Articles Posted in Legislation

There are at least 150,000 unplugged inactive oil and gas wells in Texas, and the number is growing. Of these, almost 9,000 are “orphan wells,” having no active operator because the owner has gone out of business or gone bankrupt. Senate Bill 1150, passed by the Legislature, is the Legislature’s effort to address the problem–“a rare example of the Texas Legislature regulating the state’s oil and gas industry,” according to the Texas Tribune. In my opinion it is a weak effort.

Prior to SB 1150 operators could avoid plugging wells indefinitely, as long as they held a lease on the property where the well is located. Operators could obtain extensions of plugging obligations as long as the held the lease and they filed the necessary paperwork.

SB 1150 amends Section 89.023 of the Natural Resources Code. The amendment provides that an operator cannot obtain a plugging extension if the well was completed more than 25 years ago and has been inactive “for more than 15 years.”  But there are exceptions. An operator doesn’t have plug a well even if it is more than 25 years old and has been inactive for more than 15 years if the commission finds that “the operator’s demonstrated history of returning inactive wells to operation warrants the granting of the extension,” or “the operator’s financial hardship in complying [the plugging requirement] warrants the granting of the extension.” The operator must submit a compliance plan committing to plug the well or bring it back into production by September 1, 2042 (not a typo). The operator must also provide a performance bond in an amount not less than the full cost for plugging the inactive well, “as established by the commission, that runs with and covers the lifetime of the well, regardless of a change in the operator.”

Governor Abbot has signed House Bill 456, passed by the Legislature, granting certain charities an exemption from ad valorem taxes on their oil and gas royalties, effective January 1, 2024. The bill amends Tax Code Section 11.18(a), which provides ad valorem tax exemptions for charitable organizations, including churches and educational institutions. The bill amends the statute to provide an ad valorem tax exemption for mineral and royalty interests, but only for some charitable organizations.

The exemption applies to the following types of charitable organizations who provide services without regard to ability to pay, but only if the mineral or royalty interest (i) is not severed from the surface estate (i.e., is under land owned by the charity), or (ii) was donated to the charity:

• a charity providing medical care;

Tiffany Dowell Lashmet, blogger at Texas A&M AgriLife Extension, alerted me in her blog to a bill passed in the last session of the Texas Legislature, HB 365, that Texas landowners should know about. The bill amends the Texas Farm Animal Liability Act, Texas Civil Practice and Remedies Code Chapter 87. The Act offers landowners protection from liability from injuries caused to “participants” resulting from an inherent risk of engaging in a “farm animal activity”.

The bill was passed to address an issue with the Act addressed in a Texas Supreme Court case, Waak v. Rodriguez, 603 S.W.3d 103 (Tex. 2020). The Waaks breed Charolais cattle on their ranch in Fayette County. They hired Raul Zuniga to help with the cattle. They instructed him to move some cattle to a different pasture, including a 2,000-pound bull. They later found Zuniga dead in the pen with the bull, cause of death blunt force and crush injuries. Zuniga’s parents and surviving children sued the Waaks for wrongful death and survival claims, alleging negligence. The trial court dismissed the case on the ground that the Farm Animal Activity Act barred the claims. The Court of Appeals reversed, holding that the Act did not apply. The Supreme Court affirmed, holding that the Waaks were not entitled to the protection of the Act. The Act limits liability for injury to a “participant in a farm animal activity” that results from “inherent risk” of such activities. The court held that Zuniga was not a “participant in a farm animal activity” as defined in the Act.

HB 365 broadens the definitions of participant and farm animal activity so that they would cover injuries sustained in handling cattle like the activity engaged in by Zuniga. (It also now includes bees as farm animals covered by the Act.)

Senator Dan Patrick and Speaker Joe Strauss have issued their list of interim charges for the next legislative session – issues that committees must study during the interim between sessions. Those interim charges may be found here:

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