SPLIT ESTATES

H.R. 3221, The Renewable Energy and Energy Conservation Tax Act of 2007, passed the House of Representatives on August 4th by a vote of 241 - 172.

Many in the West are interested in the split estate problems, and Section 7221 (see below) of H.R. 3221 attempts to address that issue. There is no similar provision in the Senate version of this legislation, so it will be decided in conference between the two houses. Those of you with an interest in this issue may want to contact your U.S. Senators.

For more information on the split estate issue go here.


SEC. 7221. SURFACE OWNER PROTECTION.

(a) Definitions- As used in this section--
(1) the term `Secretary' means the Secretary of the Interior;
(2) the term `lease' means a lease issued by the Secretary under the Mineral Leasing Act (30 U.S.C. 181 et seq.);
(3) the term `lessee' means the holder of a lease; and
(4) the term `operator' means any person that is responsible under the terms and conditions of a lease for the operations conducted on leased lands or any portion thereof.
(b) Post-Lease Surface Use Agreement-
(1) IN GENERAL- Except as provided in subsection (c), the Secretary may not authorize any operator to conduct exploration and drilling operations on lands with respect to which title to oil and gas resources is held by the United States but title to the surface estate is not held by the United States, until the operator has filed with the Secretary a document, signed by the operator and the surface owner or owners, showing that the operator has secured a written surface use agreement between the operator and the surface owner or owners that meets the requirements of paragraph (2).
(2) CONTENTS- The surface use agreement shall provide for--
(A) the use of only such portion of the surface estate as is reasonably necessary for exploration and drilling operations based on site-specific conditions;
(B) the accommodation of the surface estate owner to the maximum extent practicable, including the location, use, timing, and type of exploration and drilling operations, consistent with the operator's right to develop the oil and gas estate;
(C) the reclamation of the site to a condition capable of supporting the uses which such lands were capable of supporting prior to exploration and drilling operations or other uses as agreed to by the operator and the surface owner; and
(D) compensation for damages as a result of exploration and drilling operations, including but not limited to--
(i) loss of income and increased costs incurred;
(ii) damage to or destruction of personal property, including crops, forage, and livestock; and
(iii) failure to reclaim the site in accordance with this subparagraph (C).
(3) PROCEDURE-
(A) IN GENERAL- An operator shall notify the surface estate owner or owners of the operator's desire to conclude an agreement under this section. If the surface estate owner and the operator do not reach an agreement within 90 days after the operator has provided such notice, the matter shall be referred to third party arbitration for resolution within a period of 90 days. The cost of such arbitration shall be the responsibility of the operator.
(B) IDENTIFICATION OF ARBITERS- The Secretary shall identify persons with experience in conducting arbitrations and shall make this information available to operators and surface owners.
(C) REFERRAL TO IDENTIFIED ARBITER- Referral of a matter for arbitration by a person identified by the Secretary pursuant to subparagraph (B) shall be sufficient to constitute compliance with subparagraph (A).
(4) ATTORNEYS FEES- If action is taken to enforce or interpret any of the terms and conditions contained in a surface use agreement, the prevailing party shall be reimbursed by the other party for reasonable attorneys fees and actual costs incurred, in addition to any other relief which a court or arbitration panel may grant.
(c) Authorized Exploration and Drilling Operations-
(1) AUTHORIZATION WITHOUT SURFACE USE AGREEMENT- The Secretary may authorize an operator to conduct exploration and drilling operations on lands covered by subsection (b) in the absence of an agreement with the surface estate owner or owners, if--
(A) the Secretary makes a determination in writing that the operator made a good faith attempt to conclude such an agreement, including referral of the matter to arbitration pursuant to subsection (b)(3), but that no agreement was concluded within 90 days after the referral to arbitration;
(B) the operator submits a plan of operations that provides for the matters specified in subsection (b)(2) and for compliance with all other applicable requirements of Federal and State law; and
(C) the operator posts a bond or other financial assurance in an amount the Secretary determines to be adequate to ensure compensation to the surface estate owner for any damages to the site, in the form of a surety bond, trust fund, letter of credit, government security, certificate of deposit, cash, or equivalent.
(2) SURFACE OWNER PARTICIPATION- The Secretary shall provide surface estate owners with an opportunity to--
(A) comment on plans of operations in advance of a determination of compliance with this section;
(B) participate in bond level determinations and bond release proceedings under this subsection;
(C) attend an on-site inspection during such determinations and proceedings;
(D) file written objections to a proposed bond release; and
(E) request and participate in an on-site inspection when they have reason to believe there is a violation of the terms and conditions of a plan of operations.
(3) PAYMENT OF FINANCIAL GUARANTEE- A surface estate owner with respect to any land subject to a lease may petition the Secretary for payment of all or any portion of a bond or other financial assurance required under this subsection as compensation for any damages as a result of exploration and drilling operations. Pursuant to such a petition, the Secretary may use such bond or other guarantee to provide compensation to the surface estate owner for such damages.
(4) BOND RELEASE- Upon request and after inspection and opportunity for surface estate owner review, the Secretary may release the financial assurance required under this subsection if the Secretary determines that exploration and drilling operations have ended and all damages have been fully compensated.
(d) Surface Owner Notification- The Secretary shall--
(1) notify surface estate owners in writing at least 45 days in advance of lease sales;
(2) within ten working days after a lease is issued, notify surface estate owners regarding the identity of the lessee;
(3) notify surface estate owners in writing within 10 working days concerning any subsequent decisions regarding a lease, such as modifying or waiving stipulations and approving rights-of-way; and
(4) notify surface estate owners within five business days after issuance of a drilling permit under a lease.
(e) Regulations- The Secretary shall issue regulations implementing this section by not later than 1 year after the date of the enactment of this Act.
(f) Relationship to State Law- Nothing in this section preempts applicable State law or regulation relating to surface owner protection.