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SF268 • 2026

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

Energy
Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor
KLIMESH
Last action
2025-03-06
Official status
Committee report approving bill, renumbered as SF 546 . S.J. 438 .
Effective date
Not listed

Plain English Breakdown

Using official source text because the generated explanation was unavailable or could not be confirmed against the official bill text.

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

What This Bill Does

  • A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

Limits and Unknowns

  • This entry is temporarily using official source text because the generated explanation could not be confirmed against the official bill text during the last sync.

Bill History

  1. 2025-03-06 Iowa Legislature

    Committee report approving bill, renumbered as SF 546 . S.J. 438 .

  2. 2025-02-25 Iowa Legislature

    Subcommittee recommends passage.

  3. 2025-02-24 Iowa Legislature

    Subcommittee Meeting: 02/24/2025 3:45PM Senate Lounge.

  4. 2025-02-17 Iowa Legislature

    Subcommittee: Sweeney, Staed, and Zumbach. S.J. 271 .

  5. 2025-02-11 Iowa Legislature

    Introduced, referred to Natural Resources and Environment. S.J. 241 .

Official Summary Text

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders.(See SF 546 , SF 2449 , SF 2490 .)

Current Bill Text

Read the full stored bill text
Senate

File

268

-

Introduced

SENATE

FILE

268

BY

KLIMESH

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

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268

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.

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(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

department’s

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

department’s

rules

or

33

otherwise

under

law.

If

the

information

is

determined

to

34

be

confidential,

the

owner

will

submit

hard

copies

of

the

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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

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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

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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

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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

owner’s

share

34

of

the

costs,

unless

the

owner

has

agreed

otherwise,

shall

be

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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

owner’s

4

share

of

the

production

applicable

to

the

owner’s

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

owner’s

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

owner’s

share

of

the

cost

of

12

operating

the

well

commencing

with

first

production

and

13

continuing

until

the

nonconsenting

owner’s

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

owner’s

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

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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

owner’s

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

applicant’s

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

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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

explanation’s

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

department’s

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

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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

owner’s

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

owner’s

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

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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

owner’s

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.

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