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RULE §139.12Oil and Gas Auction Exemption

For purposes of this rule only, the term "mineral interest" means an interest in or under an oil, gas, or mining lease, fee, or title, including real property from which the minerals have not been severed, or contracts relating thereto. The offer and sale of a mineral interest, at an auction, by the seller itself, or a registered dealer or agent acting on behalf of the seller, is exempt from the securities registration requirements of the Texas Securities Act, Section 7, if all of the following conditions are met.

  (1) Auctioneer. The auctioneer or associate auctioneer through which the mineral interest is offered or sold must be licensed as a dealer under the Texas Securities Act and licensed by the Texas Department of Licensing and Regulation in accordance with Texas Occupations Code, §1802.001 et. seq.

  (2) Seller.

    (A) Intent. The seller did not acquire the mineral interest with a view to resale, unless the seller was forced to acquire the mineral interest in a package in order to obtain other properties in the package.

    (B) No fractionalization of mineral interests.

      (i) The seller has the full right and authority to sell the mineral interest, and is selling 100% of its mineral interest, except that retention by the seller of a royalty or overriding royalty or the horizontal severance of the property is permissible as indicated in clause (ii) of this subparagraph.

      (ii) The seller must not be creating undivided interests out of its mineral interest for the purpose of resale. Where all the seller owns is a partial interest (such as a royalty, overriding royalty, or undivided fractional working interest), this requirement is met if the seller sells all of that interest. However, the seller shall not be considered to be fractionalizing its interest in sales where the seller retains only a royalty or overriding royalty, or where the seller horizontally severs the property by retaining all of its existing rights in certain formations or depths under the whole property.

  (3) Not applicable to investment contracts. The mineral interest offered or sold does not constitute an investment contract.

  (4) Purchaser.

    (A) Knowledge and experience. The purchaser or its representative is engaged in the business of exploring for or producing oil or gas or other minerals as an ongoing business. By reason of this knowledge and experience, the purchaser or its representative has evaluated the merits and risks of the mineral interest to be purchased at auction and has formed an opinion based solely upon his knowledge and experience and not upon any statement, representation, or printed material provided or made by auctioneer or seller. If a purchaser representative is used, such purchaser representative:

      (i) has no business relationship with the seller;

      (ii) represents only the purchaser and not the seller; and

      (iii) is compensated only by the purchaser.

    (B) Financial ability. The purchaser has sufficient financial resources in order to bear the risk of loss attendant to the purchase of the property.

    (C) Suitability. In all sales to purchasers in this state, the seller or any person acting on its behalf shall have reasonable grounds to believe and after making reasonable inquiry shall believe that the purchaser satisfies the requirements set forth in subparagraphs (A) and (B) of this paragraph. This requirement could be met by obtaining a document signed by the purchaser to the effect that the purchaser meets these conditions.

  (5) Auction. For purposes of this rule only, auction shall mean the sale of the seller's mineral interest by public outcry.

  (6) Information not prohibited. The use of statistical information in trade journals and data bases as well as auction pamphlets concerning the mineral interests to be offered pursuant to this rule is not prohibited.

Source Note: The provisions of this §139.12 adopted to be effective August 23, 1991, 16 TexReg 4352; amended to be effective June 12, 2002, 27 TexReg 4936; amended to be effective February 24, 2016, 41 TexReg 1225

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