Bill Text: TX SB1094 | 2013-2014 | 83rd Legislature | Engrossed

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Bill Title: Relating to security interests in oil and gas production and its proceeds.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2013-05-02 - Left pending in committee [SB1094 Detail]

Download: Texas-2013-SB1094-Engrossed.html

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By: Hinojosa S.B. No. 1094

A BILL TO BE ENTITLED
AN ACT
relating to security interests in oil and gas production and its
proceeds.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 9.301, Business & Commerce Code, is
amended to read as follows:
Sec. 9.301. LAW GOVERNING PERFECTION AND PRIORITY OF
SECURITY INTERESTS. In this section, "first purchaser" and "oil
and gas production" have the meanings assigned by Section 9.343(r).
Except as otherwise provided in Sections 9.303 through 9.306, the
following rules determine the law governing perfection, the effect
of perfection or nonperfection, and the priority of a security
interest in collateral:
(1) Except as otherwise provided in this section,
while a debtor is located in a jurisdiction, the local law of that
jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in
collateral.
(2) While collateral is located in a jurisdiction, the
local law of that jurisdiction governs perfection, the effect of
perfection or nonperfection, and the priority of a possessory
security interest in that collateral.
(3) Except as otherwise provided in Subdivision (4),
while tangible negotiable documents, goods, instruments, money, or
tangible chattel paper is located in a jurisdiction, the local law
of that jurisdiction governs:
(A) perfection of a security interest in the
goods by filing a fixture filing;
(B) perfection of a security interest in timber
to be cut; and
(C) the effect of perfection or nonperfection and
the priority of a nonpossessory security interest in the
collateral.
(4) The local law of the jurisdiction in which the
wellhead or minehead is located governs perfection, the effect of
perfection or nonperfection, and the priority of a security
interest in as-extracted collateral. The local law of the
jurisdiction in which the wellhead or minehead is located,
including, if applicable, the provisions of Section 9.343(b) that
provide for the automatic perfection of a security interest, govern
the perfection of a security interest against the first purchaser,
regardless of the jurisdiction in which the first purchaser is
organized, for oil and gas production owned by, received by, or due
to the first purchaser and in the identifiable proceeds of that
production owned by, received by, or due to the first purchaser, if
the proceeds are oil or gas production, inventory of raw, refined,
or manufactured oil or gas production, or rights to or products of
any of those.
(5) For a purchase-money security interest against the
first purchaser of oil and gas production or its proceeds, Sections
9.324(b) and 9.343(f) govern the priority of the purchase-money
security interest, regardless of:
(A) the jurisdiction in which the first purchaser
is organized; or
(B) whether the purchase-money security interest
was perfected by filing a financing statement, if the
purchase-money security interest was also perfected automatically
under Section 9.343(b).
SECTION 2. Subsections (b) and (c), Section 9.324, Business &
Commerce Code, are amended to read as follows:
(b) In this subsection, "first purchaser," "oil and gas
production," and "subsequent purchaser" have the meanings assigned
by Section 9.343(r). The provisions of this subsection apply
regardless of the jurisdiction in which the first purchaser is
organized. 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 or,
in the case of identifiable cash proceeds from oil and gas
production or its proceeds, to the extent the identifiable cash
proceeds are owned by, received by, or due to the first purchaser on
or before the delivery of the inventory to a subsequent purchaser,
if:
(1) the purchase-money security interest is perfected
automatically under Section 9.343(b) or in another authorized
manner 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, if notification is required,
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.
(c) Subsections (b)(2)-(4) apply only if the holder of the
conflicting security interest had filed a financing statement
covering the same types of inventory:
(1) before the date of the filing, if the
purchase-money security interest is perfected only by filing, and
is not also perfected automatically under Section 9.343(b) [before
the date of the filing]; or
(2) if the purchase-money security interest is
temporarily perfected without filing or possession under Section
9.312(f), before the beginning of the 20-day period under that
subsection.
SECTION 3. Section 9.343, Business & Commerce Code, is
amended by amending Subsections (c), (f), and (g) and adding
Subsection (k-1) to read as follows:
(c) The security interest exists in oil and gas production
owned by, received by, or due to the first purchaser[,] and [also]
in the identifiable proceeds of that production owned by, received
by, or due to the first purchaser:
(1) for an unlimited time if:
(A) the proceeds are oil or gas production,
inventory of raw, refined, or manufactured oil or gas production,
or rights to or products of any of those, although the sale of those
proceeds to a subsequent [by a first] purchaser [to a buyer in the
ordinary course of business as provided in Subsection (e)] cuts off
the security interest in those proceeds;
(B) the proceeds are accounts, chattel paper,
instruments, documents, or payment intangibles; or
(C) the proceeds are cash proceeds, as defined in
Section 9.102; and
(2) for the length of time provided in Section 9.315
for all other proceeds.
(f) The security interests and all liens created by this
section have the following priorities over other Chapter 9 security
interests:
(1) A security interest created by this section,
whether perfected automatically under Subsection (b) or perfected
by the filing of the optional financing statement authorized by
Section 9.5055, is treated as a purchase-money security interest
for purposes of determining its relative priority under Section
9.324 over other security interests not provided for by this
section. A holder of a security interest created under this section
is not required to give the written notice every five years as
provided in Section 9.324(b)(3) to have purchase-money priority
over a security interest with a prior financing statement covering
inventory.
(2) A statutory lien is subordinate to all other
perfected Chapter 9 security interests and has priority over
unperfected Chapter 9 security interests and the lien creditors,
buyers, and transferees mentioned in Section 9.317.
(g) The security interests and liens created by this section
have the following priorities among themselves:
(1) Regardless of whether the optional financing
statement authorized by Section 9.5055 was filed to perfect those
security interests, if [If] a record effective as a filed financing
statement under Subsection (b) exists, the security interests
perfected by that record have priority over a security interest
automatically perfected without filing under Subsection (b). If
several security interests perfected by records exist, they have
the same priority among themselves as established by real property
law for interests in oil and gas in place. If real property law
establishes no priority among them, they share priority pro rata.
(2) A security interest perfected automatically
without filing under Subsection (b), or for which the optional
financing statement authorized by Section 9.5055 was filed, if the
security interest was also perfected automatically without filing
under Subsection (b), has priority over a lien created under
Subsection (d).
(3) A nontax lien under Subsection (d) has priority
over a lien created under that subsection that secures the payment
of taxes.
(k-1) The sale to a subsequent purchaser by the first
purchaser of oil and gas production or the proceeds of that
production, if the proceeds are oil or gas production, inventory of
raw, refined, or manufactured oil or gas production, or rights to or
products of any of those, cuts off the liens and security interests
created by this section in the oil and gas production and its
proceeds. The security interests and liens created by this section
are subject to and do not impair or impact in any manner the
exercise or enforcement by a subsequent purchaser of any rights,
including rights of a secured creditor and rights of set-off,
net-out, exchange, recoupment, or withholding of funds, provided
under any enforceable contract or applicable law that governs the
relationship between a subsequent purchaser and the first purchaser
or an affiliate or representative of the first purchaser.
SECTION 4. Subsection (r), Section 9.343, Business &
Commerce Code, is amended by adding Subdivision (5) to read as
follows:
(5) "Subsequent purchaser" means a person who is not
an affiliate of the first purchaser and who purchases from the first
purchaser or affiliate or representative of the first purchaser oil
and gas production or the proceeds of that production, if the
proceeds are oil or gas production, inventory of raw, refined, or
manufactured oil or gas production, or rights to or products of any
of those.
SECTION 5. Subchapter E, Chapter 9, Business & Commerce
Code, is amended by adding Section 9.5055 to read as follows:
Sec. 9.5055. OPTIONAL FINANCING STATEMENT FOR SECURITY
INTEREST IN OIL AND GAS PRODUCTION AND ITS PROCEEDS. (a) In this
section, "first purchaser," "interest owner," "operator," and "oil
and gas production" have the meanings assigned by Section 9.343(r).
(b) To the extent of a conflict between this section and
another provision of this subchapter, this section prevails.
(c) If a security interest in oil and gas production or its
proceeds is perfected automatically under Section 9.343(b), an
interest owner or an operator acting on behalf of one or more
interest owners may also, but is not required to, file a financing
statement against the first purchaser in the jurisdiction in which
the first purchaser is organized.
(d) A financing statement filed pursuant to this section is
sufficient if it:
(1) provides the name of the debtor;
(2) provides the name of the secured party or a
representative of the secured party; and
(3) indicates the collateral covered by the financing
statement.
SECTION 6. Subsections (e), (m), and (n), Section 9.343,
Business & Commerce Code, are repealed.
SECTION 7. The changes in law made by this Act apply only to
a civil action commenced on or after the effective date of this Act.
A civil action commenced before the effective date of this Act is
governed by the law in effect immediately before the effective date
of this Act, and that law is continued in effect for that purpose.
SECTION 8. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2013.