House Bill text for HB0219

HOUSE BILL 219

49th legislature - STATE OF NEW MEXICO - first session, 2009

INTRODUCED BY

Brian F. Egolf

AN ACT

RELATING TO AGREEMENTS FOR THE DEVELOPMENT OF OIL AND GAS; ENACTING THE FREE MARKET IN ENERGY RESTORATION ACT; REQUIRING NOTICE TO CERTAIN SURFACE OWNERS BEFORE ENTERING INTO A LEASE OR SIMILAR AGREEMENT; REQUIRING NOTICE BY THE COMMISSIONER OF PUBLIC LANDS BEFORE OFFERING CERTAIN LEASES FOR SALE; PROHIBITING THE ISSUANCE OF CERTAIN PERMITS UNDER CERTAIN CIRCUMSTANCES; PROVIDING A PENALTY.

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

Section 1. [NEW MATERIAL] SHORT TITLE.--Sections 1 through 6 of this act may be cited as the "Free Market in Energy Restoration Act".

Section 2. [NEW MATERIAL] FINDINGS AND PURPOSE.--

A. The legislature finds that:

(1) due to federal, state and private land management policies, New Mexico has millions of acres in which the surface and the mineral estates have been separated and are now owned by different persons;

(2) often the surface owner does not know that the mineral estate has been separated from the surface or does not know how to identify or locate the owner of the mineral estate;

(3) notice of an oil and gas lease or notice of imminent oil and gas operations to a surface owner often occurs only after an oil and gas operator has made a substantial investment in purchasing a lease and formulating a development plan; and

(4) early notice to a surface owner of an intent to acquire an oil and gas lease or similar agreement would allow the surface owner an equitable opportunity to negotiate independently with the owner of the mineral estate and would also allow the mineral estate owner an alternative, competitive option for benefiting from the mineral ownership.

B. The purposes of the Free Market in Energy Restoration Act are to:

(1) require advance notice to a private surface owner by an oil and gas operator of the operator's intent to acquire a lease or other development right for private minerals underlying the surface estate; and

(2) provide mineral estate owners with an alternative, competitive option for benefiting from mineral ownership.

Section 3. [NEW MATERIAL] DEFINITIONS.--As used in the Free Market in Energy Restoration Act:

A. "mineral owner" means a person who owns legal title to the mineral estate that includes the oil and gas in place underlying a surface owner's real property;

B. "oil and gas development agreement" means a lease or other agreement between a mineral owner and an operator or an operator's predecessor in interest under which the operator has the legal right to conduct oil and gas operations on the surface owner's land;

C. "oil and gas operations" means all activities affecting the surface owner's land that are associated with exploration, drilling or production of oil or gas;

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

E. "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 real property that is subject to an oil and gas development agreement.

Section 4. [NEW MATERIAL] DUTY TO NOTIFY SURFACE OWNER.--

A. Except as provided in Subsection E of this section, a person seeking to enter into an oil and gas development agreement with a mineral owner shall, before entering into the agreement, by certified mail or hand delivery, give the surface owner notice of the intent to enter into the agreement. The notice shall include:

(1) a statement that the notice is required by the provisions of the Free Market in Energy Restoration Act;

(2) a statement that the surface owner does not own the oil and gas underneath the surface and that the surface owner may be legally unable to prevent oil and gas operations on the surface owner's land;

(3) a statement that the person giving notice intends to enter into an oil and gas development agreement with the mineral owner;

(4) the name, address, telephone number and, if available, facsimile number and electronic mail address of the mineral owner; and

(5) a statement that the surface owner may be able to avoid or minimize oil and gas operations by entering into a separate agreement with the mineral owner.

B. The notice required by this section shall be delivered to the surface owner at the address shown by the records of the county clerk at the time 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 the notice is given.

C. A person sending a notice pursuant to this section shall not enter into an oil and gas development agreement with the mineral owner for thirty days following the receipt of the notice.

D. A notice required by this section shall be deemed to have been received five days after mailing by certified mail or immediately upon hand delivery.

E. A person may enter into an oil and gas development agreement with a mineral owner without giving the notice otherwise required by this section if:

(1) within the twelve months immediately preceding the date that the oil and gas development agreement is entered into, a notice has previously been given to the surface owner pursuant to the provisions of this section;

(2) the surface owner's property that was included in the previous notice is identical to the surface owner's property subject to the oil and gas development agreement; and

(3) the surface owner and the mineral owner are the same persons as in the previous notice.

Section 5. [NEW MATERIAL] FAILURE TO GIVE NOTICE.--

A. An oil and gas development agreement entered into without first giving the notice required by Section 4 of the Free Market in Energy Restoration Act or entered into during the thirty-day waiting period required by that section is void and unenforceable and any entry unto the surface owner's land in reliance upon the void agreement is a criminal and civil trespass.

B. No permit to drill or other permit to conduct oil and gas operations shall be issued by the oil conservation commission or the oil conservation division of the energy, minerals and natural resources department pursuant to the Oil and Gas Act unless the applicant certifies that:

(1) the oil and gas development agreement under which the oil and gas operations are to be conducted was entered into in compliance with the requirements of the Free Market in Energy Restoration Act; or

(2) the provisions of the Free Market in Energy Restoration Act do not apply to the applicable oil and gas development agreement.

Section 6. [NEW MATERIAL] APPLICABILITY.--The Free Market in Energy Restoration Act applies to all oil and gas development agreements, entered into after the effective date of that act, for land in which the surface owner and the mineral owner are separate persons except those oil and gas development agreements for land:

A. in which the mineral owner is the federal government or one of its agencies; or

B. in which the mineral owner is the state and that is subject to the jurisdiction of the commissioner of public lands.

Section 7. Section 19-10-17 NMSA 1978 (being Laws 1929, Chapter 125, Section 8, as amended) is amended to read:

"19-10-17. PUBLIC SALE OF RESTRICTED DISTRICT LEASES--TIME--REGULATIONS--NOTICE--MINIMUM BONUS--SEALED BIDS OR PUBLIC AUCTION AUTHORIZED--SITE OF SALE--PUBLICATION OF NOTICE--REJECTION OF BIDS--COMPLETION OF TRANSACTION.--

A. The commissioner shall hold a public sale of oil and gas leases upon lands [which] that may be open to lease and embraced within the restricted district or districts created and [which] that may be created under Section 19-10-16 NMSA 1978 on the third Tuesday of each month or on the next business day following, where the third Tuesday falls on a legal holiday, and shall offer for lease such lands in designated tracts to the highest and best bidder. All sales of leases upon competitive bidding or a public auction shall be governed by regulations issued by the commissioner not in conflict with the provisions of Chapter 19, Article 10 NMSA 1978. Notice of such sales shall be given by posting in a conspicuous place in the state land office, not less than ten days before the date of sale, a notice of the sale specifying the day and hour when and the place where the sale will be held and specifying the following for each tract to be offered for lease:

(1) a description of the lands;

(2) the form of lease to be used;

(3) the royalty rate; and

(4) the annual rental per acre to be paid.

B. The commissioner may, when it is deemed to be for the best interests of the beneficiaries of such lands, also specify a minimum bonus to be paid for the leases upon the respective tracts, and, when so specified, the bonus shall be paid in addition to the first year's rental. The notice shall also contain such other information as the commissioner may deem advisable or necessary. Sales may be conducted through sealed bids or at public auction or by both methods combined, but the method of conducting each sale shall be stated in the notice of sale required pursuant to this section. Sales may be held at the option of the commissioner either in the office of the commissioner or at the county seat of the county in which the lands, or the greater part thereof, are situated or such other place within the state as the commissioner may designate in the notice of public auction provided for in this section. If a sale includes lands in which the surface estate has been separated from the mineral estate or in which the surface estate is being sold under a purchase contract, notice of the sale shall also be given to the surface owner or purchaser of any lands included in the sale at the address shown by the records of the county clerk at the time the notice is given, and, if legal title and equitable title to the surface estate 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 the notice is given. The commissioner is also authorized to give such additional notice of the sales, either by publication in newspapers or by mailing copies of the notice of sale to interested persons, firms or corporations, as [he] the commissioner may deem necessary to give proper publicity thereto. The commissioner shall have the right to reject all bids received at any sale for the lease upon any tract but shall not reject any bids made in conformity with the regulations and provisions of Chapter 19, Article 10 NMSA 1978 without rejecting all bids applicable to the same tract of land. Leases sold at sales as provided in this section shall be awarded to the respective bidders offering the largest bonus, which shall be paid in addition to the first year's rental, or, where a minimum bonus is not specified and no offer of a bonus is received, to the bidder offering the rental specified in the notice of sale [which] that, for the first year, shall not be less than one hundred dollars ($100) for each lease as provided in Section 19-10-15 NMSA 1978. Where two or more sealed bids making the same offer for the same tract are received, the commissioner shall award the lease in accordance with such regulations as [he] the commissioner may prescribe. The successful bidders shall file proper applications for the leases purchased and shall complete the payment of any balance due on their bids before the closing of the office of the commissioner on the day of the sale."

Section 8. Section 30-14-1 NMSA 1978 (being Laws 1963, Chapter 303, Section 14-1, as amended) is amended to read:

"30-14-1. CRIMINAL TRESPASS.--

A. Criminal trespass consists of knowingly entering or remaining upon posted private property without possessing written permission from the owner or person in control of the land. The provisions of this subsection do not apply if:

(1) the owner or person in control of the land has entered into an agreement with the department of game and fish granting access to the land to the general public for the purpose of taking any game animals, birds or fish by hunting or fishing; or

(2) a person is in possession of a landowner license given to [him] the person by the owner or person in control of the land that grants access to that particular private land for the purpose of taking any game animals, birds or fish by hunting or fishing.

B. Criminal trespass also consists of knowingly entering or remaining upon the unposted lands of another knowing that such consent to enter or remain is denied or withdrawn by the owner or occupant [thereof] of the lands. Notice of no consent to enter shall be deemed sufficient notice to the public and evidence to the courts, by the posting of the property at all vehicular access entry ways.

C. Criminal trespass also consists of knowingly entering or remaining upon the posted or unposted lands of a surface owner with the intent of conducting oil and gas operations under a lease or other agreement that is void pursuant to Section 5 of the Free Market in Energy Restoration Act.

[C.] D. Criminal trespass also consists of knowingly entering or remaining upon lands owned, operated or controlled by the state or any of its political subdivisions knowing that consent to enter or remain is denied or withdrawn by the custodian [thereof] of the lands.

[D.] E. Any person who enters upon the lands of another without prior permission and injures, damages or destroys any part of the realty or its improvements, including buildings, structures, trees, shrubs or other natural features, is guilty of a misdemeanor and [he] shall be liable to the owner, lessee or person in lawful possession for civil damages in an amount equal to double the value of the damage to the property injured or destroyed.

[E. Whoever] F. Any person who commits criminal trespass is guilty of a misdemeanor. Additionally, any person who violates the provisions of Subsection A, B, [or] C or D of this section, when in connection with hunting, fishing or trapping activity, shall have [his] the person's hunting or fishing license revoked by the state game commission for a period of not less than three years, pursuant to the provisions of Section 17-3-34 NMSA 1978.

[F. Whoever] G. Any person who knowingly removes, tampers with or destroys any "no trespass" sign is guilty of a petty misdemeanor; except when the damage to the sign amounts to more than one thousand dollars ($1,000), [he or she] the person is guilty of a misdemeanor and shall be subject to imprisonment in the county jail for a definite term less than one year or a fine not more than one thousand dollars ($1,000) or to both such imprisonment and fine in the discretion of the judge.

[G.] H. This section, as amended, shall be published in all issues of "Big Game Hunt Proclamation" as published by the department of game and fish."

Section 9. A new section of the Oil and Gas Act is enacted to read:

"[NEW MATERIAL] PERMIT APPLICATION--ADDITIONAL REQUIREMENT.--

A. No permit to drill or other permit to conduct oil and gas operations shall be issued pursuant to the Oil and Gas Act unless the applicant certifies that:

(1) the applicable lease or other oil and gas development agreement under which the operations are to be conducted was entered into in compliance with the requirements of the Free Market in Energy Restoration Act; or

(2) the provisions of the Free Market in Energy Restoration Act do not apply to the lease or other oil and gas development agreement.

B. Filing a certificate pursuant to Subsection A of this section that contains statements known to the applicant to be false constitutes a violation of the Oil and Gas Act."

Section 10. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2009.

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