To assure that development of certain Federal oil and gas resources will occur in ways that protect water resources and surface owner rights, and for other purposes.

December 8, 2003

Mr. UDALL of Colorado (for himself and Mr. UDALL of New Mexico) introduced the following bill; which was referred to the Committee on Resources, and in addition to the Committee on Transportation and Infrastructure, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

To assure that development of certain Federal oil and gas resources will occur in ways that protect water resources and surface owner rights, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; FINDINGS; PURPOSE.

(a) SHORT TITLE- This Act may be cited as the `Western Waters and Surface Owners Protection Act'.

(b) FINDINGS- The Congress finds the following:

(1) Domestic oil and gas resources, including coalbed methane, are an important part of the Nation's energy supply portfolio and their development in appropriate locations and in appropriate ways can help reduce dependence on imported energy supplies.

(2) In many areas of the Western United States, federally owned minerals, including oil and gas, are in lands where the surface estate belongs to non-Federal parties whose interests can be adversely affected if the development of the minerals is not done in an appropriate manner.

(3) Development of oil and gas--and especially coalbed methane--often involves removal of a significant volume of groundwater.

(4) Some of the water extracted in connection with this development is reinjected into the ground, while some is retained in surface holding ponds or released on the surface and allowed to flow into streams or other waterbodies, including ditches used for irrigation.

(5) The quality of these extracted waters varies from one location to another. Some of these waters are of good quality, but they often contain dissolved minerals (such as sodium, magnesium, arsenic, or selenium) that can contaminate other waters as a result of leaks or leaching from holding ponds or discharge of extracted waters. In addition, extracted waters often have other characteristics, such as high acidity and temperature, that can adversely affect agricultural uses of land or the quality of the environment.

(6) Clearer requirements for proper disposal of these extracted waters is necessary in order to avoid adverse effects on the quality of ground and surface waters as well as the productivity of surrounding agricultural lands.

(7) To reduce the chance of potential harm to water supplies, agricultural production, and the environment that otherwise could result from disposal of water extracted in connection with coalbed methane development or the development of other oil or gas resources, the Congress should act to ensure that such disposal is subject to regulation under the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.) and the Mineral Leasing Act (30 U.S.C. 181 et seq.).

(8) Under the Stock-Raising Homestead Act (43 U.S.C. 291 et seq.) and other laws, the Federal Government has transferred to other parties the surface estate in millions of acres in Western States where ownership of coal, oil, gas, and other minerals has been retained by the Federal Government.

(9) Under current Federal law, the leasing of federally owned coal on lands where the surface estate is not owned by the United States is subject to the consent of the surface estate owners, but neither this consent requirement nor the operating and bonding requirements applicable to development of federally owned locatable minerals applies to the leasing or development of oil or gas in similar split-estate situations.

(10) To better balance the need for development of oil and gas resources (including coalbed methane) with the rights and interests of the owners of the surface estate of affected lands, current law should be revised so as to increase the involvement of the surface estate owners in developing and implementing plans for such development and to provide clearer and more adequate standards for such development.

(c) PURPOSE- The purpose of this Act is to provide for the protection of water resources and surface estate owners in the development of oil and gas resources, including coalbed methane.

TITLE I--PROTECTION OF WATER RESOURCES

SEC. 101. MINERAL LEASING ACT REQUIREMENTS.

Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended by adding at the end the following:

`(p) WATER REQUIREMENTS-

`(1) An operator producing oil or gas (including coalbed methane) under a lease issued under this Act shall--

`(A) replace the water supply of a water user who obtains all or part of such user's supply of water for domestic, agricultural, or other purposes from an underground or surface source that has been affected by contamination, diminution, or interruption proximately resulting from drilling operations for such production;

`(B) assure that any reinjection of water produced by drilling in connection with operations under the lease will return the water into the same aquifer from which it was extracted or an aquifer of no better water quality; and

`(C) comply with all applicable requirements of Federal and State law for discharge of

any water produced under the lease that is not reinjected.

`(2) An application for a lease under this subsection shall be accompanied by a proposed water management plan including provisions to--

`(A) protect the quantity and quality of surface and ground water systems, both on-site and off-site, from adverse effects of the exploration, development, and reclamation processes or to provide alternative sources of water if such protection cannot be assured;

`(B) protect the rights of present users of water that would be affected by operations under the lease, including the discharge of any water produced in connection with such operations that is not reinjected; and

`(C) identify any agreements with other parties for the beneficial use of produced waters and the steps that will be taken to comply with state and Federal laws related to such use.'.

SEC. 102. CLEAN WATER ACT REQUIREMENTS.

Section 402(b) of the Federal Water Pollution Control Act (33 U.S.C. 1342) is amended by adding at the end the following:

`(10) To issue permits that comply with subsection (a) and any other relevant requirements of this Act, and to ensure that waters extracted from a subsurface formation in connection with development of oil or gas, including coalbed methane, will be subject to appropriate requirements to minimize adverse effects on any lands or waters that would be affected by disposal or other uses of such extracted waters.'.

SEC. 103. RELATION TO STATE LAW.

Nothing in this Act or any amendment made by this Act shall--

(1) be construed as impairing or in any manner affecting any right or jurisdiction of any State with respect to the waters of such State; or

(2) be construed as limiting, altering, modifying, or amending any of the interstate compacts or equitable apportionment decrees that apportion water among and between States.

TITLE II--SURFACE OWNER PROTECTION

SEC. 201. DEFINITIONS.

As used in this title--

(1) the term `Secretary' means the Secretary of the Interior;

(2) the term `lease' means a lease issued by the Secretary under the Mineral Leasing Act (30 U.S.C. 181 et seq.) or any other law, providing for development of oil and gas resources (including coalbed methane) owned by the United States;

(3) the term `lessee' means the holder of a lease; and

(4) the term `operator' means any person that is responsible under the terms and conditions of a lease for the operations conducted on leased lands or any portion thereof.

SEC. 202. POST-LEASE SURFACE USE AGREEMENT.

(a) IN GENERAL- Except as provided in section 203, the Secretary may not authorize any operator to conduct exploration and drilling operations on lands with respect to which title to oil and gas resources is held by the United States but title to the surface estate is not held by the United States, until the operator has filed with the Secretary a document, signed by the operator and the surface owner or owners, showing that the operator has secured a written surface use agreement between the operator and the surface owner or owners that meets the requirements of subsection (b).

(b) CONTENTS- The surface use agreement shall provide for--

(1) the use of only such portion of the surface estate as is reasonably necessary for exploration and drilling operations based on site-specific conditions;

(2) the accommodation of the surface estate owner to the maximum extent practicable, including the location, use, timing, and type of exploration and drilling operations, consistent with the operator's right to develop the oil and gas estate;-

(3) the reclamation of the site to a condition capable of supporting the uses which such lands were capable of supporting prior to exploration and drilling operations; and

(4) compensation for damages as a result of exploration and drilling operations, including but not limited to--

(A) loss of income and increased costs incurred;

(B) damage to or destruction of personal property, including crops, forage, and livestock; and

(C) failure to reclaim the site in accordance with this paragraph (3).

(c) PROCEDURE- (1) An operator shall notify the surface estate owner or owners of the operator's desire to conclude an agreement under this section. If the surface estate owner and the operator do not reach an agreement within 90 days after the operator has provided such notice, the matter shall be referred to third party arbitration for resolution within a period of 90 days. The cost of such arbitration shall be the responsibility of the operator.

(2) The Secretary shall identify persons with experience in conducting arbitrations and shall make this information available to operators.

(3) Referral of a matter for arbitration by a person identified by the Secretary pursuant to paragraph (2) shall be sufficient to constitute compliance with paragraph (1).

(d) ATTORNEYS FEES- If action is taken to enforce or interpret any of the terms and conditions contained in a surface use agreement, the prevailing party shall be reimbursed by the other party for reasonable attorneys fees and actual costs incurred, in addition to any other relief which a court or arbitration panel may grant.

SEC. 203. AUTHORIZED EXPLORATION AND DRILLING OPERATIONS.

(a) AUTHORIZATION WITHOUT SURFACE USE AGREEMENT- The Secretary may authorize an operator to conduct exploration and drilling operations on lands covered by section 202 in the absence of an agreement with the surface estate owner or owners, if--

(1) the Secretary makes a determination in writing that the operator made a good faith attempt to conclude such an agreement, including referral of the matter to arbitration pursuant to section 202(c), but that no agreement was concluded within 90 days after the referral to arbitration;

(2) the operator submits a plan of operations that provides for the matters specified in section 202(b) and for compliance with all other applicable requirements of Federal and State law; and

(3) the operator posts a bond or other financial assurance in an amount the Secretary determines to be adequate to ensure compensation to the surface estate owner for any damages to the site, in the form of a surety bond, trust fund, letter of credit, government security, certificate of deposit, cash, or equivalent.

(b) SURFACE OWNER PARTICIPATION- The Secretary shall provide surface estate owners with an opportunity to--

(1) comment on plans of operations in advance of a determination of compliance with this title;

(2) participate in bond level determinations and bond release proceedings under this section;

(3) attend an on-site inspection during such determinations and proceedings;

(4) file written objections to a proposed bond release; and

(5) request and participate in an on-site inspection when they have reason to believe there is a violation of the terms and conditions of a plan of operations.

(c) PAYMENT OF FINANCIAL GUARANTEE- A surface estate owner with respect to any land subject to a lease may petition the Secretary for payment of all or any portion of a bond or other financial assurance required under this section as compensation for any damages as a result of exploration and drilling operations. Pursuant to such a petition, the Secretary may use such bond or other guarantee to provide compensation to the surface estate owner for such damages.

(d) BOND RELEASE- Upon request and after inspection and opportunity for surface estate owner review, the Secretary may release the financial assurance required under this section if the Secretary determines that exploration and drilling operations are ended and all damages have been fully compensated.

SEC. 204. SURFACE OWNER NOTIFICATION.

The Secretary shall--

(1) notify surface estate owners in writing at least 45 days in advance of lease sales;

(2) within ten working days after a lease is issued, notify surface estate owners of regarding the identity of the lessee;

(3) notify surface estate owners in writing concerning any subsequent decisions regarding a lease, such as modifying or waiving stipulations and approving rights of way; and

(4) notify surface estate owners within five business days after issuance of a drilling permit under a lease.

TITLE III--RECLAMATION AND BONDING

SEC. 301. RECLAMATION STANDARD AND BOND.

Section 17 of the Mineral Leasing Act (30 U.S.C. 226) is amended by adding at the end the following:

`(p) RECLAMATION REQUIREMENTS- An operator producing oil or gas (including coalbed methane) under a lease issued pursuant to this Act shall--

`(1) at a minimum restore the land affected to a condition capable of supporting the uses that it was capable of supporting prior to any drilling, or higher or better uses of which there is reasonable likelihood, so long as such use or uses do not present any actual or probable hazard to public health or safety or pose any actual or probable threat of water diminution or pollution, and the permit applicants' declared proposed land use following reclamation is not impractical or unreasonable, inconsistent with applicable land use policies and plans, or involve unreasonable delay in implementation, or is violative of Federal, State, or local law;

`(2) ensure that all reclamation efforts proceed in an environmentally sound manner and as contemporaneously as practicable with the oil and gas drilling operations; and

`(3) submit with the plan of operations a reclamation plan that describes in detail the methods and practices that will be used to ensure complete and timely restoration of all lands affected by oil and gas operations.

`(q) RECLAMATION BOND- An operator producing oil or gas (including coalbed methane) under a lease issued under this Act shall post a bond that covers that area of land within the permit area upon which the operator will initiate and conduct oil and gas drilling and reclamation operations within the initial term of the permit. As succeeding increments of oil and gas drilling and reclamation operations are to be initiated and conducted within the

permit area, the lessee shall file with the regulatory authority an additional bond or bonds to cover such increments in accordance with this section. The amount of the bond required for each bonded area shall depend upon the reclamation requirements of the approved permit; shall reflect the probable difficulty of reclamation giving consideration to such factors as topography, geology of the site, hydrology, and revegetation potential; and shall be determined by the Secretary. The amount of the bond shall be sufficient to assure the completion of the reclamation plan if the work had to be performed by the Secretary in the event of forfeiture.

`(r) REGULATIONS- No later than one year after the date of the enactment of this subsection, the Secretary shall promulgate regulations to implement the requirements of subsections (p) and (q).

`(s) STUDY BY THE GENERAL ACCOUNTING OFFICE- (1) The Comptroller General shall conduct a review to assess the adequacy of the regulations issued by the Secretary pursuant to subsection (r) to ensure that operators will meet the requirements of subsection (p).

`(2) A report of the results of the review required by paragraph (1) shall be transmitted to the Committee on Resources of the House of Representatives and the Committee on Energy and Natural Resources of the Senate no later than 180 days after the date on which the Secretary promulgates regulations pursuant to subsection (r).

`(3) The report required by paragraph (2) shall include findings and conclusions by the Comptroller General of the United States, and any recommendations the Comptroller General may make with respect to any legislation or administrative actions the Comptroller General determines would be appropriate to ensure compliance with the requirements of subsection (p).'.

TITLE IV--ABANDONED WELLS

SEC. 401. DEFINITION.

As used in this title, the term `abandoned well' means any well drilled for the purpose of exploring for or developing oil or gas resources (including coalbed methane) that--

(1) has not been in operation for a period of 12 continuous months, unless the owner or operator has notified the Secretary of the Interior (for wells drilled to explore for or develop minerals owned by the United States) or the relevant State regulatory agency (for wells drilled to explore for or develop minerals not owned by the United States) that the well has been temporarily shut down; or

(2) has not been operative for more than 60 continuous months after the owner or operator has notified the Secretary of the Interior (for wells drilled to explore for or develop minerals owned by the United States) or the relevant State regulatory agency (for wells drilled to explore for or develop minerals not owned by the United States) that the well has been temporarily shut down.

SEC. 402. FEDERAL REMEDIATION PROGRAM.

(a) ESTABLISHMENT OF PROGRAM- (1) The Secretary of the Interior, in cooperation with the Secretary of Agriculture, shall establish a program to ensure to the maximum extent feasible the remediation, reclamation, and closure of abandoned wells that--

(A) are located on lands administered by an agency of the Department of the Interior or the Forest Service; or

(B) were drilled to explore for or develop minerals owned by the United States located on lands with respect to which the surface estate is not owned by the United States.

(2) In implementing the program, the Secretary of the Interior--

(A) shall cooperate with the Secretary of Agriculture and the States with respect to the Federal lands covered by the program are located; and

(B) shall consult with the Secretary of Energy and the Interstate Oil and Gas Compact Commission.

(3) The Secretary of the Interior shall establish the program by no later than 3 years after the date of enactment of this section.

(b) PROGRAM ELEMENTS- The program established under subsection (a) shall--

(1) provide for identification of abandoned wells to be covered by the program;

(2) establish a means of ranking critical sites for priority in remediation based on potential environmental harm, other land use priorities, and public health and safety; and

(3) provide as far as possible for identifying any lessees or other persons responsible for abandoned wells, and for recovering the costs of remediation to the maximum extent feasible.

(c) PLAN- Within 6 months after the date of enactment of this section, the Secretary of the Interior, in cooperation with the Secretary of Agriculture, shall prepare a plan for implementing the program established under subsection (a). A copy of the plan shall be transmitted to the Committee on Resources of the House of Representatives and the Committee on Energy and Natural Resources of the Senate.

(d) REVIEW AND REPORT- (1) No later than 3 years after the date of enactment of this section, the Secretary of the Interior, in consultation with the Secretary of Agriculture, shall complete a review of the status of remediation, reclamation, and closure actions under the program.

(2) Upon completion of the review required by paragraph (1), the Secretary of the Interior shall provide to the Committee on Resources of the House of Representatives and the Committee on Energy and Natural Resources of the Senate--

(A) a report on the results of the review;

(B) information regarding any wells on lands covered by the program that have been abandoned since the date of enactment of this section; and

(C) any recommendations the Secretary may choose to make regarding legislative or administration steps to further the purposes for which the program was established.

(e) AUTHORIZATION OF APPROPRIATIONS- There are authorized to be appropriated to the Secretary of the Interior $5,000,000 for each of fiscal years 2005 through 2006 to carry out this section.

SEC. 403. ASSISTANCE TO STATES AND TRIBES.

(a) STATE PROGRAM- The Secretary of the Interior, in consultation with the Secretary of Energy, shall establish a program to provide technical assistance to facilitate State efforts to develop and implement practical and economical remedies for environmental problems caused by abandoned wells on lands that are not owned by the United States. The Secretary shall work with the States, through the Interstate Oil and Gas Compact Commission, to assist the States in quantifying and mitigating environmental risks of onshore abandoned wells on State and private lands.

(b) TRIBAL PROGRAM- The Secretary of the Interior, in consultation with the Secretary of Energy, shall establish a program to provide technical assistance to facilitate efforts by Indian Tribes to develop and implement practical and economical remedies for environmental problems caused by abandoned wells on Indian lands, including lands held in trust by the United States.

(c) PROGRAM ELEMENTS- So far as possible, the programs established under this section shall include--

(1) mechanisms to facilitate identification of responsible parties;

(2) criteria for ranking critical sites based on factors such as other land use priorities, potential environmental harm and public visibility; and

(3) information and training programs regarding best practices for remediation of different types of sites.

(d) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated to the Secretary of the Interior for activities under this section $5,000,000 for each of fiscal years 2005 through 2007.

END