PART 1. GENERAL LAND OFFICE

CHAPTER 9. EXPLORATION AND LEASING OF STATE OIL AND GAS

SUBCHAPTER E. POOLING AND UNITIZING STATE PROPERTY

31 TAC §9.81

BACKGROUND AND ANALYSIS OF PROPOSED AMENDMENT

The General Land Office ("GLO") proposes an amendment to 31 TAC §9.81 (relating to Pooling and Unitizing of State Property) paragraphs 9.81(a), 9.81(b), 9.81(c), and 9.81(d). The proposed amendments to 31 TAC §9.81 update and clarify the timelines associated with School Land Board ("SLB") meetings, pooling committee meetings and makeup, and the GLO process to review and approve pooling and production sharing agreement applications.

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 rules are in effect, there will be no cost or fiscal implications for local governments or the local economy expected as a result of enforcing or administering the rules, and (ii) there is no expected impact on employment.

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 rules are in effect, the public benefits expected from the proposed rules include a more accurate understanding of: (i) the timelines associated with SLB meetings; (ii) timelines and makeup of the pooling committee; and (iii) the time necessary for the GLO, pooling committee and SLB to review and process applications for pooling and production sharing agreements. Mr. Carter has further determined that, during the same period, there are no additional persons required to comply with these rules, and that there are no net increased costs to regulated persons as a result of the rules.

RURAL COMMUNITY IMPACT

Brian Carter does not anticipate any rural community impact as a result of administering the proposed rule amendments.

SMALL BUSINESS ANALYSIS

There may be some economic cost to small businesses, micro-businesses, and individuals based on the proposed amendments. The total costs for an individual, small business, or micro-business associated with compliance will vary depending on the different situations and choices made by each individual, small business, or micro-business. Further, the GLO does not have information on these businesses' gross receipts, sales revenues, or labor costs. Therefore, the GLO is not able to determine the exact cost of compliance.

GOVERNMENT GROWTH IMPACT STATEMENT

The GLO prepared a Government Growth Impact Statement for the proposed rulemaking. During the first five years the amended rules would be in effect, the rules would not: (i) create or eliminate a government program; (ii) create or eliminate any employee positions; (iii) require an increase or decrease in future legislative appropriations to the agency; (iv) require an increase or decrease in fees paid to the agency; (v) create a new regulation; (vi) expand, limit, or repeal an existing regulation; (vii) increase or decrease the number of individuals subject to the rule's applicability; or (viii) affect the state's economy.

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 email at walter.talley@glo.texas.gov, by no later than 30 days after publication.

STATUTORY AUTHORITY

The amendment to 31 TAC §9.81 is proposed pursuant to the authority set out in Texas Natural Resources Code Sections 31.05 (3), 32.062(a), 32.205, and 33.064, which state that the Commissioner of the GLO shall make and enforce suitable rules consistent with the law.

CROSS-REFERENCE TO STATUTE

Texas Natural Resources Code Sections 31.051, 32.062, and 32.205 are affected by the proposed amendments.

§9.81.Pooling and Unitizing of State Property.

(a) Approval. An agreement to pool or unitize any state leases or royalty interests or to amend an existing unit must be approved by the SLB or appropriate board or agency and executed by the commissioner to be effective. When necessary, the [The] SLB meets [has regular meetings] on the first and/or [and] third Tuesday of each month.

(b) Procedure.

(1) Submit a completed pooling or production sharing application and the processing fee prescribed by §3.31 of this title, (relating to fees) to the GLO. Application forms may be obtained from the GLO upon request. The application must be submitted at least 30 business [14] days prior to the SLB meeting at which the application will be considered. If not timely submitted, the application will be considered at the next available meeting. Any proprietary information submitted with the application shall be kept confidential as required by law, and upon request of applicant, will be returned after examination by GLO staff. The application should include the following information if available:

(A) a legal description of the area to be pooled (or to be subject to production sharing) and a list of the affected leases; [leases to be pooled;]

(B) geological and geophysical data; e.g., structural maps, isopach maps, cross-sections, productive limits, engineering studies and analysis;

(C) electrical and/or geophysical logs;

(D) information on wells drilled in the general area of the proposed unit, and current production rates of offset wells;

(E) names of all the working interest owners in the leases (or units) to be pooled (or from which production will be shared) and the names and respective capacities (e.g., president, vice-president, attorney-in-fact, etc.) of the persons authorized to execute the pooling or production sharing agreement;

(F) for Relinquishment Act Leases, [Leases; ] a list of the owners of the soil who have not authorized pooling in the lease and will be executing the pooling agreement; and

(G) any other data which may be requested.

(2) Pooling and production sharing applications will be reviewed by GLO staff and the pooling committee. The pooling committee consists of a representative from the GLO and the governor's office. The pooling committee meets to review pooling applications before the week of an SLB meeting. An appearance before the pooling committee is generally not required, however, an applicant may be present while the application is considered. The pooling committee will present the terms of the application to the SLB and make a recommendation.

[(2) The pooling application will be reviewed by GLO staff and the pooling committee. The pooling committee consists of a representative from the GLO, the governor's office and the office of the attorney general. The pooling committee usually meets to review pooling applications on the Wednesday before the week of a SLB meeting. An appearance before the pooling committee is generally not required, however, an applicant may be present while the application is considered. The pooling committee will present the terms of the application to the SLB and make a recommendation.]

(c) Agreement provisions. After pooling approval by the SLB, the state's [states'] form of pooling agreement, or ratification will be prepared by the GLO and sent to the applicant for signature. The agreement may provide:

(1) the effective date of the agreement;

(2) the term of the agreement, whether it be for a specified term (a temporary pooled unit) or for so long as the pooled mineral is produced from the pooled unit or the leases in the unit are otherwise maintained in force (a standard [permanent] pooled unit). A new pooling application should be submitted prior to the expiration of a temporary pooled unit to extend its term or to obtain a standard [permanent] pooled unit;

(3) the manner in which unit production is to be allocated to each tract within the unit (e.g., surface acres, productive acreage or volumetric calculation, etc.); and

(4) any other provisions which the SLB considered necessary to protect the state's interests.

(d) Requirement of timely execution.

(1) If the pooling agreement or ratification is not signed and returned to the GLO within 90 days of approval by the SLB, or within 30 days after the approved pooling agreement or ratification has been sent to the applicant by the GLO, whichever date is later, the agreement or ratification shall be of no force and effect, unless a written request is made and accepted by the GLO to extend the 90 or 30 day period, as applicable. [period.]

(2) An applicant may resubmit a pooling or production sharing application to the GLO.

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 March 6, 2024.

TRD-202400995

Mark Havens

Chief Clerk

General Land Office

Earliest possible date of adoption: April 21, 2024

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