 
Department of Insurance to amend Procedural Rule P-27 concerning disbursement 
from trust fund accounts. P-27 subsection a. 7. is amended to include checks 
drawn on "savings banks" and delete references to FSLIC and the Texas Share 
Guaranty Credit Union which are entities that no longer exists. P-27 subsection 
b. is further amended to require that good funds received by a trustee must be 
deposited within three days after they are received rather than three days after 
closing unless the trustee is given express written instructions signed by the 
buyer and seller to postpone depositing the funds for a time period longer than 
three days. These amendments to P-27 also more specifically define business day 
to be consistent with federal banking regulations and further reflect the 
cessation of the FSLIC and The Texas Share Guaranty Credit Union. 
Item 96-10 was adopted by reference. Item 96-10 is a submission by Staff that 
adopts a distinct form number designation for each promulgated form in the Basic 
Manual. The new form numbers are to be fully implemented within six months. This 
amendment promotes standardization of the Basic Manual. Reference to a form by a 
unique number alleviates confusion when referring to forms with similar names. 
Item 96-11 was adopted by reference. Item 96-11 is a submission by Staff that 
amends Procedural Rules P-1, P-11, and P-38. Procedural Rule P-1 e. is amended 
to add the language "or other title insurance form." Procedural Rule P-1 l. is 
amended by adding the language "conducting the business of title insurance" and 
deleting the language "insuring titles to real property." Procedural Rule P-1 q. 
is amended to add language to broaden the definition of "the business of title 
insurance" to prevent business entities that are not licensed title agents from 
offering products that closely resemble title insurance. Procedural Rule P-11 is 
amended to clarify the definition of "insuring around" as the willful issuance 
of a title binder or policy showing no outstanding enforceable recorded liens 
when a title agent has determined through examination of title that there are 
valid and enforceable liens of record. Procedural Rule P-38 is amended to 
provide for the issuance of a Residential Owner Policy of Title Insurance (From 
T-1R) to a natural person prior to the construction of improvements, if the 
contemplated improvements meet the definition of residential property. This 
change is needed because under the existing rules there is an inconsistency 
which requires a purchaser of unimproved property, who anticipates immediate 
construction of a residence, to be issued the incorrect Owner Policy of Title 
Insurance (Form T-1). The amendments to P-1, P-11, and P-38 were all required to 
conform these rules to the statutory changes made to Articles 9.02, 9.07A, and 
9.08 by Senate Bill 1284. Item 96-12 was adopted by reference. Item 96-12 
withdraws all of the Bulletins contained in Section VI of the Basic Manual. 
Certain Bulletins that continue to have some historical importance will be 
maintained in an appendix for reference purposes. Bulletins which are deemed to 
no longer have any applicability are repealed and will not be maintained in the 
proposed appendix. Upon withdrawal of the Bulletins contained in Section VI of 
the Basic Manual, Section VII will be redesignated as Section VI and Section 
VIII will be redesignated as Section VII. These changes are necessary because 
many references in the Bulletins are out of date because they refer to statutes 
that are no longer in effect or which have been greatly modified or deal with 
practices and procedures which have been changed by actions of the Board or 
Commissioner over the years. Item 96-13 was adopted by reference. Item 96-13 
withdraws four forms in Section V of the Basic Manual because they are out of 
date and have been superseded by more current forms. The following forms are 
withdrawn from Section V of the Basic Manual: 1)Acknowledgment of Notice of 
Appointment/Notice of Cancellation of Appointment Form 108 2)Texas Title 
Insurance Agent's License Form 3) Notice of Appointment Cancellation of Title 
Insurance Agent 4) Notice of Appointment Cancellation of Title Insurance Escrow 
Officer. Item 96-14 was adopted by reference. Item 96-14 amends the Arbitration 
Provisions in Procedural Rule P-36, Owner Policy of Title Insurance (Form T-1), 
Mortgagee Policy of Title of Insurance (Form T-2), and Commitment for Title 
Insurance form to provide consistency in punctuation, spelling, and grammar and 
correct typographical errors in previous amendments to the rule and forms, and 
to amend the Commitment for Title Insurance form Schedule B, entitled Exceptions 
From Coverage, to correct an omission of the words "is furnished" in exception 
number 7 and to amend the forms for the Mortgagee Title Policy on Interim 
Construction Loan and the Immediately Available Funds Procedure Agreement, and 
Rate Rules R-1 and R-8 to reflect the elimination of the State Board of 
Insurance. Items 96-4 through 96-14 are incorporated by reference for all 
purposes. 
Amended sec.9.1 incorporates by reference certain amendments to the Basic Manual 
which the Commissioner considered as individual items at the biennial hearing on 
March 25, 1997. Item 96-4 was not adopted and will receive no further 
consideration. Item 96-5 adopts new Procedural Rule P-43 which specifies the 
requirements that apply to the issuance of a new Limited Pre-Foreclosure Policy 
and new Limited Pre-Foreclosure Policy Downdate Endorsement. Item 96-6 amends 
Section II of the Basic Manual, Insuring Forms, to add a new Limited Pre-
Foreclosure Policy and new Downdate Endorsement. Item 96-7 was not adopted and 
will receive no further consideration. Item 96-8 amends the Minimum Escrow 
Accounting Procedures and Internal Controls in Section V of the Basic Manual in 
order to strengthen accounting controls over trust funds held by the industry. 
Item 96-9 amends Procedural Rule P-27 to require that good funds received by the 
trustee must be deposited within three business days after they are received 
unless the trustee is given express written instructions signed by the buyer and 
seller to postpone depositing the funds for a time period longer than three 
days. Item 96-10 adopts a distinct form number designation for each promulgated 
form in the Basic Manual to alleviate confusion when referring to forms with 
similar names. Item 96-11 amends Procedural Rules P-1, P-11, and P-38 to conform 
these rules to the statutory changes made to Articles 9.02, 9.07A, and 9.08 by 
Senate Bill 1284. Item 96-12 repeals the out of date bulletins in the Basic 
Manual and retains in an appendix only those bulletins that continue to have 
some historical importance. Item 96-13 withdraws four forms in Section V of the 
Basic Manual which are out of date and have been superseded by more current 
forms. Item 96-14 amends the Arbitration Provisions in Procedural Rule P-36, 
Owner Policy of Title Insurance (Form T-1), Mortgagee Policy of Title Insurance 
(Form T-2), and Commitment for Title Insurance form to provide consistency in 
punctuation, spelling, and grammar and correct typographical errors in previous 
amendments to the rule and forms, and to amend the Commitment for Title 
Insurance form Schedule B, entitled Exceptions From Coverage to correct an 
omission of language in exception number 7 and to amend certain insuring forms 
and Rate Rules R-1 and R-8 to reflect the elimination of the State Board of 
Insurance. 
No comments were received regarding adoption of the amendment. 
This section is adopted under the Insurance Code, Articles 1.02, 9.07, and 9.21; 
and the Government Code, sec.sec.2001.004, et. seq. Article 1.02 provides that a 
reference in the Insurance Code or another insurance law to the State Board of 
Insurance means the Commissioner of Insurance or the Texas Department of 
Insurance as consistent with the respective powers and duties of the 
Commissioner and the Department under Article 1.02. Article 9.07 authorizes and 
requires the Commissioner to hold a biennial hearing to promulgate or approve 
rules and policy forms of title insurance and otherwise to provide for the 
regulation of the business of title insurance. Article 9.21 authorizes the 
Commissioner to promulgate and enforce rules and regulations prescribing 
underwriting standards and practices, and to promulgate and enforce all other 
rules and regulations necessary to accomplish the purposes of Chapter 9, 
concerning regulation of title insurance. The Government Code, sec.sec.2001.004-
2001.038 (Administrative Procedures Act), authorize and require each state 
agency to adopt rules of practice stating the nature and requirements of 
available procedures and prescribe the procedures for adoption of rules by a 
state administrative agency. 
The following articles are affected by this proposal: Articles 9.07 and 9.21. 

sec.9.1.Basic Manual of Rules, Rates, and Forms for the Writing of Title 
Insurance in the State of Texas.
The Texas Department of Insurance adopts by reference the Basic Manual of Rules, 
Rates, and Forms for the Writing of Title Insurance in the State of Texas, as 
amended effective October 1, 1997. The document is published by and available 
from Hart Information Services, 11500 Metric Boulevard, Austin, Texas 78758, and 
is available from and on file at the Texas Department of Insurance, Title 
Insurance Section, MC 103-1T, 333 Guadalupe Street, Austin, Texas 78701-1998. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 26, 1997.
TRD-9711316
Caroline Scott
General Counsel and Chief Clerk
Texas Department of Insurance
Effective date: October 1, 1997
Proposal publication date: June 27,1997
For further information, please call: (512) 463-6327

TITLE 31. NATURAL RESOURCES AND CONSERVATION
PART X. Texas Water Development Board
CHAPTER 371.Drinking Water State Revolving Fund
Program Requirements
31 TAC sec.371.20, sec.371.21
The Texas Water Development Board (board) adopts amendments to sec.371.20 and 
sec.371.21, concerning the Drinking Water State Revolving Fund without changes 
to the proposed text as published in the July 15, 1997, Texas Register (22 
TexReg 6551). 
The amendments support a new distribution of funds by soliciting applications 
only for the total amount of funds available, rather than two times the amount 
of funds available, as authorized by the current rules. The amendments are 
proposed in response to comments from the United States Environmental Protection 
Agency. 
No comments were received regarding adoption of the amendments. 
The amendments are adopted under the authority of the Texas Water Code, 
sec.6.101 and sec.15.605 which provide the Texas Water Development Board with 
the authority to adopt rules necessary to carry out the powers and duties in the 
Water Code and other laws of the State and specifically the SRF programs. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 21, 1997.
TRD-9711049
Craig D. Pedersen
Executive Administrator
Texas Water Development Board
Effective date: September 10, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 463-7981

TITLE 34. PUBLIC FINANCE
PART IV. Employees Retirement System
CHAPTER 71.Creditable Service
34 TAC sec.sec.71.3, 71.14, 71.17
The Employees Retirement System of Texas (ERS) adopts amendments to sec.71.3, 
concerning service credit for members of the elective class, sec.71.14, 
concerning payments to establish or reestablish service credit, and sec.71.17, 
concerning credit for unused accumulated sick leave, without changes to the 
proposed text as published in the July 15, 1997, issue of the Texas Register (22 
TexReg 6553). 
These rules are being amended to add features that will enhance employee 
benefits and help the state continue to attract qualified employees. 
These rules will provide state employees with more flexibility in purchasing 
service. 
No comments were received regarding adoption of these amendments. 
The amendments are adopted under the Government Code sec.815.102, which provides 
that the Board of Trustees may adopt rules for the transaction of any business 
of the Board and sec.813.104, which provides for alternative payments to 
establish or reestablish service credit. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711198
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

34 TAC sec.71.10
The Employees Retirement System of Texas (ERS), adopts the repeal of sec.71.10, 
concerning the purchase of military service credit, without changes to the 
proposed text as published in the July 15, 1997, issue of the Texas Register (22 
TexReg 6554). This rule is being repealed as a result of changes made in Senate 
Bill 1102, 75th Texas Legislature. 
The repeal of this rule will allow partial month purchase of military service 
credit in accordance with Senate Bill 1102. 
No comments were received regarding the proposed repeal of this rule. 
The repeal is adopted under Government Code sec.815.102, which provides that the 
Board of Trustees may adopt rules for the transaction of any business of the 
Board. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711200
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

34 TAC sec.71.25
The Employees Retirement System of Texas (ERS) adopts new rule sec.71.25, 
concerning eligibility for service credit previously canceled, without changes 
to the proposed text as published in the July 15, 1997, issue of the Texas 
Register (22 TexReg 6554).
This new rule will provide more efficient administration of the retirement 
system. 
This new rule allows eligible former members the ability to establish service 
credit that was previously canceled. 
No comments were received regarding adoption of the new rule. 
The new rule is adopted under Government Code sec.815.102, which provides that 
the Board of Trustees may adopt rules for the transaction of any business of the 
Board. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711199
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

CHAPTER 73.Benefits
34 TAC sec.sec.73.13, 73.25, 73.31, 73.35
The Employees Retirement System of Texas (ERS) adopts amendments to sec.73.13 
concerning proportionate retirement under programs administered by the Board, 
sec.73.25 concerning payments to an estate, sec.73.31 concerning adjustments to 
annuities, and sec.73.35 concerning supplemental payments, without changes to 
the proposed text as published in the July 15, 1997, issue of the Texas Register 
(22 TexReg 6555).
These rules will provide enhanced services and benefits for state employees and 
retirees. 
No comments were received regarding adoption of these amendments. 
The amendments are adopted under the Government Code sec.803.401, which provides 
that the Board of Trustees may adopt rules necessary to implement the 
proportionate retirement program; sec.814.602, which provides that the Board of 
Trustees may adopt rules that adjust or modify annuities as necessary to be 
consistent with changes in plan design; sec.814.603, which authorizes the 
retirement system to make a supplemental payment in addition to the regular 
monthly annuity; and sec.815.102, which provides that the Board of Trustees may 
adopt rules for the transaction of any business of the Board.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711201
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

34 TAC sec.73.27
The Employees Retirement System of Texas (ERS), adopts the repeal of sec.73.27, 
concerning the percentage value of a member's first 10 years of service, without 
changes to the proposed text as published in the July 15, 1997, issue of the 
Texas Register (22 TexReg 6555).
The rule is being repealed as a result of changes made in Senate Bill 1102, 75th 
Texas Legislature. 
The repeal of this rule will result in the ERS not enforcing an obsolete rule. 
No comments were received regarding repeal of this rule. 
The repeal is adopted under Government Code sec.815.102, which provides that the 
Board of Trustees may adopt rules for the transaction of any business of the 
Board. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711203
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

34 TAC sec.73.41
The Employees Retirement System of Texas (ERS) adopts new rule sec.73.41, 
concerning privatization or other reduction in workforce temporary service 
retirement option, with changes to the proposed text as published in the July 
15, 1997, issue of the Texas Register (22 TexReg 6556). The changes were 
necessary in order to correct a grammatical error and to provide clarification 
of the new rule. The new rule provides guidelines for privitization or other 
reduction in workforce. 
This new rule will provide for the efficient privatization of certain state 
employees and provide a temporary service retirement option. 
No comments were received regarding the adoption of this new rule. 
The new rule is adopted under Government Code sec.815.102, which provides that 
the Board of Trustees may adopt rules for the transaction of any business of the 
Board. 

sec.73.41.Privatization or Other Reduction in Workforce Temporary Service 
Retirement Option.
(a) The purpose of this section is to implement the Government Code, Title 8, 
sec.814.1041, concerning employee class positions that, between September 1, 
1997 and August 31, 1999, are eliminated as a result of privatization or the 
reduction in services provided by the Texas Workforce Commission, the Texas 
Department of Human Services, and the Texas Department of Mental Health and 
Mental Retardation, hereinafter referred to as "agency". Separations that do not 
result in the elimination of the position because of privatization or a 
reduction in service are not subject to the provisions of this section. 
(b) The agency shall provide the Employees Retirement System of Texas (ERS) as 
soon as practicable after September 30, 1997 and September 30, 1998, 
respectively, the identification of each individual subject to the provisions of 
this section. Not less than 30 days prior to the actual effective date of 
separation, the agency shall provide the ERS, on a form prescribed by the ERS, 
certification of the member's separation as a result of the position elimination 
through privatization or other reduction in service. Upon receipt of the 
certification, the ERS shall determine the member's eligibility for benefits 
under sec.814.1041. 
(c) To be eligible for benefits under sec.814.1041(b) or sec.814.1041(c), the 
member's age and service at the time of separation, including, if eligible, 
credit for unused accrued sick leave, transferred service, or service purchased, 
must not otherwise qualify the member for service retirement benefits. The 
eligibility date for benefits under sec.814.1041(b) is the end of the month in 
which separation of state employment occurs. The eligibility date for benefits 
under sec.814.1041(c) is the end of the month in which the member's age and 
service combination under the provisions of this section meet the requirement 
for service retirement under sec.814.104(a). An eligible member who is 
subsequently reemployed with the state prior to the retirement eligibility date 
under sec.814.1041(c), may use only the time between the period of separation 
and reemployment for purposes of meeting eligibility for service retirement 
benefits. Failure to retire upon first eligibility under this section will 
result in cancellation of the member's right to benefits under this section. 
Service creditable under sec. 814.1041(b) for age and service shall be in equal 
increments not to exceed the maximum of three years of service and three years 
of age. For a member retiring under the provisions of sec.814.104(a)(1), only 
the amount of age or service credit needed for eligibility shall be added. 
(d) The provisions of this section apply only to service retirements under the 
Government Code, Subtitle B.  
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711202
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

CHAPTER 75.Hazardous Profession Death Benefits
34 TAC sec.75.1
The Employees Retirement System of Texas (ERS) adopts amendments to sec.75.1, 
concerning the filing of claims for hazardous profession death benefits, without 
changes to the proposed text as published in the July 15, 1997, issue of the 
Texas Register (22 TexReg 6556).
This rule is a result of recent recodification of the pertinent statutes.
This rule will result in the accurate citation of the statutes governing this 
program. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted under the Government Code sec.615.002, which provides 
that the Board of Trustees shall administer this chapter under rules adopted by 
the Board. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711204
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

CHAPTER 77.Judicial Retirement
34 TAC sec.77.15
The Employees Retirement System of Texas (ERS) adopts amendment to sec.77.15, 
concerning payments to establish or reestablish service credit, with changes to 
the proposed text as published in the July 15, 1997, issue of the Texas Register 
(22 TexReg 6557). One administrative change was made to correct a grammatical 
error. 
This rule will provide members of the Judicial Retirement System of Texas with 
more flexibility in purchasing service. 
No comments were received regarding adoption of the amendments.
The amendment is adopted under Government Code sec.838.105, which provides 
authority for the Board of Trustees to make alternative payments to establish or 
reestablish service credit. 

sec.77.15.Payments to Establish or Reestablish Service Credit.
(a) A member or contributing member of the Judicial Retirement System of Texas 
Plan One or Plan Two may purchase eligible service creditable in the member's 
respective retirement system in accordance with the Government Code, Chapter 833 
and Chapter 838, respectively. The retirement system shall grant the applicable 
amount of service credit after each payment made under this section is equal to 
the amount required to establish one or more months of creditable service. 
(b) (No change.) 
(c) A contributing member of the Judicial Retirement System of Texas Plan One or 
Plan Two may file with the member's state payroll officer, a contract to 
establish or reestablish service credit through a monthly payroll deduction 
installment plan. The state agency shall provide the Employees Retirement System 
of Texas (ERS) a signed copy of the contract not later than the date the service 
purchase contribution is reported to the ERS. Plan Two members with payroll 
deductions that will result in less than the amount required to establish one 
month of creditable service by fiscal year end will be provided written notice 
at the time the contract is received by the ERS, that a balloon payment will be 
due at fiscal year end; otherwise additional penalty interest will accrue on the 
service cost. 
(d) The contributing member shall designate the amount to be deducted from the 
member's salary and deposited each month with the ERS. The total amount deducted 
in any one fiscal year must equal or exceed the cost to establish one month of 
service credit. Excess payments of $5.00 or greater will be applied to the next 
fiscal year service purchase contract, if eligible. In the event the member does 
not negotiate a new contract within 60 days of a new fiscal year or there is no 
remaining service for purchase, any overpayment of $5.00 or greater will be 
refunded to the member. Any remaining credit of less than $5.00 for Plan One 
members will be deposited to the retirement system's state accumulation account 
and will not be subject to refund. Any remaining credit of less than $5.00 for 
Plan Two members will be deposited as penalty interest toward the last purchase 
established and will not be subject to refund. 
(e)-(f) (No change.) 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711205
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

34 TAC sec.77.19
The Employees Retirement System of Texas (ERS) adopts new rule sec.77.19, 
concerning acceptance of rollovers and transfers from other qualified, without 
changes to the proposed text as published in the July 15, 1997, issue of the 
Texas Register (22 TexReg 6558). 
This rule contains a new plan design feature which will enhance the fringe 
benefits available to judicial members and help the state to continue to attract 
qualified judicial candidates. 
This new rule will allow Judicial Retirement System Plan Two member to purchase 
eligible service credit using a procedure not previously available. No comments 
were received regarding adoption of the new rule. 
The new rule is adopted under Government Code sec.840.002, which provides that 
the Board of Trustees may adopt rules for the administration of the funds of the 
retirement system. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711206
Shelia W. Beckett
Executive Director
Employees Retirement System
Effective date: September 15, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 867-3336

TITLE 37. PUBLIC SAFETY AND CORRECTIONS
PART I. Texas Department of Public Safety
CHAPTER 23.Vehicle Inspection
Vehicle Emissions Inspection and Maintenance Program
37 TAC sec.23.93
The Texas Department of Public Safety adopts an amendment to sec.23.93, 
concerning vehicle emissions inspections, without changes to the proposed text 
as published in the June 17, 1997, issue of the Texas Register (22 TexReg 5816). 
The justification for this section will be improved air quality by the reduction 
of emissions of hydrocarbons, carbon monoxide, and other pollutants from mobile 
sources. 
Subsection (n) is amended to include the adoption by reference of the VEHICLE 
EMISSIONS INSPECTION AND MAINTENANCE RULES AND REGULATIONS MANUAL FOR OFFICIAL 
VEHICLE INSPECTION STATIONS AND CERTIFIED INSPECTORS as the standard for 
conducting emissions inspections in designated counties. 
No comments were received regarding adoption of the amendment. 
The amendment is adopted pursuant to Texas Government Code, sec.411.006(4), 
which provides the director with the authority to adopt rules, subject to 
commission approval, considered necessary for the control of the department.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 14, 1997.
TRD-9711026
Dudley M. Thomas
Director
Texas Department of Public Safety
Effective date: September 9, 1997
Proposal publication date: June 17, 1997
For further information, please call: (512) 424-2890

TITLE 40. SOCIAL SERVICES AND ASSISTANCE
PART I. Texas Department of Human Services
CHAPTER 46.Licensed Personal Care Facilities Contracting with the Texas 
Department of Human Services to Provide Residential Care Services 
The Texas Department of Human Services (DHS) adopts an amendment to sec.46.2005, 
and adopts new sec.sec.46.8001-46.8003, without changes to the proposed text 
published in the July 15, 1997, issue of the Texas Register (22 TexReg 6560). 
New sec.sec.46.8001-46.8003 are adopted in a new undesignated head titled 
"Administrative and Financial Errors." 
The justification for the proposal is to add rules concerning administrative and 
financial errors, which will allow DHS to recoup overpayments made to the 
provider agencies. These sections also apply to Community Based Alternatives 
(CBA) assisted living and residential care providers. 
The sections will function by allowing DHS to recoup monies erroneously paid to 
provider agencies. 
No comments were received regarding adoption of the sections. 

Provider Participation
40 TAC sec.46.2005
The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 
and 32, which provides the department with the authority to administer public 
and medical assistance programs and under Texas Government Code, sec.531.021, 
which provides the Health and Human Services Commission with the authority to 
administer federal medical assistance funds. 
The amendment implements the Human Resources Code, sec.sec.22.001-22.030 and 
32.001-32.041. 
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711235
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Effective date: September 16, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 438-3765

Administrative and Financial Errors
40 TAC sec.sec.46.8001-46.8003
The new sections are adopted under the Human Resources Code, Title 2, Chapters 
22 and 32, which provides the department with the authority to administer public 
and medical assistance programs and under Texas Government Code, sec.531.021, 
which provides the Health and Human Services Commission with the authority to 
administer federal medical assistance funds. 
The new sections implement the Human Resources Code, sec.sec.22.001-22.030 and 
32.001-32.041.
This agency hereby certifies that the adoption has been reviewed by legal 
counsel and found to be a valid exercise of the agency's legal authority. 
Issued in Austin, Texas, on August 25, 1997.
TRD-9711236
Glenn Scott
General Counsel, Legal Services
Texas Department of Human Services
Effective date: September 16, 1997
Proposal publication date: July 15, 1997
For further information, please call: (512) 438-3765