By: Duncan S.B. No. 1574

(In the Senate - Filed March 8, 2007; March 21, 2007, read first time and referred to Committee on Natural Resources; April 23, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 10, Nays 0; April 23, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 1574 By: Duncan

A BILL TO BE ENTITLED

AN ACT

relating to the regulation by the Railroad Commission of Texas of the use of the surface of land in connection with certain activities associated with the exploration, development, or production of oil or gas, including the gathering of oil or gas by pipeline.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Chapter 91, Natural Resources Code, is amended by adding Subchapter P to read as follows:

SUBCHAPTER P. MISCELLANEOUS PROVISIONS REGARDING USE OF SURFACE OF

LAND IN CONNECTION WITH OIL AND GAS-RELATED ACTIVITIES

Sec. 91.701. DEFINITIONS. In this subchapter:

(1) "Inactive well" means a well for which the operator has not maintained regular and continuing activities related to the production of oil and gas. A well that has been inactive for 12 consecutive months or longer and that is not permitted as a disposal or injection well is considered to remain an inactive well, regardless of any minimal activity, until the reported production for the well has been at least 10 barrels of oil, if the well is an oil well, or 100,000 cubic feet of gas, if the well is a gas well, each month for at least three consecutive months.

(2) "Operator" means a person who assumes responsibility for the physical operation and control of a well as shown by a form the person files with the commission and the commission approves.

(3) "Primary ranch road" means a road used to travel on a ranch. The term does not include a well service road installed by an operator and used by the operator or an agent or contractor of the operator primarily to service wells or other leasehold equipment.

(4) "Well" has the meaning assigned by Section 89.002.

(5) "Well-site equipment" means any production-related equipment or materials specific to a well, including motors, pumps, pump jacks, tanks, tank batteries, separators, compressors, the operator's electric lines and poles, pipes that exclusively serve an inactive well, or other equipment located on the surface of an oil and gas leasehold estate, but does not include lease identification signs, wellheads, tubing heads, valves, or any other equipment used for well control or well monitoring.

Sec. 91.702. TRANSFER OR REMOVAL OF WELL-SITE EQUIPMENT. (a) This section applies only to an inactive well.

(b) Unless the lease or another agreement with the lessor provides otherwise, the operator shall transfer or remove well-site equipment, in the manner provided by Subsection (c), from the site of an inactive well that has been inactive for more than 60 months.

(c) Unless the lease or another agreement with the lessor provides otherwise, on written notice from the lessor, as provided by Section 91.705, complaining of the failure of the operator to remove well-site equipment from an inactive well, the operator, not later than the 90th day after the date of the written notice, shall:

(1) transfer the well-site equipment to another active well site on the leased premises for use in connection with another well; or

(2) remove the well-site equipment from the leased premises.

(d) If the operator transfers the well-site equipment to another well site on the leased premises for use in connection with another active well as provided by Subsection (c)(1), the operator must employ a substantial portion of the transferred equipment in connection with the active well to which it has been transferred within the next 12 months, or remove all transferred equipment from the leased premises.

Sec. 91.703. STANDARDS FOR MAINTENANCE OF CERTAIN PIPELINES. (a) The commission by rule shall establish minimum standards for maintaining pipelines on leased premises that lie on or beneath established primary ranch roads located on the leased premises.

(b) Rules that may be adopted under this section are limited to rules establishing a required minimum soil depth above a pipeline or requiring an alternative means of protection reasonably necessary to protect the pipeline from damage from expected vehicular traffic and to allow the maintenance of the surface of the road on or beneath which the pipeline lies.

Sec. 91.704. STANDARDS FOR CONSTRUCTION, OPERATION, AND MAINTENANCE OF ELECTRICAL POWER LINES. (a) The operator shall construct, operate, and maintain electrical power lines serving well sites and other surface facilities employed in operations incident to oil and gas development and production in accordance with the National Electrical Code published by the National Fire Protection Association and adopted by the Texas Commission of Licensing and Regulation under Chapter 1305, Occupations Code.

(b) The operator shall de-energize lines to well sites and other surface facilities when equipment is transferred from the site or removed from the leased premises.

Sec. 91.705. ENFORCEMENT: ACTION FOR INJUNCTION OR COSTS; MANDATORY MEDIATION. (a) If an operator violates this subchapter, the lessor may give notice of the violation to the operator and request that the operator remedy the violation. The notice must be mailed by certified mail to the address of the operator as shown by the records of the commission and must specifically describe the violation.

(b) If the operator fails to remedy the violation before the 90th day after the date the notice is mailed under Subsection (a), the lessor may bring an action against the operator for injunctive relief to require the operator to remedy the violation described in the notice. The district court in the county in which the land subject to the lease is located has jurisdiction to hear a suit brought under this section. The trier of fact shall determine whether the violation alleged by the lessor has occurred. After a trial, if it is determined that the operator has violated this subchapter in the manner described in the notice from the lessor, the court may issue an injunction requiring the operator to comply, within a reasonable time of the entry of the injunction, with the particular provision or provisions of this subchapter that have been found to have been violated. The general requirements for the issuance of an injunction need not be satisfied for the lessor to be entitled to injunctive relief. A bond may not be required of the lessor as a condition to the issuance of an injunction. The trial court may suspend the operation of the injunction pending appeal by the operator conditioned on the operator posting bond in an amount necessary to pay the costs of complying with this subchapter with regard to the particular violation found.

(c) The trial court, absent a timely appeal by the operator, on a complaint by the affected lessor, may remedy the failure by the operator to comply with the terms of the injunction by requiring that the operator post a bond payable to the lessor in an amount sufficient to remedy the violation, conditioned on the lessor having remedied the violation at the lessor's expense. The amount of any judgment rendered against the bond must be only for those costs determined by the trial court to have been reasonably necessary to remedy the violation. If remedying the violation requires the removal of well-site equipment, the court may order the equipment forfeited and authorize the lessor to sell the forfeited equipment and recover the proceeds. The amount of any judgment rendered against the bond must be reduced by the amount of proceeds received from the sale of the equipment. Any proceeds received from the sale of the equipment in excess of the reasonable and necessary cost of remedying the violation are subject to further order of the court.

(d) If the operator fails to comply with the injunction and also fails to post the bond as ordered by the trial court, the lessor may bring an action in the district court for the county in which the land subject to the lease is located to recover from the operator the reasonable and necessary costs incurred by the lessor in remedying the violation. If remedying the violation requires removal of well-site equipment, the court may order the equipment forfeited and may authorize the lessor to sell the forfeited equipment and recover the proceeds. The amount of any judgment rendered against the operator must be reduced by the amount of proceeds received from the sale of the equipment. Any proceeds received from the sale of the equipment in excess of the reasonable and necessary cost of remedying the violation are subject to further order by the court.

(e) The party who prevails in an action under this section shall be awarded its reasonable attorneys' fees and court costs.

(f) For a suit that arises from a violation of this subchapter, the court shall refer the matter to mediation among all parties and by order shall set the time and place of the mediation.

(g) The court shall appoint a mediator if the parties do not agree on a mediator.

(h) Each party shall:

(1) participate in the mediation in good faith; and

(2) share the mediation fee equally.

(i) Except as provided by this section, the following apply to the appointment of a mediator and the mediation process provided by this section:

(1) Sections 154.023(a) and (b), Civil Practice and Remedies Code; and

(2) Subchapters C and D, Chapter 154, Civil Practice and Remedies Code.

(j) The court may proceed with the trial on the matter if the parties are unable to agree after participating in the ordered mediation.

SECTION 2. The Railroad Commission of Texas shall adopt rules to implement Subchapter P, Chapter 91, Natural Resources Code, as added by this Act, not later than January 1, 2008.

SECTION 3. (a) This Act may not be construed to revive any cause of action barred under the law as it existed immediately before the effective date of this Act brought by a lessor to require removal of equipment from the leased premises based on a claim of breach of contract arising out of the relationship between lessor and lessee or a tort claim arising out of operations on the leased premises by the operator or a predecessor of the operator.

(b) This Act does not impede a lessor from contracting with a surface owner for enforcement of rights granted by this Act.

(c) This Act may not be construed to impose:

(1) a duty on a lessor or surface owner to enforce a violation of this Act; or

(2) liability on a lessor or surface owner for failure to enforce a violation or for agreeing not to enforce a violation.

SECTION 4. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.

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