2015 LEGISLATIVE UPDATE

Texas Land Title Institute 2015

December 4, 2015

Prepared by:

Michael C. Savas Vice President/Senior Texas Counsel

First American Title Insurance Company 1500 South Dairy Ashford, Suite 300

Houston TX 77077 msavas@firstam.com

281-588-2200 Ext. 2584

 

Michael C. Savas Vice President, Senior Texas Counsel

First American Title Insurance Company 1500 S. Dairy Ashford, Ste. 300

Houston, Texas 77077 Toll-free: 800-FIRSTAM (800-347-7826)

Email: msavas@firstam.com

EDUCATION, LICENSING & EXPERIENCE Colgate University, B.A., 1988; Double Major in Economics and English

The University of Texas at Austin, J.D., 1991.

Licensed to practice law in Texas and Arkansas

21 Years in the title industry, past roles include underwriting, examination, commercial closing, and residential closing. TEXAS LAND TITLE ASSOCIATION INVOLVEMENT Past Director, TLTA Board of Directors Trustee, TLTA PAC Board of Trustees Chair, TLTA Legislative Committee Member, TLTA Regulatory Committee PUBLICATIONS FOR TEXAS SEMINARS & COURSES Texas Probate, 1998 The Fast Paced World of Intestacy!, 2005 Home Equity Loans and Reverse Mortgages, 2006. Texas Tax Sales, 2007 Texas Foreclosures, 2007 Foreclosures, 2008 Hot Button Foreclosure Issues, 2008 Unusual Sales, 2009 Home Equity Loans and Reverse Mortgages, 2010 Reverse Mortgages-Everything You Want to Know, 2011 Foreclosures in 2011 Minerals and Title Insurance in 2012. T-19 Series Endorsements, 2012 Specific Insuring Concerns-Do We Insure that? 2012 Reviewing Surveys and Easements. 2013 Surveys and T-19 Endorsements, 2013 Marital Rights Panel Discussion, 2013 Minerals and Title Insurance in 2014 Probate and Intestate Administration, 2014 & 2015 Decedent’s Estates, With a Focus on Intestacy, 2015 Curing Defects Outside the Title Policy, 2015

2015 Texas Land Title Institute – Legislative Update

TABLE OF CONTENTS

2015 LEGISLATIVE UPDATE

I. BILLS RELATING TO THE TITLE INDUSTRY…………………………………………1 II. PROBATES, ESTATES, AND POWERS OF ATTORNEY BILLS .................................. 2 III. FORECLOSURE BILLS ....................................................................................................... 3 IV. MINERAL INTEREST BILLS ............................................................................................. 4 V. REAL PROPERTY TRANSACTION BILLS ...................................................................... 4 VI. LOCAL AND COUNTY GOVERNMENT BILLS ............................................................ 5 VII. TAX BILLS .......................................................................................................................... 5 VIII. MISCELLANEOUS BILLS ............................................................................................... 6 IX. BILLS "OFF THE BEATEN TRACK"...............................................................................6 X. BILLS THAT DID NOT PASS………………….…………………………………………...7

2015 Texas Land Title Institute – Legislative Update Page 1

This Summary provides information regarding the most recent Texas legislative session and serves as a synopsis of the many bills affecting our industry. Many of the bills passed may relate somehow to title insurance or real estate law. This summary focuses only on those bills which may have some bearing on title insurance transactions. For further information, all bills can be accessed at http://www.capitol.state.tx.us/.

I. BILLS RELATING TO THE TITLE INDUSTRY

Correction Instrument Bill (SB 584):

This bill provides clarity and guidance to county clerks regarding the proper way to index correction instruments. That is, a correction instrument is an instrument between a grantor and grantee, even if it is signed by a third party, and the bill amends the Local Government Code Section 193.003 to make it clear that an instrument must be indexed to the grantors and grantees of the document, not by the person executing the instrument.

Maximum Policy Liability and Reinsurance (SB 572):

Amends the calculation for single risk policy limits from Capital Stock and Surplus to surplus as regards policyholders and the company’s statutory premium reserves. Also amends and clarifies methods and mechanisms when an underwriter engages in reinsurance.

Escrow Officer Licensing Bill (HB 2491):

Amends a portion of the Title Insurance Section of the Insurance Code to provide for freestanding licensing of escrow officers. The bill provides that that instead of licensing escrow officers through a title agent, that each individual escrow officer shall retain a license and be “appointed” by the title agency that employs the escrow officer. The employer Title Agency shall still pay for a bond for the escrow officer. While this bill is effective September 1, 2015, the changes in the law apply only to the issuance of renewal of the license of an escrow officer on or after January 1, 2016. The Texas Department of Insurance under Commissioner’s Bulletin #B-0022-15 has stated the following:

“To reduce disruption to the industry and potential delays in the escrow officer license issuance and renewals, TDI will not enforce the provisions of HB 2491 until changes have been made to the Texas Title Insurance Manual (Title Manual) by rule. TDI expects this process will be completed during the summer of 2016. This time frame will allow TDI to more fully layout and discuss the changes and new processes with the industry while maintaining current levels of service. Until the changes are adopted by rule, the processes contained in the current version of the Title Manual will continue to be used”.

2015 Texas Land Title Institute – Legislative Update Page 2

Notary Public Identification Number (HB 1683)

Provides for an identification number for all notary publics approved by the state, and requires all notary public stamps to include such identifying number. The requirement that the Secretary of State issue ID numbers only applies to notary publics who apply for a commission or reappointment on or after 1/1/16, per Section 4 of the bill. However, Section 3 of the bill appears to require a number as of 1/1/16.

II. PROBATES, ESTATES, AND POWERS OF ATTORNEY BILLS

Transfer on Death Deeds (SB 462):

This bill provides for a new Chapter 114 of the Texas Estates Code entitled “Transfer on Death Deed”. It allows a transferor to convey property to a transferee, with the provision that the deed is only effective upon the death of the transferor. Elements of the new law include:

1) A Transfer on Death Deed (“TODD”) is revocable.

2) A TODD may not be created through a Power of Attorney

3) A TODD must be recorded before the transferor’s death

4) A will may not revoke or supersede a TODD

5) A divorce will revoke a TODD to an ex-spouse, upon recordation of the decree

6) A subsequent deed by a transferor, recorded before the transferor’s death will void a previously recorded TODD

7) The recording of a TODD is deemed to be the date of death of the transferor

8) Optional Form for TODD is included in new law

9) Optional Form for Revocation of TODD is included in new law

10) Transferee may disclaim grant under TODD

Recordation of a Durable Power of Attorney (HB 3316)

Section 751.151 of the Texas Estates Code requires recordation of a durable power of attorney relating to a real estate transaction. This bill creates a deadline of 30 days from the date the instrument is filed for recording.

2015 Texas Land Title Institute – Legislative Update Page 3

Promulgation of Certain Probate Forms (SB 512):

This bill gives the power to the Texas Supreme Court to promulgate forms for Small Estate Affidavits, probates of will as muniments of title, and simple Will forms to be used by individuals representing themselves.

Business Organizations (SB 859)

Creates additional sections 101.055 and 154.204 of the Business Organizations Code relating to Powers of Attorney as they relate to Limited Liability Companies and Partnerships.

III. FORECLOSURE BILLS

Instruments concerning Foreclosure (HB 2063)

This bill amends Texas Property Code Section 12.0012to establish that certain documents relating to the foreclosure of property be recorded. The bill further provides for clarity regarding the affective date of appointment of a substitute trustee in certain instances.

Rescission of Acceleration (HB 2067)

This bill provides that when a debt has been accelerated in contemplation with a foreclosure but then the debt is reinstated, a mechanism is in place to rescind the acceleration

Rescission of Foreclosure Sale (HB 2066)

Provides for certain circumstances where a foreclosure may be rescinded and establishes requirement for a person attempting to rescind including:

1) Rescission must occur within 15 days of the foreclosure sale

2) Notice must be served by certified mail to purchaser at foreclosure sale and all debtors within 15 days of the foreclosure sale

3) notice must be recorded in the real property records within 15 days of the foreclosure sale

4) Purchasers must be have amounts paid returned within 5 days of the rescission, and affidavit to this effect must be filed.

2015 Texas Land Title Institute – Legislative Update Page 4

IV. MINERAL INTEREST BILLS

Sale of Property Subject to Oil or Gas Lease (HB 2207)

An Oil, Gas or Mineral lease is not cut off by a foreclosure sale if the lease was recorded prior to the foreclosure sale, even if the lease was subordinate to the foreclosed lien; however, surface rights are terminated and extinguished if the lease was subordinate to the foreclosed lien. The former debtor’s interest in such a lease passes to the buyer at foreclosure. This new law does not apply to a security instrument that does not attach to a mineral interest in hydrocarbons in the mortgaged real property.

Jurisdiction of the regulation of Oil and Gas Operations (HB 40)

This bill adds section 81.0523 to the Natural Resource Code which argues that regulation of oil and gas operations are within the jurisdiction of the state, and that municipalities may not so regulate except as to:

1) activity at or above the surface of the ground,

2) commercially reasonable regulation,

3) regulation that does not prohibit oil and gas prosecution conducted by a “reasonably prudent operator”.

Note that any municipal regulation in effect for 5 years or more is presumed valid under this law.

V. REAL PROPERTY TRANSACTION BILLS

Contracts for Sale (HB 311)

Amends portions of Chapter 5 of the Texas Property Code to encourage recordation of contracts for deed and establish damages for sellers who do not record. Further, if the contract for deed is recorded, then the remedy of rescission of foreclosure under Section 5.064 is unavailable and foreclosure of a contract for deed must comply with Section 5.066. The bill also provides some language indicating that a recorded contract for deed may be treated as a vendor’s lien with implied warranty.

Deceptive Trade Practice-Real Estate (HB 2590)

Fraud in real estate transaction actions may now be brought by city attorneys.

2015 Texas Land Title Institute – Legislative Update Page 5

VI. LOCAL AND COUNTY GOVERNMENT BILLS

Photo ID Required for Recording in Harris County (HB 1681)

A person presenting in person a document to be recorded may be required to produce Valid Photo ID.

Courthouse Construction Funding- Hidalgo and Cameron Counties (SB 1964)

This bill provides filling fees for suits filed in these counties for the purpose of construction and renovation of courthouse. Also gives County Clerks the option of assessing an additional fee for recording real property records, not to exceed $10.

Posting Information on Appraisal District Website (HB 394)

The bill prevents an appraisal district from indicating the age of a property owner, including information that a property owner is 65 years of age or older.

Requesting Information (HB 685)

This bill adds language to section 552.221 of the Government Code providing for an option for an officer of a governmental body to provide requested information through an Internet or URL location.

VII. TAX BILLS

Franchise Taxes (HB 32)

This bill reduces the franchise tax rate.

School District Taxes (SB 1)

This bill increases homestead exemptions relating to school districts

Homestead Exemption and Transfer Taxes (SJR 1)

This bill is a proposed constitutional amendment which would increase the homestead exemption amount and would prevent the imposition of Transfer Taxes.

2015 Texas Land Title Institute – Legislative Update Page 6

Transfer of Tax Lien Notice (HB 1936)

Amends Section 32.06 of the Tax Code to provide that an existing mortgage servicer must be provided with notice of owner’s intent to enter into a contract with a transfer of tax lien lender.

VIII. MISCELLANEOUS BILLS

Insurance Discrimination (SB 76)

A person may not refuse to insure or provide insurance coverage based on sexual orientation or gender identity or expression. This addition to Section 544.002 adds to a list of other characteristics existing in the current law (race, color, age, gender, etc.).

Disclosure of Mortgage Information to Surviving Spouse (HB 831)

Adds Section 343.103 of the Finance Code stating that a mortgage servicer must provide information to a requesting surviving spouse of a mortgagor of a home loan regarding certain information about the loan including balance information and documentation.

Amendment of Seller’s Disclosure Notice (HB 1221)

Amends the Seller’s Disclosure Notice under Property Code Section 5.008(b) to add a provision for location of the property in a groundwater conservation, or other similar, district.

IX. BILLS “OFF THE BEATEN TRACK”

Standby Electric Generators (HB 939)

An HOA cannot restrict an owner from owning, operating or installing a standby electric generator.

Compassionate Use Act (SB 339)

Sets up a mechanism whereby certain licensed organizations may dispense low-THC Cannabis oils if prescribed by a neurologist or epileptologist. An HOA cannot restrict an owner from owning, operating or installing a standby electric generator.

"I remain convinced that Texas should not legalize marijuana, nor should Texas open the door for conventional marijuana to be used for medicinal purposes," Abbott said before the signing. "As governor, I will not allow it; SB 339 does not open the door to marijuana in Texas."

2015 Texas Land Title Institute – Legislative Update Page 7

Western Honey Bee is the official State Pollinator of Texas (HCR 65)

“Lone Star State” is the official nickname of Texas (HCR 78)

#TexasToDo is the official state hashtag of Texas Tourism (HCR 106)

X. BILLS THAT DID NOT PASS

Powers of Attorney (HB 3095)

This bill was a substantial rewrite of the Estates Code which would have reworked the current statutory durable power of attorney and created other law regarding usage of powers of attorney. A previous version of the bill imposed damages upon any party refusing to accept a power of attorney. While TLTA was instrumental in working with stakeholders to amend a provision for such damages, many other issues, not related to the title industry, still remained.

Required Disclosure by Title Companies (SB 594)

Would have required Title Companies to provide information to buyers about homestead exemption with the local tax office and to provide the applicable tax forms.

Model 3 Instruments (HB 2682)

This bill would have forced all e-filers of documents in the real property records to file “Model 3” Instruments which are imbedded with certain software which would facilitate the automatic indexing of recorded records.

Adverse Possession by Co-Tenant Heirs (HB 2544)

Would have allowed co-tenant heirs to seek title from other co-tenant heirs through an adverse possession action.

Use of Public Information for Marketing Purposes (HB 3199)

This bill would have prohibited the use of public information for “marketing purposes”.

Electronic Notary Public (HB 3309)

This bill would have provided a means for electronic notarization and appears to have allowed acknowledgments to be taken electronically through the internet and through other mechanisms.

2015 Texas Land Title Institute – Legislative Update Page 8

Order Allowing Nonjudicial Foreclosures (SB 283)

This bill would have amended Chapter 51 of the Property code to require a 736 order for all foreclosures against a debtor’s residence.

District Court producing Index of parties to suits (SB 567)

This bill would have required the clerk of a district court to produce the index of parties to all suits upon demand and allowed the clerk to collect a fee for such production.

Lender Notice of Default to Contractor (HB 1208)

As to loans not used for personal, family or household purposes, this bill would have established that a contractor would provide to lender its contact information, and would have established a duty upon the lender to notice the contractor upon default of the loan.

Priority of Transfer of Tax Liens (HB 3222)

This bill would have removed the special priority status of a transfer of tax lien once that lien was transferred to a third party.

Public Information on Texans only Available to Texans (HB 1118)

This bill would have prevented non-Texas residents from obtaining access to public information.

Indexing of District Court Records (HB 1859)

This bill would have required district clerks to deliver index records to a requesting party and would have permitted additional fees to be charged by district clerks.

Signing Services (HB 3642)

This bill would have allowed an entity to engage in signing services and employ a notary public to do so, and would have permitted the notary public to charge for such services.

Repeal of Roll Back Taxes (HB 133)

This bill would have, among other things, repealed section 23.55 of the Tax Code relating to Roll Back Taxes.

2015 Texas Land Title Institute – Legislative Update Page 9

Navigable Waters (HB 2892)

This bill would have allowed the Texas Commission on Environmental Quality, after notice and hearing, to designate waterways as navigable

Drilling Activities near certain structures (HB 2991)

Would have allowed for consistent implementation of restriction of drilling within a certain distance from certain structures, and would have required recordation of any waiver of such restrictions.

Qualified Subdivision for Energy Development (HB 4023)

This bill would have allowed for subdivision of properties for use in the generation of electricity by a plant or industrial facility which would contain operations sites for road and pipeline easements.

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Legislative UpdateMichael C. Savas, First American Title Insurance Company

2015 TEXAS LAND TITLE INSTITUTE

SUMMARY

Busy Session.

6,276 Bills Filed (more than last session)

1,322 Bills Passed (less than last session)

Pre-Session Concerns/Politics

Single Bill – Affirmative Agenda.

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Correction Instruments

Correction Instruments SB 584

This bill provide clarity and guidance to county clerks regarding the proper way to index correction instruments. That is, a correction instrument is an instrument between a grantor and grantee, even if it is signed by a third party, and the bill amends the Local Government Code Section 193.003 to make it clear that an instrument must be indexed to the grantors and grantees of the document, not by the person executing the instrument.

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Correction Instruments SB 584

Maximum Policy Liability and Reinsurance (SB 572)

Amends the calculation for single risk policy limits from Capital Stock and Surplus to surplus as regards policyholders and the company’s statutory premium reserves.

Amends and clarifies methods and mechanisms when an underwriter engages in reinsurance.

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Maximum Policy Liability and Reinsurance (SB 572)

Escrow Officer Licensing Bill (HB 2491)

Escrow Officer Single LicenseEach individual escrow officer shall retain a

license and be “appointed” by the title agency that employs the escrow officer.

TDI to Issue Further GuidanceApplies only to the issuance of renewal of the

license of an escrow officer on or after January 1, 2016.

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Escrow Officer Licensing Bill (HB 2491)

Commissioner’s Bulletin #B-0022-15:

“To reduce disruption to the industry and potential delays in the escrow officer license issuance and renewals, TDI will not enforce the provisions of HB 2491 until changes have been made to the Texas Title Insurance Manual (Title Manual) by rule. TDI expects this process will be completed during the summer of 2016”.

Notary Public Identification Number (HB 1683)

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Notary Public Identification Number (HB 1683)

ID Number RequiredRequires the Secretary of State to assign an

identifying number to each notary public

Notary Seal must contain ID numberThe act takes effect January 1, 2016

Requirement to issue ID number only applies to new or renewing notary publics as of January 1, 2016

Secretary of State is already issuing ID Numbers!

Notary Public Identification Number (HB 1683)

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Notary Public Identification Number (HB 1683)

Section 406.013(a) Government Code:

PROBATES, ESTATES, AND POWERS OF ATTORNEY BILLS

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Transfer on Death Deeds (SB 462)

Transfer on Death Deeds (SB 462)TODD is revokable

TODD may not be created through POA

TODD must be recorded before transferor’s death

A will may not revoke or supercede a TODD

A divorce will revoke a TODD to an ex-spouse upon recordation of the decree

Transfer on Death Deeds (SB 462)

Transfer on Death Deeds (SB 462)A subsequent deed by transferor, recorded

before the transferor’s death will voide a previously recorded TODD

The recording of a TODD is deemed to be the date of death of the transferor

Optional Form for TODD is included in bill

Optional Form for Revocation is included in bill

Transferee may disclaim grant under TODD

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Recordation of a Durable Power of Attorney (HB 3316) BEFORE

Recordation of a Durable Power of Attorney (HB 3316) AFTER

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PROBATES, ESTATES, & POWERS OF ATTORNEY BILLS

Promulgation of Certain Probate Forms (SB 512)Small Estate Affidavits

Probates of Will as a Muniment of Title

Simple Will Forms

Business Organizations (SB 859) Provides for POA by a member of a Limited

Liability Company

Provides for POA by Partner

FORECLOSURE BILLS

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FORECLOSURE BILLS

Instruments concerning Foreclosure (HB 2063)

Rescission of Acceleration (HB 2067)

FORECLOSURE BILLS

Rescission of Foreclosure Sale (HB 2066)

Rescission must occur w/in 15 days of foreclosure

Notice served by certified mail to purchaser at foreclosure & all debtors w/in 15 days of foreclosure sale

Notice recorded w/in 15 days of foreclosure sale

Purchasers must be have amounts paid returned within 5 days of the rescission, and affidavit to this effect must be filed.

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MINERAL INTEREST BILLS

Sale of Property Subject to Oil or Gas Lease (HB 2207) Inferior leases not cut off by foreclosure of prior

recorded deed of trust

Rights under leases pass to purchaser at foreclosure

Surface rights under these leases are terminated

Does not apply if the mineral estate was not encumbered by foreclosing deed of trust

MINERAL INTEREST BILLS

Jurisdiction of the regulation of Oil and Gas Operations (HB 40)

Municipal Regulation shall:

Only regulate activity at or above surface

Be Commercially Reasonable

Not prohibit oil & gas prosecution by a reasonably prudent operator

GRANDFATHERED: MUNICIPAL REGULATION IN PLACE FOR >5 YEARS

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REAL PROPERTY TRANSACTIONS BILLS

Contracts for Sale (HB 311) Seeks to force recordation of Contracts for

Deed

Seeks to provide legal title to purchasers over and above equitable title

Deceptive Trade Practice-Real Estate (HB 2590)City attorneys may bring fraud in real estate

actions

LOCAL AND COUNTY GOVERNMENT BILLS

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LOCAL AND COUNTY GOVERNMENT BILLS

Photo ID Required for Recording in Harris County (HB 1681)

Courthouse Construction Funding- Hidalgo and Cameron Counties (SB 1964)

Requesting Information (HB 685)

LOCAL AND COUNTY GOVERNMENT BILLS

Posting Information on Appraisal District Website (HB 394)

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TAX BILLS

TAX BILLS

Franchise Taxes (HB 32)

School District Taxes (SB 1)

Homestead Exemption and Transfer Taxes (SJR 1)

Transfer of Tax Lien Notice (HB 1936)

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MISCELLANEOUS BILLS

Insurance Discrimination (SB 76)

Disclosure of Mortgage Information to Surviving Spouse (HB 831)

Amendment of Seller’s Disclosure Notice (HB 1221)

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LEFTOVERS

Standby Electric Generators (HB 939)

Compassionate Use Act (SB 339)"I remain convinced that Texas should not legalize marijuana, nor should Texas open the door for conventional marijuana to be used for medicinal purposes," Abbott said before the signing. "As governor, I will not allow it; SB 339 does not open the door to marijuana in Texas."

LEFTOVERS

Western Honey Bee is the official State Pollinator of Texas (HCR 65)

“Lone Star State” is the official nickname of Texas (HCR 78)

#TexasToDo is the official state hashtag of Texas Tourism (HCR 106)

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BILLS THAT DID NOT PASS

Powers of Attorney (HB 3095)

Required Disclosure by Title Companies (SB 594)

Model 3 Instruments (HB 2682

Adverse Possession by Co-Tenant Heirs (HB 2544)

Use of Public Information for Marketing Purposes (HB 3199)

BILLS THAT DID NOT PASS

Electronic Notary Public (HB 3309)

Order Allowing Nonjudicial Foreclosures (SB 283)

District Court producing Index of parties to suits (SB 567)

Lender Notice of Default to Contractor (HB 1208)

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BILLS THAT DID NOT PASS

Priority of Transfer of Tax Liens (HB 3222)

Public Information on Texans only Available to Texans (HB 1118)

Indexing of District Court Records (HB 1859)

Signing Services (HB 3642)

BILLS THAT DID NOT PASS

Repeal of Roll Back Taxes (HB 133)

Navigable Waters (HB 2892)

Drilling Activities near certain structures (HB 2991)

Qualified Subdivision for Energy Development (HB 4023)

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Thank You