THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY GEORGE, BELFANTI, BOBACK, CARROLL, CONKLIN, GOODMAN, HORNAMAN, GIBBONS, HALUSKA, JOSEPHS, KORTZ, MUNDY, MURPHY, MYERS, PETRARCA, SIPTROTH, WANSACZ, SOLOBAY, THOMAS, WALKO AND WHEATLEY, MARCH 31, 2009

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY, MARCH 31, 2009  

AN ACT

Providing for duties of oil and gas well operators, for notice

of operations and surface use and compensation agreement, for

entry without surface use compensation agreement, for

restriction on issuance of permits for wells, for attorney

fees and costs and for emergency situations.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Short title.

This act shall be known and may be cited as the Surface

Owners' Protection Act.

Section 2.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Department."  The Department of Environmental Protection of

the Commonwealth.

"Gas."  Fluid, either combustible or noncombustible, which is

produced in a natural state from the earth and which maintains a

gaseous or rarified state at a standard temperature of 60

degrees Fahrenheit and a pressure of 14.7 PSIA, manufactured

gas, byproduct gas or any mixture of gases.

"Oil" or "petroleum."  Hydrocarbons in liquid form at a

standard temperature of 60 degrees Fahrenheit and a pressure of

14.7 PSIA.

"Oil or gas operations" or "operations."  Activities

affecting land or water sources, no matter how slight, that are

associated with oil or gas exploration or production, including,

but not limited to:

(1)  Construction, installation, maintenance or removal

of oil or gas wells.

(2)  Construction, installation, maintenance or removal

of pipelines and equipment for gas, oil or water.

(3)  Installation, maintenance and removal of all access

or service roads.

(4)  Installation, maintenance or removal of oil or gas

production or storage equipment and facilities.

(5)  Rework of oil and gas wells.

(6)  Plugging of oil or gas wells.

(7)  Actions taken to reclaim well sites.

(8)  Actions taken regarding road and pipeline rights-of-

way.

"Person."  Any natural person, association, partnership,

corporation, political subdivision or agency of the Federal or

State Government or other legal entity.

"Reclaim."  To restore any portion of land affected by oil or

gas operations to the same or substantially similar condition

that existed prior to oil or gas operations, or as otherwise

agreed to in a memorialized agreement between the operator and

the landowner or tenants.

"Surface."  The uppermost portion of the earth's crust,

including land and aquatic features.

"Surface owner."  A person who holds legal or equitable title

to the surface of a parcel of real property.

"Surface use and compensation agreement."  An agreement

written, signed and notarized between a surface owner and an

operator stipulating the location of proposed oil or gas wells,

access roads and any other uses of the surface during oil or gas

exploration and production. An oil or gas operation lease

agreement entered into by a surface owner and an operator, which

pays the surface owner at least a one-eighth royalty on gas or

oil extracted from areas under the surface of the surface

owner's real property, shall be deemed a surface use and

compensation agreement for the purposes of this act.

"Tenant."  A person who occupies a parcel of real property

belonging to the surface owner in subordination to the surface

owner's title and with the surface owner's assent, expressed or

implied.

"Water sources."  Rivers, streams, creeks, rivulets,

impoundments, ditches, water courses, storm sewers, lakes,

dammed water, ponds, springs or all other bodies of surface

water, or parts thereof, whether natural or artificial, within

or on the boundaries of the surface owner.

"Well."  A borehole drilled or being drilled for the purpose

of or to be used for producing, extracting or injecting any gas,

petroleum or other liquid related to oil or gas production or

storage, including brine disposal, but excluding boreholes

drilled to produce potable water to be used as such. The term

does not include a borehole drilled or being drilled for the

purpose of or to be used for systems of monitoring, producing or

extracting gas from solid waste disposal facilities, as long as

the wells are subject to the act of July 7, 1980 (P.L.380,

No.97), known as the Solid Waste Management Act, and do not

penetrate a workable coal seam. The term also does not include a

borehole drilled or being drilled for the purpose of or to be

used for degasifying coal seams if the following conditions are

satisfied:

(1)  The borehole is used to vent methane to the outside

atmosphere from an operating coal mine.

(2)  The borehole is regulated as part of the mining

permit pursuant to the act of June 22, 1937 (P.L.1987,

No.394), known as The Clean Streams Law, and the act of May

31, 1945 (P.L.1198, No.418), known as the Surface Mining

Conservation and Reclamation Act.

(3)  The borehole is drilled by the operator of the

operating coal mine for the purpose of increased safety.

(4)  The borehole is used to vent methane to the outside

atmosphere pursuant to a federally funded or State-funded

abandoned mine reclamation project.

"Well operator" or "operator."  The person designated as the

well operator or operator on the permit application or well

registration. Where a permit or registration was not issued, the

term shall mean any person who owns, manages, leases, controls

or possesses any well or coal property, or any person who

locates, drills, operates, alters or plugs any well or

reconditions any well with the purpose of production from the

well.

Section 3.  Duties of operators.

(a)  Nonlease extraction agreements.--Except to the extent

otherwise provided in a surface use and compensation agreement

duly executed by a surface owner and an operator, where oil or

gas are not leased for extraction from the surface owner by the

operator in a lease paying at least a one-eighth royalty to the

surface owner, an operator shall:

(1)  Compensate fully the surface owner for damages

resulting in any diminution in value of the real property and

any real estate upon the tract, including, but not limited

to:

(i)  Lost agricultural production and income.

(ii)  Lost timber production.

(iii)  Lost land value.

(iv)  Lost use of and access to the surface owner's

land or water sources.

(v)  Lost value of property improvements caused by

operations.

(2)  Reclaim entirely the surface affected by oil or gas

operations within nine months of the cessation of extracting

oil or gas from any well on a surface owner's tract of land.

(b)  Compensation.--An operator shall not be responsible for

negotiating or allocating compensation between the surface owner

and any tenant, except that an operator shall compensate fully

any tenant of the surface owner for any diminution in value of

leasehold improvements, made by said tenant, damaged as a result

of the operator's oil or gas operations.

Section 4.  Notice of operations and surface use and

compensation agreement.

(a)  Prior to entry.--No less than 15 business days prior to

initial entry upon a tract of land for activities that will not

disturb the surface, including inspections, staking, surveys,

measurements and general evaluations of proposed routes and

sites for oil or gas operations, an operator shall provide

notice by certified mail to the surface owner of each tract on

which the operator proposes activity as well as a statement

citing deeds, leases, rights-of-way, easements and other rights

relating to the right of access of the operator to the tract of

land.

(b)  Prior to application.--Prior to submission of an

application for a permit to the department under section 201 of

the act of December 19, 1984 (P.L.1140, No.223), known as the

Oil and Gas Act, and no less than 45 days before entering the

surface of the land to conduct any oil or gas operations, an

operator shall, by certified mail, provide the surface owner

with notice of the planned operations. Copies of the notice

shall also be sent to surface owners within a one-half mile

radius of each proposed well site. The notice shall include:

(1)  Sufficient disclosure of the planned operations,

including topographical and underground maps of the relevant

areas, permits and materials submitted by the operator to

obtain permits to enable the surface owner to evaluate the

effects the operations might have on the lands of the surface

owner.

(2)  A copy of this act and a copy of the Oil and Gas

Act.

(3)  The name, address, telephone number and, if

available, facsimile number and electronic mail address of

the operator and the authorized representative of the

operator.

(4)  Information regarding required or recommended

predrilling surveys and other provisions relating to:

(i)  Protection of water sources.

(ii)  Well location restrictions.

(iii)  Casing, cementing and plugging plans for wells

and production-related horizontal boreholes under the Oil

and Gas Act.

(5)  A proposed surface use and compensation agreement

addressing, to the extent known, the following:

(i)  Placement, specifications, maintenance and

design of well pads, gathering pipelines, water

pipelines, storage facilities for water, oil or gas,

compressor stations, pump stations, meter pits and roads

to be constructed and other facilities of every type to

be constructed and utilized either temporarily or

permanently for operations.

(ii)  The proposed frequency of ingress and egress

across or under the surface of the land for operations,

including pipelines, and the routes for the same.

(iii)  Construction, maintenance and placement of

pits used or planned for operations.

(iv)  Use and impoundment of water on the surface of

the land.

(v)  Removal and restoration of the species of plant

life existing prior to commencement of any operations on

areas to be impacted by those operations.

(vi)  Surface water drainage changes.

(vii)  Plans and actions to limit and effectively

control precipitation runoff, sedimentation and erosion.

(viii)  Control and management of noise, weeds, dust,

traffic, trespass, litter and other interferences with

the use and enjoyment of the surface by the surface owner

or tenant.

(ix)  Interim and final proposals to reclaim the

surface.

(x)  Plans or actions to be undertaken to minimize

damages to the surface.

(xi)  Operator indemnification for injury to persons

or properties other than that of the surface owner when

caused by the operations.

(xii)  Efforts to restrict access to the land of the

surface owner by third parties utilizing the access roads

and rights-of-way of the operator.

(xiii)  An offer of compensation for damages to the

surface affected by operations.

(6)  A plat that shows:

(i)  The tract of land upon which each well is to be

located.

(ii)  The name of the surface landowner of record and

lessor, if any.

(iii)  The name of all surface landowners or water

purveyors whose water supplies are within one-half mile

of the proposed well location.

(iv)  The location of water sources.

(v)  Placement of well pads, gathering pipelines,

water pipelines, storage facilities for oil, gas or

water, compressor stations, meter pits and pump stations

and roads to be constructed for oil and gas operations.

(vi)  Placement of pits and equipment used or

planned, and use and impoundment of water on the surface

of the land.

(vii)  The workable coal seams, if any, underlying

the tract of land upon which the well is to be drilled or

altered, which are to be cased off in accordance with

section 207 of the Oil and Gas Act.

(viii)  The name of the owner of record or operator

of known underlying workable coal seams, if any.

(ix)  The acreage in the tract to be drilled.

(x)  The proposed location of each well determined by

survey.

(xi)  The courses and distances of the proposed well

locations from two or more permanent identifiable points

or landmarks on the tract boundary corners.

(xii)  The proposed angle and direction of a well, if

the well is to be deviated substantially from the

vertical course.

(xiii)  The number or other identification to be

given to the wells.

(c)  Persons to be notified.--The notices required under this

section shall be sent to the surface owner at the address shown

by the property tax records at the time the notice is given. If

the property tax records for the county or the records in the

recorder's office for the county where the property is located

disclose that legal and equitable title of the land are not held

by the same person, notice shall be given to both the holder of

the legal title and to the holder of the equitable title at the

addresses shown by the property tax records at the time the

notice is given.

(d)  Surface owner options.--Upon receipt of the notice

required under subsection (b), the surface owner may:

(1)  agree to the proposed surface use and compensation

agreement within 45 days of receipt; or

(2)  reject the proposed surface use and compensation

agreement and enter into a mutually acceptable surface use

and compensation agreement that sets forth the rights and

obligations of the parties.

(e)  Presumption of receipt.--Notices to the surface owners

required under this act shall be deemed to have been received 15

days after mailing by certified mail.

Section 5.  Entry without surface use and compensation

agreement.

(a)  Requirements.--If, after 45 days from the date on which

a surface owner receives notice under section 4(b), no surface

use and compensation agreement has been executed by the operator

and surface owner, the operator may file applications for

permits with the department for the oil or gas wells proposed to

be located on the surface owner's property after depositing a

surety bond, letter of credit from a banking institution, cash

or certificate of deposit with a Pennsylvania surety company or

financial institution for the benefit of a surface owner in an

amount equal to the greater of:

(1)  120% of the operator's best compensation offer as to

each oil or gas production facility's location; or

(2)  $250,000 per production facility location.

(b)  Release.--The surety bond, letter of credit, cash or

certificate of deposit shall only be released by the surety

company or financial institution back to the operator if:

(1)  the surface owner provides an affidavit that

compensation for use of and damages to the surface owner's

land have been paid in full to the surface owner;

(2)  the surface owner and the operator have executed a

surface use and compensation agreement or otherwise agreed

the surety should be released;

(3)  there has been a final resolution of the judicial

appeal in any action for damages brought by the surface owner

and any awarded damages have been paid; or

(4)  all wells on the land of the surface owner have been

plugged and abandoned in accordance with law and the operator

has not conducted oil or gas operations on the property of

the surface owner for a period of four years.

Section 6.  Restriction on issuance of permits for wells.

The department shall not issue new permits or renew existing

permits for wells where an operator is not complying with the

terms of this act. The department may resume issuing permits to

the operator only when the operator demonstrates to the

department it is in compliance with this act.

Section 7.  Attorney fees and costs.

(a)  General rule.--In an action brought under this act, if a

court finds that compensation is owed under section 3, the court

may also award the prevailing party attorney fees and costs if:

(1)  the operator conducted operations without providing

notice as required under section 4(b);

(2)  the operator conducted operations without a surface

use and compensation agreement and before either depositing

or maintaining a bond or other surety as required under

section 5;

(3)  the operator conducted operations outside the scope

of a surface use and compensation agreement and, when

entering into the agreement, knew or should have known that

operations would be conducted outside the scope of the

agreement; or

(4)  the surface owner failed to exercise good faith in

complying with the provisions of this act or the terms of a

surface use and compensation agreement.

(b)  Clear and convincing evidence standard.--In an action

brought under this act, if a court finds that compensation is

owed under section 3, the court may also award the prevailing

party attorney fees, costs and treble damages if the court

finds, by clear and convincing evidence, that:

(1)  the operator willfully and knowingly entered upon

the premises for the purpose of commencing the drilling of a

well:

(i)  without giving notice as required under section

4(b); or

(ii)  without a surface use and compensation

agreement with the surface owner and before depositing a

bond or other surety under section 5; or

(2)  either the surface owner or the operator willfully

and knowingly violated the terms of a surface use and

compensation agreement between them.

Section 8.  Protection of water supplies.

(a)  Restoration and replacement.--A well operator who

affects a public or private water supply by pollution or

diminution shall restore or replace the affected supply with an

alternate source of water adequate in quantity and quality for

the purposes served by the supply.

(b)  Investigation requests.--A landowner or water purveyor

suffering pollution or diminution of a water supply as a result

of the drilling, alteration or operation of an oil or gas well

may so notify the department and request that an investigation

be conducted. Within ten days of the notification, the

department shall investigate the claim and shall, within 45 days

following notification, make a determination. If the department

finds that the pollution or diminution was caused by the

drilling, alteration or operation activities, or if the

department presumes the well operator responsible for pollution

under subsection (c), then the department shall issue orders to

the well operator necessary to assure compliance with subsection

(a). The orders may include orders requiring the temporary

replacement of a water supply where it is determined that the

pollution or diminution may be of limited duration.

(c)  Presumption.--Unless rebutted by one of the five

defenses established under subsection (d), it shall be presumed

that a well operator is responsible for the pollution of a water

supply that is within 2,500 feet of the oil or gas well, where

the pollution occurred within six months after the completion of

drilling or alteration of the well.

(d)  Defenses.--In order to rebut the presumption of

liability established under subsection (c), the well operator

must affirmatively prove one of the following five defenses:

(1)  The pollution existed prior to the drilling or

alteration activity as determined by a predrilling or

prealteration survey.

(2)  The landowner or water purveyor refused to allow the

operator access to conduct a predrilling or prealteration

survey.

(3)  The water supply is not within 2,500 feet of the

well.

(4)  The pollution occurred more than six months after

completion of drilling or alteration activities.

(5)  The pollution occurred as the result of some cause

other than the drilling or alteration activity.

(e)  Preservation of defenses.--Any operator electing to

preserve its defenses under subsection (d)(1) or (2) shall

retain the services of an independent certified laboratory to

conduct the predrilling or prealteration survey of water

supplies. A copy of the results of the survey shall be submitted

to the department and the landowner or water purveyor in a

manner prescribed by the department.

Section 9.  Remedies not exclusive.

The remedies provided by this act are not exclusive and do

not preclude a person from utilizing any other remedies allowed

by statute, common law, deed or contract.

Section 10.  Emergency situations.

Notwithstanding any provision of this act to the contrary, no

notice, surface use and compensation agreement or bond shall be

required in emergency situations for activities determined by

the department to be necessary to protect public health and

safety or the environment.

Section 20.  Effective date.

This act shall take effect in 120 days.