Bill Text: TX HB3409 | 2021-2022 | 87th Legislature | Introduced

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Bill Title: Relating to the duty of a lessee or other agent in control of certain state land to drill an offset well, pay compensatory royalty, or otherwise protect the land from drainage of oil or gas by a horizontal drainhole well located on certain land.

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2021-04-12 - Left pending in committee [HB3409 Detail]

Download: Texas-2021-HB3409-Introduced.html

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87R10225 ANG-F
By: Goldman H.B. No. 3409

A BILL TO BE ENTITLED
AN ACT
relating to the duty of a lessee or other agent in control of
certain state land to drill an offset well, pay compensatory
royalty, or otherwise protect the land from drainage of oil or gas
by a horizontal drainhole well located on certain land.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 66.75, Education Code, is amended by
amending Subsection (a) and adding Subsections (a-1) and (g) to
read as follows:
(a) In this section:
(1) "Horizontal drainhole well" means a well with a
horizontal drainhole that may produce oil or gas along at least 100
feet of the drainhole.
(2) "Take point" means any point in a horizontal
drainhole well where oil and gas can be produced from the reservoir
or field interval recognized by the Railroad Commission of Texas.
(3) "Unconventional fracture treated field" means an
oil or gas field in which horizontal well development and hydraulic
fracture treatment must be used to recover resources from all or
part of the field.
(a-1) The lessee shall protect the leased premises from
drainage. The lease may contain express terms regarding drainage
as the board may adopt.
(g) Notwithstanding any other provision of this section, a
lease or other agreement relating to university lands may not
require a lessee to drill an offset well, pay compensatory royalty,
or otherwise protect the leased premises or acreage pooled with the
leased premises from drainage by a horizontal drainhole well
located in an unconventional fracture treated field if no take
point of the horizontal drainhole well is located closer to the
leased premises or acreage pooled with the leased premises than the
applicable lease-line spacing distance requirement of the Railroad
Commission of Texas.
SECTION 2. Section 52.034, Natural Resources Code, is
amended by amending Subsections (a) and (d) and adding Subsections
(a-1) and (a-2) to read as follows:
(a) In this section:
(1) "Horizontal drainhole well" means a well with a
horizontal drainhole that may produce oil or gas along at least 100
feet of the drainhole.
(2) "Take point" means any point in a horizontal
drainhole well where oil and gas can be produced from the reservoir
or field interval recognized by the Railroad Commission of Texas.
(3) "Unconventional fracture treated field" means an
oil or gas field in which horizontal well development and hydraulic
fracture treatment must be used to recover resources from all or
part of the field.
(a-1) Except as provided by Subsection (a-2), if [If] oil or
gas is produced in commercial quantities from a well located on a
privately owned area or areas of state land leased at a lesser
royalty and the well is located within 1,000 feet of an area leased
under this subchapter[,] or [in any case where such an area] is
draining an area leased under this subchapter [being drained by
such a well or wells], the lessee of the state area shall begin in
good faith and prosecute diligently the drilling of an offset well
or wells on the area leased from the state within 60 days after the
initial production from the draining well or the well located
within 1,000 feet of the leased state area.
(a-2) If the well producing oil or gas in commercial
quantities under Subsection (a-1) is a horizontal drainhole well
located in an unconventional fracture treated field, a lessee of a
state area is not required to drill an offset well as provided by
Subsection (a-1) unless any take point in the horizontal drainhole
well is located closer to the leased state area than the minimum
distance established by the applicable lease-line spacing
requirement of the Railroad Commission of Texas.
(d) At the determination of the commissioner and with the
commissioner's [his] written approval, the payment of a
compensatory royalty shall satisfy the obligation to drill an
offset well or wells required by Subsection (a-1) [Subsection (a)
of this section]. Such compensatory royalty shall be paid at the
royalty rate provided by the state lease issued under this
subchapter and shall be paid on the market value at the well of
production from the [draining] well producing oil or gas in
commercial quantities described by Subsection (a-1) [or the well
located within 1,000 feet of the leased state area].
SECTION 3. Section 52.173, Natural Resources Code, is
amended by amending Subsections (a) and (d) and adding Subsections
(a-1) and (a-2) to read as follows:
(a) In this section:
(1) "Horizontal drainhole well" means a well with a
horizontal drainhole that may produce oil or gas along at least 100
feet of the drainhole.
(2) "Take point" means any point in a horizontal
drainhole well where oil or gas can be produced from the reservoir
or field interval recognized by the Railroad Commission of Texas.
(3) "Unconventional fracture treated field" means an
oil or gas field in which horizontal well development and hydraulic
fracture treatment must be used to recover resources from all or
part of the field.
(a-1) Except as provided by Subsection (a-2), if [If] oil or
[and/or] gas is [should be] produced in commercial quantities
within 1,000 feet of land subject to this subchapter[,] or if
production of oil or gas is draining [in any case where] land
subject to this subchapter, [is being drained by production of oil
or gas] the owner, lessee, sublessee, receiver, or other agent in
control of land subject to this subchapter shall in good faith begin
the drilling of a well or wells upon such state land within 100 days
after the draining well or wells or the well or wells completed
within 1,000 feet of the state land commence to produce in
commercial quantities[,] and shall prosecute such drilling with
diligence to reasonably develop the state land and to protect such
state land against drainage.
(a-2) If the well producing oil or gas in commercial
quantities under Subsection (a-1) is a horizontal drainhole well
located in an unconventional fracture treated field, the owner,
lessee, sublessee, receiver, or other agent in control of land
subject to this subchapter is not required to drill an offset well
as provided by Subsection (a-1) unless any take point in the
horizontal drainhole well is located closer to the state land than
the minimum distance established by the applicable lease-line
spacing requirement of the Railroad Commission of Texas.
(d) At the determination of the commissioner and with the
commissioner's [his] written approval, the payment of a
compensatory royalty shall satisfy the obligation to drill an
offset well or wells required by Subsection (a-1). Such
compensatory royalty shall be paid at a royalty rate established by
the commissioner if the land is unleased, or at the royalty rate
provided by the state lease, if the land is leased. Such
compensatory royalty shall be paid on the market value at the well
of production from the [draining] well producing oil or gas in
commercial quantities described by Subsection (a-1) [or the well
located within 1,000 feet of the state land].
SECTION 4. This Act takes effect September 1, 2021.