TITLE 31. NATURAL RESOURCES AND CONSERVATION

PART 1. GENERAL LAND OFFICE

CHAPTER 9. EXPLORATION AND LEASING OF STATE OIL AND GAS

SUBCHAPTER C. MAINTAINING A STATE OIL AND GAS LEASE

31 TAC §9.35

The General Land Office ("GLO") proposes an amendment to 31 TAC §9.35 (relating to Producing the State Lease) by amending paragraph (2) and adding paragraph (4).

The proposed amendment clarifies the procedures and standards for obtaining permission to commingle oil and gas production from wells in which the State holds a royalty interest.

FISCAL AND EMPLOYMENT IMPACTS

Brian Carter, Senior Deputy Director of Asset Enhancement of the GLO, has determined that (i) during the first five-year period the proposed amended rule is in effect, there will be no cost or fiscal implications for local governments expected as a result of enforcing or administering the rule, and (ii) there will be no impact on employment expected.

SMALL BUSINESS, MICRO BUSINESS AND RURAL COMMUNITY ANALYSIS

The GLO has determined that for each year of the first five years the proposed amended rule will be in effect, there will be minimal economic cost to small businesses, micro businesses, rural communities and individuals based on the proposed rule.

GOVERNMENT GROWTH IMPACT STATEMENT

During the first five years the proposed rule would be in effect: the proposed rule does not create or eliminate a government program; implementation of the proposed rule does not require the creation of new employee positions or the elimination of existing employee positions; implementation of the proposed rule does not require an increase or decrease in future legislative appropriations to the agency; the proposed rule does not require an increase or decrease in fees paid to the agency; the proposed rule does not create a new regulation; the proposed rule does not expand, limit, or repeal an existing regulation; the proposed rule does not increase or decrease the number of individuals subject to the rule's applicability; and the proposed rule does not affect this state's economy.

LOCAL EMPLOYMENT IMPACT

The GLO has determined the proposed rule will not affect a local economy.

PUBLIC BENEFIT

Brian Carter, Senior Deputy Director of Asset Enhancement of the GLO, has determined that during the first five-year period the proposed amended rule is in effect, the public benefits expected from the proposed amendment include clarification of the procedures and standards used by the GLO in evaluating requests for commingling, and more efficient use of staff time in management of mineral production and income for the Permanent School Fund. Mr. Carter has further determined that, during the same period, as compared to the rule in its current form, there are no additional persons required to comply with this rule after the amendment, and that there are no net increased costs to persons who seek permission to commingle as a result of the amendment.

PUBLIC COMMENT REQUEST

Comments may be submitted to Walter Talley, Office of General Counsel, Texas General Land Office, 1700 N. Congress Avenue, Austin Texas 78701 or by facsimile (512) 463-6311, no later than 30 days after publication.

STATUTORY AUTHORITY

This amendment to 31 TAC §9.35 is proposed pursuant to the authority set out in Texas Natural Resources Code §31.051(3), which states that the Commissioner of the GLO shall make and enforce suitable rules consistent with the law.

Jeff Gordon, General Counsel of the GLO, has determined, and certifies, that the proposed amendment is within the GLO's authority to adopt.

§9.35.Producing the State Lease.

(a) General provisions applicable to producing oil and/or gas on state leases.

(1) (No change.)

(2) All wells producing natural gas and water or natural gas and surface hydrocarbon liquids or natural gas, water and surface hydrocarbon liquids must be produced through oil and gas separators of ample capacity and in good working order. All separators shall be of conventional type (or other equipment at least as efficient) to provide for separation and measurement of all lease or pooled unit gas and liquid hydrocarbon production before sale or surface commingling with production from any other lease and/or pooled unit. All measurement shall be in accordance with the American Gas Association (AGA) standards and all applicable chapters of the American Petroleum Institute (API) Manual of Petroleum Measurement Standards (MPMS) subject to the following: (i) gross lease or pooled unit gas and liquid hydrocarbon production must be measured by, at the option of the lessee, either (A) continuous measurement, or (B) utilization of periodic production well tests as described in MPMS Chapter 20.5 with each lease or pooled unit being tested at least once per month; and (ii) all lessees shall perform both gas and oil sampling with compositional analyses at the outlet of the initial stage of separation for each lease and/or pooled unit with (A) the gas sampling occurring within fifteen (15) days of the expiration of each six (6) month interval, and (B) the oil sampling occurring initially within thirty (30) days after completion of the well, and again between 24 to 36 months after such initial sampling. Industry standard laboratory analysis shall be performed on such samples in compliance with ASTM, API, and GPA standards for gas and oil. Lessees shall retain the foregoing required oil and gas analysis data and make such data available to the GLO as directed per the authority retained under §9.32(c)(3)(D) of this title, upon request. Requests submitted by the lessee [However, upon review and approval by the GLO, a waiver granting exception to this requirement may be provided. The lessee shall request and obtain the waiver from GLO staff before installation of full well stream/wet gas meters in lieu of setting a separator. Waiver requests] shall be sent to the Texas General Land Office, Attention: Mineral Leasing, 1700 N. Congress Ave., Austin, TX 78701-1495.

(3) (No change.)

(4) If, within a group of properties comprised of surface commingled leases, tracts, and/or pooled units (Commingled Properties):

(A) all state leases pertaining to the Commingled Properties were executed prior to January 7, 1999; or

(B) the State's largest revenue interest among the Commingled Properties is less than 5.000%; or

(C) the State has a net revenue interest in each and all of the Commingled Properties and those net revenue interests are identical to a tolerance of 0.001, then upon written certification by Lessee to the GLO that one or more of these conditions has been met, such Commingled Properties are deemed to have obtained permission from the GLO as required under §9.35(a)(3) of this title until and unless additional, non-qualifying surface commingling occurs in conjunction with the Commingled Properties, at which time written permission from the GLO shall be required.

(b) - (d) (No change.)

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on January 7, 2020.

TRD-202000046

Mark Havens

Chief Clerk, Deputy Land Commissioner

General Land Office

Earliest possible date of adoption: February 23, 2020

For further information, please call: (512) 475-1859