HSB 740 (LSB 6881YC (4) 91)

HOUSE FILE _____ 

BY  (PROPOSED COMMITTEE ON NATURAL RESOURCES BILL BY CHAIRPERSON WOOD)

A BILL FOR

An Act relating to the production of oil and gas, geologic hydrogen, hydrocarbons, or other minerals, including establishing certain duties required of oil and gas operators, requiring notice and surface use agreement offers, and providing for remedies.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  557D.1  Short title.
   This chapter shall be known and may be cited as the “Iowa Surface Owners Protection Act”.
    Sec. 2.  NEW SECTION.  557D.2  Applicability.
   This chapter applies to all of the following:
   1.  Real property and its improvements on which oil and gas operations are conducted.
   2.  Oil and gas operations commenced on or after July 1, 2026, except for all of the following:
   a.  Maintenance and ongoing production activities related to an oil or gas well producing or capable of producing oil or gas on July 1, 2026, for which the operator has a valid permit from the department of natural resources, except for all of the following:
   (1)  Reentries, workovers, and other oil or gas operations are subject to this chapter if the activities disturb additional surface.
   (2)  The duty to reclaim, as stated in 557D.4, subsection 4, is applicable to a well that is not plugged or abandoned on July 1, 2026.
   b.  Oil and gas operations conducted within the scope of an agreement, entered into prior to July 1, 2026, between a surface owner and an operator that sets forth the rights and obligations of the parties with respect to surface activities conducted by the operator.
    Sec. 3.  NEW SECTION.  557D.3  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Farm tenant” means a person who occupies land or premises belonging to another in subordination to the owner’s title and with the owner’s assent, express or implied.
   2.  “Oil and gas operations” means all activities affecting a surface owner’s land that are associated with exploration, drilling, or production of oil and gas, geologic hydrogen, hydrocarbons, or other minerals, from initial exploration through final reclamation of the affected surface.
   3.  “Operator” means a person with the legal right to conduct oil and gas operations, including an agent, employee, or contractor of the person.
   4.  “Reclaim” means to substantially restore the surface affected by oil and gas operations to the condition that existed prior to the oil and gas operations, or as otherwise agreed to in writing by the operator and surface owner.
   5.  “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 on which the operator has the legal right to conduct oil and gas operations.
   6.  “Surface use and compensation agreement” means an agreement between a surface owner and an operator specifying the rights and obligations of the surface owner and the operator concerning oil and gas operations.
    Sec. 4.  NEW SECTION.  557D.4  Compensation for oil and gas operations.
   1.  An operator shall compensate the surface owner for all of the following, as applicable, caused by oil and gas operations:
   a.  For damages sustained to all of the following:
   (1)  Crops.
   (2)  Crop yields.
   (3)  Soils.
   (4)  Water.
   (5)  Groundwater.
   (6)  Any land improvement, including a tile drainage system or soil and water conservation structure.
   b.  Loss of agricultural production and income.
   c.  Reduction in land value.
   d.  Loss of use.
   e.  Loss of access to the surface owner’s land.
   2.  An operator shall compensate a farm tenant of the surface owner for any crop damage or reduction in crop yields and any leasehold improvements damaged as a result of the operator’s oil and gas operations. The compensation shall equal the amount invested in the crop or the value of the crop, whichever is greater, and the cost of repairing and replacing the improvements.
   3.  An operator shall reclaim all the surface affected by the operator’s oil and gas operations once the oil and gas operations are completed or the well is plugged or closed.
    Sec. 5.  NEW SECTION.  557D.5  Notice of operations —— proposed surface use and compensation agreement.
   1.  Prior to initial entry upon the land for an activity that does not disturb the surface, including an inspection, staking, survey, measurement, or general evaluation of a proposed route or site for oil and gas operations, the operator shall provide at least ten business days’ notice by certified mail or hand delivery to the surface owner.
   2.  No less than ninety days before first entering the surface of the land to conduct oil and gas operations, an operator shall, by certified mail or hand delivery, give the surface owner notice of the planned oil and gas operations. The notice shall include all of the following:
   a.  Sufficient disclosure of the planned oil and gas operations to enable the surface owner to evaluate the effect of the operations on the property.
   b.  A copy of the provisions of this chapter.
   c.  The name, address, telephone number and, if available, facsimile number, and electronic mail address of the operator and the operator’s authorized representative.
   d.  A proposed surface use and compensation agreement addressing, at a minimum and to the extent known, all of the following issues:
   (1)  The placement, specifications, maintenance, and design of well pads, gathering pipelines, and roads to be constructed for oil and gas operations.
   (2)  Terms of ingress and egress upon the surface of the land for oil and gas operations.
   (3)  Construction, maintenance, and placement of all pits and equipment used or planned for oil and gas operations.
   (4)  Use and impoundment of water on the surface of the land.
   (5)  Removal and restoration of plant life.
   (6)  Surface water drainage changes.
   (7)  Actions to limit and effectively control precipitation runoff and erosion.
   (8)  Control and management of noise, weeds, dust, traffic, trespass, litter, and interference with the surface owner’s use.
   (9)  Interim and final reclamation.
   (10)  Actions to minimize surface damages to the property.
   (11)  Operator indemnification for injury to persons caused by the operator.
   (12)  An offer of compensation for damages to the surface affected by oil and gas operations.
   3.  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.
   4.  a.  Upon receipt of the notice required by subsection 2, the surface owner may do any of the following:
   (1)  Accept the proposed surface use and compensation agreement.
   (2)  Reject the proposed surface use and compensation agreement. Failure to accept the proposed agreement within ninety days shall be deemed to be a rejection by the surface owner.
   b.  If the proposed agreement is rejected, the surface owner may enter into negotiations with the operator, including, if the parties agree, with the aid of mediation.
   5.  The operator and the surface owner may enter into a mutually acceptable agreement that sets forth the rights and obligations of the parties with respect to the surface activities conducted by the operator.
   6.  Notices required under this section shall be deemed to have been received five days after mailing by certified mail or immediately upon hand delivery.
    Sec. 6.  NEW SECTION.  557D.6  Entry without agreement.
   If, after ninety days from when a surface owner received notice pursuant to section 557D.5, subsection 2, no surface use and compensation agreement has been entered into, the operator may enter the surface owner’s property and conduct oil and gas operations. The operator shall pay actual damages for entry and use of the surface owner’s property.
    Sec. 7.  NEW SECTION.  557D.7  Damages.
   In an action brought pursuant to this chapter, if the court finds that compensation is owed under section 557D.4, the court may also award the surface owner one of the following:
   1.  Attorney fees and costs if any of the following occurred:
   a.  The operator conducted oil and gas operations without providing notice as required by section 557D.5, subsection 2.
   b.  The operator conducted oil and gas operations without a surface use and compensation agreement and before depositing a bond or other surety as required pursuant to section 458A.4, subsection 1, paragraph “d”.
   c.  The operator conducted oil and gas operations outside the scope of a surface use and compensation agreement and, when entering into the agreement, knew or should have known that oil and gas operations would be conducted outside the scope of the agreement.
   d.  The operator failed to exercise good faith in complying with the provisions of this chapter or the terms of a surface use and compensation agreement.
   2.  Attorney fees, costs, and treble damages if the court finds, by clear and convincing evidence, that any of the following occurred:
   a.  The operator willfully and knowingly entered upon the premises for the purpose of commencing the drilling of a well without the occurrence of any of the following:
   (1)  Giving notice as required by section 557D.5, subsection 2.
   (2)  Entering a surface use and compensation agreement with the surface owner before depositing a bond or other surety pursuant to section 458A.4, subsection 1, paragraph “d”.
   b.  The operator willfully and knowingly violated the surface use and compensation agreement.
    Sec. 8.  NEW SECTION.  557D.8  Remedies not exclusive.
   The remedies provided by this chapter are not exclusive and do not preclude a person from seeking other remedies allowed by law.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the production of oil and gas, geologic hydrogen, hydrocarbons, or other minerals, including establishing certain duties required of oil and gas operators, requiring notice and surface use agreement offers, and providing for remedies. The bill is known as and may be cited as the Iowa surface owners protection Act.
    The bill applies to real property and improvements on which oil and gas operations are conducted and to oil and gas operations commenced on or after July 1, 2026, with exceptions for certain maintenance and ongoing production activities at wells producing or capable of producing on that date if the operator holds a valid permit, and for operations conducted within the scope of agreements entered into before July 1, 2026.
   The bill defines terms relating to oil and gas operations and describes oil and gas operations to include activities from initial exploration through final reclamation of the affected surface.
   The bill requires an operator to compensate a surface owner for certain damages or losses resulting from oil and gas operations. The bill also requires an operator to compensate a farm tenant for crop damage or reduced crop yields and for damage to leasehold improvements. The bill requires an operator to reclaim the surface affected by oil and gas operations once operations are completed or a well is plugged or closed.
   The bill requires the operator to provide at least 10 business days’ notice before beginning an activity that does not disturb the surface. At least 90 days before entering the surface to conduct oil and gas operations, the bill requires the operator to provide the surface owner with notice that includes information about the planned operations, a copy of the Iowa surface owners protection Act, operator contact information, and a proposed surface use and compensation agreement. The bill requires the proposed agreement to address certain subjects relating to the oil and gas operations. If legal and equitable title are held by different persons, the bill directs both persons to receive notice.
   The bill allows the surface owner to accept or reject the proposed agreement. Failure to accept the proposed agreement within 90 days is deemed a rejection. If rejected, the surface owner may negotiate, including through mediation if the parties agree. The bill allows the parties to enter into a mutually acceptable surface use and compensation agreement governing surface activities.
   If no agreement is reached within 90 days after the surface owner receives notice, the bill allows the operator to enter the property and conduct operations, but must pay actual damages for entry and use of the surface.
   The bill provides remedies in court actions. If compensation is owed, the court may award attorney fees, costs, and, in some circumstances, treble damages for certain violations by the operator. The bill also provides that the remedies in the chapter are not exclusive of other remedies allowed by law.