HB4292 S EIM AM #1 2-12

Lazell  7879

The Committee on Energy, Industry, and Mining moved to amend the bill by striking out everything after the enacting clause and inserting in lieu thereof the following:

ARTICLE 4. COVENANTS.

§36-4-9c. Damages and Penalties for nonpayment of royalties from conventional vertical wells, Applicability, Retention of Proceeds, Written Demand, Civil Action.

(a) Applicability. – This section applies only to conventional vertical oil, natural gas, or natural gas liquids wells permitted under §22-6-1 et seq. of this code.

(b) Producers may temporarily retain proceeds. - Unless otherwise expressly provided for in writing, proceeds due from production of oil, natural gas, and natural gas liquids may be accumulated by lessees, operators, producers, or their successors or assigns, until such time as the proceeds attributable to a lessor or landowner, or their successors or assigns, exceeds $100 before making a remittance: Provided, That regardless of the amount of money accumulated, the lessee, operator, producer, or their successors or assigns, shall remit the proceeds attributable to each lessor or landowner, or their successors or assigns, not less than once annually: Provided, however, That all accumulated proceeds shall be due and paid to the lessor or landowner, or their successors or assigns, within 60 days of receipt of proceeds from production upon the cessation of production of oil, natural gas, or natural gas liquids or relinquishment, or transfer of payment responsibility to another party.

(c) Written demand and subsequent civil action. - A lessor or landowner, or their successors or assigns, who does not receive royalty payments due under the terms of a lease or under the terms of this section in a timely manner may send a written request for the royalty payments by certified mail, return receipt requested, to the operator or producer from whom payment is due, or their successors or assigns. If the interest owner makes such written request for royalty payments under the terms of a lease or the terms of this section and the lessee, operator, producer, or their successors or assigns, does not provide the delinquent royalty payments within 60 days after receipt of the written request, the lessor or landowner, or their successors or assigns, may bring a civil action against the lessee, operator, producer or their successors or assigns, to enforce the terms of the lease or the terms of this section, whichever may apply. The prevailing party in such civil action shall be entitled to recover reasonable attorneys’ fees and court costs incurred in addition to and not withstanding any other rights, remedies, and penalties otherwise provided by law.

(d) Damages for failure to pay royalties timely. - Unless otherwise expressly provided for in writing, or unless such failure to remit is due to lack of record title in the interest owner, a legal dispute concerning the interest or amount of payment due, a missing or unlocatable owner of the interest, or other just cause; any lessee, operator, producer or their successors or assigns, who is responsible for payment but fails to pay a royalty payment that is due for production of oil, natural gas, or natural gas liquids, to a landowner or lessor, or their successors and assigns, in a timely manner, shall pay in addition to all delinquent royalties a mandatory additional payment of an interest penalty to be set at the prime rate plus an additional two percent to be compounded quarterly beginning on the date payment was due under the terms of the lease or the terms of this section and shall continue to compound until such time payment is made in full of all delinquent amounts and the interest penalties thereon. The prime rate shall be the rate published on the day of the end of the month of the last sale of oil, natural gas, and natural gas liquids in the Wall Street Journal reflecting the base rate on corporate loans posted by at least 75 percent of the nation’s 30 largest banks: Provided, That if the total delinquent royalty payment amounts and the penalty interest accrued thereon total less than $500, the responsible operator or producer or their successors or assigns, shall pay as damages a mandatory additional payment to each lessor or landowner or their successors or assigns to whom payment is delinquent a sum of $500 each in lieu of the amount otherwise due.

(e) Default due dates for royalty payments. - Unless otherwise expressly provided for in writing or otherwise determined within this section, royalty payments due for the production of oil, natural gas, and natural gas liquids shall be due 120 days from the first date of sale of oil, natural gas, or natural gas liquids and within 60 days of receipt of payment thereafter for additional sales thereafter.

Adopted

Rejected