TX NATURAL RESOURCES CODE

SUBTITLE B. SURVEYS AND SURVEYORS

CHAPTER 32. SCHOOL LAND BOARD

SUBCHAPTER F. LEASE OF HIGHWAY LANDS


§ 32.201. PREFERENTIAL RIGHT TO LEASE CERTAIN LAND BY ADJOINING MINERAL OWNER.
     (a) In this section, "mineral owner"
      means any person who owns the right to explore for, develop, and produce oil and gas from a tract of land adjoining lands owned by the state that were or may be acquired to construct or maintain a highway, road, street, alley, or other right-of-way.
     (b) Oil and gas under lands owned by the state that were or may be acquired to construct or maintain a highway, road, street, alley, or other right-of-way may be offered for lease under this chapter only after the oil and gas are first offered for lease to the mineral owner of the land adjoining the length of the land to be leased. The board shall set the terms and conditions of the lease as follows:
          (1) In instances where the adjoining land is covered by an existing oil and gas lease currently in effect, the royalty, bonus, and rental shall be identical to those amounts contained in the lease covering the adjoining land or, in the event there is more than one lease covering adjoining land, shall be no less favorable to the state than the most favorable of such leases.
          (2) In instances where the adjoining land is not covered by an existing oil and gas lease, the royalty, bonus, and rental for the lease shall be as provided in Sections 32.1072 and 32.1073 of this code.
     (c) The preferential right of the mineral owner created by Subsection (b) of this section is subject to the following limitations:
          (1) the lease of the oil and gas extends only to the center of the width of the particular highway, road, street, alley, or other right-of-way adjacent to the property in which the lessee is the mineral owner; and
          (2) the preferential right to lease must be exercised by the mineral owner within 120 days of actual notice of the intention to lease as provided by Subsection (d) of this section.
     (d) Actual notice, describing the land as required by Section 32.204 of this code, has occurred upon mailing of the notice of the intention to lease by registered mail to the last known address of the affected mineral owner or owners, if more than one, as determined from records of the county clerk for the county in which the land to be leased is located. If the identity or address of a mineral owner is not known, and cannot be located after a diligent search of the records of the county clerk and tax assessor-collector for the county in which the land is located, the actual notice required by Subsection (c) of this section shall be provided by publication. The notice shall be published in the manner provided in the Texas Rules of Civil Procedure for citation by publication in actions against unknown owners or claimants of interest in the land. Actual notice has occurred on completion of all procedures required by the Rules of Civil Procedure.
     (e) To exercise the preferential right under this section, the mineral owner must tender to the commissioner the bonus set by the board, together with the appropriate statutory sales fee. The tender to the commissioner must be made on or before the end of the 120-day period provided by Subsection (c)(2) of this section.
     (f) At any time during the 120-day period a mineral owner may waive his preferential right to lease by providing the General Land Office with a written waiver. Failure by the mineral owner to exercise his preferential right to lease the land within the 120-day period provided by Subsection (c)(2) of this section, or the filing of a written waiver, results in forfeiture of the preferential right to lease the land.
     (g) If a mineral owner's preferential right is forfeited under this section, the land may be offered for lease by the board directly to an applicant or by sealed bid as provided by this chapter. The board shall not offer nor accept a price or terms which are less than that offered to the adjoining mineral owner under this section. If not leased at a public offering within 18 months from the date the lease was offered to the adjoining mineral owner, it shall be reoffered to the mineral owner prior to public offering in accordance with the provisions of this section.
     (h) An adjoining mineral owner shall have the right to seek a judicial determination of the state's title to minerals beneath the adjoining highway right-of-way, and legislative consent to sue the state is hereby granted. Within 60 days of a final nonappealable judgment finding the state did not have title, or only had partial title, the state shall refund all or the proportionate part of any bonus, rental, royalty, and other consideration to the lessee. The state's lessee shall pay to the lawful mineral owner the value of any oil and gas produced from or allocated to the minerals upon which the state's title failed.

Added by Acts 1985, 69th Leg., ch. 327, § 2, eff. June 8, 1985. Amended by Acts 1987, 70th Leg., ch. 948, § 16, eff. Sept. 1, 1987. Renumbered from § 34.0511 by Acts 1987, 70th Leg., ch. 167, § 6.05(a), eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 167, § 6.05(c), (f)(1), (2), (g), eff. Sept. 1, 1987.

§ 32.202. POOLING.
     Any oil and gas lease offered under § 32.201 of this code shall provide:
          (1) authority for pooling all of the leased area into units of no more than 160 acres for an oil well or 640 acres for a gas well plus a 10 percent tolerance or of a unit size allowed under or prescribed by rules of the Railroad Commission of Texas;
          (2) that the production allocable to the state lease shall be based upon the surface acreage of the state lease included in the unit;
          (3) that the unit operations, production from any portion of the unit or payment of shut-in gas well royalty on a lease or unit well shall be considered for all purposes to be the conduct of operations and production on the state lease; and
          (4) that neither unit production of oil or gas, nor unit operations, nor payment of shut-in royalties from a unit gas well, shall serve to hold the lease in force as to any area outside the unit, regardless of whether the production, maintenance of a shut-in gas well, or operations are actually located on the state tract or not.

Added by Acts 1985, 69th Leg., ch. 327, § 3, eff. June 8, 1985. Renumbered from § 34.0512 by Acts 1987, 70th Leg., ch. 167, § 6.05(a), eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 167, § 6.05(b), eff. Sept. 1, 1987; Acts 1991, 72nd Leg., ch. 642, § 3, eff. Aug. 26, 1991.

§ 32.203. COMPENSATORY ROYALTY.
     Compensatory royalty shall be paid to the state on any lease offered and granted under Section 32.201 of this code if the lease is not being held by production on the tract, by production from a pooled unit, or by payment of shut-in royalties in accordance with the terms of the lease, and if oil or gas is sold and delivered in paying quantities from a well located within 2,500 feet of the leased premises and completed in a producible reservoir underlying the state lease or in any case in which drainage is occurring. Such compensatory royalty shall be paid at the royalty rate provided in the state lease based on the value of production from the well as provided in the lease on which such well is located. The compensatory royalty shall be paid in the same proportion that the acreage of the state lease has to the acreage of the state lease plus the acreage of the proration unit surrounding the draining well. The compensatory royalty is to be paid monthly to the commissioner on or before the last day of the month next succeeding the month in which the oil or gas is sold and delivered from the well causing the drainage or from the well located within 2,500 feet of the leased premises and completed in a producible reservoir under the state lease. Notwithstanding anything herein to the contrary, compensatory royalty payable under this section shall be no less than an amount equal to double the annual rental payable under the state lease. Payment of compensatory royalty shall maintain the state lease in force and effect for so long as such payments are made as provided in this section.

Added by Acts 1985, 69th Leg., ch. 327, § 3, eff. June 8, 1985. Renumbered from § 34.0513 by Acts 1987, 70th Leg., ch. 167, § 6.05(a), eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 167, § 6.05(b), eff. Sept. 1, 1987.

§ 32.204. LEASE PROVISIONS.
     Any lease offered under Section 32.201 of this code shall contain a sufficient description of the land to be leased to enable the tract to be located on the ground. All other terms and conditions of the lease shall be identical to those contained in the lease covering such adjacent land, provided the terms and conditions are not inconsistent with any laws of this state. In the event there is more than one lease covering such land, the terms and conditions of the lease shall be no less favorable to the state than the most favorable of such leases. In those instances where the adjoining land is not covered by an existing oil and gas lease, all other terms and conditions of the lease shall be set by the board.

Added by Acts 1985, 69th Leg., ch. 327, § 3, eff. June 8, 1985. Renumbered from § 34.0514 by Acts 1987, 70th Leg., ch. 167, § 6.05(a), eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 167, § 6.05(b), (f)(3), eff. Sept. 1, 1987.

§ 32.205. RULES.
     The board may adopt rules to carry out the provisions of this chapter.

Added by Acts 1985, 69th Leg., ch. 327, § 3, eff. June 8, 1985. Renumbered from § 34.0515 by Acts 1987, 70th Leg., ch. 167, § 6.05(a), eff. Sept. 1, 1987. Amended by Acts 1987, 70th Leg., ch. 167, § 6.05(f)(4), eff. Sept. 1, 1987.

§ 32.206. RATIFICATIONS AND OTHER AGREEMENTS.
     (a) The board may approve by rule or order a ratification or other agreement that includes in the benefits of production a mineral or royalty interest in land owned by the state that was acquired to construct or maintain a highway, road, street, or alley.
     (b) An agreement approved by the board under this section must be executed by the commissioner to be effective.
     (c) This section does not apply to an interest subject to pooling or unitization by a lessee under a lease issued under this subchapter.

Added by Acts 1993, 73rd Leg., ch. 897, § 15, eff. Sept. 1, 1993.