A bill to amend the Mineral Leasing Act to ensure that development of certain Federal oil and gas resources will occur in a manner that protects water resources and respects the rights of surface owners, and for other purposes.

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Surface Owner 
Protection Act''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
                 TITLE I--PROTECTION OF WATER RESOURCES

Sec. 101. Mineral Leasing Act requirements.
Sec. 102. Relationship to State law.
                   TITLE II--SURFACE OWNER PROTECTION

Sec. 201. Definitions.
Sec. 202. Post-lease surface use agreement.
Sec. 203. Authorized exploration and drilling operations.
Sec. 204. Surface owner notification.
                   TITLE III--RECLAMATION AND BONDING

Sec. 301. Reclamation requirements and bond.

                 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:
    ``(q) Water Requirements.--
            ``(1) In general.--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 the supply of the user 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 the production; 
                and
                    ``(B) comply with all applicable requirements of 
                Federal and State law for discharge of any water 
                produced under the lease.
            ``(2) Water management plan.--An application for a lease 
        under this subsection shall be accompanied by a proposed water 
        management plan including provisions--
                    ``(A) to 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 the protection cannot 
                be ensured;
                    ``(B) to 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 the operations that is not reinjected; 
                and
                    ``(C) to identify any agreements with other parties 
                for the beneficial use of produced waters and the steps 
                that will be taken to comply with Federal and State 
                laws relating to the use.''.

SEC. 102. RELATIONSHIP TO STATE LAW.

    Nothing in this Act or an amendment made by this Act--
            (1) impairs or affects any right or jurisdiction of any 
        State with respect to the waters of the State; or
            (2) limits, alters, modifies, or amends any of the 
        interstate compacts or equitable apportionment decrees that 
        apportion water among and between States.

                   TITLE II--SURFACE OWNER PROTECTION

SEC. 201. DEFINITIONS.

    In this title:
            (1) Lease.--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.
            (2) Lessee.--The term ``lessee'' means the holder of a 
        lease.
            (3) Operator.--The term ``operator'' means any person that 
        is responsible under the terms and conditions of a lease for 
        the operations conducted on leased land or any portion of the 
        land.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.

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 land 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 1 or more surface 
owners, indicating that the operator has secured a written surface use 
agreement between the operator and the 1 or more surface owners that 
meets the requirements of subsection (b).
    (b) Contents.--A surface use agreement shall provide for--
            (1) the use of only the portion of the surface estate that 
        is reasonably necessary for exploration and drilling operations 
        based on site-specific conditions, as determined by the 
        Secretary;
            (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 right of the operator to develop the oil 
        and gas estate;
            (3) the reclamation of the site to a condition capable of 
        supporting the uses which the land was capable of supporting 
        prior to exploration and drilling operations; and
            (4) compensation for damages as a result of exploration and 
        drilling operations, including--
                    (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 
                paragraph (3).
    (c) Procedure.--
            (1) Notice.--An operator shall notify each surface estate 
        owner of the desire of the operator to conclude an agreement 
        under this section.
            (2) Arbitration.--
                    (A) In general.--If the surface estate owner and 
                the operator do not reach an agreement within 90 days 
                after the date on which the operator provided the 
                notice, the matter shall be referred to third party 
                arbitration for resolution within a period of 90 days.
                    (B) Cost.--The cost of the arbitration shall be the 
                responsibility of the operator.
                    (C) Arbitrators.--The Secretary shall--
                            (i) identify persons with experience in 
                        conducting arbitrations; and
                            (ii) make the information available to 
                        operators.
                    (D) Referrals.--Referral of a matter for 
                arbitration by a person identified by the Secretary 
                pursuant to subparagraph (C) shall 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 that a court or arbitration panel may grant.

SEC. 203. AUTHORIZED EXPLORATION AND DRILLING OPERATIONS.

    (a) In General.--The Secretary may authorize an operator to conduct 
exploration and drilling operations on land covered by section 202 in 
the absence of an agreement with each surface estate owner, 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)(2), but that no agreement was 
        concluded within 90 days after the referral to arbitration;
            (2) the operator submits a plan of operations that covers 
        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 damage 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--
            (1) to comment on plans of operations in advance of a 
        determination of compliance with this title;
            (2) to participate in bond level determinations and bond 
        release proceedings under this section;
            (3) to attend an on-site inspection during the 
        determinations and proceedings;
            (4) to file written objections to a proposed bond release; 
        and
            (5) to request and participate in an on-site inspection if 
        the owners have reason to believe there is a violation of the 
        terms and conditions of a plan of operations.
    (c) Payment of Financial Guarantee.--
            (1) In general.--A surface estate owner, with respect to 
        any land subject to a lease, may petition the Secretary for 
        payment of all or part of a bond or other financial assurance 
        required under this section as compensation for any damage as a 
        result of exploration and drilling operations.
            (2) Compensation.--Pursuant to the petition, the Secretary 
        may use the bond or other guarantee to provide compensation to 
        the surface estate owner for the damage.
    (d) Bond Release.--On 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--
            (1) exploration and drilling operations have ended; and
            (2) all damage has been fully compensated.

SEC. 204. SURFACE OWNER NOTIFICATION.

    The Secretary shall--
            (1) notify surface estate owners of lease sales in writing 
        at least 45 days in advance;
            (2) not later than 10 working days after the date on which 
        a lease is issued, notify surface estate owners 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 not later than 5 business 
        days after the date of issuance of a drilling permit under a 
        lease.

                   TITLE III--RECLAMATION AND BONDING

SEC. 301. RECLAMATION REQUIREMENTS AND BOND.

    (a) In General.--Section 17 of the Mineral Leasing Act (30 U.S.C. 
226) (as amended by section 101) is amended by adding at the end the 
following:
    ``(r) Reclamation Requirements and Bond.--
            ``(1) Requirements.--An operator producing oil or gas 
        (including coalbed methane) under a lease issued pursuant to 
        this Act shall--
                    ``(A) at a minimum, restore the land affected to a 
                condition capable of supporting the uses that the land 
                was capable of supporting prior to any drilling, or 
                higher or better uses if there is reasonable likelihood 
                that--
                            ``(i) the 1 or more uses do not--
                                    ``(I) present any actual or 
                                probable hazard to public health or 
                                safety; or
                                    ``(II) pose any actual or probable 
                                threat of water diminution or 
                                pollution; and
                            ``(ii) the declared proposed land use of 
                        the permit applicant following reclamation--
                                    ``(I) is not impractical or 
                                unreasonable, inconsistent with 
                                applicable land use policies and plans, 
                                or involve unreasonable delay in 
                                implementation; and
                                    ``(II) does not violate Federal, 
                                State, or local law;
                    ``(B) ensure that all reclamation efforts proceed 
                in an environmentally sound manner and as 
                contemporaneously as practicable with the oil and gas 
                drilling operations; and
                    ``(C) 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 land affected by oil and gas 
                operations.
            ``(2) Reclamation bond.--
                    ``(A) In general.--An operator producing oil or gas 
                (including coalbed methane) under a lease issued under 
                this Act shall post a bond that covers the area of land 
                within the permit area on which the operator will 
                initiate and conduct oil and gas drilling and 
                reclamation operations within the initial term of the 
                permit.
                    ``(B) Additional bonds.--As succeeding increments 
                of oil and gas drilling and reclamation operations are 
                initiated and conducted within the permit area, the 
                lessee shall file with the regulatory authority 1 or 
                more additional bonds to cover the increments in 
                accordance with this section.
                    ``(C) Amount.--The amount of the bond required for 
                each bonded area shall--
                            ``(i) meet the reclamation requirements of 
                        the approved permit;
                            ``(ii) reflect the probable difficulty of 
                        reclamation considering factors such as 
                        topography, the geology of the site, hydrology, 
                        and revegetation potential;
                            ``(iii) be determined by the Secretary; and
                            ``(iv) be sufficient to ensure the 
                        completion of the reclamation plan if the work 
                        had to be performed by the Secretary in the 
                        event of forfeiture.
            ``(3) Regulations.--No later than 1 year after the date of 
        enactment of this subsection, the Secretary shall promulgate 
        regulations to implement the requirements of this 
        subsection.''.
    (b) Review and Report.--
            (1) Review.--The Comptroller General of the United States 
        shall conduct a review of the adequacy of the regulations 
        promulgated by the Secretary of the Interior pursuant to 
        subsection (r)(3) of section 17 of the Mineral Leasing Act (30 
        U.S.C. 226) (as added by subsection (a)) to ensure that 
        operators will meet the requirements of subsection (r) of that 
        section.
            (2) Report.--Not later than 180 days after the date on 
        which the Secretary promulgates regulations pursuant to 
        subsection (r)(3) of section 17 of the Mineral Leasing Act (30 
        U.S.C. 226) (as added by subsection (a)), the Comptroller 
        General of the United States shall submit to the Committee on 
        Natural Resources of the House of Representatives and the 
        Committee on Energy and Natural Resources of the Senate a 
        report that describes the results of the review conducted under 
        paragraph (1), including--
                    (A) any findings and conclusions of the Comptroller 
                General of the United States; and
                    (B) any recommendations the Comptroller General may 
                make with respect to any legislation or administrative 
                actions the Comptroller General of the United States 
                determines would be appropriate to ensure compliance 
                with the requirements of subsection (r) of that 
                section.

Summary: Surface Owner Protection Act - Amends the Mineral Leasing Act to require an operator producing oil or gas (including coalbed methane) under a federal lease to: (1) replace the water supply of a water user who obtains all or part of it from an underground or surface source affected by contamination, diminution, or interruption proximately resulting from such drilling operations; and (2) comply with federal and state law governing discharge of water produced under the lease.

Prohibits the Secretary of the Interior from authorizing exploration and drilling operations on land with respect to which title to oil and gas resources is held by the United States but not the title to the surface estate, unless the operator has filed a document with the Secretary, signed by the operator and surface owners, that a written surface use agreement has been consummated meeting certain criteria.

Cites conditions under which the Secretary may authorize an operator to conduct exploration and drilling operations in the absence of such an agreement.

Requires the Secretary to comply with specified surface owner notification requirements.

Sets forth reclamation and bond requirements.