Iowa would tax oil and gas and limit local rules

The state would charge a tax on oil and gas when it is extracted. The tax applies to oil and gas extracted from land in Iowa. The tax is based on fair market value at the wellhead. Producers cannot deduct expenses incurred before valuation. The tax applies when oil or gas is extracted; revenue distributions are made quarterly.

An operator must get written permission from the surface owner before entering the site for an oil and gas operation. These rules cover sites under a pooling order or within an exploratory spacing unit. Before bringing heavy equipment to drill, the operator must negotiate payment for possible damage. If there is no written agreement, the operator cannot enter to drill. A surface owner may stop further talks by notifying the operator and the attorney general. The operator must then stop contacting the owner about a damage agreement, but may continue notices required by law. The owner can later withdraw the refusal. The permission requirement applies before entry; damage talks and a written agreement are required before entry with heavy equipment for drilling.

The director may order pooling of interests in a spacing unit for natural hydrogen development. The rule applies only if the producer has identified existing natural hydrogen in the spacing unit. The order requires notice and a hearing, and its terms must be just and reasonable. It may allow the producer to recover costs and risk penalties from owners who do not agree to participate. An owner without a lease or other oil and gas development contract is entitled to a cost-free royalty of 12.5 percent while the producer recovers costs. After costs are fully recovered, the producer must offer a nonconsenting owner a choice between joining as a working-interest owner and continuing to receive the specified royalty.

The state has exclusive authority over oil and gas operations, with limited local rules allowed. The limits apply to counties, cities, and other local governments regulating oil and gas operations. Cities and counties may regulate certain above-ground activity involving fire and emergency response, traffic, lights, or noise, and may set notice or reasonable setback rules. Any permitted local rule must be commercially reasonable, must not prohibit or effectively prohibit operations by a reasonably prudent operator, and must not be preempted by state or federal law. The text states no separate start date for these rules.