H. B. 3023
(By Delegates Brown, Martin, Argento,
Paxton, M. Poling, D. Poling, Moye,
Moore, Fleischauer, Manypenny
and Rodighiero)
[Introduced January 13, 2010
; referred to the
Committee on Energy, Industry and Labor, Economic Development and
Small Business then the Judiciary .]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §22-5A-1, §22-5A-2,
§22-5A-3, §22-5A-4, §22-5A-5, §22-5A-6, §22-5A-7, §22-5A-8,
§22-5A-9, §22-5A-10 and §22-5A-11; to amend and reenact
§22-6-6 of said code; to amend and reenact §22-7-3, §22-7-5
and §22-7-7 of said code; and to amend said code by adding two
new sections, designated §22-7-5a and §22-7-9 of said code;
all relating to rights, administration and enforcement of oil
and gas wells; and surface owner bill of rights.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §22-5A-1, §22-5A-2,
§22-5A-3, §22-5A-4, §22-5A-5, §22-5A-6, §22-5A-7, §22-5A-8,
§22-5A-9, §22-5A-10 and §22-5A-11; to amend and reenact §22-6-6 of
said code; to amend and reenact §22-7-3, §22-7-5 and §22-7-7 of
said code; and to amend said code by adding two new sections, designated §22-7-5a and §22-7-9 of said code, all to read as
follows:
ARTICLE 5A. OIL AND GAS SURFACE OWNER'S BILL OF RIGHTS.
§22-5A-1. Findings and purpose.
(a) The Legislature finds that the owner of the surface of
property where an oil or gas lease operator intends to drill a well
in many cases does not also own the minerals or any right to the
royalty or any other benefit from the drilling of the well on, or
the production of oil or gas from under, the surface owner's
property.
(b) Even where the surface owner also owns the minerals, the
surface owner may have signed a "standard" lease that provides
little or no means to have the surface owners rights recognized.
(c) The construction of an oil or gas well site, the
construction of access road to the well site, the laying of a
pipeline from wells on the surface owners land, and often
neighboring lands, has an enormous impact on value, use and
enjoyment of the surface owner's land.
(d) Under the common law, unless changed by the terms of a
severance deed or a lease, the operator who intends to drill an oil
or gas well on the surface owner's property only has the right to
do what is "fairly necessary" in order to produce the oil or gas;
the operator must give "due regard" to or "accommodate" the
interest of the surface owner.
(e) The only notice to the surface owner required by state
code when an operator plans to drill a well on a surface owner is
the requirement that the operator give the surface owner a copy of
the operator's application to the state for a permit to drill an
oil or gas well on the surface owner's land. This notice is only
required to be given to the surface owner at the time the
application is filed and already contains a well site location and
access road location that the operator has already chosen and
surveyed, and for which the operator has already prepared a soil
erosion and sediment control plan. The operator may come onto the
land and even send surveyors to mark well sites and road locations
to choose the well site and road locations to put in the permit
without notifying or communicating with to the surface owner first.
(f) The surface owner has a right to comment on the permit
application if he or she can get comments to the Office of Oil and
Gas of the Department of Environmental Protection within fifteen
days of filing the permit. However, the surface owner has no
statutory right to a hearing on the surface owner's comments on the
permit application.
(g) The surface owner's comments on the operator's drilling
permit application cannot cause the state to change the road or
well site location on the grounds that the operator is doing more
surface disturbance and so onto the surface owner's land than is fairly necessary under the common law. The state can only change
the permit for the reasons set out in the next subsection.
(h) The state can only change an operator's permit to drill an
oil or gas well based on the surface owner's comments if the
drilling activity proposed in the permit would cause erosion or
sedimentation, if the down hole casing and tubing program would
endanger water sources, if the drilling would be a safety hazard,
if the drilling would damage public lands, or if the state has
issued an actual "violation" against the operator for improper
activity relating to other wells.
(i) The state cannot change the operator's permit to drill an
oil or gas well because the operator's plans fail to recognize the
surface owner's common law rights. If the plans set out in the
permit do more than is fairly necessary, the surface owner's only
recourse is to hire a lawyer and sue in circuit court, which may
require the posting of a bond.
(j) As a result, many operators take advantage of surprise,
plus the advantages of more knowledge and years of experience on
the part of the operator compared to the surface owner who has
never had a well drilled before, plus the operator's vast
advantages of resources and lawyers compared to a citizen
landowner. As a result of these advantages, many operators fail to
give due regard to any preferences of the surface owners and they do more than is fairly necessary to the surface owner and his or
her land.
(k) Although one statute provides that many surface owners are
entitled to compensation for the use of their surface land, under
that statute the surface owners are not entitled to their land's
full market value or to the diminution in the value that the
drilling causes to the lands adjacent to the well site, access road
and pipeline, even though the surface owners are the ones who will
continue to pay taxes on the disturbed land.
(l) Although the gas will be produced from under the surface
owners land, and although the gas will be produced out of a well
placed on their land and piped to market across their land, surface
owners have no right to connect to the well or gathering pipelines
for their domestic use of the gas - at any price.
(m) The Legislature therefore exercises its police and other
powers to foster, protect, and control the exercise of the parties'
common law rights by the enactment of this article.
§22-5A-2. Definitions.
For the purposes of this article the words or terms used in
this article, and any variation of those words or terms required by
the context, have the meanings ascribed to them in article six of
this chapter unless a different meaning clearly appears from the
context.
§22-5A-3. Notices.
The notices to the surface owner required by this article
shall be given to the same persons or entities and in the same
manner as set out for notice to surface owners of the application
for a well work permit as provided in article six, section nine-a
of this chapter.
§22-5A-4. Surface use and compensation agreement.
(a) A surface use agreement must be in writing or, if the
surface owner agrees and has the ability to use it, in the form of
an authenticated electronic record.
(b) A surface use agreement shall include:
(1) The name, physical address, telephone number of the
operator, the surface owner and the mineral owner;
(2) Locations and dimensions of well sites, access roads,
pipelines, land application sites and other uses set out in a
format and in sufficient detail for the surface owner to be able to
locate them on his or her property and determine and evaluate the
effect of the operator's plan on the surface owner's interest,
including what soil and timber or other vegetation will be
disturbed;
(3) Specifications for construction of the well site, pits,
disposal areas, access roads, pipelines, and other facilities or
uses associated with the well work or for entry on to land by
motorized equipment, including without limitation temporary soil
erosion and sediment control, dimensions of all cut and fill locations, top soil banking and road grades expressed as a percent
of slope, side slope, drainage structures and their frequency, and
whether the specifications will require a waiver from the state;
(4) Specifications applicable for the life of the well
including reclamation of the well site, pits, disposal areas,
access roads, pipelines, and other facilities, uses or disturbances
of the surface lands associated with the well work including
without limitation erosion and sediment control for the life of the
well;
(5) Specifications for the temporary and permanent
revegetation of the well site, pits, disposal areas, access roads,
pipelines, and other facilities or uses associated with the well
work, road surfaces, soil preparation, seed species;
(6) Specifications for maintenance of well sites, pipelines
and access roads, including frequency or indicators of need for
maintenance including, without limitation, gating appliance
specifications and gate and access control practices;
(7) Particular specifications for maintenance at all times of
existing roads used by the surface owner that will also be utilized
by the operator, including, without limitation, gating appliance
specifications and gate practices;
(8) Compensation to the surface owner pursuant to article
seven of this chapter or the common law including, without
limitation, compensation for the value of the land disturbed by the operator pursuant to the activity for which the well work permit
will be sought, the land foreseen for occupation of the land and
used by the well site, access road and pipeline or other uses, the
foreseen diminution in value of the adjacent land, and foreseen
lost or damaged personal property, fixtures, timber and other crops
and vegetation.
(c) A surface use and compensation agreement may include any
other documents that will be included in the well permit
application including those regarding casing and cementing and land
application of pit waste.
(d) A surface use and compensation agreement may include a
statement of no objection as provided in article twenty one,
section twelve of this chapter.
(e) A surface use and compensation agreement may not waive
damages for breach of the agreement, for pollution of water sources
or supplies not identified in the agreement, for negligence or
failure to perform tasks in a workmanlike manner, or for unforeseen
damages.
§22-5A-5. Notice of initial entry upon surface lands.
(a) At least fifteen days before entering upon the surface
land for inspection, measurements, surveying or other evaluation of
proposed access routes and sites for either new well work or roads
or other work requiring disturbance of the surface that has not
been disturbed before by the operator of an oil or gas well, an operator shall provide notice of the fact that the operator is
entering the surface land and of the general purposes for such
entry. The fifteen days begins to run from the surface owner's
actual receipt of the notice or refusal to accept the notice. The
fifteen days notice before entry may be waived by a surface owner
in writing. A surface use and compensation agreement is not valid
unless it is finalized and signed at least fifteen days after
receipt of the notice provided in this section.
(b) The notice shall include:
(1) The name, mailing address and physical address of the
operator, and a land line telephone number if one exists, a cell
phone number if one exists, and an e-mail address or other
electronic contact information if any exist for the actual person
or persons who may come onto the land representing the operator,
the person with authority to make decisions regarding the access
road, well site and pipelines, and their supervisors;
(2) The anticipated, approximate dates and times of entry onto
the surface land;
(3) A copy of the West Virginia Oil and Gas Production
Compensation Act;
(4)A copy of this article, and other statutes regarding the
surface owner's rights to notice of, and to comment upon, the well
work permit, together with any rules arising from those statutes;
(5) A copy of the soil erosion and sediment control manual of
the Office of Oil and Gas of the State of West Virginia;
(6) A copy of an explanation of the surface owner's rights to
challenge the real property tax assessment of their land after the
drilling of the well. The use of a form prepared by an agency of
state government shall be presumed to be proper notice of these
rights; and
(7) An offer to meet with the surface owner either on the land
or, at the option of the surface owner, at another mutually agreed
location. The offer to meet shall be to meet prior to or at the
time of the first entry.
(c) At the meeting the operator shall point out and explain
his or her preference for locations of well sites, shall consider
the surface owner's suggestions for alternate locations, and if the
surface owner's suggestion cannot be used, shall state and make a
record of the reasons it cannot be used. The surface owner shall
state his or her preference for access roads and pipelines to the
proposed sites and consider the operator's suggestions for
alternative road locations, and if the surface owner's suggestion
cannot be used, the operator shall state and make a record of the
reasons it cannot be used.
§22-5A-6. Notice of planned surface use; mediation.
(a) This section does not apply if the operator and the
surface owner have entered into an agreed surface use and compensation agreement in compliance with section six of this
article that, by separate signature, waives the requirements of
this section.
(b) Before filing an application for a well work permit the
operator shall give the surface owner notice of the planned well
work.
(c) The notice of the planned well work shall include:
(1) The name of the operator, the mailing and physical address
of the operator and the name, land line telephone number if any,
cell phone number if any, and e-mail or other electronic contact
information if any of the individual with authority to negotiate a
surface use and compensation agreement plus, at the option of the
operator, any other individual working for the operator; and
(2) A proposed surface use and compensation agreement as set
out in section seven of this article.
(d) The notice of planned well work shall include a statement
that if the parties cannot agree to a surface use and compensation
agreement, then either party may request that the parties enter
into private mediation to attempt to reach an agreement not less
than fifteen days nor more than thirty days from the receipt of the
notice of planned well work by the surface owner, and a statement
that the office of oil and gas may have an explanation of the
agreed private mediation process.
(e) Either party may request that the parties enter into
agreed private mediation not less than fifteen nor more than thirty
days after the notice of planned well work is received. The
mediator may be a person licensed as a real estate agent, a person
licensed as a real estate appraiser, or a person licensed as a
forester, and each of those licensing agencies is authorized within
the limits of existing funding, but not required, to provide
mediation training to its licensees, to charge the cost thereof,
and to maintain a list of those who have completed the training
available that is available to the public. A person who is a
member of the West Virginia State Bar who has completed State Bar
mediation training may also be a mediator. The parties may agree
to the use of a mediator who does not meet these requirements. The
office of oil and gas may, but is not required, to provide a
brochure explaining the mediation process and possible sources of
mediators. Any such brochure shall be provided to the surface
owner by the operator when the operator requests the mediation, or
in response to a surface owner's request for mediation. The office
of oil and gas may create a written agreed private mediation form,
but the form does not have to be used and the mediation agreement
does not have to be in writing. The private mediation agreement
shall include a method of sharing the cost. The private mediation
agreement shall include an agreement on a mediator or on a person
to select a mediator. The mediator shall schedule the mediation within twenty days of the agreement. The mediation shall follow
standard mediation practices. Each party must send a person to the
mediation with authority to enter into a surface use and
compensation agreement. Parties may be represented by an attorney.
The mediation shall be completed within thirty days of the request
for agreed private mediation. The report of the mediation shall be
documented in writing. Agreements reached through mediation are
binding and enforceable. If the parties cannot come to a private
mediation agreement on the mediator or other aspects of the
process, then the mediation shall not proceed.
(f) Notwithstanding article six, chapter eleven of this code,
unless the operator submits an agreed surface use and compensation
agreement with the permit application that, by separate signature,
waives the requirements of this section, no well work permit
application shall be submitted to the office of oil and gas until
forty-five days after the notice has been received by the surface
owner. However, if a party makes a request for agreed private
mediation within thirty days of receipt by the surface owner of the
notice of planned well work, a permit application may not be
submitted until sixty days after the service of the notice of
planned surface use. The surface use agreement so submitted may
also include a separately signed statement of no objections as
provided in article six of this chapter.
§22-5A-7. Effect of surface use and compensation agreement; bond.
(a) If a statement of no objections is included in a surface
use and compensation agreement as provided in article six of this
chapter, the director may issue a permit at any time without
waiting for any comment from the surface owner. However, the
surface owner may still comment: (1) On any provision of the
permit that was not supplied to the surface owner prior to signing
the statement of no objection; and (2) on any documents that
contains provisions inconsistent with the surface use and
compensation agreement or documents included with the surface use
and compensation agreement. The director shall deny or condition
a permit if it is inconsistent with a surface use and compensation
agreement or document included with the surface use and
compensation agreement.
(b) If an agreed upon surface use and compensation agreement
is not submitted with the permit application, no permit may issue
pursuant to article six, chapter eleven of this code unless the
operator submits proof that it has furnished a surety bond, letter
of credit from a banking institution or a certificate of deposit
for the benefit of the surface owner in the amount of $20,000 for
each permitted well work. The surety bond, letter of credit, cash
or certificate of deposit shall only be released by the surety
company, financial institution or state if:
(1) The operator and the surface owner enter into an agreed
surface use and compensation agreement before reclamation has been
completed;
(2) The surface owner signs a release after reclamation has
been completed regarding compensation for damages;
(3) The operator provides proof that it has paid an amount for
surface owner compensation determined by binding arbitration
pursuant to article seven of this chapter;
(4) The operator provides proof that it has paid a judgement
in favor of the surface owner entered by a magistrate court or a
circuit court of this state or a federal court; or
(5) As provided in article seven, section five-a of this
chapter.
§22-5A-8. Purchase of gas by surface owners.
(a) Where the owner of the surface on which a gas well has
been drilled is not entitled to or is not given free gas and does
not have access to gas from a regulated utility, the surface owner
shall have the option of connecting to the well or, at the option
of the well operator, to another well or any gathering line to the
well or another well in order to obtain gas service for one
residence or farm, or residence and associated farm.
(b) The surface owner is responsible for all of the reasonable
actual costs of making the connection.
(c) The operator may set reasonable conditions to assure the
safety and integrity of its system in a surface use and
compensation agreement or another agreement.
(d) The operator may require the surface owner to pay for the
gas at a price no greater than that used to determine the royalty
owner's payment and may set a maximum amount if the surface owner's
use of a greater amount than the maximum would interfere with the
operation of or production from the gas well.
(e) The operator has the duty to warn of known dangers
relating to the surface owner's use of the gas, but is otherwise
not liable for ordinary negligence.
(f) The operator may have reasonable rules for the safe and
reliable purchase and use of the gas by the surface owner.
(g) Notwithstanding other statues or rules or case law, a
person who receives well head or gathering line gas pursuant to
this section is not a "residential customer" for the purpose of
determining whether a natural gas producer is a public utility.
§22-5A-9. Options for surface use and revegetation.
(a) The office of oil and gas shall include in its soil
erosion and sediment control manual alternatives for road
construction that include the interests of the surface owner for a
permanent road intended for regular travel through his or her
property or a road that has minimal impacts upon the property, and
alternatives for revegetation with fast growing, wildlife, or native seed species or other individually negotiated seed species
subject to approval by the chief.
(b) Any requirement of the soil erosion and sediment control
manual that can be waived by the inspector of the office of oil and
gas can only be waived if the surface owner also agrees in writing.
If the surface owner is a natural person or persons, the waiver
must be in writing and separately signed from other waivers.
(c) "Daylighting", the practice of clearing woody material
back from the roadway in an attempt to accelerate drying of the
road surface, may only be used with the written consent of the
surface owner.
§22-5A-10. Waiver.
Except as expressly provided, the provisions of this article
may not be waived.
§22-5A-11. Effective dates.
Sections one, two, three, four, five, six, seven and nine
shall apply to all permits issued more than ninety days from
passage. Section eight shall take effect ninety days from passage.
Subsections (b) and (c) of section nine take effect from passage.
Subsection (a) of section nine takes effect September 1, 2009.
ARTICLE 6. OFFICE OF OIL AND GAS; OIL AND GAS WELLS;
ADMINISTRATION; ENFORCEMENT.
§22-6-6. Permit required for well work; permit fee; application;
soil erosion control plan.
(a) It is unlawful for any person to commence any well work,
including site preparation work which involves any disturbance of
land, without first securing from the director a well work permit.
An application may propose and a permit may approve two or more
activities defined as well work.
(b) The application for a well work permit shall be
accompanied by applicable bond as prescribed by section twelve,
fourteen or twenty-three of this article, and the applicable plat
required by section twelve or fourteen of this article.
(c) Every permit application filed under this section shall be
verified and shall contain the following:
(1) The names and addresses of: (i) The well operator; (ii)
the agent required to be designated under subsection (e) of this
section; and (iii) every person whom the applicant must notify
under any section of this article together with a certification and
evidence that a copy of the application and all other required
documentation has been delivered to all such persons;
(2) The name and address of every coal operator operating coal
seams under the tract of land on which the well is or may be
located, and the coal seam owner of record and lessee of record
required to be given notice by section twelve, if any, if said
owner or lessee is not yet operating said coal seams;
(3) The number of the well or such other identification as the
director may require;
(4) The type of well;
(5) The well work for which a permit is requested;
(6) The approximate depth to which the well is to be drilled
or deepened, or the actual depth if the well has been drilled;
(7) Any permit application fee required by law;
(8) If the proposed well work will require casing or tubing to
be set, the entire casing program for the well, including the size
of each string of pipe, the starting point and depth to which each
string is to be set, and the extent to which each such string is to
be cemented;
(9) If the proposed well work is to convert an oil well or a
combination well or to drill a new well for the purpose of
introducing pressure for the recovery of oil as provided in section
twenty-five of this article, specifications in accordance with the
data requirements of section fourteen of this article;
(10) If the proposed well work is to plug or replug the well:
(i) Specifications in accordance with the data requirements of
section twenty-three of this article; (ii) a copy of all logs in
the operator's possession as the director may require; and (iii) a
work order showing in detail the proposed manner of plugging or
unplugging the well, in order that a representative of the director
and any interested persons may be present when the work is done.
In the event of an application to drill, redrill or deepen a well,
if the well work is unsuccessful so that the well must be plugged and abandoned, and if the well is one on which the well work has
been continuously progressing pursuant to a permit, the operator
may proceed to plug the well as soon as the operator has obtained
the verbal permission of the director or the director's designated
representative to plug and abandon the well, except that the
operator shall make reasonable effort to notify as soon as
practicable the surface owner and the coal owner, if any, of the
land at the well location, and shall also timely file the plugging
affidavit required by section twenty-three of this article;
(11) If the proposed well work is to stimulate an oil or gas
well, specifications in accordance with the data requirements of
section thirteen of this article;
(12) The erosion and sediment control plan required under
subsection (d) of this section for applications for permits to
drill; and
(13) Any other relevant information which the director may
require by rule.
(d) An erosion and sediment control plan shall accompany each
application for a well work permit. except for a well work permit
to plug or replug any well Such plan shall contain methods of
stabilization and drainage, including a map of the project area
indicating the amount of acreage disturbed, including without
limitation acreage disturbed for pipelines and the type and spacing
of access road drainage structures. The erosion and sediment control plan shall meet the minimum requirements of the West
Virginia erosion and sediment control manual as adopted and from
time to time amended by the division, in consultation with the
several soil conservation districts pursuant to the control program
established in this state through section 208 of the federal Water
Pollution Control Act Amendments of 1972 (33 U.S.C. 1288). The
erosion and sediment control plan shall become part of the terms
and conditions of a well work permit, except for a well work permit
to plug or replug any well, which is issued and the provisions of
the plan shall be carried out where applicable in the operation.
The erosion and sediment control plan shall set out the proposed
method of reclamation which shall comply with the requirements of
section thirty of this article.
(e) The well operator named in such application shall
designate the name and address of an agent for such operator who
shall be the attorney-in-fact for the operator and who shall be a
resident of the State of West Virginia upon whom notices, orders or
other communications issued pursuant to this article or article
eleven, chapter twenty-two, may be served, and upon whom process
may be served. Every well operator required to designate an agent
under this section shall within five days after the termination of
such designation notify the director of such termination and
designate a new agent.
(f) The well owner or operator shall install the permit number
as issued by the director in a legible and permanent manner to the
well upon completion of any permitted work. The dimensions,
specifications and manner of installation shall be in accordance
with the rules of the director.
(g) The director may waive the requirements of this section
and sections nine, ten and eleven of this article in any emergency
situation, if the director deems such action necessary. In such
case the director may issue an emergency permit which would be
effective for not more than thirty days, but which would be subject
to reinsurance by the director.
(h) The director shall deny the issuance of a permit if the
director determines that the applicant has committed a substantial
violation of a previously issued permit, including the erosion and
sediment control plan, or a substantial violation of one or more of
the rules promulgated hereunder and whether or not a finding or
order has been made pursuant to sections three and four of this
article. If a finding or order has been made pursuant to sections
three and four of this article, the permit shall not be denied
unless the applicant has failed to abate or seek review of the
violation within the time prescribed by the director pursuant to
the provisions of sections three and four of this article and the
rules promulgated hereunder, which time may not be unreasonable.
Provided, That However, in the event that the director does find that a substantial violation has occurred and that the operator has
failed to abate or seek review of the violation in the time
prescribed, the director may suspend the permit on which said
violation exists, after which suspension the operator shall
forthwith cease all well work being conducted under the permit.
Provided, however, That However, the director may reinstate the
permit without further notice, at which time the well work may be
continued. The director shall make written findings of any such
determination and may enforce the same in the circuit courts of
this state and the operator may appeal such suspension pursuant to
the provisions of section forty of this article. The director
shall make a written finding of any such determination.
(i) Any person who violates any provision of this section
shall be guilty of a misdemeanor and, upon conviction thereof,
shall be fined not more than $5,000, or be imprisoned confined in
the county jail not more than twelve months, or both fined and
imprisoned confined.
ARTICLE 7. OIL AND GAS PRODUCTION DAMAGE COMPENSATION.
§22-7-3. Compensation of surface owners for drilling operations.
(a) The oil and gas developer shall be obligated to pay the
surface owner compensation for:
(1) Lost income or expenses incurred as a result of being
unable to dedicate land actually occupied by the driller's
operation or to which access is prevented by such drilling operation to the uses to which it was dedicated prior to
commencement of the activity for which a permit was obtained
measured from the date the operator enters upon the land until the
date reclamation is completed;
(2) The market value of crops destroyed, damaged or prevented
from reaching market;
(3) Any damage to a water supply in use prior to the
commencement of the permitted activity;
(4) The cost of repair of personal property up to the value of
replacement by personal property of like age, wear and quality; and
(5) The diminution in value, if any, of the surface lands and
other property after completion of the surface disturbance done
pursuant to the activity for which the permit was issued determined
according to the actual use made market value thereof by the
surface owner immediately prior to the commencement of the
permitted activity, including the surface lands actually disturbed,
and any adjacent surface lands the market value of which is
diminished by the presence of the well and the surface disturbance
and other appurtenances.
The amount of damages may be determined by any formula
mutually agreeable between the surface owner and the oil and gas
developer.
(b) Any reservation or assignment of the compensation provided
in this section apart from the surface estate except to a tenant of
the surface estate is prohibited.
(c) In the case of surface lands owned by more than one person
as tenants in common, joint tenants or other coownership, any claim
for compensation under this article shall be for the benefit of all
such coowners. The resolution of a claim for compensation provided
in this article shall operate as a bar to the assertion of
additional claims under this section arising out of the same
drilling operations.
§22-7-5. Notification of claim.
Any surface owner, to receive compensation under section three
of this article, shall notify the oil and gas developer of the
damages sustained by the person within at any time after ninety
days after the drilling rig is removed from the site, but no later
than two years after the date that the oil and gas developer files
notice that reclamation is commencing under section thirty, article
six of this chapter. Such notice shall be given to surface owners,
by delivering it in person, or by registered or certified mail,
return receipt requested, and shall be complete upon mailing. If
more than three tenants in common or other coowners hold interests
in such lands, the developer may give such notice to the person
described in the records of the sheriff required to be maintained
pursuant to section eight, article one, chapter eleven-a of this code, or and to any other owner requesting a copy or if neither a
current location for personal service nor a mailing address for
registered or certified mail notice can be obtained after
reasonable diligence, and no other owner has requested a copy
publish in the county in which the well is located or to be located
a Class II legal advertisement as described in section two, article
three, chapter fifty-nine of this code, containing such notice and
information as the director shall prescribe by rule.
§22-7-5a. Notification of claim by certain operators.
An operator who has posted a bond pursuant to section four,
article seven-a, chapter twenty-two of this code that has not been
released may make an offer of settlement to the surface owner by
hand delivery in the same manner as provided in subdivision (2),
subsection (a) and subsection (b), section nine, article six,
chapter twenty-two of this code.
(1) If the surface owner accepts the offer and the
compensation is paid, then the bond required by section four,
article seven-a, chapter twenty-two of this code shall be released.
(2) If the surface owner rejects the offer and elects binding
arbitration the bond shall be released at the end of the
arbitration or one year from the election of arbitration, which
ever is earlier.
(3) If the surface owner files an action for compensation in
circuit court the bond shall be released when the action is dismissed or within two years of the filing of the action,
whichever is earlier.
(4) If the surface owner neither elects arbitration nor files
an action in circuit court the bond shall be released after the
later of:
(A) The last day for the surface owner to elect arbitration
under this section; or
(B) The last day upon which a surface owner may notify the oil
and gas developer of the damages sustained as set out in section
five of this article. However, in order for the bond to be
released under this subdivision, the operator must have provided a
notice to the surface owner not less than three calendar months nor
more than one calendar year before the last day which states the
last calendar day before the deadline passes and notifies the
surface owner that that is the last day to notify the oil and gas
developer of the damages sustained to begin a claim for damages
pursuant to the oil and gas production damages compensation act.
§22-7-7. Rejection; legal action; arbitration; fees and costs.
(a) Unless the oil and gas developer has paid the surface
owner a negotiated settlement of compensation within sixty days
after the date the notification of claim was mailed under section
five of this article, the surface owner may within eighty days
after the notification mail date, either: (i) Bring an action for
compensation pursuant to this article in the circuit court of the county in which the well is located within the statute of
limitations for a common law damages action; or (ii) within one
hundred twenty days after the notification mail date, elect
instead, by written notice delivered by personal service or by
certified mail, return receipt requested, to the designated agent
named by the oil and gas developer under the provisions of section
six, article six of this chapter, to have his or her compensation
finally determined by binding arbitration pursuant to article ten,
chapter fifty-five of this code. A surface owner may not proceed
in circuit court after receiving an arbitration award pursuant to
this article.
Settlement negotiations, offers and counter-offers between the
surface owner and the oil and gas developer shall not be admissible
as evidence in any arbitration or judicial proceeding authorized
under this article, or in any proceeding resulting from the
assertion of common law remedies.
(b) The compensation to be awarded to the surface owner shall
be determined by a panel of three disinterested arbitrators. The
first arbitrator shall be chosen by the surface owner in such
party's notice of election under this section to the oil and gas
developer; the second arbitrator shall be chosen by the oil and gas
developer within ten days after receipt of the notice of election;
and the third arbitrator shall be chosen jointly by the first two
arbitrators within twenty days thereafter. If they are unable to agree upon the third arbitrator within twenty days, then the two
arbitrators are hereby empowered to and shall forthwith submit the
matter to the court under the provisions of section one, article
ten, chapter fifty-five of this code, so that, among other things,
the third arbitrator can be chosen by the judge of the circuit
court of the county wherein the surface estate lies.
(c) The following persons shall be deemed interested and not
be appointed as arbitrators: Any person who is personally
interested in the land on which rotary drilling is being performed
or has been performed, or in any interest or right therein, or in
the compensation and any damages to be awarded therefor, or who is
related by blood or marriage to any person having such personal
interest, or who stands in the relation of guardian and ward,
master and servant, principal and agent, or partner, real estate
broker, or surety to any person having such personal interest, or
who has enmity against or bias in favor of any person who has such
personal interest or who is the owner of, or interested in, such
land or the oil and gas development thereof. No person shall be
deemed interested or incompetent to act as arbitrator by reason of
being an inhabitant of the county, district or municipal
corporation wherein the land is located, or holding an interest in
any other land therein.
(d) The panel of arbitrators shall hold hearings and take such
testimony and receive such exhibits as shall be necessary to determine the amount of compensation to be paid to the surface
owner. However, no award of compensation shall be made to the
surface owner unless the panel of arbitrators has first viewed the
surface estate in question. A transcript of the evidence may be
made but shall not be required.
(e) Each party shall pay the compensation of such party's
arbitrator and one half of the compensation of the third
arbitrator, or such party's own court costs as the case may be.
§22-7-9. Effective date of amendments.
The amendments to this article made by the regular session of
the 2009 Legislature take effect for all well work for which a
notice that the operator is commencing reclamation pursuant to
section five of this article has not been sent.
NOTE: The purpose of this bill is to enhance the exercise of
the state's police powers regarding the rights of surface owners
and drillers when oil and gas wells are drilled on the surface
owner's land by:
?Enacting procedures to encourage the recognition of the
existing common law and statutory rights of surface owners as oil
and gas well operators begin drilling new wells or performing other
well work on the surface owners' land. The existing, statutory,
waivable right of the surface owners to comment on how, but not
where, the well sites, access roads etc. are built during the state
permit application process remains waivable. If the surface owner
and the operator enter into a "surface use and compensation
agreement" determining where the well site and access road are
built and other aspects of the driller's activity, the bill only
adds a new fifteen day nonwaivable notice to the surface owners,
and the surface owner's existing fifteen day right to comment on
the well work permit can still be waived as part of the agreement.
If the operator and surface owner cannot agree, the operator can
limit the delay caused by the new procedures to sixty days.
?Enacting an option for the surface owners to purchase gas to
heat their homes from the wells being drilled on the surface
owners' property.
?Amending the Oil and Gas Production Compensation Act to
require that surface owners be compensated for the loss of use of
the surface owner's land for the well site and access road at its
market value, and to require that surface owners be compensated for
the decrease in market value of the surface owners' other land
caused by the placement of a well site and access road on the
surface owners' lands.
?Making other changes to current statutes.
§22-5A, §22-7-7a and §22-7-9 are new; therefore,
strike-throughs and underscoring have been omitted.
[Actually they are underlined in this draft to make it easier
to see the changes.]
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
Table of Contents
ARTICLE 5A. OIL AND GAS SURFACE OWNER'S BILL OF RIGHTS.1
22-5A-1. Findings and purpose.1
22-5A-2. Definitions.4
22-5A-3. Notices.4
22-5A-4. Surface use and compensation agreement.4
22-5A-5. Notice of initial entry upon surface lands.6
22-5A-6. Notice of planned surface use; mediation.8
22-5A-7. Effect of surface use and compensation agreement;
bond.10
22-5A-8. Purchase of gas by surface owners.11
22-5A-9. Options for surface use and re-vegetation.12
22-5A-10. Waiver.13
22-5A-11. Effective dates.13
ARTICLE 6. OFFICE OF OIL AND GAS; OIL AND GAS WELLS;
ADMINISTRATION; ENFORCEMENT.13
22-6-6. Permit required for well work; permit fee;
application; soil erosion control plan.13
ARTICLE 7. OIL AND GAS PRODUCTION DAMAGE COMPENSATION.17
22-7-3. Compensation of surface owners for drilling
operations.17
22-7-5. Notification of claim.18
22-7-5A. Notification of claim by certain operators.19
22-7-7. Rejection; legal action; arbitration; fees and
costs.20
22-7-9. Effective date of amendments.22