CHAPTER 66. PERMANENT UNIVERSITY FUND
EDUCATION CODE
TITLE 3. HIGHER EDUCATION
SUBTITLE C. THE UNIVERSITY OF TEXAS SYSTEM
CHAPTER 66. PERMANENT UNIVERSITY FUND
SUBCHAPTER A. COMPOSITION, INVESTMENT, AND USE
Sec. 66.01. PERMANENT UNIVERSITY FUND. The composition,
investment, purposes, and use of the permanent university fund
are governed by Article VII, Sections 10, 11, 11a, 15, and 18, of
the Texas Constitution.
Acts 1971, 62nd Leg., p. 3149, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.02. AVAILABLE UNIVERSITY FUND. Distributions from the
permanent university fund shall constitute the available
university fund. All distributions from the permanent university
fund shall be deposited in the State Treasury to the credit of
the available university fund by the board of regents of The
University of Texas System or by the custodian or custodians of
the permanent university fund's securities. The University of
Texas System shall provide the information necessary for the
comptroller to accurately account for distributions from the
permanent university fund and to protect state revenues. The
system shall provide the information using the method, format,
and frequency required by the comptroller.
Acts 1971, 62nd Leg., p. 3149, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971. Amended by Acts 1997, 75th Leg., ch. 1311, Sec. 1,
eff. Sept. 1, 1997; Acts 1999, 76th Leg., ch. 1467, Sec. 1.04,
eff. June 19, 1999.
Sec. 66.04. VALIDITY OF BONDS PURCHASED BY BOARD. Whenever the
board has purchased the bonds of any city, county, or
municipality, approved by the attorney general, the certificate
of the attorney general attesting their validity shall be
admitted and received as prima facie evidence of the validity of
the bonds; and in all cases in which the proceeds of the sale of
these bonds have been received by the proper officers of the
city, municipality, or county, or by the party acting for them in
negotiating the sale of the bonds, the city, municipality, or
county is thereafter estopped from denying the validity of the
bonds and they shall be held to be valid and binding obligations.
In the case of any bonds bought under this section, premium or
discount shall be distributed over the life of the bonds.
Acts 1971, 62nd Leg., p. 3149, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.05. REPORTS. (a) Before December 1 of each year the
board of regents of The University of Texas System shall prepare
a written report providing statements of assets and a schedule of
changes in book value of the investments from the permanent
university fund during the year ending August 31 preceding the
publication of the report.
(b) The report shall contain a summary of all gains, losses and
income from investments and an itemized list of all securities
held for the fund on August 31. The report shall also contain any
other information needed to clearly indicate the nature and
extent of investments made of the fund and all income realized
from the components of the fund.
(c) The report shall be distributed to the governor, state
comptroller of public accounts, state auditor, attorney general,
commissioner of higher education, and to the members of the
legislature by the 1st day of January each year. The board shall
furnish copies of the report to any interested person on request.
Added by Acts 1971, 62nd Leg., p. 3347, ch. 1024, art. 2, Sec.
20, eff. Sept. 1, 1971. Amended by Acts 1995, 74th Leg., ch. 823,
Sec. 8, eff. Aug. 28, 1995; Acts 1997, 75th Leg., ch. 1423, Sec.
5.17, eff. Sept. 1, 1997.
Sec. 66.06. WRITTEN OBJECTIVES; PERFORMANCE EVALUATION. (a)
The board of regents of The University of Texas System shall
develop written investment objectives concerning the investment
of the permanent university fund. The objectives may address
desired rates of return, risks involved, investment time frames,
and any other relevant considerations.
(b) The board of regents shall evaluate and analyze the
investment results of the permanent university fund. The service
shall compare investment results with the written investment
objectives developed by the board of regents, and shall also
compare the investment of the permanent university fund with the
investment of other funds operating with substantially the same
objectives and restrictions.
Added by Acts 1983, 68th Leg., p. 5097, ch. 925, Sec. 2, eff.
Aug. 29, 1983. Amended by Acts 1995, 74th Leg., ch. 823, Sec. 9,
eff. Aug. 28, 1995.
Sec. 66.07. CUSTODY AND INVESTMENT OF ASSETS PENDING
TRANSACTIONS. With the approval of the comptroller, the board of
regents of The University of Texas System may appoint one or more
commercial banks, depository trust companies, or other entities
to serve as a custodian or custodians of the permanent university
fund's securities with authority to hold the money realized from
those securities pending completion of an investment transaction
if the money held is reinvested within one business day of
receipt in investments determined by the board of regents. Money
not reinvested within one business day of receipt shall be
deposited in the state treasury not later than the fifth day
after the date of receipt.
Added by Acts 1997, 75th Leg., ch. 1311, Sec. 2, eff. Sept. 1,
1997.
Sec. 66.08. INVESTMENT MANAGEMENT. (a) The board may delegate
investment authority for the investment of the permanent
university fund to the same extent as an institution with respect
to an institutional fund under Chapter 163, Property Code.
(b) The board may enter into a contract with a nonprofit
corporation for the corporation to invest funds under the control
and management of the board, including the permanent university
fund, as designated by the board. The corporation may not engage
in any business other than investing funds designated by the
board under the contract.
(c) The board must approve the:
(1) articles of incorporation and bylaws of the corporation and
any amendment to the articles of incorporation or bylaws;
(2) investment policies of the corporation, including changes to
those policies;
(3) audit and ethics committee of the corporation; and
(4) code of ethics of the corporation.
(d) The board of directors of the corporation shall have nine
members. The board shall appoint and remove all members of the
board of directors of the corporation. At least three members of
the board and the chancellor of The University of Texas System
shall be appointed as directors.
(e) The board shall select one or more of the members of the
board of directors of the corporation from a list of candidates
with substantial background and expertise in investments that is
submitted to the board by the board of regents of The Texas
A&M University System.
(f) If an investment contract entered into under Subsection (b)
includes the permanent university fund within the scope of funds
under the control and management of the board to be invested by
the corporation, the board shall provide for an annual financial
audit of the permanent university fund. The audit shall be
performed by the auditors of The University of Texas System and
The Texas A&M University System and presented to the board.
(g) The corporation shall file quarterly reports with the board
concerning matters required by the board.
(h) The corporation:
(1) is subject to the Texas Non-Profit Corporation Act (Article
1396-1.01 et seq., Vernon's Texas Civil Statutes); and
(2) is subject to the provisions of Chapter 551, Government Code
(the open meetings law), that apply to the board of regents of
The University of Texas System, except that the board of
directors of the corporation:
(A) may discuss an investment or potential investment with one
or more employees of the corporation or with a third party to the
extent permitted to the board of trustees of the Texas growth
fund under Section 551.075, Government Code; and
(B) is not subject to Section 551.121 or Section 551.125,
Government Code, rather any director of the corporation may
attend any meeting of the board of directors by telephone
conference call provided that the telephone conference is audible
to the public at the meeting location specified in the notice of
the meeting during each part of the meeting that is required to
be open to the public.
(i) The corporation may not enter into an agreement or
transaction with a:
(1) director, officer, or employee of the corporation acting in
other than an official capacity on behalf of the corporation; or
(2) business entity in which a director, officer, or employee of
the corporation has an interest
(j) An agreement or transaction entered into in violation of
Subsection (i) is void.
(k) For purposes of this section, a person has an interest in a
business entity if:
(1) the person owns five percent or more of the voting stock or
shares of the business entity;
(2) the person owns five percent or more of the fair market
value of the business entity; or
(3) money received by the person from the business entity
exceeds five percent of the person's gross income for the
preceding calendar year.
(l) A former director of the corporation may not make any
communication to or appearance before a director, officer, or
employee of the corporation before the second anniversary of the
date an individual ceased to be a director of the corporation if
the communication or appearance is made:
(1) with the intent to influence; and
(2) on behalf of any person in connection with any matter on
which the person seeks action by the corporation.
(m) A former officer or employee of the corporation may not
represent any person or receive compensation for services
rendered on behalf of any person regarding a particular matter in
which the former officer or employee participated during the
period of service or employment with the corporation, either
through personal involvement or because the particular matter was
within the officer's or employee's responsibility.
(n) An individual who violates Subsection (l) or (m) commits an
offense. An offense under this subsection is a Class A
misdemeanor.
(o) In this section:
(1) "Board" means the board of regents of The University of
Texas System.
(2) "Institution" and "institutional fund" have the meanings
assigned by Chapter 163, Property Code.
(3) "Participated" means to have taken action as an officer or
employee through decision, approval, disapproval, recommendation,
giving advice, investigation, or similar action.
(4) "Particular matter" means a specific investigation,
application, request for a ruling or determination, rulemaking
proceeding, contract, claim, charge, accusation, arrest, or
judicial or other proceeding.
Added by Acts 1983, 68th Leg., p. 5100, ch. 926, Sec. 2, eff.
Aug. 29, 1983. Renumbered from Education Code Sec. 66.06 by Acts
1987, 70th Leg., ch. 167, Sec. 5.01(a)(20), eff. Sept. 1, 1987.
Amended by Acts 1995, 74th Leg., ch. 213, Sec. 3, eff. May 23,
1995; Acts 1997, 75th Leg., ch. 19, Sec. 1, eff. April 25, 1997;
Acts 2001, 77th Leg., ch. 118, Sec. 3.06, eff. Sept. 1, 2001.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
834, Sec. 3, eff. September 1, 2007.
Acts 2007, 80th Leg., R.S., Ch.
834, Sec. 4, eff. September 1, 2007.
Sec. 66.09. COST VALUE OF INVESTMENTS AND OTHER ASSETS OF THE
PERMANENT UNIVERSITY FUND. If substantially all of the assets of
the permanent university fund are invested in an internal
investment fund established by the board of regents of The
University of Texas System, the cost value of the permanent
university fund's investment in the commingled fund for the
purpose of Sections 18(a) and (b), Article VII, Texas
Constitution, shall be calculated by multiplying the permanent
university fund's ownership percentage in the commingled fund by
the commingled fund's net asset value at cost as determined by
the board of regents. The permanent university fund's ownership
percentage of the commingled fund shall be determined by dividing
the permanent university fund's units of participation or shares
by the total units or shares of the commingled fund.
Added by Acts 1999, 76th Leg., ch. 1467, Sec. 1.06, eff. June 19,
1999.
SUBCHAPTER B. PERMANENT UNIVERSITY FUND BONDS AND NOTES
Sec. 66.21. REGISTRATION. All bonds and notes issued pursuant
to the provisions of Article VII, Section 18, of the Texas
Constitution, as originally adopted or as amended, shall be
registered by the comptroller of public accounts after they have
been approved by the attorney general.
Acts 1971, 62nd Leg., p. 3150, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.22. REFUNDING BONDS AND NOTES. Any bonds or notes
issued pursuant to the constitutional provisions described in
Section 66.21 of this code, or issued pursuant to this
subchapter, may be refunded by the governing board which issued
the bonds or notes, upon such terms and conditions, including
interest rates and maturities, as may be determined by that
board, provided that such terms and conditions shall not be
inconsistent with the applicable constitutional provisions. Any
such bonds or notes may be so refunded by the issuance of
refunding bonds or notes, either to be exchanged for the bonds or
notes being refunded and cancelled, or to be sold, with the
proceeds to be used for the redemption and cancellation of the
bonds or notes being refunded.
Acts 1971, 62nd Leg., p. 3150, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.23. REFUNDING BONDS AND NOTES: APPROVAL; REGISTRATION.
All refunding bonds or notes authorized to be issued under this
subchapter and the records relating to their issuance, including
any proceedings relating to the redemption of any outstanding
bonds or notes, shall be submitted to the attorney general for
examination, and if he finds that they have been issued in
accordance with law, he shall approve them, and then they shall
be registered by the comptroller of public accounts, and after
such approval and registration they shall be incontestable. When
any such refunding bonds or notes are issued to be exchanged for
any outstanding bonds or notes, the comptroller of public
accounts shall register and deliver such refunding bonds on
surrender for cancellation of the bonds or notes being refunded.
When any such refunding bonds or notes are sold, with the
proceeds to be used for redeeming any outstanding bonds or notes,
the comptroller of public accounts shall register such refunding
bonds or notes, even though the bonds or notes to be redeemed
shall not have been surrendered for redemption or cancellation.
Acts 1971, 62nd Leg., p. 3150, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.24. AUTHORIZED INVESTMENTS; SECURITY FOR DEPOSITS. All
bonds and notes, whether original or refunding, issued pursuant
to the constitutional provisions or issued pursuant to this
subchapter, shall be fully negotiable instruments, and all bonds
and notes are declared to be legal and authorized investments for
banks, savings banks, trust companies, building and loan
associations, savings and loan associations, insurance companies,
fiduciaries, trustees, guardians, and for the sinking funds of
cities, towns, villages, counties, school districts, and all
other political corporations or subdivisions of the State of
Texas; and the bonds and notes shall be eligible to secure the
deposit of any and all public funds of the State of Texas, and
any and all public funds of cities, towns, villages, counties,
school districts, and all other political corporations or
subdivisions of the State of Texas; and the bonds and notes shall
be lawful and sufficient security for those deposits to the
extent of their par value when accompanied by all unmatured
coupons appurtenant to them.
Acts 1971, 62nd Leg., p. 3150, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.25. TAX EXEMPT. The carrying out of the purposes of the
constitutional provisions and of this subchapter will be
performing an essential public function under the constitution,
and all bonds and notes, whether original or refunding,
heretofore or hereafter issued pursuant to the constitutional
provisions or this subchapter, and their transfer and the income
from them, including the profits made on their sale, shall at all
times be free from taxation of this state.
Acts 1971, 62nd Leg., p. 3151, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
SUBCHAPTER C. MANAGEMENT OF UNIVERSITY LANDS
Sec. 66.41. MANAGEMENT OF UNIVERSITY LANDS. The board of
regents of The University of Texas System has the sole and
exclusive management and control of the lands set aside and
appropriated to, or acquired by, the permanent university fund.
The board may sell, lease, and otherwise manage, control, and use
the lands in any manner and at prices and under terms and
conditions the board deems best for the interest of the permanent
university fund, not in conflict with the constitution. However,
the land shall not be sold at a price less per acre than that at
which the same class of other public land may be sold under the
statutes. No grazing lease shall be made for a period of more
than 10 years.
Acts 1971, 62nd Leg., p. 3151, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.42. DUTY OF LAND COMMISSIONER. The commissioner of the
general land office shall:
(1) furnish to the board of regents complete and accurate maps
and all other data necessary to show the location and condition
of every tract of the university lands;
(2) furnish to the board any additional information it may
require; and
(3) render to the board any possible assistance it may request
in the discharge of its duties under this chapter.
Acts 1971, 62nd Leg., p. 3151, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.43. UNIVERSITY LANDS: SURVEYS; PERSONNEL. (a) The
board of regents shall cause to be done such surveying or
resurveying of the blocks and subdivisions of the university
lands as may be necessary to enable the lines of the blocks and
sections and fractional sections to be determined and identified
and have such corners as may be necessary to that end permanently
marked. When it is impracticable to establish such lines and
corners as originally surveyed, or when such sections have not
been actually surveyed on the ground, the blocks shall be
surveyed or resurveyed and divided into surveys of sections and
fractional sections, and as many corners thereof as may be
necessary for the identification shall be permanently marked. The
surveyors to do such surveying shall be employed by the board.
The field notes of such surveys shall be returned to the general
land office, and when correct and in accordance with law shall be
approved by the commissioner of the general land office, filed in
the general land office, and become archives therein.
(b) The board of regents may employ and compensate personnel the
board deems necessary in connection with performance of any
duties under this section or under Subchapter D of this chapter.
Acts 1971, 62nd Leg., p. 3151, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.44. MANAGEMENT OF MINERALS OTHER THAN OIL AND GAS. The
board of regents has the sole and exclusive management and
control of all minerals, other than oil and gas, in lands set
aside and appropriated to, or acquired by the permanent
university fund. The board may sell, lease, and otherwise manage
and control the minerals, other than oil and gas, in those lands
as may seem best to it for the interests of the permanent
university fund. The board may also explore and have explored and
developed the minerals and may make any contract or contracts
with any person, association of persons, firm, or corporation for
the exploration, development, mining, production, disposition,
and sale of the minerals in those lands.
Acts 1971, 62nd Leg., p. 3152, ch. 1024, art. 1, Sec. 1, eff.
Sept. 1, 1971.
Sec. 66.45. SOIL AND WATER CONSERVATION PLANS. Under each lease
issued under this subchapter for agricultural or grazing
purposes, the lessee shall be required to implement a soil and
water conservation plan reviewed and approved by the board of
regents of The University of Texas System under procedures
adopted by the board. The board, in reviewing a plan, and the
lessee, in implementing a plan, may be assisted by the United
States Department of Agriculture Soil Conservation Service.
Added by Acts 1985, 69th Leg., ch. 613, Sec. 7, eff. Sept. 1,
1985.
Sec. 66.46. EASEMENTS ON UNIVERSITY LAND. (a) The board of
regents of The University of Texas System may execute grants of
easements or other interests in property for rights-of-way or
access across land that belongs to the state but is dedicated to
the support and maintenance of The University of Texas System for
telephone, telegraph, electric transmission, and powerlines, for
oil pipelines, gas pipelines, sulphur pipelines, and other
electric lines and pipelines of any nature, and for irrigation
canals, laterals, and water pipelines.
(b) The board of regents may execute grants of easements for the
erection and maintenance of electric substations, pumping
stations, loading racks, and tank farms on university land, and
for any other purpose the board determines to be in the best
interest of the permanent university fund land.
(c) In addition to the purposes for which grants of easements
may be executed under Subsections (a) and (b), the board of
regents may execute grants of easements on university land for
any other purpose and on any terms it considers to be in the best
interest of the permanent university fund land.
(d) An easement under this section may not be granted for a term
that is longer than 10 years, but the easement may be renewed by
the board of regents. The rent to be charged for an easement
under this section shall be an amount agreed to by the grantee
and the board.
(e) Income received from university land under this section
shall be credited to the available university fund.
(f) Payments under this subchapter that are past due shall bear
interest at a rate equal to the rate imposed by the comptroller
under Section 111.060, Tax Code, for delinquent payments due the
state, except that if the board of regents enters into an
agreement with the grantee of the easement specifying a lower
rate, the payments bear interest at that lower rate.
(g) Each easement granted under this section shall be recorded
in the county clerk's office of the county in which the land is
located, and the recording fee shall be paid by the person who
obtains the easement. The person who obtains the easement shall
furnish to the board of regents a certified copy of the easement.
(h) No person may construct or maintain any structure or
facility on land dedicated to the support and maintenance of The
University of Texas System, nor may any person who has not
acquired a proper easement, lease, permit, or other instrument
from the board of regents and who owns or possesses a facility or
structure that is now located on or across land dedicated to the
support and maintenance of The University of Texas System
continue in possession of the land unless the person obtains from
the board an easement, lease, permit, or other instrument for the
land on which the facility or structure is to be constructed or
is located.
(i) A person who constructs, maintains, owns, or possesses a
facility or structure on university land without a proper
easement or lease is liable for a penalty of not less than $50 or
more than $1,000 a day for each day that a violation occurs. The
penalty shall be recovered on behalf of the board of regents in a
civil action by the attorney general.
(j) A person who owns, maintains, or possesses an unauthorized
facility or structure is, for purposes of this section, the
person who last owned, maintained, or possessed the facility or
structure.
(k) A person who constructs, maintains, owns, or possesses a
facility or structure on university land without the proper
easement or lease is liable to the board of regents for the costs
of removing that facility or structure.
(l) This section does not affect the authority of the board of
regents under Section 66.41.
Acts 1977, 65th Leg., p. 2438, ch. 871, art. I, Sec. 1, eff.
Sept. 1, 1977. Amended by Acts 1985, 69th Leg., ch. 624, Sec. 36,
eff. Sept. 1, 1985.
Transferred from Natural Resources Code, Section 51.293 and
amended by Acts 2007, 80th Leg., R.S., Ch.
387, Sec. 6, eff. June 15, 2007.
SUBCHAPTER D. BOARD FOR LEASE OF UNIVERSITY LANDS
Sec. 66.61. DEFINITIONS. In this subchapter:
(1) "Board" means the Board for Lease of University Lands.
(2) "Board of regents" means the board of regents of The
University of Texas System, except where otherwise specified.
(3) "Commissioner" means the commissioner of the General Land
Office.
(4) "Oil and gas" means crude oil, natural gas, and all
substances, including other hydrocarbons, produced in association
with crude oil and natural gas.
(5) "University lands" means land dedicated to the permanent
university fund.
(6) "Well" means an oil or gas well that has been assigned a
well number by the state agency having regulatory jurisdiction
over the production of oil and gas. A single wellbore may contain
more than one well.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.62. BOARD FOR LEASE OF UNIVERSITY LANDS. (a) The board
is composed of the commissioner, two members of the board of
regents selected by that board, and one member of the board of
regents of The Texas A&M University System selected by that
board. If a regent member is unable to attend a meeting of the
board, the presiding officer of the board of regents of the
applicable system may appoint another member of that board of
regents as a substitute member of the board to attend the meeting
that the regular regent member is unable to attend. The
substitute regent member shall exercise all the powers, duties,
and responsibilities of the absent regent member during the
conduct of the meeting for which he was appointed. A substitute
regent member is subject to the provisions of this subchapter.
(b) Members of the board, other than the commissioner, serve
two-year terms expiring February 1 of each odd-numbered year.
Regent members continue to serve until a successor is appointed
and qualified.
(c) The commissioner is chairman of the board.
(d) A person who is directly or indirectly employed by, or is an
officer or employee of a person or entity actively engaged in the
exploration for or production of oil and gas, other than as a
landowner or royalty owner, may not be a regent member.
(e) An officer, employee, or paid consultant of a trade
association in the oil and gas industry may not be a regent
member or employee of the board, nor may a person who cohabits
with or is the spouse of an officer, managerial employee, or paid
consultant of a trade association in the oil and gas industry be
a regent member of the board or a non-classified employee of the
board.
(f) A person who is required to register as a lobbyist under
Chapter 305, Government Code, by virtue of his activities for
compensation in or on behalf of a profession related to the
operation of the board, may not serve as a regent member of the
board or act as the general counsel to the board.
(g) The board of regents of the university system appointing a
regent member may remove the regent member from the board if that
member:
(1) does not have at the time of appointment the qualifications
required by this section for appointment to the board;
(2) does not maintain during the service on the board the
qualifications required by this section for appointment to the
board;
(3) violates a prohibition established by Subsection (d), (e),
or (f);
(4) is unable to discharge his duties for a substantial portion
of the term for which he was appointed because of illness or
disability; or
(5) is absent from more than one-half of the regularly scheduled
board meetings which the member is eligible to attend during a
calendar year, except when the absence is excused by majority
vote of the board.
(h) The board is exempt from the provisions of Chapter 2001,
Government Code.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.63. CERTAIN BOARD ACTIONS. (a) A majority of the
members of the board have the power to act for the board on a
matter before the board. Two members of the board have the power
to award leases issued on a form of lease previously approved by
a majority of the board.
(b) The validity of an action of the board is not affected
because it was taken when a ground for removal of a regent member
of the board existed. A regent member continues to serve until
removed under Section 66.62(g).
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.64. POWERS AND DUTIES OF THE BOARD. (a) The board
shall in a manner consistent with this subchapter:
(1) lease university lands for oil and gas exploration and
development on terms, at times, and in the manner it may
determine;
(2) contract for the sale or other disposition of oil and gas
royalties taken in kind;
(3) adopt rules and policies for the administration and
enforcement of this subchapter and leases issued under this
subchapter;
(4) set fees and penalties for the administration and
enforcement of this subchapter;
(5) set the terms of a contract for the development of
university lands for oil and gas;
(6) approve agreements that commit the royalty interest in
university lands on terms acceptable to the board; and
(7) exercise other powers and authority and perform other duties
as may be reasonably necessary to administer and enforce the
provisions of this subchapter.
(b) The board shall hold meetings and keep records of its
proceedings in a manner consistent with the requirements of
Chapter 551, Government Code. The board shall develop and
implement policies which provide the public with a reasonable
opportunity to appear before the board, to speak on an issue
under the board's jurisdiction, or be heard with respect to a
declaration of forfeiture. The board shall give written notice to
each lessee whose leasehold interest may be forfeited. Such
notice shall be given at least 21 days before the meeting at
which the board will consider forfeiture of the lease. The notice
shall state the time, date, and place of the meeting of the board
and include a statement of the board's policy concerning the
public's opportunity to be heard with respect to a declaration of
forfeiture. Notice shall be properly given when mailed to the
last known address of the lessee based on the records of the
board of regents or, if the records do not contain an address, to
any address that may reasonably be determined to be an address
for the lessee.
(c) Except as otherwise provided in this subchapter, the records
of the board are subject to the requirements of Chapter 552,
Government Code.
(d) The financial transactions of the board are subject to audit
by the state auditor in accordance with Chapter 321, Government
Code.
(e) The board may delegate to the staff provided to it by the
board of regents any duty except as prohibited by law.
(f) The board shall appoint a secretary.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.65. BOARD STAFF; EXCHANGE OF INFORMATION WITH STATE
AGENCIES. (a) The board of regents shall employ and compensate
personnel to assist the board in the performance of its powers
and duties under this subchapter or may assign employees of The
University of Texas System to those duties.
(b) The members of the board, personnel and counsel employed or
assigned to assist the board, the board of regents, staff of The
University of Texas System, the commissioner and staff of the
General Land Office, the board of regents and staff of The Texas
A&M University System, the office of the comptroller, the
office of the attorney general, and any other agency or official
of the state with a reasonable business interest in state or
university lands, minerals, or resources may consult with each
other and exchange information related to the administration of
leases, collection and disposition of royalties, whether in cash
or in kind, and any other matter related to the lease, sale, or
production of, or the exploration for, oil, gas, or any other
mineral or resource, including geothermal, wind, and solar energy
on state or university lands. The information so exchanged and
consultations and related communications shall be or shall remain
confidential and shall be privileged from discovery in the same
manner and to the same extent as if the persons consulted, which
includes counsel, were members of the same agency. Sections
52.134 and 52.140, Natural Resources Code, shall not prohibit the
consultations or exchange of information provided for by this
section; however, each agency receiving such confidential
information is required to keep the information confidential
under Sections 52.134 and 52.140, Natural Resources Code, as
appropriate, and to take all reasonable actions necessary to
protect the confidential and privileged nature of the
information.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.66. LEASE SALES. (a) Oil and gas leases shall be
offered at public auction or by sealed bid, or through a
combination of public auction and sealed bid, as the board
elects. Contracts for development may be awarded in the same
manner.
(b) The board shall publish notice that the board will receive
bids for oil and gas leases or contracts for development of oil
and gas in two or more daily newspapers in this state and in
other publications as the board may choose.
(c) The notice shall be published at least 30 days before the
date the bids will be opened.
(d) The notice shall state that land is to be offered for lease
or a contract for development and that a person may obtain a
publication from The University of Texas System offices that
describes the land offered and the minimum terms.
(e) The board of regents may solicit and include advertising in
the publication describing a lease sale. Fees paid for
advertising shall be deposited into the special fee account
established by Subsection (g) and are available for the same
purposes as described in that subsection.
(f) The board may withdraw any lands advertised for lease before
the hour set for receiving bids.
(g) Each bid is subject to the payment of a special fee equal to
one and one-half percent of the total bonus whether stipulated or
bid, which special payment shall constitute a special fund from
which the board of regents shall defray the expenses of the sale,
including the payment of the general operating expenses for
geology, engineering, field inspection, and auditing oil and gas
production of university lands and including salaries and
traveling expenses of persons employed by the board of regents
for those purposes.
(h) The board of regents may direct the comptroller of The
University of Texas System to transmit to the state comptroller
for deposit to the credit of the permanent university fund
unexpended balances remaining in the special fee account after
reserving a sufficient amount in it for the payment of current
expenses as set out in Subsection (g).
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.67. LEASE TERMS. (a) The oil and gas lease for each
tract shall be offered for a bonus to be determined by high bid
in addition to the stipulated royalty or for a stipulated bonus
and a royalty to be determined by high bid. Each tract shall be
offered separately and the minimum bonus or royalty, depending on
the basis for the bid, and the length of the primary term for
each tract shall be set out in the official publication
describing the tracts and terms.
(b) Except as otherwise provided by law, the minimum royalty
rate shall be one-eighth of the oil or gas produced or the value
thereof.
(c) The primary term of a lease shall not exceed 10 years.
(d) Each lease shall be subject to the provisions of this
subchapter and rules promulgated by the board.
(e) The successful bidder shall pay to the board of regents on
the day the bid is accepted the full amount of bonus, whether
stipulated or bid, and the special fee in the form of payment
specified by the board.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
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.
Sec. 66.69. AWARD OF LEASE. (a) Except as otherwise provided
in this subchapter, the board shall award a lease for each tract
to the person offering the highest bid that includes the terms
adopted by the board and consistent with this subchapter.
(b) The board may reject all bids for one or more tracts.
(c) The commissioner shall execute a lease awarded by the board
in conformance with this subchapter.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.70. ADDITIONAL LEASE PROVISIONS. An oil and gas lease
issued under this subchapter shall include the provisions
required by this subchapter and additional provisions not
inconsistent herewith that the board may adopt to preserve the
interests of the state. On submission of an application by all
lessees under the lease in the form required by the board and
payment of any applicable fee set by the board, the board may
amend a lease that does not include provisions required by
Sections 66.71, 66.72, and 66.73 to include those provisions in
the form adopted by the board at the time the lease is amended.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.71. LEASE PROVISIONS. (a) An oil and gas lease issued
by the board shall provide for payment of a delay rental. During
the primary term of the lease, the lease shall terminate on the
anniversary date of the lease unless:
(1) oil or gas is being produced in paying quantities from the
leased premises;
(2) drilling operations are being conducted on the leased
premises; or
(3) the lessee pays timely in the manner provided in the lease
the amount of delay rental stated in the lease.
(b) If oil or gas is discovered in paying quantities on any
tract covered by a lease, the lease as to that tract shall remain
in force as long as oil and gas is produced in paying quantities
from the tract, provided that the other provisions of this
subchapter are complied with by the lessee.
(c) An oil and gas lease issued by the board shall provide that
royalty may be taken in kind at any time and from time to time at
the discretion of the board in the manner provided in this
subchapter.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.72. CESSATION OF PRODUCTION; DRILLING AND REWORKING.
Each lease shall provide that in the event production of oil or
gas on the leased premises, once obtained, shall cease for any
cause within 60 days before the expiration of the primary term of
the lease or at any time or times thereafter, the lease shall not
terminate if the lessee commences additional drilling or
reworking operations within 60 days thereafter, and the lease
shall remain in full force and effect so long as such operations
continue in good faith and in workmanlike manner, without
interruptions, totalling more than 60 days during any one such
operation; and if such drilling or reworking operations result in
the production of oil and/or gas, the lease shall remain in full
force and effect so long as oil or gas is produced therefrom in
paying quantities or payment of shut-in gas well royalty or
compensatory royalties is made as provided in this subchapter.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.73. SHUT-IN ROYALTY. An oil and gas lease issued under
this subchapter shall provide for the extension of the lease by
the payment of shut-in royalties on terms as the board may adopt.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.74. LEASE EXTENSION OR SUSPENSION. (a) At the
expiration of the primary term of a lease, if production of oil
or gas has not been obtained on the leased premises, but drilling
operations are being conducted in good faith and in a good and
workmanlike manner, the lessee may apply in writing to extend the
lease for a period of 30 days. The application shall be filed
with the board of regents on or before the expiration of the
primary term.
(b) The applicant shall submit with the application a fee in an
amount set by the board of not less than $7.50 for each acre in
the lease requested to be extended.
(c) If the commissioner determines that the conditions of this
section have been met, the commissioner, or a designee appointed
by the commissioner, shall execute a written extension as
provided by this section.
(d) As long as drilling operations are being conducted in good
faith and in a good and workmanlike manner, additional extensions
of 30 days each may be granted up to an aggregate of 360 days.
The lessee must submit a written application and payment on or
before the last day of the extended primary term. The payment for
each additional 30-day extension shall be in an amount set by the
board of not less than $7.50 for each acre in the lease.
(e) The board may elect to suspend a lease and all of the
conditions and covenants contained in the lease if there is a
legitimate dispute regarding the validity of the lease. The board
may rescind the suspension at any time, in which event the lease
shall resume as of the date the suspension is rescinded and shall
continue for the remainder of the period specified in the lease
as the primary term, or, if the primary term ended prior to the
suspension, the lessee shall have 60 days to commence production
or drilling and reworking operations.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.75. PROTECTION FROM DRAINAGE; COMPENSATORY ROYALTIES.
(a) The lessee shall protect the leased premises from drainage.
The lease may contain express terms regarding drainage as the
board may adopt.
(b) Subject to the provisions of this section, the commissioner
may execute agreements that provide for the payment of
compensatory royalty in lieu of drilling offset wells that may be
required to protect the leased premises from drainage from a well
or wells located on non-university lands, or university lands
leased at a lesser royalty, situated within 1,000 feet of or
draining the leased premises.
(c) Agreements providing for the payment of compensatory royalty
must be approved by the board.
(d) Agreements providing for the payment of compensatory royalty
must be found by the commissioner and the board to be in the best
interest of the state.
(e) Nothing in an agreement for the payment of compensatory
royalty shall relieve the lessee of the obligation of reasonable
development or of the obligation to drill offset wells, obtain
suitable regulatory relief, propose appropriate pooling or
unitization arrangements, or conduct other activities to protect
the leased premises from drainage as to other producing horizons.
(f) An agreement for the payment of compensatory royalty shall
provide that compensatory royalty be paid at the royalty rate
provided in the lease and shall provide that compensatory royalty
be paid on the market value of production from the well located
on non-university lands or university lands leased at a lesser
royalty situated within 1,000 feet of or draining the leased
premises.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.76. ASSIGNMENT; RELINQUISHMENT. (a) Rights acquired in
a lease or contract for development issued under this subchapter
may be assigned; provided, however, for an assignment to be valid
and effective, the assignment must be filed in the county or
counties in which the leased premises are situated and a legible
copy of the recorded assignment must be filed with the board of
regents within the time set by the board, accompanied by a filing
fee and any applicable penalty for late filing set by the board
for each lease assigned and a summary in the form adopted by the
board of regents.
(b) Rights to a lease or to an assigned portion thereof may be
relinquished at any time by having an instrument of
relinquishment or release recorded in the county or counties in
which the area relinquished is situated and a legible copy of the
recorded instrument filed with the board of regents, accompanied
by a filing fee set by the board.
(c) An assignment or relinquishment of a lease or a portion
thereof or an interest in a lease shall not relieve the lessee of
accrued obligations, including the payment of royalty, penalty,
or interest, and the lessee shall remain liable therefor.
(d) In the enforcement of lease obligations, the board and the
board of regents shall be entitled to rely on the state of title
reflected by the records of the board of regents.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.77. ROYALTY PAYMENTS AND REPORTS. (a) Royalty as
stipulated in the lease and all other amounts due under this
subchapter shall be paid to the board of regents at Austin,
Travis County, Texas. The lessee of record in the records of the
board of regents shall be responsible for making or causing to be
made all payments required by this subchapter at the required
times and in the form and manner determined by the board of
regents or otherwise required by law.
(b) The board shall set by rule the date for making royalty
payments and for filing any reports, documents, or other records
required to be filed by this section. The date set by the board
must be on or after the fifth day of the second month succeeding
the month of production of oil and on or after the 15th day of
the second month succeeding the month of production of gas.
(c) A royalty payment is timely made if the payment is deposited
in a postpaid, properly addressed wrapper, with a post office or
official depository under the care and custody of, and postmarked
by, the United States Postal Service before the applicable due
date.
(d) The lessee shall provide to the board of regents with each
royalty payment:
(1) an affidavit of the owner, manager, or other authorized
agent completed in the form and manner required by the board of
regents and showing the gross amount and disposition of all oil
and gas produced and the market value of the oil and gas, the
number assigned by the Railroad Commission of Texas, and
university lease numbers;
(2) a purchase statement or other document showing the price at
which the oil and gas was sold;
(3) a check stub, schedule, summary, or other remittance advice
showing by the assigned lease number the amount of royalty being
paid on each lease; and
(4) other reports or records that the board of regents may
require to identify the well and lease and verify the gross
production, disposition, and market value.
(e) The board of regents may implement such practices and
procedures with regard to accounting for royalty payments as it
may determine to be in the best interest of the state.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.78. INTEREST AND PENALTIES. (a) If royalty is not paid
when due, a penalty of one percent shall be added to the unpaid
amount due. If the royalty is not paid within seven days after
the due date, a penalty of an additional four percent of the
royalty due is imposed. If the royalty is not paid within 30 days
after the due date, a penalty of an additional five percent is
imposed. The minimum penalty under this subsection is $25 or the
minimum penalty in excess thereof set by the board. The board
shall not add a penalty under this subsection in cases of title
dispute as to the state's portion of the royalty or to that
portion of the royalty in dispute as to fair market value.
(b) Interest shall accrue on delinquent royalties beginning on
the 61st day after the due date. The annual interest rate on
delinquent royalties is 12 percent. Interest accrued under this
subsection shall be in addition to any delinquency penalty due
under this section.
(c) The board of regents shall add a penalty of 25 percent to
delinquent sums due under this subchapter if the board determines
that the delinquency is due to fraud or an intent to evade the
provisions of this subchapter on the part of the lessee or the
lessee's agents, employees, or assignees.
(d) If a report, affidavit, supporting document, or other
instrument required to be filed under Section 66.77 or Section
66.80 is not filed when due, a penalty accrues in the amount set
by the board but not less than $10 per document for each 30-day
period of delinquency or fractional part thereof.
(e) Collection of penalty and interest charges under this
section are in addition to any rights, including forfeiture, that
the board or the board of regents may exercise for failure to pay
a royalty or to submit a report or other instrument when due.
(f) The board may provide by rule procedures and standards for
reduction of interest charged or penalties assessed under this
subchapter or other interest or penalties assessed relating to
unpaid or delinquent royalties or other amounts due.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.79. PAYMENT OF ROYALTY IN KIND. (a) An oil or gas
royalty due under a lease on university lands shall be paid in
kind at the discretion of the board.
(b) The option to take royalty in kind or to take cash royalties
may be exercised by the board at any time or from time to time on
not less than 60 days' notice to the lessee.
(c) The board shall enter into contracts or other instruments or
agreements to dispose of the portion of the royalty taken in
kind, which may include contracts for sale, transportation, or
storage of the oil or gas. The commissioner shall execute
contracts approved by the board under this section that are
consistent with applicable law.
(d) The board of regents may enter into insurance contracts or
other agreements to secure or guarantee payment of contracts or
other instruments or agreements to dispose of the portion of the
royalty taken in kind, including contracts for sale,
transportation, and storage.
(e) If the board has elected to take royalty in kind, the board
may elect that delivery of the correct amount of oil or gas shall
be at the wellhead, at the oil and gas separator, into a pipeline
connected at the well, or at such other location as may be
specified in a royalty in kind provision in the lease or other
agreement. Such delivery by the lessee shall satisfy the lessee's
obligation for payment of the royalty due under the lease. This
section shall not be construed to surrender or in any way affect
the right of the board of regents under existing or future leases
to receive royalty on the basis of market value of production not
taken in kind.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.80. RECORDS. (a) The lessee shall provide to the board
of regents a copy of every contract for the sale or processing of
oil or gas and any subsequent agreement and amendment thereto,
together with a summary in the form adopted by the board of
regents, within 30 days after the contract, agreement, or
amendment is made.
(b) The books and accounts, receipts, and discharges of all
wells, tanks, pools, meters, and pipelines, and all contracts and
other records pertaining to the production, transportation, sale,
and marketing of the oil and gas, shall at all times be subject
to inspection, examination, and copying by the commissioner of
the General Land Office, the attorney general, the governor, the
board of regents, or the board, or the representative of any of
them.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.81. AUDIT INFORMATION CONFIDENTIAL. (a) All documents
and information secured, derived, or obtained during the course
of an inspection or examination of books, accounts, reports, or
other records of the lessee or a third party, as provided by this
subchapter, and contracts, agreements, or amendments provided to
the board of regents under Section 66.80(a) are confidential and
may not be used publicly, opened for public inspection, or
disclosed, except for information set forth in a lien filed under
this chapter and except as permitted under Subsections (c) and
(d). This section shall not apply to records or information
provided by the lessee under Section 66.77.
(b) Documents and information made confidential in this section
shall not be subject to subpoena directed to the board, the board
of regents, the commissioner, the attorney general, or the
governor except in a judicial or administrative proceeding in
which the state and a person with an equitable or legal interest
in the lease or land to which the information relates are
parties.
(c) The board, the board of regents, or the attorney general may
use documents and information made confidential by the provisions
of this section and contracts made confidential by this
subchapter to enforce the provisions of this subchapter or may
authorize their use in judicial or administrative proceedings in
which this state is a party or may authorize their examination by
employees, agents, or contractors of the board of regents or the
state auditor for audit purposes.
(d) This section does not prohibit:
(1) the delivery of documents and information made confidential
by this section to the lessee or its successor, receiver,
executor, guarantor, administrator, assignee, or representative;
(2) the publication of statistics classified to prevent the
identification of a particular audit or items in a particular
audit;
(3) the release of documents or information otherwise available
to the public;
(4) the release of documents or information concerning the
amount of royalty assessed as a result of an examination
conducted under this subchapter or the release of other
information which would have been properly included in reports
required under Section 66.77;
(5) sharing of documents or information among state agencies
pursuant to Section 66.65. Shared documents or information will
remain confidential under this section; or
(6) the release of documents or information authorized by the
lessee.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.82. FORFEITURE; OTHER REMEDIES. (a) If a lessee fails
or refuses to perform a material requirement of this subchapter
or the lease, the board may, after notice to the lessee and an
opportunity to be heard, declare a forfeiture of the lease or an
interest in the lease. Material requirements include but are not
limited to:
(1) failure or refusal to pay a sum due, including penalty and
interest, within 30 days after the sum becomes due;
(2) failure or refusal to tender oil or gas for delivery as
in-kind royalty;
(3) making a false report concerning exploration, production, or
royalty;
(4) failure or refusal to file an assignment as required by this
subchapter;
(5) failure or refusal, after demand, to file or make available
for inspection and copying a record or document required to be
filed or made available for inspection or copying under this
subchapter or rules promulgated thereunder;
(6) failure or refusal, after demand, to protect the leased
premises from drainage; or
(7) the breach of an obligation under the lease or this
subchapter.
(b) Forfeiture is not the exclusive remedy. The attorney
general, at the request of the board of regents, may bring suit
for damages or specific performance, or both, or other remedy, at
law or in equity.
(c) The board, in its sole discretion, may authorize
reinstatement of a forfeited lease on terms the board may
determine at the time of the declaration of forfeiture.
Amended by Acts 1997, 75th Leg., ch. 1324, Sec. 1, eff. Jan. 1,
1998.
Sec. 66.83. LIEN; ABANDONED PERSONAL PROPERTY. (a) The board
of regents shall have a statutory first lien on oil and gas
produced from the area covered by the lease to secure payment of
all unpaid royalty and other sums of money that may become due
under the lease or this subchapter.
(b) By acceptance of the lease, the lessee grants to the board
of regents an express contractual lien on and security interest
in all oil and gas in and extracted from the area covered by the
lease, all proceeds which may accrue to the lessee from the sale
of the oil and gas, whether the proceeds are held by the lessee
or another person, and all fixtures on and improvements to the
area covered by the lease used in connection with the production
or processing of the oil and gas to secure the payment of
royalties and other amounts due or to become due under the lease
or this subchapter and to secure payment of damages or loss that
the state may suffer by reason of the lessee's breach of a
covenant or condition of the lease, whether express or implied.
(c) The statutory and contractual liens and security interest
described in this section may be foreclosed with or without court
proceedings in the manner provided under Chapter 9, Business
& Commerce Code. The board of regents may require the lessee
to execute and record instruments reasonably necessary to
acknowledge, attach, or perfect the liens.
(d) Personal property, including casing, equipment, and fixtures
remaining on lands covered by the lease more than o