Bulletin: TX2015002

Date:
June 24, 2015
To:
All Texas Issuing Offices
RE:
UNDERWRITING - HB 40 by Darby relating to exclusive jurisdiction of the state to regulate oil and gas operations and express preemption of local regulations of these operations effective May 18, 2015

Dear Associates:

The legislature has passed and the governor has signed the referenced bill. The bill was passed and signed to counteract local cities passing ordinance that restricted or prohibited hydraulic fracturing (fracking) in their city limits. The bill, section 81.0523 Natural Resources Code, expressly reserves to the state all “oil and gas operations”, defined as an activity “associated with the exploration, development, production, processing and transportation of oil and gas, including, drilling, hydraulic fracture stimulation” and other drilling related activities.

The law allows a city or other political subdivision to regulate only aboveground activities related to an oil and gas operation that occur at or above the surface of the ground, including a regulation governing fire and emergency response, traffic, lights, noises or imposing notice or reasonable setback requirements. Existing regulations of this type that have been in effect for at least 5 years and have allowed oil and gas activities to continue are considered to be commercially reasonable and remain in effect. You will notice that aboveground activities cities may regulate include the normal activities of zoning and other regulations.

What this means for title insurance:

  • Existing non-drilling ordinances that have been in effect since before 5-18-2010 and allow oil and gas activities may still be relied upon to provide T-19 series endorsements without deletion of item 4d.
  • Private restrictive covenants are not affected by the law.
  • Surface waivers (that is, an agreement by the owner(s) of the mineral estate to waive the use of the surface for oil and gas activities) are not affected and may still be relied on.

If you are presented with a non-drilling ordinance with an effective date of 5-19-2010 or later, we will require an opinion of counsel that the ordinance is commercially reasonable and is a proper exercise of the city’s police power governing fire and emergency response, traffic, lights or noise, and imposes reasonable notice requirements and reasonable set back requirements. The opinion along with the qualifications of the attorney author must be presented to a Texas underwriter for approval.  

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None