Senate File 2490 H-8450 Amend Senate File 2490, as passed by the Senate, as follows: 1 1. Page 1, line 11, by striking < section 458A.29 > and 2 inserting < section 458A.30 > 3 2. Page 1, after line 11 by inserting: 4 < Sec. ___. Section 458A.1, Code 2026, is amended to read as 5 follows: 6 458A.1 Declaration of policy —— interpretation —— well 7 prohibitions . 8 1. It is declared to be in the public interest to foster, 9 to encourage, and to promote the development, production, and 10 utilization of natural resources of oil and gas and metallic 11 minerals in the state in such a manner as will prevent waste; 12 to authorize and to provide for the operation and development 13 of oil and gas and metallic minerals properties in such a 14 manner that a greater ultimate recovery of oil and gas and 15 metallic minerals be had and that the correlative rights of all 16 owners be fully protected; and to encourage and to authorize 17 such measures as will result in the greatest possible economic 18 recovery of oil and gas and metallic minerals within the 19 state to the end that the landowners, the royalty owners, 20 the producers, and the general public realize and enjoy the 21 greatest possible good from these vital natural resources. It 22 is further declared that the general welfare of the people 23 requires that the underground and surface water of the state to 24 be protected from pollution and conserved in the best interests 25 of the people of the state. 26 2. Ambiguities in this chapter and in rules adopted under 27 this chapter shall be construed in favor of landowners, 28 mineral-interest owners, and royalty-interest owners. For 29 purposes of this subsection, “landowner” means a person holding 30 legal or equitable title to the surface of land, a person 31 holding a mineral interest severed from the surface, or a 32 person holding a royalty or overriding royalty interest; 33 and “ambiguity” is to be determined without deference to an 34 administrative agency’s construction of the provision at issue. 35 -1- SF 2490.4418 (1) 91 sb/js 1/ 14 #1. #2.

3. Notwithstanding any other provision of this chapter 1 or other Iowa law, no well or similar activity shall be dug 2 or placed on the real property of any person who does not 3 expressly consent to its placement. > 4 3. Page 2, line 1, by striking < the following > 5 4. Page 2, line 2, after < year > by inserting < , which 6 filings the department shall maintain in an online, searchable 7 registry, accessible to the public without fee or registration 8 and updated promptly upon receipt of each filing, the following 9 information > 10 5. Page 2, after line 14 by inserting: 11 < (6) A list of all active and pending oil, gas, and metallic 12 minerals leases held by the filer, by location and acreage. 13 (7) Summary financial information sufficient to evaluate 14 the filer’s ability to perform surface damage, restoration, and 15 abandonment obligations under this chapter. 16 (8) Confirmation of all bonds posted by the filer under 17 this chapter or under rules adopted by the department, with 18 documentation sufficient to establish current effectiveness. > 19 6. Page 3, by striking lines 1 through 4 and inserting 20 < shall provide notice of the variance request to each landowner 21 whose property is within one-half mile of the operation that 22 is the subject of the request, and shall allow a public 23 comment period of not less than fourteen days before issuing 24 a decision. The director shall issue a written decision, 25 supported by a contemporaneously public statement of reasons, 26 not later than forty-five days after receipt of the request. 27 The director shall report any variance granted at the 28 subsequent hearing and shall contemporaneously make public any 29 variance granted. A variance granted under this subsection 30 is appealable to the district court by an affected landowner 31 under the procedure set forth in section 458A.14 within thirty 32 days of the date of issuance. The filing of a notice of appeal 33 shall stay the effect of the variance pending the court’s final 34 disposition of the appeal. > 35 -2- SF 2490.4418 (1) 91 sb/js 2/ 14 #3. #4. #5.

7. Page 3, line 16, after < good cause. > by inserting 1 < Notwithstanding any designation of confidentiality under 2 this section, information subject to this section shall be 3 disclosed to a landowner within the affected area upon written 4 request, subject to execution of a nondisclosure agreement 5 sufficient to protect the information from further disclosure 6 to competitors of the submitting owner. For purposes of this 7 section, “affected area” means the lands subject to the pooling 8 order, spacing unit, or exploratory spacing unit that is the 9 subject of the submission, together with lands within one-half 10 mile thereof. > 11 8. Page 3, line 33, after < information. > by inserting 12 < Notwithstanding any other provision of this section, 13 information reported pursuant to rules adopted by the 14 commission concerning fires, breaks, leaks, or blowouts, 15 and any other information concerning safety incidents, 16 environmental contamination, or spills, shall not be designated 17 confidential under this section, regardless of any claim of 18 commercial sensitivity. > 19 9. Page 4, line 3, by striking < the permitted > and inserting 20 < the permitted > 21 10. Page 5, line 7, after < relevant. > by inserting < An 22 application for establishment of an exploratory spacing unit 23 under this subsection shall be subject to all of the following 24 conditions: > 25 11. Page 5, after line 7 by inserting: 26 < a. The department shall provide not less than sixty days’ 27 notice of the hearing to each landowner within the proposed 28 exploratory spacing unit and to each landowner whose property 29 is within one-half mile of the proposed exploratory spacing 30 unit. 31 b. The applicant’s supporting evidence shall be made 32 publicly available not later than thirty days before the 33 hearing. 34 c. Each affected landowner shall have the right to 35 -3- SF 2490.4418 (1) 91 sb/js 3/ 14 #7. #8. #9. #10. #11.

cross-examine the applicant’s technical witnesses at the 1 hearing. 2 d. The department shall make specific written findings of 3 the evidentiary basis for any determination to establish an 4 exploratory spacing unit. 5 e. An exploratory spacing unit established under this 6 subsection shall expire two years after the date of the 7 department’s order establishing the unit, unless the 8 department, upon a new application and a full evidentiary 9 hearing, determines that the existence of a pool has been 10 established and converts the exploratory spacing unit into a 11 spacing unit under subsection 1. Upon written application and 12 a showing of good cause, the department may extend the life of 13 an exploratory spacing unit for one additional period not to 14 exceed one year. > 15 12. Page 6, line 15, after < subsection 1, > by inserting < and 16 only if the producer has identified pools of existing hydrogen 17 within the spacing unit, > 18 13. Page 6, line 16, by striking < not less than twenty-five > 19 and inserting < more than seventy > 20 14. Page 6, line 17, after < spacing unit > by inserting < and 21 constituting more than seventy percent of the number of the 22 owners in the spacing unit > 23 15. Page 6, line 22, after < reasonable > by inserting < , 24 provided that no application for a pooling order shall be 25 considered by the department unless the applicant certifies, 26 under oath, that the applicant has engaged in not less than 27 ninety days of good faith negotiation with each nonconsenting 28 owner on commercially reasonable lease terms prior to the 29 filing of the application > 30 16. Page 7, line 28, by striking < two hundred > and inserting 31 < one hundred ten > 32 17. Page 7, line 31, by striking < two hundred > and inserting 33 < one hundred ten > 34 18. Page 8, line 8, by striking < twelve and one-half > and 35 -4- SF 2490.4418 (1) 91 sb/js 4/ 14 #12. #13. #14. #15. #16. #17.

inserting < twenty-five > 1 19. Page 8, line 9, after < percent. > by inserting 2 < Notwithstanding any other provision of this section, the 3 producer’s right to recover costs against a nonconsenting owner 4 under subsection 3 shall terminate five years after the date 5 of first production from the well. Upon termination of cost 6 recovery under this subsection, an unleased nonconsenting 7 owner shall be deemed to have elected to participate as a 8 working interest owner on a pro rata basis for all subsequent 9 production, net of costs actually recovered to the date of 10 termination. > 11 20. Page 8, line 15, after < notice shall > by inserting 12 < include a certified accounting of all receipts, costs, and 13 projected costs attributable to the well through the date of 14 notice, and shall > 15 21. Page 8, line 16, after < order > by inserting < as a 16 working interest owner > 17 22. Page 8, line 19, by striking < sixty > and inserting < one 18 hundred eighty > 19 23. Page 8, line 19, after < notice > by inserting < and a 20 certified accounting under paragraph “a” > 21 24. Page 8, line 23, after < subsection 4. > by inserting 22 < The accounting shall be certified by an independent certified 23 public accountant at the producer’s expense. > 24 25. Page 8, lines 26 and 27, by striking < continue 25 receiving the royalty specified in subsection 4 > and inserting 26 < participate as a working interest owner > 27 26. Page 8, after line 32 by inserting: 28 < 6. During the time the producer is recovering costs from 29 a nonconsenting owner under subsection 3, the producer shall 30 deliver to each nonconsenting owner, on a quarterly basis, a 31 written statement setting forth all of the following: 32 a. Production volumes and prices attributable to the well 33 during the reporting period. 34 b. Costs incurred and recovered to date. 35 -5- SF 2490.4418 (1) 91 sb/js 5/ 14 #19. #20. #21. #22. #23. #24. #25. #26.

c. The producer’s good faith projection of the date on which 1 cost recovery will be completed. 2 d. A computation of royalty amounts due to the nonconsenting 3 owner under subsection 4. > 4 27. Page 8, line 33, by striking < 6. > and inserting < 7. > 5 28. Page 9, line 20, by striking < 7. > and inserting < 8. > 6 29. Page 9, line 20, before < An > by inserting < Notice of a 7 pooling application shall inform each nonconsenting owner of 8 the right to be represented at the hearing by the office of 9 landowner advocacy established under section 458A.31. > 10 30. Page 9, line 27, by striking < penalty. > and inserting 11 < penalty, which shall include all of the following: 12 (1) Documented calculations of dry-hole risk based on 13 geological data and data from comparable wells in the same or 14 analogous formations. 15 (2) A sworn certification by an officer of the applicant 16 that the applicant engaged in at least ninety days of good 17 faith negotiation with the nonconsenting owner on commercially 18 reasonable lease terms prior to filing the application and 19 attaching copies of all written offers made during that period. 20 (3) A specific factual finding by the department regarding 21 the risk actually borne by the producer with respect to the 22 well. > 23 31. Page 9, before line 31 by inserting: 24 < 1. Subsections 2 through 8 shall apply only if the surface 25 owner does not own mineral rights in the spacing unit that 26 is subject to a pooling order. An operator may only enter a 27 site that is subject to a pooling order if the operator has 28 a contract with the owner of the mineral rights of the real 29 property on which the site is located. > 30 32. Page 9, line 31, by striking < 1. > and inserting < 2. > 31 33. Page 10, line 2, after < drill > by inserting < upon 32 payment of the agreed damages > 33 34. Page 10, line 3, by striking < 2. > and inserting < 3. > 34 35. Page 10, line 4, by striking < subsection 1 > and 35 -6- SF 2490.4418 (1) 91 sb/js 6/ 14 #27. #28. #29. #30. #31. #32. #33. #34.

inserting < subsection 2 > 1 36. Page 10, lines 9 and 10, by striking < After the operator 2 has petitioned for appointment of appraisers, the operator may 3 enter the site to drill. > and inserting < The operator shall not 4 enter the site with heavy equipment for the purpose of drilling 5 until the appraisers have filed their report under subsection 4 6 and the producer has either paid the recommended compensation 7 to the surface owner or deposited the recommended compensation 8 with the clerk of the district court for the benefit of the 9 surface owner. > 10 37. Page 10, line 20, after < publication. > by inserting 11 < As a condition of entry, the producer shall post a bond with 12 the clerk of the district court, payable to the surface owner, 13 in an amount equal to the greater of two hundred percent of 14 the appraisers’ recommended compensation or fifteen thousand 15 dollars per acre of surface area subject to the drilling 16 operation. The bond shall remain in effect until the drilling 17 operation is completed and all compensation, including any 18 compensation awarded upon reassessment under subsection 8, has 19 been paid. Upon producer default, insolvency, or failure to 20 remediate damages, the bond shall be available to satisfy the 21 surface owner’s claim. > 22 38. Page 10, line 21, by striking < 3. > and inserting < 4. > 23 39. Page 11, line 11, after < paid. > by inserting 24 < Compensable damages under this section include but are not 25 limited to the loss of use of land during drilling; diminution 26 of market value of the land; crop damage; livestock loss and 27 injury; damage to springs, wells, and other water sources; 28 soil compaction and restoration costs; damage to improvements, 29 fences, and drainage; lost quality of life during active 30 operations; and consequential damages to adjoining or related 31 operations. > 32 40. Page 11, line 16, by striking < 4. > and inserting < 5. > 33 41. Page 11, line 17, by striking < subsection 3 > and 34 inserting < subsection 4 > 35 -7- SF 2490.4418 (1) 91 sb/js 7/ 14 #36. #37. #38. #39. #40.

42. Page 11, line 29, by striking < subsection 3 > and 1 inserting < subsection 4 > 2 43. Page 12, line 8, by striking < 5. > and inserting < 6. > 3 44. Page 12, line 10, by striking < subsection 3 > and 4 inserting < subsection 4 > 5 45. Page 12, line 21, by striking < 6. > and inserting < 7. > 6 46. Page 12, line 22, by striking < subsection 3 > and 7 inserting < subsection 4 > 8 47. Page 12, by striking lines 31 through 35 and inserting 9 < of damages. If the damages meet or exceed ninety percent of 10 the compensation recommended in the report of the > 11 48. Page 13, line 2, after < owner. > by inserting < If 12 the damages awarded are less than ninety percent of the 13 compensation recommended in the report of the appraisers, each 14 party shall bear its own court costs and attorney fees. > 15 49. Page 13, after line 2 by inserting: 16 < 8. When operations continue beyond one year from the date 17 of the appraisers’ report under subsection 4, the surface owner 18 may petition the court annually for reassessment of continuing 19 damages. A reassessment petition shall be subject to the 20 procedures set forth in subsections 4 through 7. > 21 50. Page 13, before line 3 by inserting: 22 < Sec. ___. NEW SECTION . 458A.27 Groundwater and aquifer 23 protection. 24 1. The requirements of this section are in addition to, 25 and not in substitution for, the water strata sealing and 26 artesian water protection requirements prescribed by rule of 27 the department at 561 IAC 17.6, as in effect on the effective 28 date of this Act. 29 2. Not later than sixty days before commencing drilling of 30 any well subject to this chapter, the operator shall arrange, 31 at the operator’s sole expense, for a baseline water-quality 32 test of every domestic, livestock, and irrigation water well 33 located within a radius of two thousand five hundred feet 34 of the proposed well pad. Testing shall be performed by a 35 -8- SF 2490.4418 (1) 91 sb/js 8/ 14 #42. #43. #44. #45. #46. #47. #48. #49. #50.

laboratory certified by the department and shall include, at a 1 minimum, tests for methane, total dissolved solids, chlorides, 2 sulfates, arsenic, barium, iron, manganese, and such other 3 parameters as the department shall specify by rule. The 4 operator shall deliver the baseline test results in writing to 5 the owner of each tested water well and shall file the results 6 with the department. 7 3. The operator shall arrange, at the operator’s sole 8 expense, for follow-up water quality testing of each water well 9 tested under subsection 2 at six months, twelve months, and 10 twenty-four months after completion or plugging of the subject 11 oil or gas well. Results shall be delivered to the water well 12 owner and filed with the department within thirty days of 13 testing. 14 4. When a water well tested under subsection 2 or 3 15 experiences a material decline in quality, or is newly shown to 16 be contaminated with any constituent typically associated with 17 oil and gas drilling or hydraulic stimulation, the water well 18 is located within a radius of two thousand five hundred feet of 19 an oil or gas well, and the contamination is first identified 20 within five years after spudding of the oil or gas well, there 21 shall be a rebuttable presumption that the drilling operation 22 caused the contamination. The presumption may be rebutted 23 only by clear and convincing evidence. In any proceeding when 24 the presumption applies, the operator shall bear the burden of 25 providing to the affected landowner a replacement water supply, 26 adequate in quantity and quality, pending final determination. 27 5. Every operator shall post, as a condition of permit 28 issuance, financial assurance in the form of a surety bond, 29 letter of credit, or cash deposit, in an amount determined 30 by the department by rule but not less than one million 31 dollars per well, to be available for remediation of aquifer 32 contamination, provision of replacement water supplies, 33 and plugging and abandonment of contaminated water wells. 34 Financial assurance under this subsection shall be in addition 35 -9- SF 2490.4418 (1) 91 sb/js 9/ 14

to, and not in substitution for, the compliance bond required 1 by section 458A.4, subsection 1, paragraph “d” , or any other 2 bonding or financial assurance requirement of this chapter. > 3 51. Page 13, line 3, by striking < 458A.27 > and inserting 4 < 458A.28 > 5 52. Page 13, line 10, after < wellhead. > by inserting 6 < Production attributable to the cost-free royalty interest 7 of an unleased nonconsenting owner under section 458A.8, 8 subsection 5, shall be exempt from the tax imposed by this 9 section. > 10 53. Page 13, by striking lines 13 through 20 and inserting: 11 < 4. The severance tax shall be paid by the producer as a 12 cost of doing business. Notwithstanding any agreement to the 13 contrary, a producer shall not deduct the severance tax paid 14 under this section from any royalty payment, lease bonus, or 15 other payment due or to become due to an interest owner of oil 16 or gas production, and shall not otherwise pass the economic 17 incidence of the tax to an interest owner. > 18 54. Page 13, line 23, by striking < 458A.28 > and inserting 19 < 458A.29 > 20 55. Page 13, line 25, by striking < section 458A.27 > and 21 inserting < section 458A.28 > 22 56. Page 13, line 32, by striking < Five > and inserting 23 < Thirty-five > 24 57. Page 16, line 18, by striking < Seventy and one-tenth > 25 and inserting < Thirty and six-tenths > 26 58. Page 16, after line 20 by inserting: 27 < e. (1) Seven and five-tenths percent of severance tax 28 revenue each year shall be deposited in the surface owner 29 compensation fund created in subparagraph (2). 30 (2) A surface owner compensation fund is created within the 31 state treasury under the control of the department. 32 (3) Moneys in the surface owner compensation fund shall 33 be available to pay awards of surface damages under section 34 458A.26 when the producer has defaulted, become insolvent, 35 -10- SF 2490.4418 (1) 91 sb/js 10/ 14 #51. #52. #53. #54. #55. #56. #57. #58.

cannot be located, or is otherwise unable to satisfy the award. 1 Upon payment from the fund, the fund shall be subrogated to the 2 surface owner’s claim against the producer. 3 (4) The department shall administer the surface owner 4 compensation fund and adopt rules pursuant to chapter 17A for 5 the disposition of claims against the fund. 6 f. Two percent of severance tax revenue each year shall 7 be deposited in an account within the state treasury for the 8 exclusive use of the office of landowner advocacy established 9 under section 458A.31. > 10 59. Page 16, line 21, by striking < e. > and inserting < g. > 11 60. Page 17, line 4, by striking < 458A.29 > and inserting 12 < 458A.30 > 13 61. By striking page 18, line 21, through page 19, line 28, 14 and inserting: 15 < Sec. ___. NEW SECTION . 458A.31 Office of landowner 16 advocacy. 17 1. There is established within the department the office 18 of landowner advocacy. The office shall be independent of the 19 divisions of the department responsible for permitting and 20 enforcement under this chapter. 21 2. The office shall have all of the following powers and 22 duties: 23 a. To intervene, on behalf of affected landowners, in 24 pooling, spacing, variance, and other proceedings before the 25 department under this chapter. 26 b. To review, on request of a landowner, any report of 27 appraisers filed under section 458A.26, and to assist the 28 landowner in evaluating and, where appropriate, contesting the 29 report. 30 c. To provide counsel, or lay representation where lawful, 31 to unrepresented landowners in proceedings under this chapter. 32 d. To maintain public records of producer performance on 33 surface damage, restoration, and abandonment obligations. 34 e. To publish an annual report on industry practices and 35 -11- SF 2490.4418 (1) 91 sb/js 11/ 14 #59. #60. #61.

emerging issues affecting landowners. 1 3. The office shall be funded by a dedicated allocation 2 of two percent of severance tax revenues pursuant to section 3 458A.29, subsection 1, paragraph “f” . 4 Sec. ___. NEW SECTION . 458A.32 Landowner private right of 5 action. 6 1. For purposes of this section: 7 a. “Landowner” means a person holding legal or equitable 8 title to the surface of land affected by an oil and gas 9 operation; a person holding a mineral interest that is or may 10 be affected by an oil and gas operation, whether or not severed 11 from the surface; a person holding a royalty or overriding 12 royalty interest in production from an oil and gas operation; 13 and a successor in interest to any of the foregoing. 14 b. “Producer” means the same as defined in section 458A.2 15 and includes any person acting as a principal or agent for a 16 producer in the production, storage, transportation, refining, 17 marketing, or processing of oil or gas. 18 c. “Violation” means a failure to comply with any provision 19 of this chapter, any rule adopted under this chapter, any order 20 of the department, any bond required under this chapter, any 21 pooling order, any surface damage award, any lease or surface 22 use agreement filed with or known to the department, or any 23 local ordinance not preempted under this chapter. 24 2. A landowner aggrieved by a violation may bring a civil 25 action against any producer responsible for the violation in 26 the district court of the county in which the oil and gas 27 operation is located, or in the district court of any county 28 in which the producer transacts business. The action may be 29 brought without regard to whether the department has taken any 30 enforcement action with respect to the violation and without 31 regard to whether administrative remedies have been exhausted. 32 3. In an action under this section, the court may grant 33 any of the following forms of relief, cumulatively or in the 34 alternative: 35 -12- SF 2490.4418 (1) 91 sb/js 12/ 14

a. Injunctive relief, including temporary restraining 1 orders, preliminary injunctions, and permanent injunctions, to 2 restrain the violation or to compel compliance. 3 b. Compensatory damages for harm caused by the violation, 4 including all categories of compensable damages enumerated in 5 section 458A.26, subsection 4. 6 c. Restitution and disgorgement of any profit, royalty, or 7 other economic benefit obtained by the producer in connection 8 with the violation. 9 d. Civil penalties of not less than five hundred dollars 10 and not more than twenty-five thousand dollars per violation, 11 payable to the aggrieved landowner, with each day of continued 12 violation constituting a separate violation for penalty 13 purposes. 14 e. Declaratory relief. 15 f. Any other relief the court deems appropriate, including 16 appointment of a receiver when necessary to secure compliance 17 or the preservation of landowner rights. 18 4. The court shall award reasonable attorney fees, expert 19 witness fees, and costs of suit to a prevailing landowner. A 20 producer shall not recover attorney fees or costs in an action 21 under this section unless the court specifically finds that 22 the landowner’s action was frivolous, unreasonable, or without 23 foundation. 24 5. An action under this section shall be commenced within 25 six years after the violation is discovered or, in the exercise 26 of reasonable diligence, should have been discovered. 27 6. The right of action established by this section is in 28 addition to, and does not supplant, any other remedy available 29 at law or in equity, including remedies available under 30 section 458A.17, remedies available at common law, and remedies 31 available under any lease, surface use agreement, or other 32 contract. Nothing in this section shall be construed to limit 33 the remedies of the department, the attorney general, or any 34 other public officer with enforcement authority under this 35 -13- SF 2490.4418 (1) 91 sb/js 13/ 14

chapter. 1 7. Any agreement purporting to waive, limit, or restrict a 2 landowner’s right of action under this section, whether entered 3 into before or after the violation giving rise to the action, 4 is void and unenforceable as against public policy. > 5 62. Page 19, after line 29 by inserting: 6 < Sec. ___. FUTURE REPEAL AND REAUTHORIZATION. 7 1. Section 458A.8, subsections 3 through 9, and sections 8 458A.26, 458A.27, 458A.28, 458A.29, 458A.30, and 458A.31, as 9 enacted or amended by this Act or as subsequently amended, are 10 repealed July 1, 2031. 11 2. The general assembly may affirmatively reauthorize each 12 provision listed in subsection 1 prior to its repeal. 13 Sec. ___. REPORT —— LEGISLATIVE SERVICES AGENCY. The 14 legislative services agency shall prepare for delivery to the 15 general assembly not later than January 15, 2031, a report 16 evaluating the operation of section 458A.8, subsections 3 17 through 9, and sections 458A.26, 458A.27, 458A.28, 458A.29, 18 458A.30, and 458A.31, as enacted or amended by this Act, 19 including information concerning the number and outcome of 20 proceedings under each section, economic effects on landowners 21 and producers, and any recommended modifications. > 22 63. Title page, line 5, by striking < and jurisdiction > and 23 inserting < a private right of action for landowners, and an 24 office of landowner advocacy > 25 64. By renumbering as necessary. 26 ______________________________ THOMSON of Floyd -14- SF 2490.4418 (1) 91 sb/js 14/ 14 #62. #63. #64.