SENATE BILL 256

47th legislature - STATE OF NEW MEXICO - first session, 2005

INTRODUCED BY

Timothy Z. Jennings

AN ACT

RELATING TO OIL AND GAS; DEFINING THE TERM "DIVISION ORDER"; AMENDING SECTIONS OF THE OIL AND GAS PROCEEDS PAYMENTS ACT.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     Section 1. Section 70-10-1 NMSA 1978 (being Laws 1985, Chapter 55, Section 1) is amended to read:

     "70-10-1. SHORT TITLE.--[This act] Chapter 70, Article 10 NMSA 1978 may be cited as the "Oil and Gas Proceeds Payment Act"."

     Section 2. Section 70-10-2 NMSA 1978 (being Laws 1985, Chapter 55, Section 2, as amended) is amended to read:

     "70-10-2. DEFINITIONS.--As used in the Oil and Gas Proceeds Payment Act:

          A. "division order" means an instrument for the purpose of directing the distribution of proceeds from the sale of oil, gas, casinghead gas or other related hydrocarbons that warrants in writing the division of interest and the name, address and tax identification number of each interest owner with a provision requiring notice of change of ownership;

          [A.] B. "oil and gas" means crude oil, natural gas, casinghead gas, condensate or any other related hydrocarbons;

          [B.] C. "oil and gas proceeds" means all payments derived from oil and gas production from any well located in New Mexico, whether royalty interest, overriding royalty interest, production payment interest or working interest, expressed as a right to a specified interest in the cash proceeds received from the sale of oil and gas produced thereunder or the cash value thereof, subject to all taxes withheld therefrom pursuant to law, but excluding "net profits interests", and other types of interest the extent of which cannot be determined with reference to a specified share of such proceeds; and

          [C.] D. "payor" means the party who undertakes to distribute oil and gas proceeds to the parties entitled thereto, including, but not limited to, the first purchaser of such production or as operator of the well from which such production was obtained or as lessee under the lease on which royalty is due."

     Section 3. A new section of the Oil and Gas Proceeds Payment Act is enacted to read:

     "[NEW MATERIAL] DIVISION ORDER--FORM.--A division order is executed to enable the first purchaser of the production or holder of proceeds to make remittance of proceeds directly to the owners legally entitled thereto and does not relieve the lessee of any liabilities or obligations under the oil and gas lease. A reasonable division order shall be in substantially the following form:

"DIVISION ORDER

To:                                   Date:

Property Number:                      Effective Date:

Property Name:

Operator:

County and State:

Property Description: 

Production: Oil Gas Other:

Owner Name                            OWNER NUMBER:

and Address: 

                                      Type of Interest:

                                      Decimal Interest:

The undersigned certifies the ownership of their decimal interest in production or proceeds as described above payable by (Payor).

   (Company Name)

Payor shall be notified, in writing, of any change in ownership, decimal interest or payment address. All such changes shall be effective the first day of the month following receipt of such notice.

Payor is authorized to withhold payment pending resolution of a title dispute or adverse claim asserted regarding the interest in production claimed herein by the undersigned. The undersigned agrees to indemnify and reimburse Payor any amount attributable to an interest to which the undersigned is not entitled.

Payor may accrue proceeds until the total amount equals , or pay , whichever occurs first, or as required by applicable state statute.

This Division Order does not amend any lease or operating agreement between the undersigned and the leasee or operator or any other contracts for the purchase of oil or gas.

In addition to the terms and conditions of this Division Order, the undersigned and Payor may have certain statutory rights under the laws of the state in which the property is located.

Special Clauses:

Owner(s) Signature(s):    

Owner(s) Tax I.D. Number(s):

Owner Daytime Telephone #:

Owner Fax Telephone #:     

Federal law requires you to furnish your Social Security or Taxpayer Identification Number. Failure to comply will result in a 28% tax withholding and will not be refundable by Payor."."

     Section 4. EFFECTIVE DATE.--The effective date of the provisions of this act is January 1, 2006.

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