StrickenARKANSAS languageSENATE would95th beGeneralAssembly deleted- fromRegular andSession, underlined2025 languageAmendment wouldForm be______________________________________________________________________ addedSubtitle toof presentHouse law.Bill 1656 TOAMEND THE LAW REGARDING OILAND GAS PRODUCTION AND CONSERVATION.

Act______________________________________________________________________ 1024Amendment ofNo. the Regular Session State of Arkansas As Engrossed:

S3/19/252 S4/1/25to 95thHouse General Assembly A Bill Regular1656 Session,Amend 2025House HOUSEBill BILL 1656 5as By:engrossed S3/19/25 (version:

Representative3/19/25 Beck09:36:08AM): By:

Page 1, line 12, delete "TO" AND Page 1, delete lines 13 and 14, and substitute the following:

"TO ADDRESS" AND Page 2, delete lines 18 through 23 AND Page 2, line 24, delete "(e)(1)" and substitute "(d)(1)" AND Page 3, line 5, delete "(f)" and substitute "(e)" AND Page 3, delete lines 9 through 11 *.CRH319* CRH319 - 03-31-2025 02:31:47 Page 1 of 2 The Amendment was read the first time, rules suspended and read the second time and _______________________ By:

Davis 8CRH/CRH For- An03-31-2025 Act02:31:47 To_________________________ BeCRH319 EntitledSecretary ANCRH319 ACT- TO03-31-2025 AMEND02:31:47 THEAmendment LAWNo. REGARDING OIL AND GAS PRODUCTION AND CONSERVATION;

TO2 CLARIFYto THEHouse ALLOCATIONBill OF1656 PRODUCTIONPage AND2 COSTof FOLLOWING2 INTEGRATION ORDER BY DEFINING "NET PROCEEDS";

TO ADDRESS OBLIGATIONS OF OPERATORS AND WORKING INTEREST OWNERS TO MINERAL OWNERS;

AND FOR OTHER PURPOSES.

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

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS:

SECTION 1.

Arkansas Code § 15-72-305, concerning the allocation of production and cost following integration order, is amended to add additional subsections to read as follows:

(c) As used in this section, "net proceeds" means the same as defined in § 15-72-325.

SECTION 2.

Arkansas Code Title 15, Chapter 72, Subchapter 3, is amended to add an additional section to read as follows:

15-72-325.

Obligation of operators and working interest owners to mineral owners — Definition.

(a) As used in this section, "net proceeds" means:

(1) If a mineral interest within a drilling unit is an integrated interest not covered by an executed lease, the gross proceeds from the sale of gas, including royalty gas, minus applicable taxes, assessments, *CRH145* 04-01-2025 11:41:49 CRH145 As Engrossed:

S3/19/25 S4/1/25 HB1656 and true third-party costs or costs specifically allowed by the form lease adopted by the Oil and Gas Commission;

and (2) If a mineral interest within a drilling unit is covered by an executed lease, the gross proceeds from the sale of gas, including royalty gas, minus applicable tax, assessments, and charges or deductions specifically allowed by the terms of the lease.

(b)(1) Ownership of minerals, including the proceeds paid as royalty from the sale of the production of the mineral estate, is a property right.

(2) Subject to subsection (c) of this section, a mineral owner shall have the right to contract pertaining to their owned mineral interest.

(c)(1) The minimum royalty payable to royalty owners from the production of gas shall be one-eighth (1/8) of the net proceeds from the sale of the gas.

(2) A mineral owner may negotiate a higher royalty with a lessee by contract.

(d)(1) If a mineral interest within a drilling unit is covered by an executed lease, then the working interest owner or owners of the respective lease is or are responsible for ensuring the full amount of royalties are paid to a royalty owner in compliance with the terms of the lease regardless of whether the payments are made by the operator or, if applicable the nonoperating working interest owner or owners that is or are a party to the lease.

(2) If deductions or expenses are taken by the operator or the nonoperating working interest owner or owners that is or are a party to the lease that are not in accordance with the lease terms, including deductions and expenses pertaining to royalty gas, then the deductions or expenses not specifically allowed by the applicable lease shall be reimbursed to the royalty owner within thirty (30) days of the deduction being taken from the royalty payment of the royalty owner.

(3) This section and § 15-72-305 shall not excuse or relieve the obligation of a working interest owner as it pertains to the contractual lease obligations with the royalty owner.

(e) This section is not applicable to any producing unit or well that produces liquid hydrocarbons only, liquid hydrocarbons associated with the production of gas, or gas produced associated with the production of liquid hydrocarbons.

04-01-2025 11:41:49 CRH145 As Engrossed:

S3/19/25 S4/1/25 HB1656 2 /s/Beck 4 APPROVED:

4/22/25 7 9 3 04-01-2025 11:41:49 CRH145