THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY KASUNIC, BREWSTER, COSTA, FONTANA, RAFFERTY, SOLOBAY, STACK, WASHINGTON AND WILLIAMS, SEPTEMBER 20, 2011

REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, SEPTEMBER 20, 2011  

AN ACT

Providing for surface owner protection.

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.  Applicability.

This act applies in the following situations when oil and gas

exploration or oil and gas operations are conducted:

(1)  Land owned by a surface owner, who does not own

mineral rights for oil and gas production, and who sustains

damages as provided in section 4(a) resulting from oil and

gas exploration or oil and gas operations.

(2)  Land subject to leasehold interests where the tenant

sustains damages to leasehold improvements resulting from oil

and gas operations.

Section 3.  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."  The term as defined in the act of December 19, 1984

(P.L.1140, No.223), known as the Oil and Gas Act.

"Oil."  The term as defined in the act of December 19, 1984

(P.L.1140, No.223), known as the Oil and Gas Act.

"Oil and Gas Act."  The act of December 19, 1984 (P.L.1140,

No.223), known as the Oil and Gas Act.

"Oil and gas exploration."  All activities affecting the land

owned by the surface owner that are associated with the

exploration for oil or gas.

"Oil and gas operations."  All activities affecting the land

owned by the surface owner that are associated with drilling or

extraction of oil or gas, including final reclamation of the

surface land affected by oil and gas operations.

"Operator."  A person with the legal right to conduct oil and

gas operations, including the agents, employees and contractors

of that person.

"Reclaim."  To substantially restore the surface affected by

oil and gas operations to the condition that existed prior to

oil and gas operations, or as otherwise agreed to in writing by

the operator and the surface owner.

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

title, as shown in the records of the county recorder of deeds,

to the surface of the real property on which the operator has

the legal right to conduct oil and gas operations.

"Surface use and compensation agreement."  An agreement

between an operator and a surface owner specifying the rights

and obligations of the surface owner and operator concerning

activities and measures to mitigate damages to the surface owner

resulting from oil and gas operations by the operator.

"Tenant."  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.

Section 4.  Compensation for oil and gas operations.

(a)  Surface owner.--An operator shall compensate the surface

owner for damages sustained by the surface owner, as applicable,

for loss of agricultural production and income, lost land value,

lost use of and lost access to the surface owner's land and lost

value of improvements caused by oil and gas exploration and oil

and gas operations. The payments required by this section only

apply to land affected by oil and gas exploration and oil and

gas operations.

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

allocating compensation between the surface owner and any

tenant, except that an operator shall compensate a tenant of the

surface owner for any leasehold improvements damaged as a result

of the operator's oil and gas exploration or oil and gas

operations if the improvements are approved and authorized by

the surface owner. The compensation shall equal the cost of

repairing or replacing the improvements.

Section 5.  Notices; surface use and compensation agreement.

(a)  General notice.--Prior to initial entry upon the land

for activities that do not disturb the surface, including

inspections, staking, surveys, measurements and general

evaluation of proposed routes and sites for oil and gas

operations, the operator shall provide at least five business

days' notice by certified mail or hand delivery to the surface

owner.

(b)  Exploration notice.--The following provisions shall

apply:

(1)  No less than 15 days before entering the property of

the surface owner to conduct oil and gas exploration, an

operator shall, by certified mail or hand delivery, give the

surface owner notice of planned oil and gas exploration. The

notice shall include:

(i)  Sufficient disclosure of the planned oil and gas

exploration to enable the surface owner to evaluate the

effect of the operations on the surface owner's property,

including applicable information listed in subsection (c)

(1) that has the potential to damage the value or use of

the property by the surface owner.

(ii)  A copy of this act.

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

available, facsimile number and electronic mail address

of the operator and the operator's authorized

representative.

(2)  The surface owner may, within 30 days of receipt of

the notice of proposed oil and gas exploration, submit to the

operator a claim that outlines the anticipated damages to the

value and use of the property resulting from the planned oil

and gas exploration.

(c)  Operation notice.--No less than 30 days before first

entering the property of the surface owner 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:

(1)  Sufficient disclosure of the planned oil and gas

operations to enable the surface owner to evaluate the effect

of the operations on the surface owner's property, including

the following information and State law requirements under

the Oil and Gas Act that has the potential to damage the

value or the use of the property by the surface owner:

(i)  Placement, specifications, maintenance and

design of well pads, gathering pipelines and roads to be

constructed for oil and gas operations.

(ii)  Planned routes of ingress and egress upon the

surface of the land and the anticipated traffic load on

each route resulting from the oil and gas operations.

(iii)  Construction, maintenance and placement of all

pits and equipment used or planned for oil and gas

operations.

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

surface owner.

(v)  Plans to remove and restore plant life on the

property.

(vi)  The likelihood for any change in the surface

water drainage on the property of the surface owner as a

result of the oil and gas operations and plans to restore

such drainage.

(vii)  Actions to limit and effectively control

precipitation runoff and erosion.

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

traffic, trespass, litter and interference with the use

of the property by the surface owner.

(ix)  Interim and final reclamation.

(2)  A copy of this act.

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

available, facsimile number and electronic mail address of

the operator and the operator's authorized representative.

(4)  A proposed surface use and compensation agreement

that shall contain, at a minimum and to the extent known, the

following:

(i)  A summary of the elements of the proposed oil

and gas operations listed in paragraph (1).

(ii)  Actions to minimize the likelihood of damages

to the use or value of the surface owner's property

arising from oil and gas operations from the requirements

contained in paragraph (1).

(iii)  Operator indemnification for injury to persons

caused by the operator.

(iv)  An offer of compensation for actual damages

incurred by the surface owner resulting from oil and gas

exploration.

(v)  An offer of compensation to include an amount

for actual damages incurred by the surface owner

resulting from oil and gas exploration and an amount for

damages to the surface owner resulting from the proposed

oil and gas operations.

(d)  Owner of record.--The notices required by this section

shall be given to the surface owner at the address shown by the

records of the county recorder of deeds at the time the notice

is given. If legal title and equitable title are not held by the

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

legal title and to the holder of equitable title at the

addresses shown by the records of the county recorder of deeds

at the time the notice is given.

(e)  Agreement.--Upon receipt of the notice required by

subsection (c), the surface owner may:

(1)  accept the proposed surface use and compensation

agreement within 20 days; or

(2)  reject the proposed surface use and compensation

agreement; provided that, failure to accept the proposed

agreement within 20 days shall be deemed to be a rejection of

the proposed agreement by the surface owner. If the proposed

agreement is rejected, the surface owner may enter into

negotiations with the operator, including, if the parties

agree, binding arbitration or mediation.

(f)  Receipt.--Notices required by this act shall be deemed

to have been received five days after mailing by certified mail

or immediately upon hand delivery.

(g)  Mitigation of damage.--The operator and the surface

owner may enter into a mutually acceptable agreement specifying

the rights and obligations of the surface owner and operator

concerning activities and measures to mitigate damages to the

surface owner resulting from oil and gas operations by the

operator.

Section 6.  Entry without agreement; bond.

If, after 30 days from a surface owner's receiving notice of

planned oil and gas operations pursuant to section 5(c), no

surface use and compensation agreement has been entered into,

the operator may enter the property of the surface owner and

conduct oil and gas operations, after compliance with either of

the following:

(1)  After depositing a surety bond, a letter of credit

from a financial institution chartered or authorized to do

business in this Commonwealth and regulated and examined by

the Commonwealth or a Federal agency, or cash or a

certificate of deposit with a corporate surety licensed to do

business in this Commonwealth and approved by the department,

or for the benefit of the surface owner in the amount of

$10,000 per well location. The surety bond, letter of credit,

cash or certificate of deposit shall only be released if:

(i)  The surface owner provides notice that

compensation for damages has been paid.

(ii)  The surface owner and the operator have

executed a surface use and compensation agreement or

otherwise agreed that the security should be released.

(iii)  There has been a final resolution of any

judicial appeal in any action for damages and any awarded

damages have been paid.

(iv)  All wells have been plugged and abandoned and

the operator has not conducted oil and gas operations on

the surface owner's property for a period of six years.

(2)  After posting a blanket security bond, letter of

credit from a financial institution chartered or authorized

to do business in this Commonwealth and regulated and

examined by the Commonwealth or a Federal agency, cash or a

certificate of deposit with a corporate surety licensed to do

business in this Commonwealth and approved by the department

in the sum of $25,000 subject to the following criteria:

(i)  The corporate surety shall hold the blanket

security bond, letter of credit, cash or certificate of

deposit for the benefit of the surface owners of this

Commonwealth and shall ensure that such security is in a

form readily payable to a surface owner awarded damages

in an action brought pursuant to this act.

(ii)  The blanket security bond, letter of credit,

cash or certificate of deposit shall remain in full force

and effect as long as the operator continues oil and gas

operations in this Commonwealth.

(iii)  The blanket security bond, letter of credit,

cash or certificate of deposit shall not be released

until six years after the operator has deposited with the

corporate surety a certified statement from the

department that, according to the records of the

department, the operator is not the operator of record of

any oil or gas well in this Commonwealth, and does not

hold any outstanding permits for the drilling issued

under the Oil and Gas Act and its regulations.

(iv)  In the event that, pursuant to a judgment, all

or a portion of the bond, letter of credit, cash or

certificate of deposit has been used to pay a surface

owner, the operator shall immediately post additional

security so that the total amount equals $25,000 and, if

the operator does not post the additional security, the

corporate surety shall publish notice to that effect in a

paper of general circulation in each county of the

Commonwealth in which the operator conducts oil and gas

operations.

Section 7.  Court-awarded damages.

In an action brought pursuant to this act, if a court finds

that compensation is owed under section 4, the court may also

award the prevailing party either of the following if one of the

criteria are met:

(1)  Attorney fees and costs, if any of the following

apply:

(i)  the operator conducted oil and gas operations

without providing notice as required under section 5(b)

and (c);

(ii)  the operator conducted oil and gas operations

without a surface use and compensation agreement entered

into between the operator and the surface owner and

before depositing a bond or other surety as required

under section 6;

(iii)  the operator conducted oil and gas operations

and did not comply with the terms of the surface use and

compensation agreement, and when entering into the

agreement, knew or should have known that compliance with

the terms of the agreement would not be met; or

(iv)  the surface owner failed to exercise good faith

in complying with the provisions of this act or the terms

of the surface use and compensation agreement.

(2)  Attorney fees, costs and treble damages if the court

finds, by clear and convincing evidence, either of the

following:

(i)  The operator willfully and knowingly entered

upon the premises for the purpose of drilling an oil or

gas well:

(A)  Without giving notice to the surface owner

as required under section 5(b).

(B)  Without a surface and compensation agreement

entered into between the operator and the surface

owner and before depositing a bond or other surety

pursuant to section 6.

(ii)  Either the surface owner or the operator

willfully and knowingly violated the terms of the surface

use and compensation agreement.

Section 8.  Remedies not exclusive.

The remedies provided by this act are not exclusive and do

not preclude a person from seeking other remedies allowed by

law.

Section 9.  Emergency situations.

Notwithstanding any provisions of this act to the contrary,

no notice, surface use compensation agreement or bond shall be

required in emergency situations for activities to protect

health, safety or the environment.

Section 10.  Temporary provision; applicability.

The provisions of this act shall apply to all oil and gas

operations commenced on or after July 1, 2011, except the

following:

(1)  Maintenance and outgoing production activities

related to an oil and gas well producing or capable of

producing oil or gas on June 30, 2011, for which the operator

has a valid permit issued under the Oil and Gas Act, provided

that:

(i)  reentries, workovers and other oil or gas

operations are subject to this act if the activities

disturb additional surface of the land; and

(ii)  the duty to reclaim, as stated in section 4(c),

is applicable to such an oil or gas well that is not

plugged and abandoned on July 1, 2011.

(2)  Oil and gas operations conducted within the scope of

an agreement, entered into prior to July 1, 2011, between a

surface owner and an operator that sets forth rights and

duties of the parties with respect to activities conducted by

the parties to mitigate the impact of oil and gas operations

on the surface owner.

Section 11.  Effective date.

This act shall take effect immediately.