By: Oliveira H.B. No. 3749

A BILL TO BE ENTITLED

AN ACT

relating to establishing certain rights of an owner of the surface estate in land who does not own any interest in the mineral estate in the land in connection with the exploration for and production of the minerals.

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

SECTION 1.

(a) The legislature determines that:

(1) tracts in which the surface and minerals have not been severed are becoming scarce;

(2) it has become difficult for an owner of the surface estate in land to locate all of the owners of the mineral estate in the land in order to negotiate contracts for surface use restrictions;

(3) the surface of land is often harmed by the development of the mineral estate in the land, and the surface estate owner is not required to be compensated for the damage to the surface;

(4) there is no statutory requirement that mineral development equipment and related improvements be removed and that the surface of land be restored after mineral development operations have ceased;

(5) the circumstances described by this subsection impede the development of land in this state to its fullest and most efficient use; and

(6) it is necessary for the legislature to exercise its authority under Section 59, Article XVI, Texas Constitution, to ensure the proper and orderly development of the surface and mineral estates in land in this state.

(c) For the reasons stated in Subsection (a) of this section, the legislature intends that:

(1) each owner of the surface estate in land who does not own any interest in the mineral estate in the land receive compensation for damages to the surface and the use of the surface in connection with mineral exploration and development; and

(2) mineral development equipment and related improvements be removed and the surface tract be restored after mineral development operations in, on or under the surface tract have ceased.

SECTION 2. Subtitle B, Title 3, Natural Resources Code, is amended by adding Chapter 93 to read as follows:

CHAPTER 93. SURFACE PROTECTIONS

Sec. 93.001. DEFINITIONS. In this chapter:

(1) "Commission" means the Railroad Commission of Texas.

(2) "Damage fee" means a one-time fee paid to a surface tract owner by a mineral interest user as provided under this chapter for all anticipated damages to the surface tract caused by the actions of the mineral interest user in developing the minerals in, on, or under the surface tract other than damages resulting from actions that are grossly negligent or intentional.

(3) "Mineral development improvements" means equipment and improvements installed or constructed by or on behalf of a mineral interest user on a surface tract, including drilling pad sites, pipelines, compressor stations, roads to drilling pad sites, tanks, and other incidental equipment and improvements that a mineral interest user may use to explore for and produce minerals in, on, or under a surface tract.

(4) "Mineral development site" means a surface area on a surface tract where mineral development improvements are located that a mineral interest user may use to explore for and produce minerals in, on, or under a surface tract.

(5) "Mineral interest user" means a person holding a possessory mineral interest who engages in exploration for or the development of minerals in, on, or under a surface tract.

(6) "Possessory mineral interest" means a mineral interest that includes the right to use a surface tract for the exploration for and production of minerals.

(7) "Surface tract" means the surface estate of a tract of land owned by a surface tract owner on which a mineral development site has been or may be located.

(8) "Surface tract owner" means an owner of a surface tract who does not own an interest in the minerals in, on, or under the land from which the surface tract has been severed.

(9) "Use fee" means an annual fee paid to a surface tract owner by a mineral interest user as provided under this chapter for the use of the surface tract and the placement of mineral development improvements on the tract until any well drilled on a mineral development site on the surface tract is plugged and abandoned.

Sec. 93.002. APPLICABILITY. (a) This chapter applies only to a surface tract.

(b) This chapter does not apply to land in which the minerals are owned by this state.

Sec. 93.003. RULES. The commission shall adopt rules as necessary for the implementation of this chapter, including rules governing:

(1) the contents of an application under Section 93.005(b);

(2) the procedure for conducting a hearing under Section 93.005(d);

(3) the method for determining the appropriate amount of a damage fee and a use fee under Section 93.005(e); and

(4) the contents of an affidavit under Section 93.007(d).

Sec. 93.004. NOTICE OF INTENT TO ENTER SURFACE TRACT. Not later than the 20th day before the date a mineral interest user begins using a surface tract, the mineral interest user must mail notice to each surface tract owner at the surface tract owner's last known mailing address of the mineral interest user's intention to enter the surface tract in order to explore for and produce minerals in, on, or under the surface tract. The notice must include the proposed location of any mineral development site.

Sec. 93.005. DETERMINATION OF AMOUNT OF DAMAGE FEE AND USE FEE. (a) After the mineral interest user provides the notice required by Section 93.004 to a surface tract owner, the mineral interest user and the surface tract owner shall make a good faith attempt to agree to the amount of a damage fee and a use fee to be paid to the surface tract owner by the mineral interest user.

(b) If the mineral interest user and the surface tract owner are unable to reach an agreement under Subsection (a), the mineral interest user or the surface tract owner may file an application with the commission requesting that the commission determine the amount of the damage fee and the use fee.

(c) An application under Subsection (b) must be accompanied by:

(1) an application fee set by the commission in an amount sufficient to cover the cost of administering this chapter;

(2) a survey showing the boundaries of the surface tract and the proposed location of any mineral development site; and

(3) if the application is filed by the mineral interest user, a description of all anticipated mineral development improvements to be installed or constructed on the surface tract.

(d) The commission shall, on notice to the surface tract owner and the mineral interest user, conduct a hearing on the application. The surface tract owner and the mineral interest user may present evidence at the hearing.

(e) Following the hearing on the application, the commission shall issue an order determining:

(1) the amount of the damage fee and the use fee to be paid to the surface tract owner by the mineral interest user; and

(2) any other matter the commission considers necessary or appropriate in connection with the determination of the amount of the fees.

(f) In determining the amount of the damage fee, the commission shall consider the actual and anticipated damages to the surface tract from the date of the filing of the application under Subsection (b). In determining the amount of the use fee, the commission shall consider the past and current use of the surface tract and the surface tract owner's interest in the surface tract.

(g) The surface tract owner or the mineral interest user may appeal the determination of the commission as provided by law.

(h) Either the surface tract owner or the mineral interest user may file a certified copy of the commission's order issued under Subsection (e) with the clerk of the county in which the surface tract is located.

(i) The mineral interest user must pay each surface tract owner a separate damage fee and use fee in connection with each oil or gas well drilled or other mineral development operation conducted on the surface tract.

Sec. 93.006. USE OF SURFACE TRACT. (a) The mineral interest user may enter the surface tract and use it for the exploration for and production of minerals in accordance with the mineral interest user's contractual rights and applicable law following:

(1) the payment by the mineral interest user to each surface tract owner of the amount of the damage fee and the use fee agreed to by the mineral interest user and the surface tract owner under Section 93.005(a), if applicable; or

(2) the filing of an application under Section 93.005(b), if applicable.

(b) Notwithstanding Subsection (a)(2), on the issuance of an order by the commission under Section 93.005(e) determining the amount of the damage fee and the use fee, the mineral interest user must suspend operations on the surface tract until the mineral interest user pays each surface tract owner the amount of the damage fee and the use fee as determined by the commission.

(c) If the mineral interest user fails to pay a surface tract owner the amount of the damage fee or the use fee on or before the 10th day after the date the mineral interest user and the surface tract owner enter into an agreement under Section 93.005(a) or the commission issues an order with respect to the surface tract owner under Section 93.005(e), the surface tract owner may:

(1) prohibit the mineral interest user from using the surface tract; and

(2) charge the mineral interest user interest on the unpaid amount of the damage fee or use fee at an annual rate of 10 percent per annum.

(d) Not later than the 30th day after the date the mineral interest user ceases mineral development operations on a mineral development site, the mineral interest user shall:

(1) remove all mineral development improvements in connection with the mineral development site; and

(2) restore the mineral development site to substantially the condition it was in before the mineral interest user began using the site.

(e) If the mineral interest user fails to comply with Subsection (d), a surface tract owner may:

(1) remove the mineral development improvements from the mineral development site and restore the site as provided by Subsection (d); and

(2) charge the mineral interest user for all costs incurred in connection with the actions described by Subdivision (1).

(f) The mineral interest user shall pay the amount charged under Subsection (e)(2) not later than the 10th day after the date the mineral interest user receives the surface tract owner's invoice. If the mineral interest user fails to pay the amount charged by the deadline prescribed by this subsection, the unpaid amount incurs interest at an annual rate of 10 percent per annum until paid.

(g) The mineral interest user may not use any groundwater under or surface water on the surface tract in connection with a mineral development site or mineral development improvements without the express prior written consent of the surface tract owner.

(h) The mineral interest user's use of the surface tract in connection with the exploration for and production of minerals must be reasonable, taking into consideration the use of the surface tract by each surface tract owner. The mineral interest user must reasonably accommodate any use of the surface tract by a surface tract owner.

Sec. 93.007. LIEN. (a) A surface tract owner has the right to claim a lien to secure the payment of the damage fee, the use fee, and all costs incurred by the surface tract owner in taking the actions described by Section 93.006(e)(1). The inception of the lien occurs on the 10th day after (i) the date the damage fee and/or use fee are due under Section 93.006(c), or (ii) the date of the surface tract owner's invoice to the mineral interest user under Section 93.006(f) regarding the costs incurred by the surface tract owner in taking the actions described by Section 93.006(e)(1).

(b) The following property is subject to the lien:

(1) any lease of the minerals in, on, or under the surface tract in which the mineral interest user has an interest;

(2) the mineral development improvements placed on the surface tract by the mineral interest user; and

(3) any other material, machinery, or supplies used for mineral activities on the surface tract and owned by the mineral interest user.

(c) The lien does not:

(1) attach to the fee title to the surface tract or the minerals in, on, or under the surface tract; or

(2) affect any encumbrance or voluntary or involuntary lien that attached to any lease of the minerals in, on, or under the surface tract before the lien's inception.

(d) To claim the lien, a surface tract owner must file an affidavit with the county clerk of the county in which the surface tract is located not later than the 180th day after the date the mineral interest user fails to timely pay the surface tract owner the damage fee or use fee or take the actions described by Section 93.006(d).

(e) A mineral interest user may not sell property, including mineral development improvements, to which the lien has attached or remove the property from the surface tract unless the surface tract owner consents in writing.

(f) The surface tract owner must enforce the lien by a suit to foreclose the lien, which must be filed on or before two (2) years after the date the affidavit described in Section 93.007(d) is filed for record with the county clerk in the county where the surface tract is located.

(g) A holder of a prior encumbrance or lien on a lease of the minerals in, on, or under the surface tract is not a necessary party to a suit to foreclose the lien.

(h) On the foreclosure of the lien, the surface tract owner:

(1) is entitled to possession of the property subject to the lien regardless of where it is found; and

(2) may sell the property subject to the lien to satisfy the debt secured by the lien.

(i) Termination of a lease owned by the mineral interest user of the minerals in, on, or under the surface tract does not affect a lien created hereunder that attached to mineral development improvements located on the surface tract before the lease terminated.

(j) If a surface tract owner brings a suit to foreclose a lien under this section, the court may include in any final judgment in favor of the surface tract owner an award of costs and reasonable and necessary attorney's fees.

SECTION 3. The Railroad Commission of Texas shall adopt rules under Chapter 93, Natural Resources Code, as added by this Act, not later than December 1, 2011.

SECTION 4. This Act takes effect September 1, 2011.