Bill Text: TX HB3794 | 2021-2022 | 87th Legislature | Enrolled

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Bill Title: Relating to oil and gas liens.

Spectrum: Bipartisan Bill

Status: (Passed) 2021-06-04 - Effective on 9/1/21 [HB3794 Detail]

Download: Texas-2021-HB3794-Enrolled.html

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H.B. No. 3794

AN ACT
relating to oil and gas liens.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 9.109(d), Business & Commerce Code, is
amended to read as follows:
(d) This chapter does not apply to:
(1) a landlord's lien, other than an agricultural
lien;
(2) a lien, other than an agricultural lien, given by
statute or other rule of law for services or materials, but Section
9.333 applies with respect to priority of the lien;
(3) an assignment of a claim for wages, salary, or
other compensation of an employee;
(4) a sale of accounts, chattel paper, payment
intangibles, or promissory notes as part of a sale of the business
out of which they arose;
(5) an assignment of accounts, chattel paper, payment
intangibles, or promissory notes that is for the purpose of
collection only;
(6) an assignment of a right to payment under a
contract to an assignee that is also obligated to perform under the
contract;
(7) an assignment of a single account, payment
intangible, or promissory note to an assignee in full or partial
satisfaction of a preexisting indebtedness;
(8) a transfer of an interest in or an assignment of a
claim under a policy of insurance, other than an assignment by or to
a health care provider of a health-care-insurance receivable and
any subsequent assignment of the right to payment, but Sections
9.315 and 9.322 apply with respect to proceeds and priorities in
proceeds;
(9) an assignment of a right represented by a
judgment, other than a judgment taken on a right to payment that was
collateral;
(10) a right of recoupment or set-off, but:
(A) Section 9.340 applies with respect to the
effectiveness of rights of recoupment or set-off against deposit
accounts; and
(B) Section 9.404 applies with respect to
defenses or claims of an account debtor;
(11) the creation or transfer of an interest in or lien
on real property, including a lease or rents, as defined by Section
64.001, Property Code, the interest of a vendor or vendee in a
contract for deed to purchase an interest in real property, or the
interest of an optionor or optionee in an option to purchase an
interest in real property, except to the extent that provision is
made for:
(A) liens on real property in Sections 9.203 and
9.308;
(B) fixtures in Section 9.334;
(C) fixture filings in Sections 9.501, 9.502,
9.512, 9.516, and 9.519; and
(D) security agreements covering personal and
real property in Section 9.604;
(12) an assignment of a claim arising in tort, other
than a commercial tort claim, but Sections 9.315 and 9.322 apply
with respect to proceeds and priorities in proceeds; [or]
(13) an assignment of a deposit account, other than a
nonnegotiable certificate of deposit, in a consumer transaction,
but Sections 9.315 and 9.322 apply with respect to proceeds and
priorities in proceeds; or
(14) an oil and gas lien arising under Chapter 67,
Property Code.
SECTION 2. Section 9.310(b), Business & Commerce Code, is
amended to read as follows:
(b) The filing of a financing statement is not necessary to
perfect a security interest:
(1) that is perfected under Section 9.308(d), (e),
(f), or (g);
(2) that is perfected under Section 9.309 when it
attaches;
(3) in property subject to a statute, regulation, or
treaty described in Section 9.311(a);
(4) in goods in possession of a bailee that is
perfected under Section 9.312(d)(1) or (2);
(5) in certificated securities, documents, goods, or
instruments which is perfected without filing, control or
possession under Section 9.312(e), (f), or (g);
(6) in collateral in the secured party's possession
under Section 9.313;
(7) in a certificated security that is perfected by
delivery of the security certificate to the secured party under
Section 9.313;
(8) in deposit accounts, electronic chattel paper,
electronic documents, investment property, or letter-of-credit
rights that is perfected by control under Section 9.314;
(9) in proceeds that is perfected under Section 9.315;
or
(10) that is perfected under Section 9.316[; or
[(11) in oil or gas production or their proceeds under
Section 9.343].
SECTION 3. Section 9.324(b), Business & Commerce Code, is
amended to read as follows:
(b) Subject to Subsection (c) and except as otherwise
provided in Subsection (g), a perfected purchase-money security
interest in inventory has priority over a conflicting security
interest in the same inventory, has priority over a conflicting
security interest in chattel paper or an instrument constituting
proceeds of the inventory and in proceeds of the chattel paper, if
so provided in Section 9.330, and, except as otherwise provided in
Section 9.327, also has priority in identifiable cash proceeds of
the inventory to the extent the identifiable cash proceeds are
received on or before the delivery of the inventory to a buyer, if:
(1) the purchase-money security interest is perfected
when the debtor receives possession of the inventory;
(2) [except where excused by Section 9.343 (oil and
gas production),] the purchase-money secured party sends an
authenticated notification to the holder of the conflicting
security interest;
(3) the holder of the conflicting security interest
receives any required notification within five years before the
debtor receives possession of the inventory; and
(4) the notification states that the person sending
the notification has or expects to acquire a purchase-money
security interest in inventory of the debtor and describes the
inventory.
SECTION 4. Subtitle B, Title 5, Property Code, is amended by
adding Chapter 67 to read as follows:
CHAPTER 67. OIL AND GAS LIENS
Sec. 67.001. DEFINITIONS. In this chapter:
(1) "Affiliate" means any person who:
(A) is controlled, directly or indirectly, by a
first purchaser; or
(B) controls, directly or indirectly, a first
purchaser.
(2) "Agreement to sell" means an enforceable agreement
by an interest owner, directly or through a representative, to sell
oil or gas on or after severance to a first purchaser. The term
includes an agreement that is express or implied, whether oral or
written.
(3) "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through ownership, by
contract, or otherwise.
(4) "First purchaser" means the first person that
purchases oil or gas from an interest owner, under an agreement to
sell.
(5) "Gas" means natural gas, casinghead gas, and all
constituent parts of natural gas and casinghead gas before and
after processing but before a first purchaser transfers title,
possession, or control of the gas to a purchaser.
(6) "Interest owner" means a person, including a
transferee interest owner, owning an interest of any kind in oil and
gas rights before acquisition by a first purchaser.
(7) "Oil" means oil, condensate, and all constituent
parts of the oil, before or after processing but before a first
purchaser transfers title, possession, or control of the oil to a
purchaser.
(8) "Oil and gas lien" means the lien described by
Section 67.002.
(9) "Oil and gas rights" means any legal or equitable
right, title, or interest in or to oil or gas from land in this
state. The term includes:
(A) oil or gas in place before severance;
(B) oil or gas production, or the right to
receive a portion of the proceeds, on severance;
(C) any interest or estate in, by, through, or
under an oil and gas lease;
(D) a right acquired under a pooling order
relating to:
(i) ownership of oil or gas;
(ii) the right to proceeds; or
(iii) the right to enter into an agreement
to sell;
(E) a right to receive consideration under an
agreement to sell oil or gas; and
(F) a mortgage lien or security interest in oil
and gas rights.
(10) "Operator" means a person engaged in the
severance of oil or gas for that person only, for other persons
only, or for that person and others.
(11) "Permitted lien" means a perfected and
enforceable lien created by statute or rule of a governmental
agency for storage or transportation charges, including terminal
charges, tariffs, demurrage, insurance, labor, or other charges,
owed by a first purchaser in relation to oil or gas originally
purchased under an agreement to sell. The term does not include a
lien that is:
(A) in favor of an affiliate of a first purchaser
unless the lien is authorized by the statute or rule creating the
lien; or
(B) for charges incurred after the 90th day after
the date the first purchaser delivers the oil or gas for storage or
transportation.
(12) "Pooling order" means an order issued by the
Railroad Commission of Texas that requires the owners of the right
to drill for oil or gas in a drilling and spacing unit to pool the
owner's interests for the development of the drilling and spacing
unit.
(13) "Proceeds" means, when paid or to be paid in
consideration of, or as a consequence of, the sale of oil or gas
under an agreement to sell:
(A) oil or gas on or after severance;
(B) inventory of raw, refined, or manufactured
oil or gas after severance;
(C) rights to or products of any of the oil or gas
described by Paragraph (A) or inventory described by Paragraph (B);
(D) cash proceeds;
(E) accounts;
(F) chattel paper;
(G) instruments;
(H) documents; or
(I) payment intangibles with respect to any of
the preceding.
(14) "Purchaser" means a person who:
(A) is not an affiliate of a first purchaser; and
(B) takes, receives, or purchases oil or gas from
a first purchaser.
(15) "Representative" means a person who is
authorized, expressly or by implication, including an operator or
an authorized broker, to:
(A) sell oil or gas on behalf of, or for the
benefit of, an interest owner under an agreement to sell; or
(B) receive on behalf of an interest owner the
consideration under an agreement to sell.
(16) "Sales price" means the proceeds a first
purchaser agrees to pay an interest owner or representative under
an agreement to sell.
(17) "Security interest" means a security interest
governed by Chapter 9, Business & Commerce Code.
(18) "Severance" means the point in time oil or gas is
possessed at the mouth of the wellbore of an oil and gas well.
(19) "Transferee interest owner" means a person that
acquires oil and gas rights from a transferor interest owner.
(20) "Transferor interest owner" means an interest
owner that transfers or conveys oil and gas rights, wholly or
partly.
Sec. 67.002. OIL AND GAS LIEN. (a) To secure the
obligations of a first purchaser to pay the sales price, each
interest owner has an oil and gas lien to the extent of the interest
owner's interest in oil and gas rights. The oil and gas lien exists
as part of and incident to the ownership of oil and gas rights.
(b) An oil and gas lien:
(1) exists in and attaches to all oil and gas before
severance;
(2) continues uninterrupted and without lapse in all
oil and gas on and after severance; and
(3) continues uninterrupted and without lapse in and
to all proceeds from the sale of the oil or gas.
(c) Except as provided by Subsection (d), an oil and gas
lien exists until the interest owner or representative first
entitled to receive the sales price has received the sales price for
the oil or gas production, but the lien does not continue to attach
to the production after the production is sold by the first
purchaser, unless the first subsequent purchaser:
(1) is an affiliate of the first purchaser; or
(2) has actual knowledge, not constructive notice or
inquiry notice, that the first purchaser has not paid the interest
owner or representative first entitled to receive the sales price.
(d) As between an interest owner and a representative of an
interest owner or any person claiming adversely to the interest
owner or representative, the interest owner's oil and gas lien
continues uninterrupted and without lapse in proceeds in the
possession or control of a representative until the interest owner
on whose behalf the representative acts receives the proceeds in
full.
(e) Except as provided by Subsection (f), a first purchaser
takes free of an oil and gas lien if the first purchaser:
(1) in good faith, paid the sales price for the oil or
gas to an interest owner or representative otherwise apparently
entitled to receive the sales price; and
(2) is without actual knowledge that the interest
owner or representative is not entitled to receive the sales price
paid.
(f) Notwithstanding Subsection (e), the oil and gas lien
continues uninterrupted in the proceeds paid to or otherwise due
the interest owner or representative.
Sec. 67.003. TRANSFER OF OIL AND GAS RIGHTS. (a) The
validity of an oil and gas lien is not dependent on possession of
the oil or gas by an interest owner or representative. An oil and
gas lien is not void or expired because of a change or transfer of
the actual or constructive possession of or title to the oil or gas
from the interest owner or representative to a first purchaser or
other purchaser.
(b) On the conveyance or transfer of any oil and gas rights
by a transferor interest owner, the oil and gas lien vested in the
transferor interest owner immediately before the conveyance or
transfer remains with the transferor interest owner to the extent
of any oil and gas rights retained by the transferor interest owner.
(c) On the conveyance or transfer of any oil and gas rights
by a transferor interest owner, the oil and gas lien vested in the
transferor interest owner immediately before the conveyance or
transfer is transferred to and attaches automatically to the oil
and gas rights acquired by the transferee interest owner
uninterrupted and without lapse and as part of and incident to the
oil and gas rights that are conveyed or transferred.
Sec. 67.004. AUTOMATIC PERFECTION OF LIEN. An oil and gas
lien of an interest owner is perfected automatically without the
need to file a financing statement or any other type of
documentation.
Sec. 67.005. COMMINGLING. (a) If oil or gas in which there
exists more than one oil and gas lien is commingled with other oil
or gas in a manner that the identity of the specific oil or gas is
lost, the oil and gas lien:
(1) continues without interruption into and attaches
to any resulting commingled product; and
(2) is perfected automatically on the date of the oil
and gas lien's original perfection but only for the volume of the
commingled product that is equal to the volume of product to which
the oil and gas lien originally attached.
(b) If commingling described by Subsection (a) occurs, the
oil and gas lien in the commingled product has priority over any
security interest or other lien that is not an oil and gas lien or
permitted lien, regardless of whether the security interest or
other lien has been properly perfected.
(c) If more than one oil and gas lien attaches to the
commingled product, the oil and gas liens rank equally in the
proportion that the respective sales prices secured by each oil and
gas lien bears as a percentage of the total of the sales prices
secured by all oil and gas liens applicable to the production at the
time the production was commingled.
(d) This section is intended to recognize the continuation
of oil and gas lien rights of an interest owner in the commingled
product stream only as to a volume of oil or gas proportionate to
the volume of oil or gas that originated from the interest owner,
with that volume of the commingled product being considered to have
maintained a distinct identity as being available for sale or
transportation under the specific contractual arrangements
applicable to the production at the time the oil or gas entered the
commingled product stream.
Sec. 67.006. RIGHTS OF PURCHASERS. (a) Except as provided
by Subsection (b), a purchaser takes free of any oil and gas lien
otherwise applicable to the oil or gas purchased if the purchaser:
(1) is a buyer in the ordinary course of the first
purchaser's business under Chapter 9, Business & Commerce Code; or
(2) has paid all of the consideration due to the first
purchaser, including by exchange of oil or gas, net-out, or
set-off, under all applicable enforceable contracts in existence at
the time of the payment.
(b) The oil and gas lien continues uninterrupted in the
proceeds paid to or otherwise due the first purchaser.
(c) Except as provided by this section, an oil and gas lien
has priority over the rights of any purchaser.
Sec. 67.007. PRIORITY IN RELATION TO OTHER LIENS OR
SECURITY INTERESTS. Except for a permitted lien, an oil and gas
lien takes priority over any other lien, whether arising by
contract, law, equity, or otherwise, or any security interest.
Sec. 67.008. TITLE NOT AFFECTED. This chapter does not
affect:
(1) when legal title to oil and gas may pass by
agreement or operation of law subject to an oil and gas lien;
(2) the right of a first purchaser to take or receive
oil and gas under the terms of a division order, provided that the
division order does not modify, waive, or abrogate in any respect
the rights of an interest owner under this chapter; or
(3) subject to Section 67.009, the right of a first
purchaser to take or receive oil and gas under an agreement to sell.
Sec. 67.009. WAIVER. (a) Except as provided by Subsection
(b), an interest owner may not be required, as a condition or term
of an agreement to sell or otherwise, to:
(1) waive or release any oil and gas lien or a right
under this chapter, other than on payment in full of the sales
price; or
(2) agree to a provision that would apply the law of
another state to a right granted under this chapter.
(b) An interest owner, or representative acting on behalf of
an interest owner, may waive or release any oil and gas lien or any
rights under this chapter or agree to apply the law of another state
to the interest owner's oil and gas rights granted under this
chapter, if the first purchaser:
(1) posts a letter of credit in a form and amount
satisfactory to the interest owner; or
(2) agrees to prepay or escrow the sales price under an
agreement to sell with the interest owner and performs all of the
first purchaser's obligations under the agreement.
(c) Unless waived or released under Subsection (b), a
condition or term described by Subsection (a) is void.
Sec. 67.010. LIMITATION ON FILING ACTION TO ENFORCE LIEN.
(a) Except as provided by Subsection (b), an action to enforce the
interest owner's oil and gas lien must be brought not later than the
first anniversary of the last day of the month after the date
proceeds from the sale of oil or gas subject to the lien are
required by law or contract to be paid to the interest owner, but
only as to the oil or gas sold during that month.
(b) The commencement of a proceeding by or against any
person claiming an interest in any property subject to the oil and
gas lien seeking to adjudicate the person as bankrupt or insolvent,
or seeking relief of the person's debts under any law relating to
bankruptcy, insolvency, reorganization, or relief of debtors, or
seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for the person or for
any substantial part of the person's property shall toll the
one-year period prescribed by Subsection (a) in which to bring an
action to enforce the oil and gas lien for an additional period of
90 days after the earlier of the date:
(1) the proceeding is dismissed or otherwise finally
concluded; or
(2) final relief is obtained from the appropriate
tribunal authorizing the commencement of the action to enforce the
oil and gas lien.
Sec. 67.011. VENUE; JURISDICTION. (a) An action to enforce
the interest owner's oil and gas lien may be brought in a district
court or other court of competent jurisdiction in the county in
which:
(1) the oil and gas well from which the oil or gas is
produced is located;
(2) the unpaid for oil or gas is located; or
(3) the proceeds for the oil or gas are located.
(b) An interest owner may join multiple proceedings to
enforce oil and gas liens involving more than one oil and gas well
in one county in the same action.
(c) In cases involving oil or gas from the same oil and gas
well or wells:
(1) any persons claiming oil and gas liens in the oil
or gas may join in the same action; or
(2) a district court may consolidate separate actions
related to the oil or gas.
Sec. 67.012. PAYMENT DISPUTES. In the case of a payment
dispute between an operator and another interest owner, a
good-faith tender of money in satisfaction of a debt or security
interest by one person operates as a tender of the money to both if
tender is made:
(1) to the person who the operator and other interest
owner jointly directed the first purchaser in writing to pay;
(2) to a person who otherwise shows the person is
entitled to the money; or
(3) to a court of competent jurisdiction in the event
of litigation or bankruptcy.
Sec. 67.013. COSTS; ATTORNEY'S FEES. The prevailing party
in an action brought under this chapter is entitled to court costs
and reasonable attorney's fees.
Sec. 67.014. CERTAIN RIGHTS OF OPERATOR NOT IMPAIRED. This
chapter does not impair an operator's right to be paid, set-off, or
withhold funds from another interest owner as security for or in
satisfaction of a debt or security interest.
Sec. 67.015. INTEREST OWNER RIGHTS CUMULATIVE. The
provisions of this chapter and the rights granted under this
chapter are intended to be cumulative with all other rights an
interest owner may otherwise have at law or in equity, including the
right of any interest owner to maintain a personal action to recover
the debt against any person liable for payment of the sales price of
the oil or gas.
Sec. 67.016. LIBERAL CONSTRUCTION OF INTEREST OWNER RIGHTS.
The rights of the interest owner shall be liberally construed to
give the interest owner the most comprehensive protection to secure
the receipt by the interest owner of the sales price.
Sec. 67.017. CONFLICT OF LAWS. To the extent of a conflict
between the provisions of this chapter and other law, this chapter
prevails.
SECTION 5. Sections 9.203(j) and 9.343, Business & Commerce
Code, are repealed.
SECTION 6. (a) The changes in law made by this Act do not
affect the rights of any interest owner that accrued before the
effective date of this Act to the extent those rights are not in
conflict with the provisions of Chapter 67, Property Code, as added
by this Act, and the former law is continued in effect to preserve
those rights.
(b) For purposes of Sections 67.005 and 67.007, Property
Code, as added by this Act, a "permitted lien" includes a mortgage
lien or security interest in oil or gas that:
(1) is granted before the effective date of this Act by
a first purchaser in favor of a person who is not an affiliate of the
first purchaser; and
(2) secures payment under a written instrument of
indebtedness signed by the first purchaser and accepted in writing
by the payee before the effective date of this Act with a principal
amount and a fixed maturity stated in the instrument, unless:
(A) the instrument of indebtedness is modified,
amended, or restated on or after the effective date of this Act to:
(i) increase the principal amount that was
owed before the effective date of this Act; or
(ii) extend the stated maturity of the debt
that was in effect before the effective date of this Act; or
(B) the mortgage lien or security interest is not
validly perfected with a first priority against the claims of all
persons under applicable law other than persons holding a statutory
or regulatory lien for which first priority is granted by statute or
rule.
SECTION 7. This Act takes effect September 1, 2021.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3794 was passed by the House on April
30, 2021, by the following vote: Yeas 140, Nays 1, 2 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 3794 was passed by the Senate on May
19, 2021, by the following vote: Yeas 31, Nays 0.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor