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.