(a) The governing body of a local government or private entity that is a sponsor of the authority may petition the board to be removed from the authority as a sponsor.
(b) A petition under Subsection (a) must be submitted in the manner and form required by board rule.

(c) After receiving a petition under Subsection (a), the board shall decide whether the petitioning sponsor should be removed from the authority as a sponsor and shall by order approve, conditionally approve, or disapprove the petition.
(d) The board may not approve a petition submitted to the board under this section if that action would impair or violate or conflict with the terms of any outstanding bonds, notes, or other obligations of the authority.
(e) An order issued under Subsection (c) that approves or conditionally approves a sponsor’s petition to be removed from the authority as a sponsor must address:
(1) all matters related to the removal as determined by the board, including the removal of the territory of the sponsor and territory located in the service area of the sponsor as provided by the sponsor’s certificate of convenience and necessity; and
(2) if applicable, any conditions imposed by the board that the petitioning sponsor must satisfy before the board approves the petition, which may include:
(A) payment by the petitioning sponsor of all bonds, notes, or other obligations issued by the authority on behalf of the sponsor;
(B) payment by the petitioning sponsor of the sponsor’s pro rata share of any bond, note, or other obligation issued by the authority, other than the bonds, notes, or other obligations described by Paragraph (A), if the payment is allowed under the terms of the bond, note, or other obligation;
(C) conditions related to the ownership or transfer of ownership of real property, facilities, equipment, personnel, and supplies; and
(D) conditions the authority considers necessary for the winding up of activities in connection with the removal of the petitioning sponsor as a sponsor from the authority.
(f) If the board by order conditionally approves a sponsor’s petition under Subsection (c), the petitioning sponsor remains a sponsor and shall make all payments owed to the authority when due and shall satisfy all conditions included in the order. The board shall approve the petition immediately after all required payments to the authority are received and all conditions included in the order are satisfied as determined by the board.
(g) The removal of a local government or private entity from the authority as a sponsor under this section does not prohibit the local government or private entity from contracting with the authority for the provision of water supply, wastewater treatment, or other services provided by the authority.