83R3694 JAM-D

By: Burnam H.B. No. 3600

A BILL TO BE ENTITLED

AN ACT

relating to the rights of an owner of the surface estate in land in connection with oil and gas exploration and production operations; providing administrative penalties.

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

SECTION 1. Subtitle B, Title 3, Natural Resources Code, is amended by adding Chapter 93 to read as follows:

CHAPTER 93. SURFACE OWNER PROTECTIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 93.001. DEFINITIONS. In this chapter:

(1) "Agricultural use" has the meaning assigned by Section 23.51, Tax Code.

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

(3) "Mineral estate" means an estate in or ownership of all or part of the minerals underlying a tract of land.

(4) "Oil and gas developer" means a person who acquires a mineral estate or a mineral lease for the purpose of extracting or using oil and gas from a tract of land.

(5) "Oil and gas operations" means the following activities to the extent they require entry on the surface of a tract of land:

(A) oil and gas exploration activities; and

(B) oil and gas drilling, production, and completion operations.

(6) "Surface estate" means an estate in or ownership of the surface of a tract of land.

(7) "Surface owner" means a person who holds record title to the surface of a tract of land.

SUBCHAPTER B. NOTICE AND ENTRY REQUIREMENTS

Sec. 93.051. NOTICE OF SURVEYING OR INSPECTION. (a) An oil and gas developer shall give each surface owner written notice that the oil and gas developer plans to begin surveying or inspecting the property not later than the fifth business day before the date the surveying or inspecting begins.

(b) An oil and gas developer shall give each surface owner written notice that the oil and gas developer plans to begin constructing improvements or conducting oil and gas operations on the property not later than the 30th day before the date the construction or operations begin. The notice must:

(1) sufficiently describe the oil and gas operations on the land, the schedule for conducting the operations, and the land to be affected by the operations to enable the surface owner to evaluate the effect of the operations on the surface owner's use of the land;

(2) include a statement advising the surface owner of the surface owner's rights under this chapter;

(3) include the name, address, telephone number, and, if available, facsimile number and e-mail address of the developer and the developer's authorized representatives; and

(4) include a proposed surface use agreement provided under Section 93.104 that contains, to the extent known, information relating to:

(A) the placement, specifications, and design of well pads, gathering pipelines, and roads to be constructed for the operations;

(B) the terms of ingress and egress on the land for the operations;

(C) the placement, construction, and maintenance of all pits and equipment to be used for the operations;

(D) the use and impoundment of water on the surface of the land;

(E) the removal and restoration of plant life;

(F) changes to the drainage of surface water;

(G) any proposed measures to control erosion, rainwater runoff, noise, dust, traffic, litter, trespass, and other interference with the use of the surface estate; and

(H) measures proposed to restore the surface estate to the condition in which it existed before the operations began.

(c) Notice under this section:

(1) must be given by certified mail or hand delivery to each surface owner at the surface owner's address as shown by the records of the county clerk or county tax assessor-collector at the time the notice is given; and

(2) is considered to have been received five days after mailing and immediately on hand delivery.

Sec. 93.052. ENTRY ON LAND; SECURITY REQUIRED. (a) Except as provided by Subsection (b), an oil and gas developer may not enter the land to conduct oil and gas operations until the oil and gas developer enters into a written agreement for the payment of compensation for damages with each surface owner.

(b) An oil and gas developer may enter the land to begin construction or oil and gas operations without entering into a surface use agreement with each surface owner if:

(1) 30 days have passed since each surface owner received notice as provided by Section 93.051(b); and

(2) the developer deposits in a banking institution for the benefit of the surface owner:

(A) a surety bond or other equivalent security in an amount of $10,000 for each well location on the land; or

(B) a blanket surety bond or other equivalent security in an amount of $25,000 provided that:

(i) the bond or other security is readily payable to a surface owner awarded damages under this chapter; and

(ii) if any portion of the bond or security has been used to pay a surface owner, the developer shall post additional security so that the total security posted is $25,000.

(c) A bond or security posted in accordance with Subsection (b)(2)(A) may be released only when:

(1) the surface owner provides notice to the holder of the bond or security that the developer has paid all required compensation for damages;

(2) the surface owner and the developer have executed a surface use agreement or otherwise agree that the security should be released;

(3) all damages awarded under a nonappealable judgment have been paid; or

(4) all wells on the land have been plugged and abandoned for a period of at least six years and the developer has not conducted oil and gas operations on the land during that period.

(d) A bond or security posted in accordance with Subsection (b)(2)(B) may not be released until six years after the developer files with the holder of the bond or security a statement certified by the Railroad Commission of Texas that according to the commission's records the developer does not conduct or hold permits for oil and gas operations in this state.

Sec. 93.053. EXEMPTION FOR EMERGENCY. Notwithstanding any other provision of this chapter, an oil and gas developer may enter the land of a surface owner to protect human health, safety, or the environment.

SUBCHAPTER C. DAMAGES

Sec. 93.101. APPLICABILITY. A surface owner is entitled to damages as provided by this subchapter regardless of whether:

(1) the surface estate of the land has been severed from the mineral estate; or

(2) the surface owner is the person who executed the instrument that gave the oil and gas developer the right to conduct oil and gas operations on the land.

Sec. 93.102. REMEDIES CUMULATIVE. The remedies provided by this subchapter are in addition to any other remedies provided by law.

Sec. 93.103. RIGHT TO PAYMENT FOR DAMAGES. (a) An oil and gas developer shall pay each surface owner an amount equal to the amount of anticipated and foreseeable damages sustained by the surface owner for the following, to the extent the damages are caused by oil and gas operations on the surface owner's land:

(1) loss of income derived from agricultural use of the land;

(2) reduction in value of the land;

(3) reduction in value of improvements to the land;

(4) loss of access to the surface of the land; and

(5) loss of the use of the surface of the land.

(b) The amount of compensation for damages under Subsection (a) may be determined by any formula agreed to by the oil and gas developer and the surface owner.

(c) A surface owner may assign the surface owner's right to compensation for damages described by Subsection (a) to a tenant of the surface owner.

Sec. 93.104. SURFACE USE AGREEMENT FOR PAYMENT OF DAMAGES. (a) At the time notice required by Section 93.051 is given to a surface owner, the oil and gas developer shall give to the surface owner a written offer to pay compensation for damages as provided by Section 93.103.

(b) The surface owner may accept or reject the offer. An acceptance of the offer must be in writing. A failure to accept a proposed agreement within 20 days of receipt of the agreement is deemed to be a rejection of the agreement by the surface owner.

SUBCHAPTER D. RESTORATION OF SURFACE REQUIRED

Sec. 93.151. RESTORATION OF SURFACE. After the cessation of oil and gas operations, an oil and gas developer shall restore the surface to a condition that is substantially the same as existed before the developer began operations.

SUBCHAPTER E. ENFORCEMENT

Sec. 93.201. ADMINISTRATIVE PENALTY. The commission may impose an administrative penalty in an amount and in the manner provided by Sections 81.0531-81.0534 on a person who violates this chapter.

Sec. 93.202. CALCULATION OF PENALTIES AND COSTS IN CIVIL SUIT. In a civil action brought by a surface owner or oil and gas developer alleging a violation of this chapter the prevailing party may be awarded:

(1) attorney's fees and costs if:

(A) the oil and gas developer conducts oil and gas operations that exceed the scope provided for by a surface use agreement entered into with the surface owner or conducts oil and gas operations without providing notice under Section 93.051 or depositing a bond or other security under Section 93.052; or

(B) the surface owner does not exercise good faith in complying with the terms of a surface use agreement entered into with an oil and gas developer; or

(2) attorney's fees, costs, and treble damages if the court finds that:

(A) either party wilfully and knowingly violates a surface use agreement entered into by the parties; or

(B) the developer wilfully and knowingly conducts oil and gas operations without providing notice under Section 93.051 or depositing a bond or other security under Section 93.052.

SECTION 2. (a) Except as provided by Subsection (b) of this section, the change in law made by this Act applies only to liability for damage to the surface of land caused by the use of the surface for oil and gas operations on or after the effective date of this Act. Liability for damage to the surface of land caused by the use of the surface for oil and gas operations before the effective date of this Act is governed by the law in effect on the date the damage was caused, and that law is continued in effect for that purpose.

(b) Section 93.151, Natural Resources Code, as added by this Act, applies to any well that is not plugged and abandoned on or before the effective date of this Act.

SECTION 3. This Act takes effect September 1, 2013.