IowaSF 249091st General Assembly (2025–2026)Senate

A bill for an act relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, pooling orders, negotiation of surface damage, imposition and distribution of a tax, and jurisdiction, and providing civil penalties. (Formerly SF 2449, SF 546, SF 268.) Effective date: 07/01/2026.

Sponsored By: COMMITTEE ON WAYS AND MEANS

Signed by Governor

appropriationsways and means

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Bill Overview

Analyzed Economic Effects

11 provisions identified: 5 benefits, 2 costs, 4 mixed.

Production taxes fund counties and relief

Beginning July 1, 2026, Iowa sends 70.1% of oil and gas production tax revenue to the taxpayer relief fund. All counties share 9.9% based on population from the latest federal census. Producing counties share another 5% based on production value, using prior-year returns to calculate payments. Another 5% goes to the road use tax fund, and 10% goes to the water-quality account. Counties can use their money only for county roads or property-tax offsets; offsets require matching levy-rate reductions. Quarterly payments equal one-fourth of estimated annual revenue, with adjustments for prior-year differences. The Department of Revenue must reconcile actual revenue and report adjustments by September 15 each year.

Production owners pay new 6% tax

Beginning July 1, 2026, Iowa taxes extracted oil and gas at 6% of fair market value at the wellhead. This tax is in addition to other taxes. Producers cannot deduct expenses incurred before valuation. Each production owner owes a share based on ownership. A producer paying the tax can subtract each owner's share from royalties or other payments, preventing a second tax charge. The Department of Revenue handles valuation, assessment, and administration, and can adopt rules. It must certify wellhead values to county assessors by June 1, or as soon afterward as determined.

Hydrogen pooling sets owner payment rules

Beginning July 1, 2026, compulsory pooling requires failed voluntary pooling, identified existing natural hydrogen pools, and applications covering at least 25% of the unit's area. Pooling combines ownership interests for production and sets each owner's production share and costs. For nonconsenting interests under a lease or development contract, producers can recover up to 200% of specified drilling and equipment costs. Unleased, nonconsenting owners receive a cost-free 12.5% royalty while recoverable costs are paid. After full recovery, producers must notify owners within 30 days; owners then have 60 days after receipt to choose participation or continued royalties. No response means continued royalties, and producers must notify the director within five business days after elections or the response deadline. The director can resolve cost disputes and adjust terms for fair sharing.

State control limits local drilling rules

Beginning July 1, 2026, Iowa has exclusive control over oil and gas operations, blocking most local bans and limits. Local governments retain narrow authority over above-ground fire response, emergencies, traffic, lights, noise, notice, and reasonable setbacks. These rules must be commercially reasonable, cannot effectively block a reasonably prudent operator, and cannot conflict with controlling law. A rule in place for at least five years that allowed operations to continue is presumed commercially reasonable. The law also repeals the prior oil and gas section, Iowa Code 458A.6.

Landowners control drilling access and contact

Beginning July 1, 2026, operators need surface owners' written permission to enter sites under pooling orders or within exploratory units. Before bringing heavy equipment to drill, operators must negotiate damages and sign a written damages agreement with the owner. Operators must explain the contact opt-out in writing before negotiations. Owners can stop further damages talks by notifying the operator verbally or in writing and notifying Iowa's Attorney General by mail or electronically. Operators then cannot initiate agreement-related contact, though legally required notices remain allowed; owners can restart talks by notifying both parties. Prohibited contact carries a civil penalty of at least $10,000 per violation, not a promised payment to the owner.

Production taxes support water quality projects

Beginning July 1, 2026, a new Environment First Fund account receives 10% of oil and gas production tax revenue. Spending requires legislative approval; the law sets no fixed dollar amount. The state agriculture department's soil and water division runs demonstration projects in designated subwatersheds and high-priority watersheds. Projects must use nutrient-reduction practices, allow people with legal interests in farmland to participate, and encourage local teamwork. State cost sharing generally cannot exceed 50% of estimated or actual costs, whichever is lower; edge-of-field practices are excepted. Administration and implementation can use no more than 10% of the deposit. Projects can include education and monitoring, combine state and federal funds, and support a confidential database of combined practice information.

Drilling owners can request rule exceptions

Beginning July 1, 2026, owners and applicants can request written exceptions to Iowa's oil and gas rules or orders. The director must approve or deny a proper request within 14 days. An exception can be granted without a hearing after a good-faith compliance effort or a showing that compliance is impossible. It cannot violate the law's basic purpose. Granted exceptions must later be reported at a hearing or otherwise made public.

Producers gain flexible well placement rules

Beginning July 1, 2026, spacing orders set unit size and shape, plus well numbers and locations under a reasonably uniform plan. On application, the director can approve alternate locations when prescribed sites cannot pay their way or create substantially greater drilling burdens or hazards. The director can add land, resize units, or allow more wells to prevent waste and protect owners' fair production shares. Orders must prevent production above the unit's fair share, and changes remain subject to appeal deadlines. After a hearing, the department can establish exploratory units when evidence cannot establish a pool or suitable unit boundaries. It can use reservoir models, other basins, existing units, and preliminary data to guide exploratory wells and future spacing.

New filing duties for drilling businesses

Beginning July 1, 2026, covered businesses and agents must file business, contact, organization, and applicable ownership details each April 1. Coverage includes oil and gas production, storage, nonrail transport, refining, reclaiming, treating, marketing, and processing, plus metallic-mineral exploration and production. Oil and gas operators must also submit well logs and location, drilling, and production reports to Iowa's natural resources department. Directional surveys must be filed if taken. Required well materials are due within six months after completion or abandonment, unless the deadline is extended under the law. Operators must supply requested samples and core chips free of charge, along with requested complete cores minus tested sections.

Production tax privacy limits public access

Beginning July 1, 2026, Iowa keeps oil and gas production tax returns and related tax-administration records confidential. Revenue and justice department staff can use them for official work, with disclosure also allowed in specified tax-related proceedings. Sharing with another government requires advance taxpayer notice, a written application, an official-business reason, and a confidentiality agreement. Reported production amounts and taxable values remain public and may be released.

Drilling confidentiality limits public access

Beginning July 1, 2026, owners must consult Iowa's natural resources department before submitting information claimed as confidential. Qualifying information must arrive as an unredacted paper copy marked confidential. It stays closed to public access for five years, with extensions allowed for good cause. Covered information includes surface-agreement payment terms, off-lease infrastructure routes, exploration records, and proposed permit or asset transfers. Protection also covers qualifying trade-secret completion chemicals, personal medical information, and commercial information whose release could harm competition.

Sponsors & Cosponsors

Sponsor

COMMITTEE ON WAYS AND MEANS
Affiliation unavailable

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 157 • No: 108

Senate vote • 5/2/2026

Passed Senate

Yes: 35 • No: 11

legislature vote • 5/2/2026

Amendment H-8477

Yes: 25 • No: 61

House vote • 5/2/2026

Passed House

Yes: 65 • No: 21

Senate vote • 4/16/2026