Tex.
Ins. Code Section 425.230
Authorized Investments: Oil, Gas, and Minerals
(a)
In this section and Section 425.231 (Authorized Investments: Real Property Acquired Under Certain Circumstances):(1)
“Producing” means producing oil, gas, or other minerals in paying quantities. A well that has been shut in is considered to be producing oil, gas, or other minerals in paying quantities if shut-in royalties are being paid.(2)
“Production payment” means a right to oil, gas, or other minerals in place or as produced that entitles the owner of the right to a specified fraction of production until the owner receives a specified amount of money, or a specified number of units of oil, gas, or other minerals.(3)
“Royalty” or “overriding royalty” means a right to oil, gas, and other minerals in place or as produced that entitles the owner of the right to a specified fraction of production without limitation to a specified amount of money or a specified number of units of oil, gas, or other minerals.(b)
Subject to this section, in addition to and without limitation on the purposes for which real property may be acquired, secured, held, or retained under Section 425.229 (Authorized Investments: Real Estate for Insurer’s Offices) or 425.231 (Authorized Investments: Real Property Acquired Under Certain Circumstances), an insurer may secure, hold, retain, and convey production payments, producing royalties, and producing overriding royalties as an investment for the production of income.(c)
The aggregate amount of an insurer’s investments under this section, plus the aggregate amount of the insurer’s investments in home office and branch office properties under Section 425.229 (Authorized Investments: Real Estate for Insurer’s Offices), may not exceed the total amount permitted by and is subject to all of the limitations imposed by Sections 425.229 (Authorized Investments: Real Estate for Insurer’s Offices)(e) and (f). For purposes of this subsection, an investment in production payments, producing royalties, or producing overriding royalties is considered to be an investment in property described by Section 425.229 (Authorized Investments: Real Estate for Insurer’s Offices).(d)
For the purposes of Section 425.229 (Authorized Investments: Real Estate for Insurer’s Offices)(f), the commissioner may establish a value of a production payment, producing royalty, or producing overriding royalty as the maximum amount that the insurer purchasing the production payment, producing royalty, or producing overriding royalty could loan against a first lien on the production payment, producing royalty, or producing overriding royalty under Sections 425.214 (Authorized Investments for All Funds: Loans Secured by Real Property)(f)-(h).(e)
An insurer may not make an investment in production payments, producing royalties, or producing overriding royalties solely for the production of income if, after making the investment, the insurer’s total investment at cost in the production payments, producing royalties, or producing overriding royalties would exceed 10 percent of the insurer’s admitted assets as of December 31 preceding the date of the investment.(f)
If production in paying quantities from a royalty interest or overriding royalty interest held by an insurer ends, the insurer shall sell and dispose of the royalty or overriding royalty not later than the second anniversary of the date the production ends, unless:(1)
production in paying quantities has resumed; or(2)
the insurer obtains from the commissioner a certificate stating that the insurer’s interests will suffer materially by the forced sale of the interest.(g)
The commissioner shall state in a certificate under Subsection (f)(2) the amount of time by which the period for sale is extended under that subsection.
Source:
Section 425.230 — Authorized Investments: Oil, Gas, and Minerals, https://statutes.capitol.texas.gov/Docs/IN/htm/IN.425.htm#425.230 (accessed Jun. 5, 2024).
