Senate File 546 - Introduced SENATE FILE 546 BY COMMITTEE ON NATURAL RESOURCES AND ENVIRONMENT (SUCCESSOR TO SF 268) A BILL FOR An Act relating to oil and gas production, including filing 1 requirements, the authority of the department of natural 2 resources, confidential information, and pooling orders. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 2000SV (1) 91 sb/js
S.F. 546 Section 1. Section 458A.2, Code 2025, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 01. Casing means the practice of 3 providing structural integrity, stability for unstable geologic 4 formations, and formation isolation, allowing for pressure 5 control via blowout preventer equipment, and allowing for 6 flowback if applicable. 7 NEW SUBSECTION . 2A. Correlative rights means the 8 opportunity afforded to the owner of each property in a pool 9 to produce, so far as it is reasonably practicable to do so 10 without waste, a just and equitable share of the oil or gas, or 11 both, in the pool. 12 NEW SUBSECTION . 5A. Exploratory well means a well drilled 13 beyond the known producing limits of a pool. 14 NEW SUBSECTION . 20A. Well log means a record of geologic 15 formations penetrated by the borehole with respect to both time 16 and depth during drilling operations. 17 Sec. 2. Section 458A.4, subsection 1, Code 2025, is amended 18 by adding the following new paragraph: 19 NEW PARAGRAPH . 0b. Every person acting as a principal or 20 agent for another or independently engaged in the production, 21 storage, transportation, except by railroad, refining, 22 reclaiming, treating, marketing, or processing of oil or gas, 23 or engaged in the exploration for or production of metallic 24 minerals to file the following with the department on or before 25 April 1 of each year: 26 (1) The name under which the business is being operated. 27 (2) The name and contact information of the person, 28 business, or businesses engaged in the activity. 29 (3) The plan of organization. 30 (4) For a corporation, the following filings apply: 31 (a) The law under which the corporation is chartered. 32 (b) The names and contact information for any person acting 33 as a trustee. 34 (c) The names of the manager, agent, or executive. 35 -1- LSB 2000SV (1) 91 sb/js 1/ 11
S.F. 546 (d) The names and contact information of all officers. 1 (5) The names and contact information of all owners if the 2 business is conducted under an assumed name. 3 Sec. 3. Section 458A.4, subsection 1, paragraph b, Code 4 2025, is amended to read as follows: 5 b. The making and filing of all mechanical well logs and 6 the filing of directional surveys if taken, and the filing of 7 reports on well location, drilling , and production, and the 8 filing free of charge of samples and core chips and of complete 9 cores less tested sections when requested in the department 10 within six months after the completion or abandonment of the 11 well , unless otherwise extended pursuant to section 458A.6A ; 12 Sec. 4. Section 458A.4, Code 2025, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 4A. To allow for variances to any of the 15 departments rules, regulations, or orders. A variance shall 16 be granted in writing by the director without a hearing upon 17 written request of an owner or applicant. The owner or the 18 applicant requesting the variance shall demonstrate that it has 19 made a good faith effort to comply or is unable to comply with 20 the specific requirements contained in the rules, regulations, 21 or orders from which it seeks a variance, and that the 22 requested variance will not violate the basic intent of this 23 chapter. Upon proper submission to the director, the director 24 shall approve or deny the variance request within fourteen days 25 of receipt. The director shall report any variance granted at 26 the subsequent hearing or otherwise make public any variance 27 granted. 28 Sec. 5. NEW SECTION . 458A.6A Confidential information. 29 If an owner seeks to submit information that is listed 30 as confidential, the owner will confer with the department 31 prior to submitting the information to verify it qualifies 32 as confidential pursuant to the departments rules or 33 otherwise under law. If the information is determined to 34 be confidential, the owner will submit hard copies of the 35 -2- LSB 2000SV (1) 91 sb/js 2/ 11
S.F. 546 information in nonredacted form but labeled confidential in a 1 conspicuous location on the document. Confidential information 2 shall be maintained as confidential and held without public 3 access for a period of five years, unless otherwise extended 4 by the director for good cause. Confidential information may 5 include the following: 6 1. Monetary amounts, payment terms, drilling obligations, 7 or personal information listed on surface use agreements, oil 8 and gas leases, or rights-of-way agreements. 9 2. Information concerning ongoing commercial negotiations 10 regarding potential or planned routing and location of 11 off-lease midstream gathering systems or infrastructure. 12 3. Confidential geological or geophysical well records 13 pertaining to exploratory wells. 14 4. Information about a proposed transfer of permits and 15 assets. 16 5. Proprietary stimulation or completion chemicals that 17 qualify as trade secrets. 18 6. Personal medical information. 19 7. Commercial information that, if disclosed, would be 20 likely to cause substantial harm to the competitive position of 21 the person providing the information. 22 Sec. 6. Section 458A.7, subsections 3 and 4, Code 2025, are 23 amended to read as follows: 24 3. An order establishing spacing units for a pool shall 25 specify the size and shape of each unit and the location and 26 number of the permitted well thereon wells in accordance with 27 a reasonably uniform spacing plan. Upon application, if the 28 director finds that a well drilled at the prescribed location 29 would not produce in paying quantities, or that surface 30 conditions would substantially add to the burden or hazard 31 of drilling such well, the director is authorized to enter 32 an order permitting the a well to be drilled at a location 33 other than that prescribed by such spacing order; however, the 34 director shall include in the order suitable provisions to 35 -3- LSB 2000SV (1) 91 sb/js 3/ 11
S.F. 546 prevent the production from the spacing unit of more than its 1 just and equitable share of the oil and gas in the pool. 2 4. An order establishing units for a pool shall cover all 3 lands determined or believed to be underlaid by the pool, and 4 may be modified by the director from time to time to include 5 additional areas determined to be underlaid by the pool. When 6 found necessary for the prevention of waste, or to avoid the 7 drilling of unnecessary wells or to protect correlative rights, 8 an order establishing spacing units in a pool may be modified 9 by the director to increase the size of spacing units in the 10 pool or any zone of the pool, or to permit the drilling of 11 additional wells within a spacing unit on a reasonable uniform 12 plan in the pool, or any zone of the pool. Orders of the 13 director may be appealed to the department within thirty days. 14 Sec. 7. Section 458A.7, Code 2025, is amended by adding the 15 following new subsection: 16 NEW SUBSECTION . 5. If the department is unable to determine 17 the existence of a pool and the appropriate acreage to be 18 embraced within a spacing unit and the shape thereof based 19 on the evidence introduced at hearing, the department may 20 establish an exploratory spacing unit for the purpose of 21 drilling one or more exploratory wells in order to establish 22 the existence of a pool and the appropriate size and shape of 23 the spacing unit to be applied for future development of the 24 pool. In establishing the size and shape of the exploratory 25 spacing unit, the department may consider the size and shape 26 of spacing units established by the department for the same 27 pool or formation in other areas, the size and shape of units 28 for similar development in other basins, reservoir modeling or 29 other preliminary data on the pool or formation, and any other 30 information the department deems relevant. 31 Sec. 8. Section 458A.8, Code 2025, is amended to read as 32 follows: 33 458A.8 Integration of fractional tracts. 34 1. When two or more separately owned tracts are embraced 35 -4- LSB 2000SV (1) 91 sb/js 4/ 11
S.F. 546 within a spacing unit, or when there are separately owned 1 interests in all or a part of the spacing unit, then the owners 2 and royalty owners of the tracts may pool their interests 3 for the development and operation of the spacing unit. In 4 the absence of voluntary pooling, the department, upon the 5 application of any interested person, shall enter an order 6 pooling all interests in the spacing unit for the development 7 and operations of the unit. Each pooling order shall be 8 made after notice and hearing, and shall be upon terms and 9 conditions that are just and reasonable, and that afford to 10 the owner of each tract or interest in the spacing unit the 11 opportunity to recover or receive, without unnecessary expense, 12 a just and equitable share. Operations incident to the 13 drilling of a well upon any portion of a spacing unit covered 14 by a pooling order shall be deemed for all purposes to be the 15 conduct of the operations upon each separately owned tract in 16 the drilling unit by the several owners of the unit. That 17 portion of the production allocated to each tract included in a 18 spacing unit covered by a pooling order shall, when produced, 19 be deemed for all purposes to have been produced from the tract 20 by a well drilled on it. 21 2. Each pooling order shall make provision for the drilling 22 and operation of a well on the spacing unit, and for the 23 payment of the reasonable actual cost of the well by the owners 24 of interests in the spacing unit, plus a reasonable charge for 25 supervision. In the event of any dispute as to such costs, 26 the department shall determine the proper costs. If an owner 27 shall drill and operate, or pay the expenses of drilling and 28 operating the well for the benefit of others, then, the owner 29 so drilling or operating shall, upon complying with the terms 30 of section 458A.10 , have a lien on the share of production 31 from the spacing unit accruing to the interest of each of 32 the other owners for the payment of a proportionate share of 33 the expenses. All the oil and gas subject to the lien shall 34 be marketed and sold and the proceeds applied in payment of 35 -5- LSB 2000SV (1) 91 sb/js 5/ 11
S.F. 546 the expenses secured by the lien as provided for in section 1 458A.10 . 2 2. In the absence of voluntary pooling pursuant to 3 subsection 1, the director, upon the application of any 4 interested person, shall enter an order pooling all interests 5 in a spacing unit for the development and operation thereof. 6 Any such pooling order may authorize cost recovery and risk 7 penalties against nonconsenting owners for a specific well. 8 Each such pooling order shall be made after notice and hearing 9 and with terms and conditions that are just and reasonable. 10 Operations incident to the drilling of a well upon any portion 11 of a spacing unit covered by a pooling order shall be deemed 12 for all purposes to be the conduct of such operations upon 13 each separately owned tract in the unit by the several owners 14 thereof. When produced, that portion of the production 15 allocated or applicable to each tract included in a unit 16 covered by a pooling order shall be deemed for all purposes to 17 have been produced from such tract by a well drilled thereon. 18 3. Each pooling order shall provide for the drilling and 19 operation of a well in the spacing unit, and for the payment of 20 the cost thereof, as provided in this subsection. The director 21 is specifically authorized to provide that the producer shall 22 be entitled to all production from the well that would be 23 received by the owner or owners, for whose benefit the well 24 was drilled or operated, after payment of royalty as provided 25 in the lease, if any, applicable to each tract or interest or 26 after payment of the royalty if required under subsection 4, 27 and obligations payable out of production, until the producers 28 have been paid the amount due under the terms of the pooling 29 order or order settling the dispute. In the event of any 30 disputed cost, the director shall determine the proper cost. 31 The pooling order shall determine the interest of each owner 32 in the unit, and may provide that each owner who agrees with 33 the producer for the payment by the owner of the owners share 34 of the costs, unless the owner has agreed otherwise, shall be 35 -6- LSB 2000SV (1) 91 sb/js 6/ 11
S.F. 546 entitled to receive, subject to royalty or similar obligations, 1 the share of the production of the well applicable to the tract 2 of the nonconsenting owner. Each owner who does not agree 3 shall be entitled to receive from the producer the owners 4 share of the production applicable to the owners interest 5 after the producer has recovered the following, subject to the 6 provisions of subsection 4: 7 a. One hundred percent of the nonconsenting owners share 8 of the cost of any newly acquired surface equipment beyond 9 the wellhead connections, including stock tanks, separators, 10 treaters, or pumping equipment and piping, plus one hundred 11 percent of the nonconsenting owners share of the cost of 12 operating the well commencing with first production and 13 continuing until the nonconsenting owners relinquished 14 interest reverts under other provisions in this section. 15 b. Up to two hundred percent of that portion of the costs 16 and expenses of drilling, reworking, deepening or plugging 17 back, testing, and completing, after deducting any cash 18 contributions received, and up to two hundred percent of that 19 portion of the cost of newly acquired equipment in the well, 20 up to and including the wellhead connections, which would have 21 been chargeable to the nonconsenting owner if the owner had 22 participated therein, if the nonconsenting owners tract or 23 interest is subject to a lease or other contract for oil and 24 gas development. 25 4. During the time the producer is recovering costs from 26 a nonconsenting owner as authorized in a pooling order issued 27 pursuant to subsection 2, a nonconsenting owner of a tract or 28 interest in a spacing unit that is not subject to a lease or 29 other contract for oil and gas development shall be entitled 30 to a cost-free royalty interest equal to twelve and one-half 31 percent. 32 5. Upon full payment of the recoverable costs as specified 33 in subsection 3, the following shall occur: 34 a. Within thirty days the producer shall notify the 35 -7- LSB 2000SV (1) 91 sb/js 7/ 11
S.F. 546 nonconsenting owner to offer to the nonconsenting owner the 1 opportunity to participate under the pooling order as a working 2 interest owner. The notice shall state that the nonconsenting 3 owner may elect to participate in the pooling order or may 4 elect to continue receiving the royalty specified in subsection 5 4. 6 b. Within sixty days after receiving notice, the 7 nonconsenting owner shall inform the producer whether the 8 nonconsenting owner wishes to make an election to participate 9 under the pooling order as a working interest owner or continue 10 receiving the royalty specified in subsection 4. 11 c. If the nonconsenting owner fails to respond to the notice 12 within the time specified in paragraph b , the nonconsenting 13 owner shall be deemed to elect to continue receiving the 14 royalty specified in subsection 4. 15 d. Within five business days after receiving notice of 16 election from a nonconsenting owner or upon expiration of the 17 time specified in paragraph b , the producer shall notify the 18 director regarding the nonconsenting owners election or lack 19 thereof. 20 6. An application for pooling shall provide at least the 21 following: 22 a. A certificate of service containing all persons that 23 have a royalty interest or are owners inside the drilling and 24 spacing unit. 25 b. The applicants interest type in the drilling and spacing 26 unit. 27 c. The legal description of the lands and the department 28 docket number establishing the drilling and spacing unit sought 29 to be pooled. 30 d. A statement that two or more separately owned tracts or 31 separately owned interests in the drilling and spacing unit 32 have not voluntarily pooled their interests and any valid 33 pooling order for the drilling and spacing unit. 34 e. The American petroleum institute well number of the well 35 -8- LSB 2000SV (1) 91 sb/js 8/ 11
S.F. 546 subject to the application, if requesting cost recovery or risk 1 penalties. 2 f. A list of all nonconsenting owners in the well that the 3 applicant is seeking cost recovery and risk penalties against 4 at the time of filing the application. 5 g. The cost recovery and risk penalties the applicant is 6 requesting, if any. 7 7. An applicant shall provide at hearing at least the 8 following: 9 a. A copy of the election letter, well proposal, and 10 authorization for expenditure sent to the owners in the 11 drilling and spacing unit. 12 b. The names and interests of all nonconsenting owners and 13 unleased nonconsenting owners in the well. 14 c. Evidence to justify the application of a risk penalty. 15 Sec. 9. REPEAL. Section 458A.6, Code 2025, is repealed. 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanations substance by the members of the general assembly. 19 This bill relates to oil and gas production, including 20 filing requirements, the authority of the department of natural 21 resources (department), confidential information, and pooling 22 orders. 23 The bill provides the director of the department the 24 authority to require yearly filings from every person acting as 25 a principal or agent for another or independently engaged in 26 the production, storage, transportation, except by railroad, 27 refining, reclaiming, treating, marketing, or processing of 28 oil or gas, or engaged in the exploration for or production of 29 metallic minerals that includes names, contact information, and 30 certain organizational details. 31 The bill grants the director the authority to issue 32 variances to any of the departments rules, regulations, or 33 orders. A variance may be granted without a hearing. The 34 application for a variance must demonstrate a good faith effort 35 -9- LSB 2000SV (1) 91 sb/js 9/ 11
S.F. 546 or inability to comply with specific requirements. A variance 1 request must be approved within 14 days and shall be made 2 public. 3 The bill allows an owner to make information submitted to 4 the department confidential for five years, unless otherwise 5 extended by the director for good cause. The bill provides 6 procedures to make information confidential and includes 7 examples of types of information that may be determined 8 confidential. 9 The bill allows the department to establish an exploratory 10 spacing unit to drill one or more exploratory wells to 11 establish the existence of a pool and the appropriate size and 12 shape of the spacing unit if it is unable to determine the 13 existence of a pool and the appropriate acreage and shape to be 14 embraced within a spacing unit based on the evidence introduced 15 at hearing. 16 The bill requires each pooling order to provide for the 17 drilling and operation of a well in the spacing unit and for 18 payment of the cost incurred. The bill authorizes the director 19 to ensure the producers are entitled to all production from 20 the well after payment of royalties and other obligations. 21 The bill requires the director to determine costs if there 22 is a dispute. The bill provides that the pooling order must 23 determine the interest of each owner in the unit, including the 24 owners share of cost, unless otherwise agreed, and entitles 25 the owners the share of production of the well applicable to 26 the tract of the nonconsenting owner, subject to royalties and 27 other obligations. Owners who do not agree to the pooling 28 order are entitled to a share of the production applicable 29 to the owners interest after the producer has recovered a 30 certain amount specified in the bill, which includes costs 31 attributed to newly acquired surface equipment beyond the 32 wellhead connections, operation, drilling, reworking, deepening 33 or plugging back, testing, and completing, and newly acquired 34 equipment in the well, up to and including the wellhead 35 -10- LSB 2000SV (1) 91 sb/js 10/ 11
S.F. 546 connections. 1 The bill provides that a nonconsenting owner of a tract or 2 interest in a spacing unit that is not subject to a lease or 3 other contract for oil and gas development shall be entitled to 4 a cost-free royalty interest equal to 12.5 percent during the 5 time of drilling or operating a well pursuant to the pooling 6 order. 7 After the producer has fully recovered costs as described 8 in the bill, the producer must send a notice within 30 days to 9 any nonconsenting owner to offer participation as a working 10 interest owner under the pooling order. The nonparticipating 11 owner has 60 days after receipt of the notice to accept 12 the offer or may elect to continue receiving the default 13 royalty. If the nonparticipating owner does not respond, 14 the nonparticipating owner will be deemed to have elected to 15 continue receiving the default royalty. The producer must 16 inform the director of the nonparticipating owners decision 17 within five business days of receiving an answer or the 18 expiration of time allowed to respond. 19 The bill provides minimum requirements for an application 20 for compulsory pooling and any associated hearing. 21 Under current law, the department has the authority to 22 determine market demand for oil and gas for each marketing 23 district and to regulate the amount of production. The bill 24 eliminates this authority from the department. 25 -11- LSB 2000SV (1) 91 sb/js 11/ 11