Presenter: Jack Bauer

Commission Agenda Item No. 9
Action
Nomination for Oil and Gas Lease
Salt Bayou Unit, J.D. Murphree WMA
Jefferson County
May 2002

I. Discussion: Minerals owned by or held in trust for Texas Parks and Wildlife (TPWD) may be leased by the Board for Lease for Parks and Wildlife Lands under Natural Resources Code § 34.051 for the purpose of prospecting or exploring for and mining, producing, storing, caring for, transporting, preserving, selling, and disposing of the oil, gas, or other minerals. State lands are typically offered for lease sale at scheduled intervals. The Board for Lease has traditionally respected recommendations of the Texas Parks and Wildlife Commission (Commission) relative to leasing minerals owned by TPWD. The Board for Lease has received a nomination at the Salt Bayou Unit of the J. D. Murphree WMA for a lease sale offering. The purpose of this Commission Item is to alert the Commission to this nomination and seek recommendations for the Board for Lease.

Lands being nominated for lease include (estimated 4,707-acres total, 2,354 lease acres):

TPWD owns 50% of the minerals associated with these lands. The Commission’s policy requiring a minimum cash bonus bid of $150.00 per acre and a fixed royalty of 25%, with a $10.00 per acre delay rental for a 3-year lease will apply. It is recommended the lease be subject to the conditions shown in Exhibit B.

II. Rcommendation: The staff recommends the Texas Parks and Wildlife Commission adopt the following motion:

"The Executive Director is authorized to nominate for oil and gas lease to the Board for Lease for Parks and Wildlife Lands, eleven tracts, with minimum acceptable bid terms of $150 per acre bonus, 25 percent royalty, $10 per acre delay rental, and a 3-year term, incorporating the restrictions set out in Exhibit A."

Attachments – 2

1. Exhibit A – Conditions
2. Exhibit B – Fiscal Note (available upon request)


Commission Agenda Item No. 9
Exhibit A

Lease Conditions

The lease shall contain the following provisions:

Any provision herein to the contrary notwithstanding, it is agreed and understood that no entry shall be permitted on the surface of the leased land. Any development of the land hereby leased shall be by means of directional wells located off the land hereby leased, or by pooling the leased land with other land, or other lease or leases, as provided by Subchapter E, Chapter 52, Natural Resource Code. Any seismic exploration activity must be governed by a Surface Use Agreement to be entered into between Lessee and Texas Parks and Wildlife Department, as outlined in the following paragraph.

To drill a directional well or wells from land owned by the Texas Parks and Wildlife Department but not leased hereby, or to engage in seismic exploration activity, Lessee must enter into a Surface Use Agreement with the Texas Parks and Wildlife Department, and such Surface Use Agreement will incorporate the highest standards for environmental protection, require spill/containment contingency plans, insure to the satisfaction of the Texas Parks and Wildlife Department that all wetland impacts will be fully mitigated and integrity of hydrology of the area will be maintained during and after cessation of drilling and mineral extraction operations, encourage development of multiple wells at existing well pads, existing common access roads, and limit surface locations to avoid sensitive resources. Lessee will be required to follow Mineral Recovery Guidelines in effect with the Texas Parks and Wildlife Department. Lessee may be required to provide an environmental impact assessment at Lessee’s expense

If, to recover minerals leased hereby, Lessee drills a directional well or wells from land not owned by Texas Parks and Wildlife Department, Lessee must first prepare a plan of operation, to be approved by Texas Parks and Wildlife Department, to prevent wetland impacts on Texas Parks and Wildlife lands or to insure that all wetland impacts on such lands will be fully mitigated and the integrity of hydrology of the area will be maintained during and after cessation of drilling and extraction operations. Approval of such plan of operation shall not be unreasonably withheld.


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