STATE OF OKLAHOMA

2nd Session of the 53rd Legislature (2012)

HOUSE BILL 3122	By:	Hickman

AS INTRODUCED

An Act relating to oil and gas; amending 52 O.S. 2011, Section 318.2, 318.3, 318.4, 318.5 and 318.9, which relate to surface damage negotiations; enacting the Oklahoma Surface Damages Act; updating statutory language; clarifying statutory language; modifying definitions; adding definitions; changing oil or gas drilling to oil or gas operations; deleting certain exception; expanding requirement for written notice to certain surface tenants; expanding scope of good faith negotiations; adding recommendation to be made by the appraisers; allowing an operator to file an alternative small claims petition for certain seismic operations; providing for the transfer from the small claims docket upon action of the surface owner; limiting the defendants that are required to be named; allowing a surface tenant to intervene upon request; clarifying notice requirements; clarifying grounds for damages; and declaring an emergency.

BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1.     AMENDATORY     52 O.S. 2011, Section 318.2, is amended to read as follows:
Section 318.2  A.  Sections 318.2 through 318.9 of this title shall be known and may be cited as the “Oklahoma Surface Damages Act”.
B.  For purposes of Sections 1 through 8 of this act the Oklahoma Surface Damages Act:
1.  "Operator" means a mineral owner or lessee who is engaged in drilling or preparing to drill for oil or gas operations or in the case of seismic exploration, means a persons or entity who is either the owner of the right to conduct seismic exploration or the agent of the owner; and
2. “Oil and gas operations” means 
a.	drilling or preparing to drill for oil or gas,
b.	conducting new or additional operations affecting the surface estate not included in the original drilling operations, or
c.	conducting or preparing to conduct seismic exploration;
3.  “Person” means any individual, executor, administrator, estate, agent, trust, trustee, institution, receiver, business trust, firm, corporation, partnership, limited liability company, cooperative, joint venture, governmental entity or agency, association or any other group or combination acting as a unit;
4.  “Small claims procedures” means the procedures set forth in Sections 1751 through 1773 of Title 12 of the Oklahoma Statutes; 
5.  “Seismic exploration” means the same as defined in Section 318.21 of this title; 
6.  “Surface estate” means the same as defined in Section 802 of this title;
7.  "Surface owner" means the owner or owners of record of the surface estate of the property on which the drilling operation is oil and gas operations are to occur; and
8.  “Surface tenant” means any person who has a possessory interest in the surface estate for agricultural purposes or through a wind or solar energy agreement, as defined in Section 802 of this title.
SECTION 2.     AMENDATORY     52 O.S. 2011, Section 318.3, is amended to read as follows:
Section 318.3  A.  Before entering upon a site for oil or gas drilling operations, except in instances where there are non‑state resident surface owners, non‑state resident surface tenants, unknown heirs, imperfect titles, or surface owners, or surface tenants whose whereabouts cannot be ascertained with reasonable diligence, the operator shall give to the surface owner and any surface tenant who has recorded with the county clerk a notice of the tenancy a written notice of his intent to drill containing conduct oil or gas operations.  The notices shall contain a designation of the proposed location and the approximate date that the operator proposes to commence drilling the oil and gas operations.
Such B.  The notice required by subsection A of this section shall be given in writing by certified mail to the surface owner party or parties entitle to notice.  If the operator makes an affidavit that he has conducted a search has been conducted with reasonable diligence and the whereabouts of the surface owner party entitled to notice cannot be ascertained or such the notice cannot be delivered, then constructive notice of the intent to drill conduct oil or gas operations may be given in the same manner as provided for the notice of proceedings to appoint appraisers.
C.  Within five (5) days of the date of delivery or service of the notice of intent to drill as required in this section, it shall be the duty of the operator and the surface owner to enter into good faith negotiations to determine if the proposed use of the surface by the operator is reasonable under the circumstances and the value of any damages that will be incurred as a result of the proposed operation.
SECTION 3.     AMENDATORY     52 O.S. 2011, Section 318.4, is amended to read as follows:
Section 318.4  A.  Every operator doing business in this state shall file a corporate surety bond, letter of credit from a banking institution, cash, or a certificate of deposit with the Secretary of State in the sum of Twenty‑five Thousand Dollars ($25,000.00) conditioned upon compliance with Sections 318.2 through 318.9 of this title the Oklahoma Surface Damages Act for payment of any location damages due which the operator cannot otherwise pay.  The Secretary of State shall hold such the corporate surety bond, letter of credit from a banking institution, cash or certificate of deposit for the benefit of the surface owners of this state and shall ensure that such the security is in a form readily payable to a surface owner awarded damages in an action brought pursuant to this act the Oklahoma Surface Damages Act.  Each corporate surety bond, letter of credit, cash, or certificate of deposit filed with the Secretary of State shall be accompanied by a filing fee of Ten Dollars ($10.00).
B.  The bonding company or banking institution shall file, for such the fee as is provided for by law, a certificate that said the bond or letter of credit is in effect or has been canceled, or that a claim has been made against it in the office of the court clerk in each county in which the operator is drilling or planning to drill conducting oil or gas operations.  Said The bond or letter of credit must shall remain in full force and effect as long as the operator continues drilling operations in this state.  Each such filing shall be accompanied by a filing fee of Ten Dollars ($10.00).
C.  Upon deposit of the bond, letter of credit, cash, or certificate of deposit, the operator shall be permitted entry upon the property and shall be permitted to commence drilling of a well oil or gas operations in accordance with the terms and conditions of any lease or other existing contractual or lawful right.
D.  If the damages agreed to by the parties or awarded by the court are greater than the bond, letter of credit, cash, or certificate of deposit posted, the operator shall pay the damages immediately or post an additional bond, letter of credit, cash, or certificate of deposit sufficient to cover the damages.  Said The increase in bond, letter of credit, cash, or certificate of deposit shall comply with the requirements of this section.
SECTION 4.     AMENDATORY     52 O.S. 2011, Section 318.5, is amended to read as follows:
Section 318.5  A.  Prior to entering the site with heavy equipment for oil or gas operations, the operator shall negotiate with the surface owner for the payment of any damages which may be caused by the drilling operation oil or gas operations.  If the parties agree, and a written contract is signed, the operator may enter the site to drill conduct oil or gas operations.  If agreement is not reached, or if the operator is not able to contact all parties, the operator shall petition the district court in the county in which the drilling site oil or gas operations is located to occur for appointment of appraisers to make recommendations to the parties and to the court concerning the reasonableness of the proposed operation and the amount of damages, if any.  If the form of the oil and gas operation is seismic exploration, and the operator asserts the damages are equal to or less than the amount set forth in the small claims procedures, the operator may alternatively petition the district court in the county in which the oil or gas operation is to occur pursuant to the small claims procedures and the action shall be conducted in accordance with the small claims procedures.  If the surface owner seeks to, and is allowed to, transfer the action from the small claims docket, the action shall proceed as though the petition was filed for the appointment of appraisers pursuant to this subsection.  The operator is only required to name as a defendant or defendants in any action filed pursuant to this subsection the surface owner or owners.  Any surface tenant shall be entitled to intervene in the action if so requested.  Once the operator has petitioned for appointment of appraisers or filed a small claims petition as allowed by this subsection, the operator may enter the site to drill conduct the oil or gas operation.
B.  Ten (10) days' notice of the petition to appoint appraisers or the small claims petition as allowed by this section shall be given to the opposite party, either by personal service or by leaving a copy thereof of the notice at the party’s usual place of residence of the party, with some family member over fifteen (15) years of age, or, in the case of nonresidents, unknown heirs or other persons whose whereabouts cannot be ascertained, by publication in one issue of a newspaper qualified to publish legal notices in said the county, as provided in Section 106 of Title 25 of the Oklahoma Statutes, said.  The ten‑day period to shall begin with the first publication.
C.  The In an action for the appointment of appraisers, the operator shall select one appraiser, the surface owner shall select one appraiser, and the two selected appraisers shall select a third appraiser for appointment by the court, which such. The third appraiser shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board.  Unless for good cause shown, additional time is allowed by the district court, the three (3) appraisers shall be selected within twenty (20) days of service of the notice of the petition to appoint appraisers or within twenty (20) days of the first date of publication of the notice as specified in subsection B of this section.  If either of the parties fails to appoint an appraiser or if the two appraisers cannot agree on the selection of the third appraiser within the required time period, the remaining required appraisers shall be selected by the district court upon application of either party of which at least one shall be a state-certified general real estate appraiser and be in good standing with the Oklahoma Real Estate Appraisal Board.  Before entering upon their duties, such the appraisers shall take and subscribe an oath, before a notary public or some other person authorized to administer oaths, that they will perform their duties faithfully and impartially to the best of their ability.  They shall inspect the real property and consider the surface damages which the owner has sustained or will sustain by reason of entry upon the subject land and by reason of drilling or maintenance of oil or gas production the oil and gas operations on the subject tract of land.  The appraisers shall then file a written report within thirty (30) days of the date of their appointment with the clerk of the court.  The report shall set forth the quantity, boundaries and value of the property entered on or to be utilized in said the oil or gas drilling operations, and the amount of surface damages done or to be done to the property.  The appraisers shall make a valuation and determine the amount of compensation to be paid by the operator to the surface owner and the manner in which the amount shall be paid.  Said The appraisers shall then make a report of their proceedings to the court.  The compensation of the appraisers shall be fixed and determined by the court.  The operator and the surface owner shall share equally in the payment of the appraisers' fees for the appraisers and court costs.
D.  1.  Within ten (10) days after the report of the appraisers is filed, the clerk of the court shall forward to each attorney of record, each party, and interested party of record, a copy of the report of the appraisers and a notice stating the time limits for filing an exception or a demand for jury trial as provided for in this section.  The operator shall provide the clerk of the court with the names and last-known addresses of the parties to whom the notice and report shall be mailed, sufficient copies of the notice and report to be mailed, and pre-addressed, postage-paid envelopes.
1.   This 2.  The notice shall be on a form prepared by the Administrative Director of the Courts, approved by the Oklahoma Supreme Court, and supplied to all district court clerks.
2. 3.  If a party has been served by publication, the clerk shall forward a copy of the report of the appraisers and the notice of time limits for filing either an exception or a demand for jury trial to the last‑known mailing address of each party, if any, and shall cause a copy of the notice of time limits to be published in one issue of a newspaper qualified to publish legal notices as provided in Section 106 of Title 25 of the Oklahoma Statutes.
3. 4.  After issuing the notice as provided herein for in this subsection, the clerk shall endorse on the notice form filed in the case the date that a copy of the report and the notice form was forwarded to each attorney of record, each party, and each interested party of record, or the date the notice was published.
E.  The time for filing an exception to the report or a demand for jury trial shall be calculated as commencing from the date the report of the appraisers is filed with the court.  Upon failure of the clerk to give notice within the time prescribed, the court, upon application by any interested party, may extend the time for filing an exception to the report or filing a demand for trial by jury for a reasonable period of time not less than twenty (20) days from the date the application is heard by the court.  Appraisers' fees The fees for the appraisers and court costs may be the subject of an exception, may be included in an action by the petitioner, and may be set and allowed by the court.
F.  The report of the appraisers may be reviewed by the court, upon written exceptions filed with the court by either party within thirty (30) days after the filing of the report.  After the hearing the court shall enter the appropriate order either by confirmation, rejection, modification, or order of a new appraisal for good cause shown.  Provided, that in In the event a new appraisal is ordered, the operator shall have continuing right of entry subject to the continuance of the bond required herein pursuant to the Oklahoma Surface Damages Act.  Either party may, within sixty (60) days after the filing of such the report, file with the clerk a written demand for a trial by jury, in which case the amount of damages shall be assessed by a jury.  The trial shall be conducted and judgment entered in the same manner as railroad condemnation actions tried in the court.  A copy of the final judgment shall be forwarded to the county assessor in the county or counties in which the property is located.  If the party demanding the jury trial does not recover a more favorable verdict than the assessment award of the appraisers, all court costs including reasonable attorney fees shall be assessed against the party.
SECTION 5.     AMENDATORY     52 O.S. 2011, Section 318.9, is amended to read as follows:
Section 318.9  A.  Upon presentation of clear, cogent and convincing evidence that the operator willfully and knowingly entered upon the premises for the purpose of commencing the drilling of a well oil or gas operations before giving notice of such the entry or without the agreement of the surface owner, the court may, in a separate action, award treble damages.  The issue of noncompliance shall be a fact question, determinable without jury, and a de novo issue in the event of appeal.
B.   Any operator who willfully and knowingly fails to keep posted the required bond or who fails to notify the surface owner, prior to entering, or fails to come to an agreement and does not ask the court for appraisers or file a small claims petition pursuant to the Oklahoma Surface Damages Act, shall pay, at the direction of the court, treble damages to the surface owner.
C.  Damages collected pursuant to this act shall not preclude the surface owner from collecting any additional damages caused by the operator at a subsequent date.
SECTION 6.  It being immediately necessary for the preservation of the public peace, health and safety, an emergency is hereby declared to exist, by reason whereof this act shall take effect and be in full force from and after its passage and approval.

53-2-8981	KB	01/09/12