SENATE BILL NO. 131
(By Senators Withers, Macnaughtan and Grubb)
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[Introduced January 27, 1994;
referred to the Committee on Energy, Industry and Mining;
and then to the Committee on Finance.]
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A BILL to amend and reenact section four, article three, chapter
eleven-a of the code of West Virginia, one thousand nine
hundred thirty-one, as amended; to amend and reenact section
one, article eight, chapter twenty-two of said code; to
further amend said chapter by adding thereto a new article,
designated article eight-a; to amend and reenact section
five, article two, chapter twenty-two-b of said code; to
further amend said article by adding thereto a new section,
designated section ten; to amend chapter thirty-six of said
code by adding thereto a new article, designated article
two-a, all relating to sheriff's sale of delinquent
minerals; reverting title to minerals to owner of surface at
time of sale; providing for forced pooling and unitization
for shallow oil and gas well exploration and production;
defining certain terms; establishing a shallow well oil and
gas conservation program; providing for the appointment of
an administrator; promulgation of rules; prohibiting waste
of oil and gas; establishing a procedure for drilling units
and pooling of interest; providing alternative options for
nonparticipant; providing for secondary recovery of oil;
establishing requirements for unitization; providing a
system of resolving disputes; providing for hearings,
judicial review and injunctive relief; providing criminal
penalties; providing the surface owner with certain notices;
providing the surface owner with certain protections;
requiring notice to surface owner of intent to drill;
providing compensation to surface owner; providing for
restoration of surface when drilling complete; making
surface estate and mineral estate equal in law; and
eliminating an implied easement for mineral owners.
Be it enacted by the Legislature of West Virginia:
That section four, article three, chapter eleven-a of the
code of West Virginia, one thousand nine hundred thirty-one, as
amended, be amended and reenacted; that section one, article
eight, chapter twenty-two of said code be amended and reenacted;
that said chapter be further amended by adding thereto a new
article, designated article eight-a; that section five, article
two, chapter twenty-two-b of said code be amended and reenacted;
that said article be amended by adding thereto a new section,
designated section ten; and that chapter thirty-six of said code
be amended by adding thereto a new article, designated article
two-a, all to read as follows:
CHAPTER 11A. COLLECTION AND ENFORCEMENT OF PROPERTY TAXES.
ARTICLE 3. SALE OF LAND FOR TAXES.
§11A-3-4. Sale by sheriff.
(a) Except as provided in subsection (b) of this sectioneach unredeemed tract or lot, or each unredeemed part thereof or
undivided interest therein, shall be sold by the sheriff at
public auction to the highest bidder for cash, between the hours
of ten in the morning and four in the afternoon on any Monday
after the fourteenth day of October and before the twenty-third
day of November:
Provided, That no such unredeemed tract or lot,
or any unredeemed part thereof or undivided interest therein,
shall be sold upon any bid or for any sum less than the total
amount of taxes, interest and charges then due:
Provided,
however, That at any such sale held after the thirtieth day of
June, one thousand nine hundred sixty-five, each unredeemed tract
or lot, and each unredeemed part of a tract or lot or interest
therein, shall be offered for sale and sold in entirety as such
tract or part thereof or interest therein is described and
constituted as a unit or entity in the list and notice prescribed
in section two of this article:
Provided further, That no part
or interest in any unredeemed tract or lot, or any part thereof
or interest therein, that is less than the entirety of such
unredeemed tract, lot or part or interest, as the same is
described and constituted as a unit or entity in said list and
notice, shall be offered for sale or sold at such sale. If the
sale shall not be completed on the day designated in the notice
for the holding of such sale, it shall be continued from day to
day between the same hours until disposition shall have been made
of all the land.
(b) An interest in real estate which does not include an
interest in the surface, other than the right to use the surface
to extract minerals, shall be sold by the sheriff at the saleprovided by this section unless the corresponding surface
land
owner pays the delinquent taxes due. Ownership of such an
interest shall, at the time of payment of delinquent taxes by
surface land owner the sale would have occurred, rest in the
owner or owners of the surface interest within the boundaries of
such interest. The vesting provided by this subsection shall be
subject to all rights of the delinquent owner to redeem his
interest in the same manner as if it had been sold at the tax
sale as provided by this article.
CHAPTER 22. ENVIRONMENTAL RESOURCES.
ARTICLE 8. OIL AND GAS CONSERVATION.
§22-8-1. Declaration of public policy; legislative findings.
(a) It is hereby declared to be the public policy of this
state and in the public interest to:
(1) Foster, encourage and promote exploration for and
development, production, utilization and conservation of oil and
gas resources;
(2) Prohibit waste of oil and gas resources and unnecessary
surface loss of oil and gas and their constituents;
(3) Encourage the maximum recovery of oil and gas; and
(4) Safeguard, protect and enforce the correlative rights of
operators and royalty owners in a pool of oil or gas to the end
that each such operator and royalty owner may obtain his just and
equitable share of production from such pool of oil or gas.
(b) The Legislature hereby determines and finds that oil and
natural gas found in West Virginia in shallow sands or strata
have been produced continuously for more than one hundred years;
that oil and gas deposits in such shallow sands or strata havegeological and other characteristics different than those found
in deeper formations; and that in order to encourage the maximum
recovery of oil and gas from all productive formations in this
state, it is
not in the public interest
with the exception of
shallow wells utilized in a secondary recovery program to enact
statutory provisions relating to the exploration for or
production from oil and gas from shallow wells, as defined in
section two of this article,
but that and it is in the public
interest to enact statutory provisions establishing regulatory
procedures and principles to be applied to the exploration for or
production of oil and gas from deep wells, as defined in said
section two.
ARTICLE 8A. OIL AND GAS SHALLOW WELL CONSERVATION.
§22-8A-1. Declaration of public policy; legislative findings.
(a) It is hereby declared to be the public policy of this
state and in the public interest to:
(1) Foster, encourage and promote exploration for and
development, production, utilization and conservation of oil and
gas resources;
(2) Prohibit waste of oil and gas resources and unnecessary
surface loss of oil and gas and their constituents;
(3) Encourage the maximum recovery of oil and gas; and
(4) Safeguard, protect and enforce the correlative rights of
operators and royalty owners in a pool of oil or gas to the end
that each such operator and royalty owner may obtain his just and
equitable share of production from such pool of oil or gas.
(b) The Legislature hereby determines and finds that oil and
natural gas found in West Virginia strata have been producedcontinuously for more than one hundred years; and that in order
to encourage the maximum recovery of oil and gas from all
productive formations in this state, it is in the public interest
to enact new statutory provisions relating to the exploration for
or production from oil and gas, and that it is in the public
interest to enact new statutory provisions establishing
regulatory procedures and principles to be applied to the
exploration for or production of oil and gas.
§22-8A-2. Definitions.
(a) Unless the context in which used clearly requires a
different meaning, as used in this article:
(1) "Administrator for shallow well oil and gas" means the
administrator for shallow well oil and gas;
(2) "Correlative rights" means the reasonable opportunity of
each person entitled thereto to recover and receive without waste
the oil and gas in and under his or her tract or tracts, or the
equivalent thereof;
(3) "Director" means the director of the department of
environmental protection;
(4) "Drilling unit" means the acreage on which one well may
be drilled;
(5) "Gas" means all natural gas and other fluid hydrocarbons
not defined as oil in this section;
(6) "Independent producer" means a person who is actively
engaged in the production of oil and gas in West Virginia, but
whose gross revenue from such production in West Virginia does
not exceed five million dollars per year;
(7) "Just and equitable share of production" means, as toeach person, an amount of oil or gas or both substantially equal
to the amount of recoverable oil and gas in that part of a pool
underlying his or her tract or tracts;
(8) "Oil" means natural crude oil or petroleum and other
hydrocarbons, regardless of gravity, which are produced at the
well in liquid form by ordinary production methods and which are
not the result of condensation of gas after it leaves the
underground reservoir;
(9) "Operator" means any owner of the right to develop,
operate and produce oil and gas from a pool and to appropriate
the oil and gas produced; in the event that there is no oil and
gas lease in existence with respect to the tract in question, the
owner of the oil and gas rights shall be considered as "operator"
to the extent of seven eights of the oil and gas in that portion
of the pool underlying the tract owned by such owner, and as
"royalty owner" as to one-eighth interest in such oil and gas;
and in the event the oil is owned separately from the gas, the
owner of the substance being produced or sought to be produced
from the pool shall be considered as "operator" as to such pool;
(10) "Person" means any natural person, corporation,
partnership, receiver, trustee, executor, administrator,
guardian, fiduciary or other representative of any kind, and
includes any government or any political subdivision or any
agency thereof;
(11) "Pool" means an underground accumulation of petroleum
in a single and separate natural reservoir (ordinarily a porous
sandstone or limestone)." It is characterized by a single
natural-pressure system so that production of petroleum from onepart of the pool affects the reservoir pressure throughout its
extent. A pool is bounded by geologic barriers in all
directions, such as geologic structural conditions, impermeable
strata, and water in the formations so that it is effectively
separated from any other pools that may be present in the same
district or on the same geologic structure;
(12) "Royalty owner" means any owner of oil and gas in
place, or oil and gas rights, to the extent that such owner is
not an operator as defined in subdivision (9) of this section;
and
(13) "Waste" means and includes: (A) Physical waste, as
that term is generally understood in the oil and gas industry;
(B) the locating, drilling, equipping, operating or producing of
any oil or gas well in a manner that causes, or tends to cause,
a reduction in the quantity of oil or gas ultimately recoverable
from a pool under prudent and proper operations, or that causes
or tends to cause unnecessary or excessive surface loss of oil or
gas; or (C) the drilling of more wells than are reasonably
required to recover efficiently and economically the maximum
amount of oil and gas from a pool.
(b) Unless the context clearly indicates otherwise, the use
of the word "and" and the word "or" shall be interchangeable, as,
for example, "oil and gas" shall mean oil or gas or both.
§22-8A-3. Application of article; exclusions.
(a) Except as provided in subsection (b) of this section,
the provisions of this article shall apply to all lands located
in this state, however owned, including any lands owned or
administered by any government or any agency or subdivisionthereof, over which the state has jurisdiction under its police
power.
(b) This article shall not apply to or affect:
(1) Any well commenced or completed prior to the effective
date of this article, unless such well is, after completion
(whether such completion is prior or subsequent to the effective
date of this article); (i) deepened subsequent to the effective
date of this article to a formation at or below the top of the
uppermost member of the "Onondaga Group" or at a depth of or
greater than six thousand feet, whichever is shallower; or (ii)
involved in secondary recovery operations for oil under an order
of the commissioner entered pursuant to section eight of this
article;
(2) Gas storage operations or any well employed to inject
gas into or withdraw gas from a gas storage reservoir or any well
employed for storage observation; or
(3) Free gas rights.
(c) The provisions of this article shall not be construed to
grant anyone the authority or power to fix prices of oil and gas.
§22-8A-4. Appointment, responsibilities and authority of the
administrator of the shallow well oil and gas conservation
program.
The director shall appoint an administrator of the shallow
well oil and gas conservation program, who shall be a graduate of
a college or university with a degree in either geology or
petroleum engineering. The administrator shall exercise all
power, authority and responsibility necessary to implement the
provisions of this article. The administrator may exempt certainareas of the state from the provisions of this article.
The administrator shall be covered by civil service and may
not be removed without good cause.
By appointing the administrator the director does not limit
his or her general authority and the director shall have specific
authority to:
(a) Regulate the spacing of wells;
(b) Make and enforce reasonable rules and orders reasonably
necessary to prevent waste, protect correlative rights, govern
the practice and procedure before the commissioner and otherwise
administer the provisions of this article;
(c) Issue subpoenas for the attendance of witnesses and
subpoenas duces tecum for the production of any books, records,
maps, charts, diagrams and other pertinent documents, and
administer oaths and affirmations to such witnesses, whenever, in
the judgment of the commissioner, it is necessary to do so for
the effective discharge of his duties under the provisions of
this article; and
(d) Serve as technical advisor regarding oil and gas to the
Legislature, to the administrator for shallow well oil and gas,
to the department of natural resources and to any other agency of
state government having responsibility related to the oil and gas
industry.
§22-8A-5. Rules; notice requirements.
(a) The administrator may promulgate reasonable rules and as
he may deem necessary or desirable to implement and make
effective the provisions of this article and the powers and
authority conferred and the duties imposed upon him under theprovisions of this article which shall be promulgated pursuant to
chapter twenty-nine-a of this code.
(b) Notwithstanding the provisions of section two, article
seven, chapter twenty-nine-a of this code, any notice required
under the provisions of this article shall be given at the
direction of the administrator by: (1) Personal or substituted
service and if such cannot be had then by (2) certified United
States mail, addressed, postage prepaid, to the last known
mailing address, if any, of the person being served, with the
direction that the same be delivered to addressee only, return
receipt requested, and if there be no known mailing address or if
the notice is not so delivered then by (3) publication of such
notice as a Class II legal advertisement in compliance with the
provisions of article three, chapter fifty-nine of this code, and
the publication area for such publication shall be the county or
counties wherein any land which may be affected by such order is
situate. In addition, the administrator shall mail a copy of
such notice to all other persons who have provided him or her
with an address to which all notices may be mailed. The notice
shall be issued in the name of the state, shall be signed by the
administrator, shall specify the style and number of the
proceeding, the time and place of any hearing, and shall briefly
state the purpose of the proceeding. Personal or substituted
service and proof thereof may be made by an officer authorized to
serve process or by an agent of the administrator in the same
manner as is now proved by the "West Virginia Rules of Civil
Procedure for Trial Courts of Record" for service of process in
civil actions in the various courts of this state. A certifiedcopy of any pooling order entered under the provisions of this
article shall be presented by the administrator to the clerk of
the county commission of each county wherein all or any portion
of the pooled tract is located, for recordation in the record
book of such county in which oil and gas leases are normally
recorded. Such recording of such order from the time noted
thereon by such clerk shall be notice of the order to all
persons.
§22-8A-6. Waste of oil or gas prohibited.
Waste of oil or gas is hereby prohibited.
§22-8A-7. Drilling units and the pooling of interests in
drilling units in connection with oil or gas wells.
(a) Drilling units:
(1) After one well has been drilled establishing a pool, an
application to establish drilling units may be filed with the
administrator by the operator of such discovery well, the
administrator or by the operator of any lands directly and
immediately affected by the drilling of such discovery well, or
subsequent wells in said pool, and the administrator shall
promptly schedule a hearing on said application. Each
application shall contain such information as the commissioner
may prescribe by reasonable rules promulgated by him in
accordance with the provisions of section four of this article;
(2) Upon the filing of an application to establish drilling
units, notice of the hearing shall be given by the administrator.
Each notice shall specify the date, time and place of hearing,
describe the area for which a spacing order is to be entered, and
contain such other information as is essential to the giving ofproper notice;
(3) On the date specified in such notice, the administrator
shall hold a public hearing to determine the area to be included
in his spacing order and the acreage to be contained by each
drilling unit, the shape thereof and the minimum distance from
the outside boundary of the unit at which a well may be drilled
thereon. At such hearing the administrator shall consider:
(i) The surface topography and property lines of the lands
underlaid by the pool to be included in such order;
(ii) The plan of well spacing then being employed or
proposed in such pool for such lands;
(iii) The depth at which production from said pool has been
found;
(iv) The maximum area which may be drained effectively and
economically by one well; and
(v) Any other available geological or scientific data
pertaining to said pool which may be of probative value to the
administrator in determining the proper well drilling units
therefor.
To carry out the purposes of this article, the administrator
shall, upon proper application, notice and hearing as herein
provided, and if satisfied after such hearing that drilling units
should be established, enter an order establishing drilling units
of a specified and approximately uniform size and shape for each
pool subject to the provisions of this section;
(4) When it is determined that an oil or gas pool underlies
an area for which a spacing order is to be entered, the
administrator shall include in his or her order all landsdetermined or believed to be underlaid by such pool and exclude
all other lands;
(5) No drilling unit established by the administrator shall
be smaller than the maximum area which can be drained effectively
and economically by one well:
Provided, That if at the time of
a hearing to establish drilling units, there is not sufficient
evidence from which to determine the area which can be drained
effectively and economically by one well, the administrator may
enter an order establishing temporary drilling units for the
orderly development of the pool pending the obtaining of
information necessary to determine the ultimate spacing for such
pool;
(6) An order establishing drilling units shall specify the
minimum distance from the nearest outside boundary of the
drilling unit at which a well may be drilled. The minimum
distance provided shall be the same on all drilling units
established under said order with necessary exceptions for wells
drilled or being drilled at the time of the filing of the
application. If the administrator finds that a well to be
drilled at or more than the specified minimum distance from the
boundary of a drilling unit would not be likely to produce in
paying quantities or will encounter surface conditions which
would substantially add to the burden or hazard of drilling such
well, or that a location within the area permitted by the order
is prohibited by the lawful order of any state agency or court,
he or she is authorized after notice and hearing to make an order
permitting the well to be drilled at a location within the
minimum distance prescribed by the spacing order. In grantingexceptions to the spacing order, the administrator may restrict
the production from any such well so that each person entitled
thereto in such drilling unit shall not produce or receive more
than his or her just and equitable share of the production;
(7) An order establishing drilling units for a pool shall
cover all lands determined or believed to be underlaid by such
pool, and may be modified by the administrator, from time to
time, to include additional lands determined to be underlaid by
such pool or to exclude lands determined not to be underlaid by
such pool. An order establishing drilling units may be modified
by the administrator to permit the drilling of additional wells
on a reasonably uniform pattern at a uniform minimum distance
from the nearest unit boundary as provided above. Any order
modifying a prior order shall be made only after application by
an interested operator and notice and hearing as prescribed
herein for the original order. However, drilling units
established by order shall not exceed one hundred sixty acres for
an oil well or six hundred forty acres for a gas well. For the
purposes of this section, unless a person seeks a variance, it is
presumed that a shallow well will drain one hundred sixty acres;
(8) After the date of the notice of hearing called to
establish drilling units, no additional well shall be commenced
for production from the pool until the order establishing
drilling units has been made, unless the commencement of the well
is authorized by order of the administrator;
(9) The administrator shall, within forty-five days after
the filing of an application to establish drilling units for a
pool subject to the provisions of this section, either enter anorder establishing such drilling units or dismiss the
application;
(10) As part of the order establishing a drilling unit, the
administrator shall prescribe just and reasonable terms and
conditions upon which the royalty interests in the unit shall, in
the absence of voluntary agreement, be deemed to be integrated
without the necessity of a subsequent order integrating the
royalty interests.
(b) Pooling of interests in drilling units:
(1) When two or more separately owned tracts are embraced
within a drilling unit, or when there are separately owned
interests in all or a part of a drilling unit, the interested
persons may pool their tracts or interests for the development
and operation of the drilling unit. In the absence of voluntary
pooling and upon application of any operator having an interest
in the drilling unit and after notice and hearing, the
administrator shall enter an order pooling all tracts or
interests in the drilling unit for the development and operation
thereof and for sharing production therefrom. Each such pooling
order shall be upon terms and conditions which are just and
reasonable. In no event shall drilling be initiated on the tract
of an unleased royalty owner without his written consent. If a
person requests a variance from the division of proceeds based on
acreage, he or she shall petition the administrator to change the
division. The administrator may alter the division for good
cause, including strata differences and the geological phenomena;
(2) All operations, including, but not limited to, the
commencement, drilling or operation of a well, upon any portionof a drilling unit for which a pooling order has been entered,
shall be deemed for all purposes the conduct of such operations
upon each separately owned tracts in the drilling unit by the
several owners thereof. That portion of the production allocated
to a separately owned tract included in a drilling unit shall,
when produced, be deemed for all purposes to have been actually
produced from such tract by a well drilled thereon;
(3) Any pooling order under the provisions of this
subsection (b) shall authorize the drilling and operation of a
well for the production of oil or gas from one pooled acreage;
shall designate the operator to drill and operate such well;
shall prescribe the time and manner in which all owners of
operating interests in the pooled tracts or portions of tracts
may elect to participate therein; shall provide that all
reasonable costs and expenses of drilling, completing, equipping,
operating, plugging and abandoning such well shall be borne and
all production therefrom shared, by all owners of operating
interests in proportion to the net oil or gas acreage in the
pooled tracts owned or under lease to each owner; and shall make
provisions for payment of all reasonable costs thereof, including
a reasonable charge for supervision and for interest on past-due
accounts, by all those who elect to participate therein;
(4) No drilling or operation of a well for the production of
oil or gas shall be permitted upon or within any tract of land
unless the operator shall have first obtained the written consent
and easement therefor, duly acknowledged and placed on record in
the office of the county clerk, for valuable consideration of all
owners of the surface of such tract of land, which consent shalldescribe with reasonable certainty, the location upon such tract,
of the location of such proposed well, a certified copy of which
consent and easement shall be submitted by the operator to the
administrator;
(5) Upon request, any such pooling order shall provide just
and equitable alternatives whereby an owner of an operating
interest who does not elect to participate in the risk and cost
of the drilling of a well may elect:
(i) Option 1. To surrender his or her interest or a portion
thereof to the participating owners on a reasonable basis and for
a reasonable consideration, which, if not agreed upon, shall be
determined by the administrator; or
(ii) Option 2. To participate in the drilling of the well
on a limited or carried basis on terms and conditions which, if
not agreed upon, shall be determined by the administrator to be
just and reasonable;
(6) In the event a nonparticipating owner elects Option 2,
and an owner of any operating interest in any portion of the
pooled tract shall drill and operate, or pay the costs of
drilling and operating, a well for the benefit of such
nonparticipating owner as provided in the pooling order, then
such operating owner shall be entitled to the share of production
from the tracts or portions thereof pooled accruing to the
interest of such nonparticipating owner, exclusive of any royalty
or overriding royalty reserved in any leases, assignments thereof
or agreements relating thereto, of such tracts or portions
thereof, or exclusive of one eighth of the production
attributable to all unleased tracts or portions thereof, untilthe market value of such nonparticipating owner's share of the
production, exclusive of such royalty, overriding royalty or one
eighth of production, equals double the share of such costs
payable by or charted to the interest of such nonparticipating
owner;
(7) If a dispute arises as to the costs of drilling and
operating a well, the administrator shall determine and apportion
the costs, within ninety days from the date of written
notification to the administrator of the existence of a dispute.
§22-8A-8. Secondary recovery of oil; unit operations.
Upon the application of any operator in a pool productive of
oil and after notice and hearing, the administrator may enter an
order requiring the unit operation of such pool in connection
with a program of secondary recovery of oil, and providing for
the unitization of separately owned tracts and interests within
such pool, but only after finding that: (1) The order is
reasonably necessary for the prevention of waste and the drilling
of unnecessary wells; (2) the proposed plan of secondary recovery
will increase the ultimate recovery of oil from the pool to such
an extent that the proposed secondary recovery operation will be
economically feasible; (3) the production of oil from the
unitized pool can be allocated in such a manner as to insure the
recovery by all operators of their just and equitable share of
such production; and (4) the operators of at least three fourths
of the acreage (calculating partial interests on a pro rata basis
for operator interests on any parcel owned in common) and the
royalty owners of at least three fourths of the acreage
(calculating partial interests on a pro rata basis for royaltyinterests on any parcel owned in common) in such pool have
approved the plan and terms of unit operation to be specified by
the administrator in its order, such approval to be evidenced by
a written contract setting forth the terms of the unit operation
and executed by said operators and said royalty owners, and filed
with the administrator on or before the day set for hearing. The
order requiring such unit operation shall designate one operator
in the pool as unit operator and shall also make provision for
the proportionate allocation to all operators of the costs and
expenses of the unit operation, including reasonable charges for
supervision and interest on past-due accounts, which allocation
shall be in the same proportion that the separately owned tracts
share in the production of oil from the unit. In the absence of
an agreement entered into by the operators and filed with the
administrator providing for sharing the costs of capital
investment in wells and physical equipment, and intangible
drilling costs, the administrator shall provide by order for the
sharing of such costs in the same proportion as the costs and
expenses of the unit operation:
Provided, That any operator who
has not consented to the unitization shall not be required to
contribute to the costs or expenses of the unit operation, or to
the cost of capital investment in wells and physical equipment,
and intangible drilling costs, except out of the proceeds from
the sale of the production accruing to the interest of such
operator:
Provided, however, That no credit to the well costs
shall be adjusted on the basis of less than the average well
costs within the unitized area:
Provided further, That no order
entered under the provisions of this section requiring unitoperation shall vary or alter any of the terms of any contract
entered into by operators and royalty owners under the provisions
of this section.
§22-8A-9. Validity of unit agreements.
No agreement between or among operators, lessees or other
owners of oil or gas rights in oil and gas properties, entered
into pursuant to the provisions of this article or with a view to
or for the purpose of bringing about the unitized development or
operation of such properties, shall be held to violate the
statutory or common law of this state prohibiting monopolies or
acts, arrangements, contracts, combinations or conspiracies in
restraint of trade or commerce.
§22-8A-10. Hearing procedures.
(a) Upon receipt of an application for an order of the
administrator for which a hearing is required by the provisions
of this article, the administrator shall set a time and place for
such hearing not less than ten and not more than thirty days
thereafter. Any scheduled hearing may be continued by the
administrator upon his or her own motion or for good cause shown
by any party to the hearing. All interested parties shall be
entitled to be heard at any hearing conducted under the
provisions of this article.
(b) All of the pertinent provisions of article five, chapter
twenty-nine-a of this code shall apply to and govern the hearing
and the administrative procedures in connection with and
following such hearing, with like effect as if the provisions of
said article five were set forth in extenso in this subsection.
(c) Any such hearing shall be conducted by theadministrator. For the purpose of conducting any such hearing,
the commissioner shall have the power and authority to issue
subpoenas and subpoenas duces tecum which shall be issued and
served within the time, for the fees and shall be enforced, as
specified in section one, article five of said chapter twenty-
nine-a, and all of the said section one provisions dealing with
subpoenas and subpoenas duces tecum shall apply to subpoenas and
subpoenas duces tecum issued for the purpose of a hearing
hereunder.
(d) At any such hearing any interested person may represent
himself or herself or be represented by an attorney at law
admitted to practice before any circuit court of this state.
Upon request by the administrator he or she shall be represented
at such hearing by the attorney general or his or her assistants
without additional compensation. The administrator, with the
written approval of the attorney general, may employ special
counsel to represent him or her at any such hearing.
(e) After any such hearing and consideration of all of the
testimony, evidence and record in the case, the administrator
shall render his or her decision in writing. The written
decision shall be accompanied by findings of fact and conclusions
of law as specified in section three, article five, chapter
twenty-nine-a of this code, and a copy of the decision and
accompanying findings and conclusions shall be served by
certified mail, return receipt requested, upon all interested
persons and their attorney of record, if any.
(f) The decision of the commissioner shall be final unless
reversed, vacated or modified upon judicial review.
§22-8A-11. Judicial review; appeal to supreme court of appeals;
legal representation for administrator.
(a) Any person adversely affected by a decision of the
administrator rendered after a hearing held shall be entitled to
judicial review. All of the pertinent provisions of section
four, article five, chapter twenty-nine-a of this code shall
apply to and govern such judicial review with like effect as if
the provisions of said section four were set forth in extenso in
this section.
(b) The judgment of the circuit court shall be final unless
reversed, vacated or modified on appeal to the supreme court of
appeals, except that the petition seeking such review must be
filed with said supreme court of appeals within thirty days from
the date of entry of the judgment of the circuit court.
(c) Legal counsel and services for the administrator in all
appeal proceedings in any circuit court and the supreme court of
appeals shall be provided by the attorney general or his or her
assistants and in any circuit court by the prosecuting attorney
of the county as well, all without additional compensation. The
administrator, with the written approval of the attorney general,
may employ special counsel to represent him or her at any such
appeal proceedings.
§22-8A-12. Injunctive relief.
(a) Whenever it appears to the administrator that any person
has been or is violating or is about to violate any provision of
this article, any reasonable rule promulgated by the
administrator hereunder or any order or final decision, the
administrator may apply in the name of the state to the circuitcourt of the county in which the violations or any part thereof
has occurred, is occurring or is about to occur, or the judge
thereof in vacation, for an injunction against such person and
any other persons who have been, are or are about to be, involved
in any practices, acts or omissions, so in violations, enjoining
such person or persons from any such violation or violations.
Such application may be made and prosecuted to conclusion whether
or not any such violation or violations have resulted or shall
result in prosecution or conviction under the provisions of
section fourteen of this article.
(b) Upon application by the administrator, the circuit
courts of this state may by mandatory or prohibitory injunction
compel compliance with the provisions of this article, the
reasonable rules promulgated by the administrator hereunder and
all orders and final decisions of the administrator. The court
may issue a temporary injunction in any case pending a decision
on the merits of any application filed. Any other section of
this code to the contrary notwithstanding, the state shall not be
required to furnish bond or other undertaking as a prerequisite
to obtaining mandatory, prohibitory or temporary injunctive
relief under the provisions of this article.
(c) The judgment of the circuit court upon any application
permitted by the provisions of this section shall be final unless
reversed, vacated or modified on appeal to the supreme court of
appeals. Any such appeal shall be sought in the manner and
within the time provided by law for appeals from circuit courts
in other civil actions.
(d) The administrator shall be represented in all suchproceedings by the attorney general or his assistants and in such
proceedings in the circuit courts by the prosecuting attorneys of
the several counties as well, all without additional
compensation. The administrator, with the written approval of
the attorney general, may employ special counsel to represent the
commissioner in any such proceedings.
(e) If the administrator refuses or fails to apply for an
injunction to enjoin a violation or threatened violation of any
provision of this article, any reasonable rule promulgated
hereunder or any order or final decision of the administrator,
within ten days after receipt of a written request to do so by
any person who is or will be adversely affected by such violation
or threatened violation, the person making such request may apply
in his own behalf for an injunction to enjoin such violation or
threatened violation in any court in which the administrator
might have brought suit. The administrator shall be made a party
defendant in such application in addition to the person or
persons violating or threatening to violate any provision of this
article, any reasonable rule promulgated by the administrator
hereunder or any order or final decision of the administrator.
The application shall proceed and injunctive relief may be
granted without bond or other undertaking in the same manner as
if the application had been made by the administrator.
§22-8A-13. Penalties.
(a) Any person who violates any provision of this article,
any of the reasonable rules promulgated by the administrator
hereunder or any order or any final decision of the
administrator, other than a violation covered by the provisionsof subsection (b) of this section, shall be guilty of a
misdemeanor, and, upon conviction thereof, shall be fined not
more than one thousand dollars, and each day that a violation
continues shall constitute a new and separate violation.
(b) Any person who, for the purpose of evading any provision
of this article, any of the reasonable rules promulgated by the
administrator hereunder or any order or final decision of the
administrator, shall make or cause to be made any false entry or
statement in a report required under the provisions of this
article, any of the reasonable rules promulgated by the
commissioner hereunder or any order or final decision of the
administrator or shall make or cause to be made any false entry
in any record, account or memorandum required under the
provisions of this article, any of the reasonable rules
promulgated by the administrator hereunder or any order or any
final decision of the administrator or who shall omit, or cause
to be omitted, from any such record, account memorandum, full,
true and correct entries, or shall remove from this state or
destroy, mutilate, alter or falsify any such record, account or
memorandum, shall be guilty of a misdemeanor, and, upon
conviction thereof, shall be fined not more than five thousand
dollars, or imprisoned in the county jail not more than six
months, or both fined and imprisoned.
(c) Any person who knowingly aids or abets any other person
in the violation of any provision of this article, any of the
reasonable rules promulgated by the administrator hereunder or
any order or final decision of the administrator, shall be
subject to the same penalty as that prescribed in this articlefor the violation by such other person.
CHAPTER 22B. OIL AND GAS.
ARTICLE 2. OIL AND GAS PRODUCTION DAMAGE COMPENSATION.
§22B-2-5. 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 two years after the
date that the oil and gas developer files notice that he is
commencing reclamation under section thirty, article one of this
chapter. Such notice shall be given to surface owners
giving
notice to the surface owner that he is commencing reclamation
under section thirty, article one of this chapter. Such notice
shall be given to surface owners prior to commencing reclamation.
The notice shall be given by registered or certified mail, return
receipt requested, and shall be complete upon mailing.
A copy of
the same notice shall immediately be filed with the office of oil
and gas by the developer. If more than three tenants in common
or other co-owners 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 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.
§22B-2-10. Notice to surface landowner of intent to drill oil
or gas well; compensation for damages to surface;
restoration of surface.
(a) As used in this section:
(1) "Completion of the well" means completion of those
processes necessary before production occurs, including the
laying of flow lines and the construction of the tank battery.
If the well is not productive, the date of completion of the well
shall be the day it is plugged and abandoned;
(2) "Drilling operations" means the drilling, deepening or
conversion of a well for oil or gas production, core hole for oil
or gas purposes, or drill hole for a stratigraphic test for oil
or gas purposes;
(3) "Entry" means the moving upon the surface of land with
equipment to commence drilling operations, but does not include
entry for the survey for or ascertaining or identification of a
well location;
(4) "New well" means a well that is spudded after the first
day of July, one thousand nine hundred ninety-four, and does not
utilize any part of a well bore or drilling location that existed
prior to that date;
(5) "Operator" means the person, whether the owner or not,
who applies for or holds a permit for well work or who is named
as the principal on a bond for a permit for a well that was
issued by the department;
(6) "Person" means any natural person, corporation, firm,
partnership, venture, receiver, trustee, executor, administrator,
guardian, fiduciary, or other representative of any kind, and
includes any government or any political subdivision or agency
thereof;
(7) "Production operation" means the operation of a well forthe production of oil or gas, including all acts, structures,
equipment and roadways necessary for the operation;
(8) "Surface owner" means the person in whose name the
surface of the land on which drilling operations are contemplated
is assessed for purposes of taxes imposed according to the
records of the county assessor of the county where the land is
located as certified by the assessor.
(b) Notwithstanding other provisions of this article in
conflict, this section is applicable only for the drilling
operations of new wells except as provided in subsection (g) of
this section. This section does not apply for reworking
operations on a well. This section is not waiveable. There has
been a complete severance of the ownership of the oil and gas
from the ownership of the surface other than those necessary to
develop the minerals.
(c)(1) Prior to commencement of the drilling of a well, the
operator shall give written notice to the surface owner of the
operator's intent to commence drilling operations.
(2) The operator shall, for the purpose of giving notice,
secure from the assessor's office at any time prior to the giving
of the notice, a certification which identifies the person in
whose name the lands on which drilling operations are to be
commenced are assessed at the time the certification is made.
For identifying the surface owner for purpose of giving the
surface owner the notice required by this section the written
certification made by the assessor of the surface owner satisfied
the requirements of this section.
(3) The notice required to be given by the operator to thesurface owner shall identify the following:
(A) The source of the operator's right of entry on the
surface for drilling operations and the date on or after which
drilling operations are expected to commence;
(B) The name, address and telephone number of the operator;
(C) An offer to discuss with the surface owner those matters
set forth in subsection (d) of this section prior to commencement
of drilling operations.
(4) If the surface owner elects to meet with the operator,
the operator shall meet at a mutually agreed time and place
within the limitations set forth herein. Failure of the surface
owner to contact the operator at least fifteen days after
receiving the notice shall be conclusively deemed a waiver of the
right to meet by the surface owner. The meeting shall be
scheduled between the hours of nine o'clock a.m. and nine o'clock
p.m. of the same day, and shall be prior to entry onto the
surface land for any purpose. Unless agreed to otherwise, the
meeting place shall be located within the county in which
drilling operations are to be commenced where the operator or his
or her agent shall be available to discuss with the surface owner
or his or her agent those matters set forth in subsection (d) of
this section.
(5) The notice shall be given to the surface owner by
either:
(A) Certified mail addressed to the surface owner at the
address shown in the certification obtained from the assessor,
which shall be postmarked at least thirty days prior to entering
onto the surface land for any purpose; or
(B) Personal delivery to the surface owner at least twenty
days prior to entering onto the surface land for any purpose.
(6) Notice to the surface owner as defined in this section
shall be deemed conclusive notice of rights under this section to
the record owners of all interest in the surface.
(d) The operator, or his agent shall, if the surface owner
accepts the offer to meet, be available at the time agreed, date
and place to discuss with the surface owner the following:
(1) Placement of roads to be constructed by the operator;
(2) Points of entry upon the surface for drilling
operations;
(3) Construction and placement of pits and any surface or
stream discharges used for drilling operations;
(4) Restoration of fences to be cut in order to make entry
upon the surface for drilling operations;
(5) Use of water on the surface of the lands;
(6) Removal of trees and vegetation;
(7) Surface water drainage changes caused by drilling
operations;
(8) Location of well head;
(9) Location of pipeline;
(10) Location of permanent equipment such as storage tanks
and dryers; and
(11) The operators' exercise of other rights to use of the
surface.
(f) The surface owner will be entitled to damages as set
forth in article two, chapter twenty-two-b of this code.
(g) In conjunction with the plugging and abandonment of anywell or the reworking of any well, the operator shall restore the
surface and any improvements thereon to a condition as near as
practicable to their condition prior to commencement of the work.
The surface owner and operator may waive this requirement in
writing, subject to the approval of the office of oil and gas
that the waiver is in accordance with its administrative
regulations.
CHAPTER 36. ESTATES IN PROPERTY.
ARTICLE 2A. PRESERVATION OF SURFACE OWNERS' RIGHTS.
§36-2A-1. Findings, purpose and public policy.
The Legislature hereby makes the findings of fact that the
historical practice of holding the surface holder as the inferior
estate and the mineral estate, severed therefrom the superior (or
dominant) estate has:
(a) Caused unnecessary and significant disturbance of the
surface lands and structures thereon, including farms and
residential homes throughout the state;
(b) Mineral owners not limited by countervailing surface
interests and were not limited by the right of the surface owner
to pursue contract damages or the ability of the surface owner to
pursue tortious damages in the excessive acts;
(c) Caused pollution of the waters and surface lands of the
state;
(d) Caused significant loss of subjacent support, caving in
of surface lands and settling of surface lands; and
(e) Encouraged bad public policy.
§36-2A-2. Estates equal.
The surface estate of interest in any real property in thestate shall be equal in the law with every mineral estate
underlying a surface interest or estate to which the surface
interest or estate is subject; each constitutes an interest in
land equal to the other.
§36-2A-3. Findings, purpose and public policy.
No easement on an interest in surface real property by an
interest in underlying minerals is implied.
§36-2A-4. Unequal estates void.
(
A) Grant or reservation in a conveyance of real property
which seeks to hold interests in the preservation of the
beneficial use of interests in the surface, subservient is null
and void to the extent they are not equal.
§36-2A-5. Presumption of equal rights.
When the ownership of any interest in minerals in real
property is separated from ownership of any interest in the
surface, it is presumed that the intent of the parties and the
language of the instruments require an equal balance between the
interest of the surface interest owner and the interest of the
mineral interest owner.
§36-2A-6. Measure of damages.
(a) The measure of damages, for damages caused to the
surface estate by the holder of any mineral interests, shall be
the standard of negligence as in tortious acts and shall not be
the breech of contract standard of whether the acts causing
damage were necessary or unnecessary to the use and enjoyment of
the mineral estate.
(b) The Legislature declares that the public policy of the
state for compensation and damages to surface owners in the stateshall not be diminished by any provision in a deed, lease or
other conveyance of property in the state.
NOTE: The purpose of this bill is to cause title to delinquent
minerals to revert to the owner of the surface; to authorize
forced pooling and unitization for shallow well drilling and
production; mandating notice of commencement of reclamation
activities for the purposes of oil and gas production damage
compensation; to require the oil and gas well driller to meet
with the surface owner before entering onto the surface owners
land to determine well placement; changing the common law that
makes the mineral estate dominant over the surface owner so they
are equal; and changing the measure of damages for surface damage
from contract to tort damages.
(1) To revise the common law which causes the surface estate
to be subservient to the mineral developer's estate to be
changed so that the estates are equal;
(2) To require communication between the mineral developer
and the surface owner before survey crews, etc., come on to
land and start making a specific plan to development.
(3) To promote the reunion of ownership of the minerals with
ownership of the surface instead of allowing separate
ownership of minerals to last forever with continued
fractionalization of ownership by:
(A) Returning ownership of minerals upon which the taxes
have not been paid to the owner of the surface estate
instead of selling them at sheriff tax sales (subject to the
original mineral owners' rights to redemption);
(4) To require shallow well pooling and unitization in order
to:
(A) Prevent reduction in the total amount of oil and gas
produced by the drilling of too many wells too close
together in the same formation;
(B) Assure that the owners of all of the land from which the
oil or gas is being produced receive their fair share of the
royalties;
(C) Reduce the cost of oil and gas to consumers by
preventing the drilling of more wells than is necessary to
produce the same amount of oil and gas; and
(D) Reduce the disturbance of the surface of the land by the
drilling of unnecessary wells.
The bill provides criminal penalties for violations.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new
language that would be added.
§22-8A, §22B-2-10, §36-2A therefore, strike-throughs and
underscoring have been omitted.
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