Committee Substitute for HB0437AGS

HOUSE AGRICULTURE AND WATER RESOURCES COMMITTEE SUBSTITUTE FOR

HOUSE BILL 437

47th legislature - STATE OF NEW MEXICO - second session, 2006

AN ACT

RELATING TO THE PRODUCTION OF OIL OR GAS; ENACTING THE SURFACE OWNERS PROTECTION ACT; STATING CERTAIN DUTIES OWED BY OIL AND GAS OPERATORS TO SURFACE OWNERS; REQUIRING NOTICE TO THE SURFACE OWNER OF OIL OR GAS OPERATIONS; REQUIRING A BOND OR OTHER SURETY IN CERTAIN CIRCUMSTANCES; PROVIDING A CAUSE OF ACTION.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. SHORT TITLE.--This act may be cited as the "Surface Owners Protection Act".

Section 2. APPLICABILITY.--The Surface Owners Protection Act applies to private fee surface land only.

Section 3. DEFINITIONS.--As used in the Surface Owners Protection Act:

A. "oil or gas operations" means all activities associated with exploration, drilling or production of oil or gas through final reclamation of the affected surface;

B. "operator" means a person with the legal right to conduct oil or gas operations and includes the agents, employees and contractors of that person;

C. "reclaim" means to make reasonable efforts to restore the surface directly affected by oil or gas operations to the condition that existed prior to oil or gas operations, or as otherwise agreed to in writing by the operator and surface owner;

D. "surface owner" means a person who holds legal or equitable title, as shown in the records of the county clerk, to the surface of the property on which oil or gas operations are to take place; and

E. "surface use and compensation agreement" means an agreement between an operator and a surface owner specifying the rights and obligations of the surface owner and the operator concerning oil or gas operations.

Section 4. COMPENSATION AND LIABILITY FOR OIL OR GAS OPERATIONS.--

A. An operator shall compensate the surface owner for damages caused as a direct result of the operator's oil or gas operations. The operator shall not be responsible for allocating compensation between the surface owner and any tenant.

B. An operator has a duty to reclaim all surface directly affected by the operator's oil or gas operations.

Section 5. NOTICE OF OPERATIONS--PROPOSED SURFACE USE AND COMPENSATION AGREEMENT--OFFER TO NEGOTIATE.--

A. Prior to initial entry upon the land for activities that do not disturb the surface, including inspections, staking, surveys, measurements and general evaluation of proposed routes and sites for oil or gas operations, the operator shall provide at least five business days' notice by certified mail or hand delivery to the surface owner.

B. No less than thirty days before first entering the surface of the land to conduct oil or gas operations, an operator shall, by certified mail or hand delivery, give the surface owner notice of the planned oil or gas operations. The notice shall include:

(1) sufficient disclosure of the planned oil or gas operations to enable the surface owner to evaluate the effect of the operations on the property;

(2) the name, address, telephone number and, if available, facsimile number and electronic mail address of the operator and the operator's authorized representative; and

(3) a proposed surface use and compensation agreement addressing, at a minimum, the following issues:

(a) placement, specifications, maintenance and design of well pads, gathering pipelines and roads to be constructed for oil or gas operations;

(b) terms of ingress and egress on the surface of the land for oil or gas operations;

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

(e) removal and restoration of plant life;

(f) surface water drainage changes;

(g) erosion control and actions to limit and effectively control precipitation runoff and erosion;

(h) control and management of noise, weeds, dust, traffic, trespass, litter and interference with the surface owner's use;

(i) interim and final reclamation; and

(j) an offer of compensation for damages to the surface resulting from the oil or gas operations.

C. The notices required by this section shall be given to the surface owner at the address shown by the records of the county clerk at the time that the notice is given. If legal title and equitable title are not held by the same person, notice shall be given to both the holder of legal title and to the holder of equitable title at the addresses shown by the records of the county clerk at the time that the notice is given.

D. Upon receipt of the notice required by Subsection B of this section, the surface owner may, within twenty days of receiving the notice, accept the proposed surface use and compensation agreement, including the offer of compensation.

E. Notices required by the Surface Owners Protection Act shall be deemed to have been received five days after mailing by certified mail or immediately upon hand delivery.

Section 6. ENTRY WITHOUT AGREEMENT--BOND.--If, after thirty days from a surface owner receiving notice pursuant to Subsection B of Section 5 of the Surface Owners Protection Act, no surface use and compensation agreement has been entered into, the operator may enter the surface owner's property and conduct oil or gas operations after posting a bond or other surety with the oil conservation division of the energy, minerals and natural resources department. Pursuant to rules of the oil conservation commission, the bond or surety shall be:

A. for the benefit of the surface owner; and

B. in an amount equal to the greater of:

(1) the compensation, as estimated by the operator, for damages; or

(2) two thousand five hundred dollars ($2,500) per well site.

Section 7. CAUSE OF ACTION.--In an action brought pursuant to the Surface Owners Protection Act, the court may award the prevailing party attorney fees if:

A. the operator conducted oil or gas operations without providing notice as required by Subsection B of Section 5 of the Surface Owners Protection Act;

B. the operator conducted oil or gas operations without a surface use and compensation agreement and without posting a bond or other surety as required by Section 6 of the Surface Owners Protection Act;

C. in posting a bond or other surety pursuant to Section 6 of the Surface Owners Protection Act, the operator failed to exercise good faith in estimating the compensation that would be owed to the surface owner for damages; or

D. the operator conducted oil or gas operations outside the scope of a surface use and compensation agreement and, when entering into the agreement, had reason to believe that oil or gas operations would be conducted outside the scope of the agreement.

Section 8. EMERGENCY SITUATIONS.--Notwithstanding any provision of the Surface Owners Protection Act to the contrary, no notice, surface use and compensation agreement or bond shall be required for operations to protect health, safety or the environment in emergency situations.

Section 9. TEMPORARY PROVISION--APPLICABILITY.--The provisions of the Surface Owners Protection Act apply to all oil or gas operations commenced on or after July 1, 2006 except:

A. maintenance or ongoing production activities related to an oil or gas well producing or capable of producing oil or gas on June 30, 2006 for which the operator has a valid permit from the oil conservation division of the energy, minerals and natural resources department, provided that reentries, workovers and other oil or gas operations requiring a drilling rig or additional waste pits conducted on such a well are subject to that act if the activities disturb additional surface; and

B. oil or gas operations conducted within the scope of an agreement, entered into prior to July 1, 2006, between a surface owner and an operator that sets forth the rights and obligations of the parties in respect to surface activities conducted by the operator.

Section 10. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2006.

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