TO AMEND THE LAW REGARDING OIL AND GAS PRODUCTION AND CONSERVATION.

2025 Regular Session Introduced by Rick Beck and 1 co-sponsor

Act 1024 ensures mineral owners receive at least 1/8 of net gas sales, clarifying royalties and requiring operators to reimburse unauthorized deductions within 30 days.

Notification that HB1656 is now Act 1024

Overview

House Bill 1656, now known as Act 1024, was introduced in the Arkansas General Assembly on March 4, 2025. The primary purpose of this legislation is to amend existing laws regarding oil and gas production and conservation, specifically focusing on the allocation of production and costs following integration orders.

Key Provisions

The bill introduces several important changes to the Arkansas Code, particularly in Title 15, Chapter 72:

Definition of "Net Proceeds"

The bill clarifies the definition of "net proceeds" in relation to oil and gas production.

Net proceeds are defined as:

For integrated interests not covered by an executed lease: Gross proceeds from the sale of gas minus applicable taxes, assessments, and specific costs.
For interests covered by an executed lease: Gross proceeds minus taxes, assessments, and deductions allowed by the lease.

Obligations of Operators and Working Interest Owners

Operators and working interest owners are required to ensure that mineral owners receive their entitled royalties.

The minimum royalty payable to royalty owners is set at one-eighth (1/8) of the net proceeds from gas sales.

Mineral owners have the right to negotiate higher royalties through contracts.

Payment and Reimbursement

If deductions or expenses not permitted by the lease terms are taken, operators must reimburse the royalty owners within 30 days of the deduction.

Applicability

The provisions of this bill do not apply to units or wells producing only liquid hydrocarbons or gas associated with liquid hydrocarbons.

The bill specifically targets unconventional sources of supply drilling as defined by the Oil and Gas Commission.

Impact

This legislation primarily affects:
- Mineral Owners: They will have clearer rights regarding royalties and the definition of net proceeds, ensuring better financial transparency and accountability from operators.
- Operators and Working Interest Owners: They will face stricter obligations regarding royalty payments and must adhere to the defined terms of leases.
- Regulatory Bodies: The Oil and Gas Commission will have clearer guidelines to enforce regarding unconventional drilling practices.

Legislative Timeline

March 4, 2025: Bill introduced.

April 1, 2025: Amendments were adopted, refining the language and provisions of the bill.

April 10, 2025: The bill passed through the Senate and was returned to the House.

April 16, 2025: The bill was correctly enrolled and transmitted to the Governor's Office.

April 22, 2025: Notification that HB 1656 is now Act 1024.

This summary provides a concise overview of House Bill 1656, highlighting its purpose, key provisions, and the potential impact on stakeholders within Arkansas's oil and gas industry.

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