By Salinas                                            H.B. No. 3089
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to requiring notice of intent to drill, requirement for
 1-3     surety deposit and negotiation of surface damages.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  Chapter 52, Natural Resources Code is amended to
 1-6     read as follows:
 1-7           Sec. 52.298.  NOTICE OF INTENT TO DRILL.  Before entering
 1-8     upon a site for oil or gas drilling, except in instances where
 1-9     there are non-state resident surface owners, non-state resident
1-10     surface tenants, unknown heirs, imperfect titles, surface owners,
1-11     or surface tenants whose whereabouts cannot be ascertained with
1-12     reasonable diligence, the operator shall give to the surface owner
1-13     a written notice of his intent to drill containing a designation of
1-14     the proposed location and the approximate date that the operator
1-15     proposes to commence drilling.  Such notice shall be given in
1-16     writing by certified mail to the surface owner.  If the operator
1-17     makes an affidavit that he has conducted a search with reasonable
1-18     diligence and the whereabouts of the surface owner cannot be
1-19     ascertained or such notice cannot be delivered, then constructive
1-20     notice of the intent to drill may be given in the same manner as
1-21     provided for the notice of proceedings to appoint appraisers.
1-22     Within five (5) days of the date of delivery or service of the
1-23     notice of intent to drill, it shall be the duty of the operator and
 2-1     the surface owner to enter into good faith negotiations to
 2-2     determine the surface damages.
 2-3           Sec. 52.299.  UNDERTAKINGS WHICH MAY BE POSTED AS DAMAGE
 2-4     DEPOSIT.  A.  Every operator doing business in this state shall
 2-5     file a corporate surety bond, letter of credit from a banking
 2-6     institution, cash, or a certificate of deposit with the Secretary
 2-7     of State in the sum of Twenty-five Thousand Dollars ($25,000.00)
 2-8     conditioned upon compliance with Sections 318.2 through 318.9 of
 2-9     this title for payment of any location damages due which the
2-10     operator cannot otherwise pay.  The Secretary of State shall hold
2-11     such corporate surety bond, letter of credit from a banking
2-12     institution, cash or certificate of deposit for the benefit of the
2-13     surface owners of this state and shall ensure that such security is
2-14     in a form readily payable to a surface owner awarded damages in an
2-15     action brought pursuant to this act.  Each corporate surety bond,
2-16     letter of credit, cash, or certificate of deposit filed with the
2-17     Secretary of State shall be accompanied by a filing fee of Ten
2-18     Dollars ($10.00).
2-19           B.  The bonding company or banking institution shall file,
2-20     for such fee as is provided for by law, a certificate that said
2-21     bond or letter of credit is in effect or has been canceled, or that
2-22     a claim has been made against it in the office of the court clerk
2-23     in each county in which the operator is drilling or planning to
2-24     drill.  Said bond or letter of credit must remain in full force and
2-25     effect as long as the operator continues drilling operations in
2-26     this state.  Each such filing shall be accompanied by a filing fee
 3-1     of Ten Dollars ($10.00).
 3-2           C.  Upon deposit of the bond, letter of credit, cash, or
 3-3     certificate of deposit, the operator shall be permitted entry upon
 3-4     the property and shall be permitted to commence drilling of a well
 3-5     in accordance with the terms and conditions of any lease or other
 3-6     existing contractual or lawful right.
 3-7           D.  If the damages agreed to by the parties or awarded by the
 3-8     court are greater than the bond, letter of credit, cash, or
 3-9     certificate of deposit posted, the operator shall pay the damages
3-10     immediately or post an additional bond, letter of credit, cash, or
3-11     certificate of deposit sufficient to cover the damages.  Said
3-12     increase in bond, letter of credit, cash, or certificate of deposit
3-13     shall comply with the requirements of this section.
3-14           Sec. 52.300.  NEGOTIATING SURFACE DAMAGES-APPRAISERS-REPORT
3-15     AND EXCEPTION THERETO-JURY TRIAL.  A.  Prior to entering the site
3-16     with heavy equipment, the operator shall negotiate with the surface
3-17     owner for the payment of any damages which may be caused by the
3-18     drilling operation.  If the parties agree, and a written contract
3-19     is signed, the operator may enter the site to drill.  If agreement
3-20     is not reached, or if the operator is not able to contact all
3-21     parties, the operator shall petition the district court in the
3-22     county in which the drilling site is located for appointment of
3-23     appraisers to make recommendations to the parties and to the court
3-24     concerning the amount of damages, if any.  Once the operator has
3-25     petitioned for appointment of appraisers, he may enter the site to
3-26     drill.
 4-1           B.  Ten (10) days' notice of the petition to appoint
 4-2     appraisers shall be given to the opposite party, either by personal
 4-3     service or by leaving a copy thereof at his usual place of
 4-4     residence with some member of his family over fifteen (15) years of
 4-5     age, or, in the case of nonresidents, unknown heirs or other
 4-6     persons whose whereabouts cannot be ascertained, by publication in
 4-7     one issue of a newspaper qualified to publish legal notices in said
 4-8     county, said ten-day period to begin with the first publication.
 4-9           C.  The operator shall select one appraiser, the surface
4-10     owner shall select one appraiser, and the two selected appraisers
4-11     shall select a third appraiser for appointment by the court.
4-12     Unless for good cause shown, additional time is allowed by the
4-13     district court, the three (3) appraisers shall be selected within
4-14     twenty (20) days of service of the notice of the petition to
4-15     appoint appraisers or within twenty (20) days of the first date of
4-16     publication of the notice as specified in subsection B of this
4-17     section.  If either of the parties fails to appoint an appraiser or
4-18     if the two appraisers cannot agree on the selection of the third
4-19     appraiser within the required time period, the remaining required
4-20     appraisers shall be selected by the district court upon application
4-21     of either party.  Before entering upon their duties, such
4-22     appraisers shall take and subscribe an oath, before a notary public
4-23     or some other person authorized to administer oaths, that they will
4-24     perform their duties faithfully and impartially to the best of
4-25     their ability.  They shall inspect the real property and consider
4-26     the surface damages which the owner has sustained or will sustain
 5-1     by reason of entry upon the subject land and by reason of drilling
 5-2     or maintenance of oil or gas production on the subject tract of
 5-3     land.  The appraisers shall then file a written report within
 5-4     thirty (30) days of the date of their appointment with the clerk of
 5-5     the court.  The report shall set forth the quantity, boundaries and
 5-6     value of the property entered on or to be utilized in said oil or
 5-7     gas drilling, and the amount of surface damages done or to be done
 5-8     to the property.  The appraisers shall make a valuation and
 5-9     determine the amount of compensation to be paid by the operator to
5-10     the surface owner and the manner in which the amount shall be paid.
5-11     Said appraisers shall then make a report of their proceedings to
5-12     the court.  The compensation of the appraisers shall be fixed and
5-13     determined by the court.  The operator and the surface owner shall
5-14     share equally in the payment of the appraisers' fees and court
5-15     costs.
5-16           D.  Within ten (10) days after the report of the appraisers
5-17     is filed, the clerk of the court shall forward to each attorney of
5-18     record, each party, and interested party of record, a copy of the
5-19     report of the appraisers and a notice stating the time limits for
5-20     filing an exception or a demand for jury trial as provided for in
5-21     this section.
5-22                 1.  This notice shall be on a form supplied to all
5-23     district court clerks.
5-24                 2.  If a party has been served by publication, the
5-25     clerk shall forward a copy of the report of the appraisers and the
5-26     notice of time limits for filing either an exception or a demand
 6-1     for jury trial to the last-known mailing address of each party, if
 6-2     any, and shall cause a copy of the notice of time limits to be
 6-3     published in one issue of a newspaper qualified to public legal
 6-4     notices.
 6-5                 3.  After issuing the notice provided herein, the clerk
 6-6     shall endorse on the notice form filed in the case the date that a
 6-7     copy of the report and the notice form was forwarded to each
 6-8     attorney of record, each party, and each interested party of
 6-9     record, or the date the notice was published.
6-10           E.  The time for filing an exception to the report or a
6-11     demand for jury trial shall be calculated as commencing from the
6-12     date the report of the appraisers is filed with the court.  Upon
6-13     failure of the clerk to give notice within the time prescribed, the
6-14     court, upon application by any interested party, may extend the
6-15     time for filing an exception to the report or filing a demand for
6-16     trial by jury for a reasonable period of time not less than twenty
6-17     (20) days from the date the application is heard by the court.
6-18     Appraisers' fees and court costs may be the subject of an
6-19     exception, may be included in an action by the petitioner, and may
6-20     be set and allowed by the court.
6-21           F.  The report of the appraisers may be reviewed by the
6-22     court, upon written exceptions filed with the court by either party
6-23     within thirty (30) days after the filing of the report.  After the
6-24     hearing the court shall enter the appropriate order either by
6-25     confirmation, rejection, modification, or order of a new appraisal
6-26     for good cause shown.  Provided, that in the event a new appraisal
 7-1     is ordered, the operator shall have continuing right of entry
 7-2     subject to the continuance of the bond required herein.  Either
 7-3     party may, within sixty (60) days after the filing of such report,
 7-4     file with the clerk a written demand for a trial by jury, in which
 7-5     case the amount of damages shall be assessed by a jury.  The trial
 7-6     shall be conducted and judgment entered in the same manner as
 7-7     railroad condemnation actions tried in the court.  If the party
 7-8     demanding the jury trial does not recover a verdict more favorable
 7-9     to him than the assessment award of the appraisers, all court costs
7-10     including reasonable attorney fees shall be assessed against him.