| (i) The royalty rate owed to the state under a lease
issued under Texas Natural Resources Code, Chapter 52, Subchapter
F (Relinquishment Act leases) or §51.195(c)(2) or (d) may not
be reduced under this subsection to less than 3.125% of 100% (one
thirty-second of eight-eighths). The state's royalty rate may not
be reduced under this clause only if the aggregate royalty rate for
the owner(s) of the soil is reduced in the same proportion. Only royalty
payable by the lessee to the commissioner may be reduced by the SLB
pursuant to this rule.
(ii) The royalty rate under a lease issued under Texas
Natural Resources Code, Chapter 52, Subchapter C (riverbed leases),
may not be reduced to a rate lower than the rate under a lease of
land that:
(I) adjoins the land leased under Subchapter C; and
(II) is held or operated by, or is under the significant
control of, the state's lessee.
(iii) The royalty rate under a lease issued under Texas
Natural Resources Code, Chapter 32, Subchapter F (highway leases),
may not be reduced to a rate that is lower than the rate under a lease
of land that adjoins the land leased under Subchapter F.
(D) The qualifying reservoir's reduced royalty rate
applies for two years from the effective date of the royalty rate
reduction. The SLB may extend the reduced rate for additional periods
not to exceed two years each. An operator may apply for a two-year
extension by filing an affidavit that the conditions that existed
at the time that the original royalty rate reduction was granted have
not changed materially. The GLO or the SLB may require an operator
to submit additional information in support of an application for
extension. An operator may apply for further royalty reduction to
a qualified reservoir during the anniversary month of the effective
date of the current royalty rate reduction.
(E) Except as provided in subparagraph (F) of this
paragraph, a reservoir that has not produced during the preceding
12 months and is located under, or is attributable to, a lease with
a royalty reduction under this program, may be granted the lowest
royalty rate currently allowed by the SLB for any other reservoir
under, or attributable to, that lease. Such rate applies for two years
from the month production from the newly productive reservoir commences.
An operator must request and obtain written approval from the GLO
for reduced royalty under this subparagraph.
(F) On leases with a royalty reduction under this program,
a reservoir below the stratigraphic equivalent of any producing qualifying
reservoir under, or attributable to, that lease may be granted the
lowest royalty rate currently allowed by the SLB for any other reservoir
under, or attributable to, that lease. To qualify for such reduced
royalty, the deeper reservoir production cannot exceed 15 BOE per
day per well (50 BOE for Gulf of Mexico properties), as shown by well
tests and/or other appropriate data. If the deeper reservoir production
exceeds 15 BOE per day per well (50 BOE for Gulf of Mexico properties),
the royalty rate for such production is the rate specified in the
lease. A royalty reduced under this subparagraph applies for one year
from the month production from the deeper reservoir commences, after
which the reduction terminates unless the operator by application
seeks and obtains SLB approval for the reduction for that deeper reservoir.
(G) If the minimum annual royalty payment provided
for in the lease exceeds the SLB-approved reduced royalty, the reduced
royalty is the amount due from the lessee as the minimum annual royalty
payment.
(H) If over a consecutive six-month period the average
of the daily price of oil exceeds $25 per barrel, the SLB may terminate
all previously granted royalty rate reductions upon 60 calendar days
notice in writing to the operators of the leases for which royalty
reduction has been granted.
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| Source Note: The provisions of this §9.51 adopted to be effective January 7, 1999, 24 TexReg 161; amended to be effective July 18, 2004, 29 TexReg 6723; amended to be effective March 8, 2010, 35 TexReg 2016; amended to be effective September 4, 2016, 41 TexReg 6500 |
