Newspaper article THE JOURNAL RECORD

Natural Gas Royalty Bill Passed by House 51-47

Newspaper article THE JOURNAL RECORD

Natural Gas Royalty Bill Passed by House 51-47

Article excerpt

Senate Bill 168, aimed at clarifying the royalty payment method for "split-stream" natural gas wells, is headed for the governor's desk after passing the Oklahoma House of Representatives 51-47 on Thursday.

Gov. David Walters declined to comment on the legislation, saying he wants to see the bill first.

"Natural gas royalty bills are often laden with all kinds of surprises, and I want to be careful," he said.

Passage of Senate Bill 168 was nip-and-tuck Thursday, as the toteboard switched back and forth several times, giving each side a one-vote edge over the other. Prior to passing the bill, legislators voted 50-49 to accept the conference committee report, with a similar scenario.

Authors of the legislation are Sens. Don Williams, D-Balko and Kevin Easley, D-Broken Arrow, and Reps. Larry Rice, D-Pryor and Ed Apple, R-Duncan.

Provisions of the bill, which also makes changes in existing law known as the "Sweetheart Gas Bill," have two different effective dates. A section titled "Natural Gas Market Sharing Act" would be effective Sept. 1. Its provisions would forbid producers from switching contracts more often than every 12 months.

The bill also contains a set of provisions known as the "Production Revenue Standards Act," which set forth the way to pay royalties.

Under language that would become effective July 1, 1993, each royalty interest owner would share in all gas sale proceeds each month, to the extent of its interest in the well. The identity of the producing owners would not matter.

Producing owners would pay the royalty percentage to the operator of the well, who would distribute the money proportionately to each royalty interest owner.

Owners of a majority working interest in a well could designate a third party, such as a bank or trust company, to distribute the royalty payments instead of the operator. If they chose an outside party, the royalty distributor would be required to have a $50,000 surety bond.

Effective Sept. 1, working interest owners in a well would be required to provide the operator with such information as names of the royalty interests and payment status of the royalty owners.

A key provision of Senate Bill 168 would change current law that makes the first purchaser in a well liable for all payments to royalty owners, beyond its own payment. The new language, which would be effective July 1, 1993, says that once the first purchaser paid royalty proceeds to the royalty owners or the operator of the well, it would have done its duty and have no further liability.

A section that defines a division order would become effective Sept.

1, and would apply retroactively only to division orders executed on or after July 1, 1989.

The Oklahoma Corporation Commission would be empowered to make rules regarding fees and expense reimbursements from working interest owners to cover the costs incurred by the operator to comply with the new law. …

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