H.B. No. 380
AN ACT
relating to oil and gas well plugging insurance policies.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 91.104, Natural Resources Code, is
amended to read as follows:
Sec. 91.104. BONDS, LETTERS OF CREDIT, [AND] CASH DEPOSITS,
AND WELL-SPECIFIC PLUGGING INSURANCE POLICIES. (a) The commission
shall require a bond, letter of credit, or cash deposit to be filed
with the commission as provided by Subsection (b) [of this
section].
(b) A person required to file a bond, letter of credit, or
cash deposit under Section 91.103 who is an inactive operator or who
operates one or more wells must, at the time of filing or renewing
an organization report required by Section 91.142, file:
(1) an individual bond as provided under Section
91.1041;
(2) a blanket bond as provided under Section 91.1042;
or
(3) a letter of credit or cash deposit in the same
amount as required for an individual bond under Section 91.1041 or a
blanket bond under Section 91.1042.
(c) A person required to file a bond, letter of credit, or
cash deposit under Section 91.103 who operates one or more wells is
considered to have met that requirement for a well if the well bore
is included in a well-specific plugging insurance policy that:
(1) is approved by the Texas Department of Insurance;
(2) names this state as the owner and contingent
beneficiary of the policy;
(3) names a primary beneficiary who agrees to plug the
specified well bore;
(4) is fully prepaid and cannot be canceled or
surrendered;
(5) provides that the policy continues in effect until
the specified well bore has been plugged;
(6) provides that benefits will be paid when, but not
before, the specified well bore has been plugged in accordance with
commission rules in effect at the time of plugging; and
(7) provides benefits that equal the greatest of:
(A) an amount equal to $2 for each foot of well
depth, as determined in the manner specified by the commission, for
the specified well;
(B) if the specified well is a bay well and
regardless of whether the well is producing oil or gas, the amount
required under commission rules for a bay well that is not producing
oil or gas;
(C) if the specified well is an offshore well and
regardless of whether the well is producing oil or gas, the amount
required under commission rules for an offshore well that is not
producing oil or gas; or
(D) the payment otherwise due under the policy
for plugging the well bore.
SECTION 2. Section 91.1041, Natural Resources Code, is
amended by adding Subsections (c) and (d) to read as follows:
(c) When calculating under Subsection (a) the amount of the
bond a person who operates one or more wells is required to file,
the commission shall exclude a well if the well bore is included in
a well-specific plugging insurance policy described by Section
91.104(c).
(d) If the inclusion of a bay or offshore well whose well
bore is included in a well-specific plugging insurance policy
described by Section 91.104(c) in the calculation under Subsection
(b) of the amount of the bond an operator of one or more bay or
offshore wells is required to file would result in an increase in
the amount of the bond that would otherwise be required, the rules
must provide for the exclusion of the well from the calculation.
SECTION 3. Section 91.1042, Natural Resources Code, is
amended by adding Subsections (c) and (d) to read as follows:
(c) When calculating the number of an operator's wells for
purposes of Subsection (a), the commission shall exclude a well if
the well bore is included in a well-specific plugging insurance
policy described by Section 91.104(c).
(d) If the inclusion of a bay or offshore well whose well
bore is included in a well-specific plugging insurance policy
described by Section 91.104(c) in the calculation under Subsection
(b) of the amount of the bond an operator of bay or offshore wells is
required to file would result in an increase in the amount of the
bond that would otherwise be required, the rules must provide for
the exclusion of the well from the calculation.
SECTION 4. Section 91.105, Natural Resources Code, is
amended to read as follows:
Sec. 91.105. BOND CONDITIONS. Each bond required by
Section 91.103 [of this code] shall be conditioned that the
operator will plug and abandon all wells and control, abate, and
clean up pollution associated with an operator's oil and gas
activities covered under the bond in accordance with the law of the
state and the permits, rules, and orders of the commission. This
section does not apply to a well-specific plugging insurance policy
described by Section 91.104(c).
SECTION 5. Sections 91.107, 91.108, and 91.1091, Natural
Resources Code, are amended to read as follows:
Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT.
If an active or inactive well is transferred, sold, or assigned by
its operator, the commission shall require the party acquiring the
well to file a new bond, letter of credit, or cash deposit as
provided by Section 91.104(b), and the financial security of the
prior operator shall continue to be required and to remain in
effect, and the commission may not approve the transfer of
operatorship, until the new bond, letter of credit, or cash deposit
is provided or the commission determines that the bond, letter of
credit, or cash deposit previously submitted to the commission by
the person acquiring the well complies with this subchapter. A
transfer of a well from one entity to another entity under common
ownership is a transfer for purposes of this section. This section
does not apply to a well bore that is included in a well-specific
plugging insurance policy described by Section 91.104(c).
Sec. 91.108. DEPOSIT AND USE OF FUNDS. Subject to the
refund provisions of Section 91.1091, if applicable, proceeds from
bonds and other financial security required pursuant to this
chapter and benefits under well-specific plugging insurance
policies described by Section 91.104(c) that are paid to the state
as contingent beneficiary of the policies shall be deposited in the
oil-field cleanup fund and, notwithstanding Sections 91.112 and
91.113, may be used only for actual well plugging and surface
remediation.
Sec. 91.1091. REFUND. The commission shall refund the
proceeds from a bond, letter of credit, or cash deposit [or other
form of security] required under this subchapter if:
(1) the conditions that caused the proceeds to be
collected are corrected;
(2) all administrative, civil, and criminal penalties
relating to those conditions are paid; and
(3) the commission has been reimbursed for all costs
and expenses incurred by the commission in relation to those
conditions.
SECTION 6. Section 91.111(c), Natural Resources Code, is
amended to read as follows:
(c) The fund consists of:
(1) penalties imposed under Section 85.381 for
violation of a law, order, or rule relating to well plugging
requirements;
(2) proceeds from bonds and other financial security
[assurances] required by this chapter and benefits under
well-specific plugging insurance policies described by Section
91.104(c) that are paid to the state as contingent beneficiary of
the policies, subject to the refund provisions of Section 91.1091,
if applicable;
(3) private contributions, including contributions
made under Section 89.084;
(4) expenses collected under Section 89.083;
(5) fees imposed under Section 85.2021;
(6) civil penalties collected for violations of
Chapter 89 or of rules or orders relating to plugging that are
adopted under this code;
(7) proceeds collected under Sections 89.085 and
91.115;
(8) interest earned on the funds deposited in the
fund;
(9) [fees collected under Section 91.104;
[(10)] civil penalties or costs recovered under
Section 91.457 or 91.459;
(10) [(11)] oil and gas waste hauler permit
application fees collected under Section 29.015, Water Code;
(11) [(12)] costs recovered under Section 91.113(f);
(12) [(13)] hazardous oil and gas waste generation
fees collected under Section 91.605;
(13) [(14)] oil-field cleanup regulatory fees on oil
collected under Section 81.116;
(14) [(15)] oil-field cleanup regulatory fees on gas
collected under Section 81.117;
(15) [(16)] fees for a reissued certificate collected
under Section 85.167;
(16) [(17)] fees collected under Section 91.1013;
(17) [(18)] fees collected under Section 89.088;
(18) [(19)] penalties collected under Section
81.0531;
(19) [(20)] fees collected under Section 91.142;
(20) [(21)] fees collected under Section 91.654;
(21) [(22)] costs recovered under Sections 91.656 and
91.657;
(22) [(23)] two-thirds of the fees collected under
Section 81.0521; and
(23) [(24)] legislative appropriations.
SECTION 7. The changes in law made by this Act apply only to
a person required to file a bond, letter of credit, or cash deposit
under Section 91.103, Natural Resources Code, on or after the
effective date of this Act. A person required to file a bond,
letter of credit, or cash deposit under Section 91.103, Natural
Resources Code, before the effective date of this Act is governed by
the law as it existed immediately before the effective date of this
Act, and that law is continued in effect for that purpose.
SECTION 8. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 380 was passed by the House on March
3, 2005, by the following vote: Yeas 135, Nays 0, 1 present, not
voting.
______________________________
Chief Clerk of the House
I certify that H.B. No. 380 was passed by the Senate on May
20, 2005, by the following vote: Yeas 30, Nays 0, 1 present, not
voting.
______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor