House File 2702 - Introduced HOUSE FILE 2702 BY COMMITTEE ON NATURAL RESOURCES (SUCCESSOR TO HSB 740) A BILL FOR An Act relating to the production of oil and gas, geologic 1 hydrogen, hydrocarbons, or other minerals, including 2 establishing certain duties required of oil and gas 3 operators, requiring notice and surface use agreement 4 offers, and providing for remedies. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6881HV (3) 91 sb/js

H.F. 2702 Section 1. NEW SECTION . 557D.1 Short title. 1 This chapter shall be known and may be cited as the “ Iowa 2 Surface Owners Protection Act ”. 3 Sec. 2. NEW SECTION . 557D.2 Applicability. 4 This chapter applies to all of the following: 5 1. Real property and its improvements on which oil and gas 6 operations are conducted. 7 2. Oil and gas operations commenced on or after July 1, 8 2026, except for all of the following: 9 a. Maintenance and ongoing production activities related 10 to an oil or gas well producing or capable of producing oil or 11 gas on July 1, 2026, for which the operator has a valid permit 12 from the department of natural resources, except for all of the 13 following: 14 (1) Reentries, workovers, and other oil or gas operations 15 are subject to this chapter if the activities disturb 16 additional surface. 17 (2) The duty to reclaim, as stated in section 557D.4, 18 subsection 3, is applicable to a well that is not plugged or 19 abandoned on July 1, 2026. 20 b. Oil and gas operations conducted within the scope of 21 an agreement, entered into prior to July 1, 2026, between a 22 surface owner and an operator that sets forth the rights and 23 obligations of the parties with respect to surface activities 24 conducted by the operator. 25 Sec. 3. NEW SECTION . 557D.3 Definitions. 26 As used in this chapter, unless the context otherwise 27 requires: 28 1. “Farm tenant” means a person who occupies land or 29 premises belonging to another in subordination to the owner’s 30 title and with the owner’s assent, express or implied. 31 2. “Oil and gas operations” means all activities affecting 32 a surface owner’s land that are associated with exploration, 33 drilling, or production of oil and gas, geologic hydrogen, 34 hydrocarbons, or other minerals, from initial exploration 35 -1- LSB 6881HV (3) 91 sb/js 1/ 7

H.F. 2702 through final reclamation of the affected surface. 1 3. “Operator” means a person with the legal right to conduct 2 oil and gas operations, including an agent, employee, or 3 contractor of the person. 4 4. “Reclaim” means to substantially restore the surface 5 affected by oil and gas operations to the condition that 6 existed prior to the oil and gas operations, or as otherwise 7 agreed to in writing by the operator and surface owner. 8 5. “Surface owner” means a person who holds legal or 9 equitable title, as shown in the records of the county clerk, 10 to the surface of the real property on which the operator has 11 the legal right to conduct oil and gas operations. 12 6. “Surface use and compensation agreement” means an 13 agreement between a surface owner and an operator specifying 14 the rights and obligations of the surface owner and the 15 operator concerning oil and gas operations. 16 Sec. 4. NEW SECTION . 557D.4 Compensation for oil and gas 17 operations. 18 1. An operator shall compensate the surface owner for all of 19 the following, as applicable, caused by oil and gas operations: 20 a. For damages sustained to all of the following: 21 (1) Crops. 22 (2) Crop yields. 23 (3) Soils. 24 (4) Water. 25 (5) Groundwater. 26 (6) Any land improvement, including a tile drainage system 27 or soil and water conservation structure. 28 b. Loss of agricultural production and income. 29 c. Reduction in land value. 30 d. Loss of use. 31 e. Loss of access to the surface owner’s land. 32 2. An operator shall compensate a farm tenant of the 33 surface owner for any crop damage or reduction in crop yields 34 and any leasehold improvements damaged as a result of the 35 -2- LSB 6881HV (3) 91 sb/js 2/ 7

H.F. 2702 operator’s oil and gas operations. The compensation shall 1 equal the amount invested in the crop or the value of the crop, 2 whichever is greater, and the cost of repairing and replacing 3 the improvements. 4 3. An operator shall reclaim all the surface affected by 5 the operator’s oil and gas operations once the oil and gas 6 operations are completed or the well is plugged or closed. 7 Sec. 5. NEW SECTION . 557D.5 Notice of operations —— 8 proposed surface use and compensation agreement. 9 1. Prior to initial entry upon the land for an activity that 10 does not disturb the surface, including an inspection, staking, 11 survey, measurement, or general evaluation of a proposed route 12 or site for oil and gas operations, the operator shall provide 13 at least ten business days’ notice by certified mail or hand 14 delivery to the surface owner. 15 2. No less than ninety days before first entering the 16 surface of the land to conduct oil and gas operations, an 17 operator shall, by certified mail or hand delivery, give the 18 surface owner notice of the planned oil and gas operations. 19 The notice shall include all of the following: 20 a. Sufficient disclosure of the planned oil and gas 21 operations to enable the surface owner to evaluate the effect 22 of the operations on the property. 23 b. A copy of the provisions of this chapter. 24 c. The name, address, telephone number and, if available, 25 facsimile number, and electronic mail address of the operator 26 and the operator’s authorized representative. 27 d. A proposed surface use and compensation agreement 28 addressing, at a minimum and to the extent known, all of the 29 following issues: 30 (1) The placement, specifications, maintenance, and design 31 of well pads, gathering pipelines, and roads to be constructed 32 for oil and gas operations. 33 (2) Terms of ingress and egress upon the surface of the land 34 for oil and gas operations. 35 -3- LSB 6881HV (3) 91 sb/js 3/ 7

H.F. 2702 (3) Construction, maintenance, and placement of all pits 1 and equipment used or planned for oil and gas operations. 2 (4) Use and impoundment of water on the surface of the land. 3 (5) Removal and restoration of plant life. 4 (6) Surface water drainage changes. 5 (7) Actions to limit and effectively control precipitation 6 runoff and erosion. 7 (8) Control and management of noise, weeds, dust, traffic, 8 trespass, litter, and interference with the surface owner’s 9 use. 10 (9) Interim and final reclamation. 11 (10) Actions to minimize surface damages to the property. 12 (11) Operator indemnification for injury to persons caused 13 by the operator. 14 (12) An offer of compensation for damages to the surface 15 affected by oil and gas operations. 16 3. If legal title and equitable title are not held by the 17 same person, notice shall be given to both the holder of legal 18 title and to the holder of equitable title. 19 4. a. Upon receipt of the notice required by subsection 2, 20 the surface owner may do any of the following: 21 (1) Accept the proposed surface use and compensation 22 agreement. 23 (2) Reject the proposed surface use and compensation 24 agreement. Failure to accept the proposed agreement within 25 ninety days shall be deemed to be a rejection by the surface 26 owner. 27 b. If the proposed agreement is rejected, the surface owner 28 may enter into negotiations with the operator, including, if 29 the parties agree, with the aid of mediation. 30 5. The operator and the surface owner may enter into a 31 mutually acceptable agreement that sets forth the rights 32 and obligations of the parties with respect to the surface 33 activities conducted by the operator. 34 6. Notices required under this section shall be deemed to 35 -4- LSB 6881HV (3) 91 sb/js 4/ 7

H.F. 2702 have been received five days after mailing by certified mail or 1 immediately upon hand delivery. 2 Sec. 6. NEW SECTION . 557D.6 Entry without agreement. 3 If, after ninety days from when a surface owner received 4 notice pursuant to section 557D.5, subsection 2, no surface use 5 and compensation agreement has been entered into, the operator 6 may enter the surface owner’s property and conduct oil and gas 7 operations. The operator shall pay actual damages for entry 8 and use of the surface owner’s property. 9 Sec. 7. NEW SECTION . 557D.7 Damages. 10 In an action brought pursuant to this chapter, if the court 11 finds that compensation is owed under section 557D.4, the court 12 may also award the surface owner one of the following: 13 1. Attorney fees and costs if any of the following occurred: 14 a. The operator conducted oil and gas operations without 15 providing notice as required by section 557D.5, subsection 2. 16 b. The operator conducted oil and gas operations without a 17 surface use and compensation agreement and before depositing a 18 bond or other surety as required pursuant to section 458A.4, 19 subsection 1, paragraph “d” . 20 c. The operator conducted oil and gas operations outside 21 the scope of a surface use and compensation agreement and, when 22 entering into the agreement, knew or should have known that oil 23 and gas operations would be conducted outside the scope of the 24 agreement. 25 d. The operator failed to exercise good faith in complying 26 with the provisions of this chapter or the terms of a surface 27 use and compensation agreement. 28 2. Attorney fees, costs, and treble damages if the court 29 finds, by clear and convincing evidence, that any of the 30 following occurred: 31 a. The operator willfully and knowingly entered upon the 32 premises for the purpose of commencing the drilling of a well 33 without the occurrence of any of the following: 34 (1) Giving notice as required by section 557D.5, subsection 35 -5- LSB 6881HV (3) 91 sb/js 5/ 7

H.F. 2702 2. 1 (2) Entering a surface use and compensation agreement with 2 the surface owner before depositing a bond or other surety 3 pursuant to section 458A.4, subsection 1, paragraph “d” . 4 b. The operator willfully and knowingly violated the surface 5 use and compensation agreement. 6 Sec. 8. NEW SECTION . 557D.8 Remedies not exclusive. 7 The remedies provided by this chapter are not exclusive and 8 do not preclude a person from seeking other remedies allowed 9 by law. 10 EXPLANATION 11 The inclusion of this explanation does not constitute agreement with 12 the explanation’s substance by the members of the general assembly. 13 This bill relates to the production of oil and gas, 14 geologic hydrogen, hydrocarbons, or other minerals, including 15 establishing certain duties required of oil and gas operators, 16 requiring notice and surface use agreement offers, and 17 providing for remedies. The bill is known as and may be cited 18 as the Iowa surface owners protection Act. 19 The bill applies to real property and improvements on 20 which oil and gas operations are conducted and to oil and gas 21 operations commenced on or after July 1, 2026, with exceptions 22 for certain maintenance and ongoing production activities at 23 wells producing or capable of producing on that date if the 24 operator holds a valid permit, and for operations conducted 25 within the scope of agreements entered into before July 1, 26 2026. 27 The bill defines terms relating to oil and gas operations 28 and describes oil and gas operations to include activities from 29 initial exploration through final reclamation of the affected 30 surface. 31 The bill requires an operator to compensate a surface owner 32 for certain damages or losses resulting from oil and gas 33 operations. The bill also requires an operator to compensate 34 a farm tenant for crop damage or reduced crop yields and 35 -6- LSB 6881HV (3) 91 sb/js 6/ 7

H.F. 2702 for damage to leasehold improvements. The bill requires 1 an operator to reclaim the surface affected by oil and gas 2 operations once operations are completed or a well is plugged 3 or closed. 4 The bill requires the operator to provide at least 10 5 business days’ notice before beginning an activity that does 6 not disturb the surface. At least 90 days before entering the 7 surface to conduct oil and gas operations, the bill requires 8 the operator to provide the surface owner with notice that 9 includes information about the planned operations, a copy 10 of the Iowa surface owners protection Act, operator contact 11 information, and a proposed surface use and compensation 12 agreement. The bill requires the proposed agreement to address 13 certain subjects relating to the oil and gas operations. If 14 legal and equitable title are held by different persons, the 15 bill directs both persons to receive notice. 16 The bill allows the surface owner to accept or reject the 17 proposed agreement. Failure to accept the proposed agreement 18 within 90 days is deemed a rejection. If rejected, the surface 19 owner may negotiate, including through mediation if the parties 20 agree. The bill allows the parties to enter into a mutually 21 acceptable surface use and compensation agreement governing 22 surface activities. 23 If no agreement is reached within 90 days after the surface 24 owner receives notice, the bill allows the operator to enter 25 the property and conduct operations, but must pay actual 26 damages for entry and use of the surface. 27 The bill provides remedies in court actions. If 28 compensation is owed, the court may award attorney fees, 29 costs, and, in some circumstances, treble damages for certain 30 violations by the operator. The bill also provides that the 31 remedies in the chapter are not exclusive of other remedies 32 allowed by law. 33 -7- LSB 6881HV (3) 91 sb/js 7/ 7