Sec. 52.173. OFFSET WELLS

(a) If oil and/or gas should be produced in commercial quantities within 1,000 feet of land subject to this subchapter, or in any case where land subject to this subchapter is being drained by production of oil or gas the owner, lessee, sublessee, receiver, or other agent in control of land subject to this subchapter shall in good faith begin the drilling of a well or wells upon such state land within 100 days after the draining well or wells or the well or wells completed within 1,000 feet of the state land commence to produce in commercial quantities, and shall prosecute such drilling with diligence to reasonably develop the state land and to protect such state land against drainage.

(b) An offset well shall be drilled to a depth and the means shall be employed which may be necessary to prevent undue drainage of oil or gas from beneath the state land.

(c) Within 30 days after an offset well has been completed or abandoned, a log of each well shall be filed in the land office.

(d) At the determination of the commissioner and with his written approval, the payment of a compensatory royalty shall satisfy the obligation to drill an offset well or wells. Such compensatory royalty shall be paid at a royalty rate established by the commissioner if the land is unleased, or at the royalty rate provided by the state lease, if the land is leased. Such compensatory royalty shall be paid on the market value at the well of production from the draining well or the well located within 1,000 feet of the state land.

Acts 1977, 65th Leg., p. 2458, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977. Amended by Acts 1987, 70th Leg., ch. 948, Sec. 30, eff. Sept. 1, 1987.