HOUSE BILL 1015
47th legislature - STATE OF NEW MEXICO - first session, 2005
INTRODUCED BY
Andy Nuñez
AN ACT
RELATING TO THE PRODUCTION OF OIL AND GAS; ENACTING THE SURFACE OWNERS' PROTECTION ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
Section 1. SHORT TITLE.--This act may be cited as the "Surface Owners' Protection Act".
Section 2. DEFINITIONS.--As used in the Surface Owners' Protection Act:
A. "agricultural production" means:
(1) the production of any growing grass or crop, whether or not the grass or crop is to be sold commercially; or
(2) the husbandry of any domestic animals, whether or not the animals are to be sold commercially;
B. "oil and gas operations" means activities intended to lead to the exploration for oil or gas, drilling of an oil or gas well or production of oil or gas and that require entrance upon the surface of land. Oil and gas operations include geophysical and other exploration activities, drilling of an oil or gas well, work overs, re-entries, recompletions, secondary or tertiary projects and any other completion or production operations;
C. "producer" means the person with the legal right to conduct oil and gas operations on the surface of the property; and
D. "surface owner" means the person who holds equitable title to the surface of the property on which the oil and gas operations are to take place.
Section 3. NOTICE OF OPERATIONS--OFFER OF SETTLEMENT-- ARBITRATION.--
A. No less than forty-five days before first entering the surface of land to conduct oil and gas operations, the producer shall give the surface owner written notice of the contemplated 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 property;
(2) a form, prepared by the oil conservation division of the energy, minerals and natural resources department, advising the surface owner of the surface owner's rights and options under the Surface Owner's Protection Act; and
(3) an offer of settlement to compensate the surface owner for damages, including loss of use, to the property. The offer may be in the form of a lump-sum payment, periodic installments paid over the time that the oil and gas operations will take place or a formula that will determine the proposed method and extent of the compensation.
B. The notice required by this section shall be given to the surface owner of record and any purchaser under contract at their addresses as shown by the records of the county clerk at the time that the notice is given.
C. Upon receipt of the notice required by Subsection A of this section, the surface owner may:
(1) within twenty days of receiving the notice, accept the offer of settlement in writing. Upon acceptance of the offer of settlement, the offer shall be construed to be a binding contract between the producer and the surface owner; or
(2) reject the offer of settlement and enter into negotiations with the producer, in accordance with the provisions of Subsection D of this section.
D. Unless otherwise agreed to by the producer and the surface owner, negotiations shall address at least the following issues:
(1) placement, specifications and design of roads to be constructed for oil and gas operations;
(2) points of entry upon the surface for oil and gas operations and precautions to preserve the safety and security of the surface owner;
(3) construction and placement of all pits and equipment used or planned for oil and gas operations;
(4) use and impoundment of water on the surface of the land;
(5) removal of plant life;
(6) surface water drainage changes caused by oil and gas operations;
(7) erosion control and actions to limit erosion, control and manage noise, weeds, dust, traffic, trespass, litter and interference with the surface owner's use;
(8) interim and final reclamation;
(9) best surface-use practices and minimization of surface damage and impacts to the land, water, value and peaceful enjoyment of the property; and
(10) producer responsibility and liability for injury, harm and damages to the property or surface owner caused by the producer's contractors, agents, representatives or others acting on their behalf.
E. If the producer and the surface owner fail to reach an agreement after good faith negotiations, either party may give written notice to the other party of that failure. Within ten days after receipt of the notice, either party may notify the other party in accordance with the provisions of Section 44-7A-2 NMSA 1978 of the initiation of binding arbitration to be conducted pursuant to the Uniform Arbitration Act. If notice to arbitrate is given pursuant to this subsection, the parties shall be deemed to have agreed pursuant to the Uniform Arbitration Act to submit to arbitration regarding compensation and other disputed terms of the surface- use agreement. The arbitration process may be abandoned or suspended at any time prior to the issuance of the arbitrator's award through mutual written agreement of the producer and the surface owner.
Section 4. COMPENSATION AND LIABILITY FOR OIL AND GAS OPERATIONS.--
A. A producer shall reasonably compensate the surface owner for the use of the owner's property and any damages expected to result from its oil and gas operations on the owner's property. A producer shall be liable to the surface owner for all damages, including harm, injury or loss of use, sustained by the surface owner or the tenant of the surface owner as a direct result of the producer's oil and gas operations. Damages shall include lost agricultural production and the lost income therefrom, diminished land value, lost use of and access to the land, lost or diminished value of improvements and damage to the watershed, aquifers or water supplies on or underneath property.
B. The liability established or confirmed by this section is intended to compensate the surface owner for damages, including loss of use. Any attempted reservation or assignment of such compensation from the surface estate, except to a tenant of the surface estate, is null and void.
C. In the absence of an agreement between the surface owner and a tenant of the surface estate regarding the division of compensation paid to satisfy the liability established or confirmed by this section, the tenant shall be entitled to recover from the surface owner only that portion of the compensation attributable to the tenant's share of the damages sustained.
Section 5. CAUSES OF ACTION--OPERATING WITHOUT AGREEMENT--DAMAGES.--
A. If a producer willfully and knowingly begins an oil and gas operation on the surface owner's property before a settlement agreement is entered into by the producer and the surface owner or, in the case of arbitration, before an award is imposed by an arbitrator, the surface owner may bring an action for treble damages in the district court of the county in which the oil and gas operation occurs.
B. Damages shall be a question of fact, based upon the issues required to be addressed in Subsection D of Section 3 of the Surface Owner's Protection Act and any other relevant factors, and may be determined by the judge.
C. Damages awarded pursuant to this section shall not preclude the surface owner from collecting any additional damages caused by subsequent actions of the producer.
D. If, in an action brought pursuant to Subsection A of this section, the court awards compensation to the surface owner and finds that the producer did not give the notice of operations required by Section 3 of the Surface Owner's Protection Act, the court may also award the surface owner punitive damages.
Section 6. INTERPRETATION OF ACT.--The Surface Owner's Protection Act shall be interpreted to benefit surface owners regardless of whether the mineral estate was separate from the surface estate and regardless of who executed the document that gave the producer the right to conduct oil and gas operations on the surface.
Section 7. REMEDIES NOT EXCLUSIVE.--The remedies provided by the Surface Owner's Protection Act are not exclusive and do not preclude a person from seeking other remedies allowed by law.
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