Sec. 52.135. INSPECTIONS AND EXAMINATIONS. (a) The books and accounts, receipts, and discharges of all lines, tanks, pools, and meters and all contracts and other records relating to the production, transportation, sale, and marketing of the oil and gas are subject at any time to inspection and examination by the commissioner and the attorney general and governor or their representatives.

(a-1) Not later than the 60th day after the date of receipt of a request from the commissioner, the attorney general, or the governor for information described by Subsection (a), a lessee shall produce the requested information.

(a-2) A lessee who is unable to produce requested information in the time required by Subsection (a-1) must, not later than the 30th day after the date of receipt of a request for the information, reply in writing to the requestor and state the reason for the inability to provide the information in the time required and when the information will be available. A requestor who receives a reply under this subsection may extend the deadline for the production of the requested information by written response to the lessee. If the requestor does not extend the deadline, the lessee shall produce the information not later than the later of:

(1) the fifth day after the date of receipt of a written response from the requestor rejecting the extension; or

(2) the 60th day after the date of receipt of the original request.

(a-3) A lessee who withholds requested information on a good faith legal basis must, not later than the 60th day after the date of receipt of a request for the information, provide the requestor with a detailed explanation of the basis for withholding the information.

(b) If, after inspection and examination of books, accounts, reports, or other records, the commissioner or his representative determines that additional royalties are due under a lease of state land or minerals, the commissioner shall send to the lessee by certified mail, return receipt requested, an audit billing notice notifying the lessee of such additional royalties, and interest and penalty, due and of the reasons for such determination.

(c) A lessee shall have 30 days from the date of the receipt of an audit billing notice under Subsection (b) or a notice of a penalty assessment under Subsection (e) in which to pay the audit deficiency assessment or penalty or to request a hearing before the commissioner or the commissioner's representative for redetermination of the assessment or to challenge the assessment of the penalty. A statement of grounds setting out in detail the lessee's reasons for disagreement with the assessment or penalty and the factual and legal grounds on which the claim is based must be submitted by a lessee with its request for a hearing. The hearing shall be conducted in accordance with the rules and procedures established by the commissioner.

(d) In order to stop the further accrual of penalty or interest, the lessee may pay the additional royalties assessed at any time after receipt of an audit billing notice.

(e) Except as provided by Subsection (f), the commissioner may assess an administrative penalty against a lessee who fails to produce requested information in the time required under Subsection (a-1) or (a-2) by intentionally withholding information to which the land office is legally entitled. The penalty may not exceed:

(1) $100 a day for each day after the deadline for producing the information that the lessee fails to produce the information until the 60th day after the deadline; and

(2) $1,000 a day for each day after the 60th day after the deadline for producing the information that the lessee fails to produce the information.

(f) The commissioner may not assess a penalty against a lessee who withholds information under Subsection (a-3) until the commissioner determines that the requestor is entitled to the information.

Acts 1977, 65th Leg., p. 2456, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977. Amended by Acts 1986, 69th Leg., 3rd C.S., ch. 5, Sec. 1, eff. Sept. 30, 1986.

Amended by:

Acts 2013, 83rd Leg., R.S., Ch. 361 (H.B. 2571), Sec. 1, eff. September 1, 2013.