Sec. 66.68. MARGINAL PROPERTY ROYALTY RATES. (a) In this section:

(1) "Barrel of oil equivalent" means 6,000 cubic feet of natural gas per 42-gallon barrel of crude oil or a volume of gas with a minimum heating value of 6,000,000 British thermal units (6,000 Mbtu), whichever is greater.

(2) "Lease" or "leases" means an oil and gas lease issued or approved by the board that is valid and in force on or after the effective date of this section.

(3) "Qualifying property" means land subject to a lease issued under this subchapter.

(4) "Qualifying reservoir" means a reservoir having an average daily per well production equal to or less than 15 barrels of oil equivalent during a period established by the board by rule and underlying either:

(A) a qualifying property; or

(B) a pooled unit including a qualifying property.

(5) "Reservoir" has the same meaning as "common reservoir" as defined by Section 86.002, Natural Resources Code.

(b) The board may provide by rule that the royalty rate for qualifying reservoirs may be reduced to not less than one-sixteenth (6.25 percent). In determining whether to grant a reduction in the royalty rate, the board may consider whether the qualifying property is being operated efficiently, including whether the property is pooled or has reasonable potential for the application of secondary or tertiary recovery techniques.

(c) If a qualifying reservoir for which royalty rate reduction is sought under this section is included in a unit subject to the authority of the board, the board may modify the terms and conditions of the unit as a condition of approving a reduction in the royalty rate.

Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1, 1998.