88R7366 ANG-D
 
  By: Goodwin H.B. No. 3839
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to financial security requirements for operators of oil
  and gas wells.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 81.067(c), Natural Resources Code, is
  amended to read as follows:
         (c)  The fund consists of:
               (1)  proceeds from bonds and other financial security
  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;
               (2)  private contributions, including contributions
  made under Section 89.084;
               (3)  expenses collected under Section 89.083;
               (4)  fees imposed under Section 85.2021;
               (5)  costs recovered under Section 91.457 or 91.459;
               (6)  proceeds collected under Sections 89.085 and
  91.115;
               (7)  interest earned on the funds deposited in the
  fund;
               (8)  oil and gas waste hauler permit application fees
  collected under Section 29.015, Water Code;
               (9)  costs recovered under Section 91.113(f);
               (10)  hazardous oil and gas waste generation fees
  collected under Section 91.605;
               (11)  oil-field cleanup regulatory fees on oil
  collected under Section 81.116;
               (12)  oil-field cleanup regulatory fees on gas
  collected under Section 81.117;
               (13)  fees for a reissued certificate collected under
  Section 91.707;
               (14)  fees collected under Section 91.1013;
               (15)  fees collected under Section 89.088;
               (16)  fees collected under Section 91.142;
               (17)  fees collected under Section 91.654;
               (18)  costs recovered under Sections 91.656 and 91.657;
               (19)  fees collected under Section 81.0521;
               (20)  fees collected under Sections 89.024 and 89.026;
               (21)  legislative appropriations;
               (22)  any surcharges collected under Section 81.070;
               (23)  fees collected under Section 91.0115;
               (24)  fees collected under Subchapter E, Chapter 121,
  Utilities Code;
               (25)  fees collected under Section 27.0321, Water Code;
               (26)  fees collected under Section 81.071; [and]
               (27)  money collected under Section 81.021; and
               (28)  money transferred from a sinking fund under
  Section 91.1045(b)(2).
         SECTION 2.  Section 89.023(a), Natural Resources Code, is
  amended to read as follows:
         (a)  The commission may grant an extension of the deadline
  for plugging an inactive well if the operator maintains a current
  organization report with the commission as required by Section
  91.142 and if, on or before the date of renewal of the operator's
  organization report as required by that section, the operator files
  with the commission an application for an extension that includes:
               (1)  an affirmation that complies with Section 89.029;
               (2)  a statement that the operator has, and on request
  will provide, evidence of a good faith claim to a continuing right
  to operate the well; [and]
               (3)  at least one of the following:
                     (A)  documentation that since the preceding date
  that the operator's organization report was required to be renewed
  the operator has plugged, or restored to active operation as
  defined by commission rule, a number of inactive wells equal to or
  greater than 10 percent of the number of inactive wells operated by
  the operator on that date;
                     (B)  an abeyance of plugging report on a form
  approved by the commission that:
                           (i)  is in the form of a certification signed
  by a person licensed by the Texas Board of Professional Engineers
  and Land Surveyors as an engineer or by the Texas Board of
  Professional Geoscientists;
                           (ii)  includes:
                                 (a)  an affirmation by the licensed
  person that the well has:
                                       (1)  a reasonable expectation of
  economic value in excess of the cost of plugging the well for the
  duration of the period covered by the report, based on the cost
  calculation for plugging an inactive well; and
                                       (2)  a reasonable expectation of
  being restored to a beneficial use that will prevent waste of oil or
  gas resources that otherwise would not be produced if the well were
  plugged; and
                                 (b)  appropriate documentation
  demonstrating the basis for the affirmation of the well's future
  utility; and
                           (iii)  specifies the field and the covered
  wells within that field in a format prescribed by the commission;
                     (C)  a statement that the well is part of an
  enhanced oil recovery project;
                     (D)  if the operator of the well is not currently
  otherwise required by commission rule or order to conduct a fluid
  level or hydraulic pressure test of the well, documentation of the
  results of a successful fluid level or hydraulic pressure test of
  the well conducted in accordance with the commission's rules in
  effect at the time the test is conducted;
                     (E)  [a supplemental bond, letter of credit, or
  cash deposit sufficient for each well specified in the application
  that:
                           [(i)  complies with the requirements of
  Chapter 91; and
                           [(ii)  is of an amount at least equal to the
  cost calculation for plugging an inactive well for each well
  specified in the application;
                     [(F)]  documentation of the deposit with the
  commission each time the operator files an application of an amount
  of escrow funds as prescribed by commission rule that equal at least
  10 percent of the total cost calculation for plugging an inactive
  well for each well specified in the application; or
                     (F) [(G)]  if the operator is a publicly traded
  entity, [:
                           [(i)]  the following documents:
                           (i) [(a)]  a copy of the operator's federal
  documents filed to comply with Financial Accounting Standards Board
  Statement No. 143, Accounting for Asset Retirement Obligations;
  and
                           (ii) [(b)]  an original, executed Uniform
  Commercial Code Form 1 Financing Statement, filed with the
  secretary of state, that:
                                 (a) [(1)]  names the operator as the
  "debtor" and the Railroad Commission of Texas as the "secured
  creditor"; and
                                 (b) [(2)]  specifies the funds covered
  by the documents described by Subparagraph (i) [Sub-subparagraph
  (a)] in the amount at least equal to the applicable decommissioning
  cost estimate established by the commission under Section
  91.1041(b) for each well specified in the application; and 
               (4)  a supplemental bond, letter of credit, or cash
  deposit sufficient for each well specified in the application that:
                     (A)  complies with the requirements of Chapter 91;
  and
                     (B)  is of an amount at least equal to the
  applicable decommissioning cost estimate established by the
  commission under Section 91.1041(b) for each well specified in the
  application [of the cost calculation for plugging an inactive well
  for each well specified in the application; or
                           [(ii)  a blanket bond in the amount of the
  lesser of:
                                 [(a)  the cost calculation for
  plugging any inactive wells; or
                                 [(b)  $2 million].
         SECTION 3.  Section 89.027(a), Natural Resources Code, is
  amended to read as follows:
         (a)  A supplemental bond, letter of credit, or cash deposit
  filed under Section 89.023(a)(4) [89.023(a)(3)(E)] is in addition
  to any other financial assurance otherwise required of the operator
  or for the well.
         SECTION 4.  Section 89.028(a), Natural Resources Code, is
  amended to read as follows:
         (a)  Escrow funds described by Section 89.023(a)(3)(E)
  [89.023(a)(3)(F)] must be deposited with the commission each time
  an operator files an application for an extension of the deadline
  for plugging an inactive well.
         SECTION 5.  Sections 91.104(b) and (c), Natural Resources
  Code, are amended to read as follows:
         (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; or
               (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)  the [an] amount established by the commission
  based on the decommissioning cost estimate established under
  Section 91.1041(b) for the applicable region [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 6.  Subchapter D, Chapter 91, Natural Resources
  Code, is amended by amending Section 91.1041 and adding Section
  91.1045 to read as follows:
         Sec. 91.1041.  INDIVIDUAL BOND. (a)  A person required to
  file a bond, letter of credit, or cash deposit under Section 91.103
  who operates one or more wells may file a bond in an amount
  established by the commission. The commission shall establish the
  bond amount based on the decommissioning cost estimate established
  under Subsection (b) for the applicable region [equal to $2 for each
  foot of well depth for each well].
         (b)  Based on the information provided to the commission
  under [Notwithstanding] Subsection (c) [(a)], the commission [by
  rule] shall establish decommissioning cost estimates for each oil
  and gas producing region of the state, as determined by the
  commission, annually and post the estimates on the commission's
  publicly accessible Internet website [set the amount of the bond
  for an operator of one or more bay or offshore wells at a reasonable
  amount that exceeds the amount provided by Subsection (a)].
         (c)  The commission shall require each operator to provide
  decommissioning cost information to the commission on an annual
  basis, including, for each well site:
               (1)  the depth of the well;
               (2)  the age of the well bore;
               (3)  a summary explaining factors or complications
  related to the well or well site that may influence the cost of
  plugging or cleanup at the well site;
               (4)  an estimated cost of materials and equipment
  necessary to plug the well bore and clean up the well site;
               (5)  an estimated cost of labor necessary to plug the
  well bore, clean up the well site, and remove any equipment;
               (6)  overhead expenses; and
               (7)  whether the well bore or site has undergone
  reworking operations during the preceding year.
         (d)  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).
         (e) [(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.
         Sec. 91.1045.  PAYMENT TO AND USE OF SINKING FUND. (a) A
  person who files a bond under Section 91.1041 shall pay into a
  sinking fund established by the commission an amount equal to the
  full cost of decommissioning the well for which the bond was filed,
  as determined by the commission under Section 91.1041(b), divided
  into equal annual payments to be completed by the earlier of:
               (1)  15 years; or 
               (2)  the estimated number of years the well is expected
  to be productive based on the projected production decline curve of
  the well.
         (b)  Money in the sinking fund may be used by the operator or
  the commission to pay the costs of plugging the well bore and
  remediating the well site. Any amount remaining in the sinking fund
  after the plugging and remediation is complete shall be transferred
  to:
               (1)  the operator, if the operator plugs the well and
  remediates the well site to commission standards; or 
               (2)  the oil and gas regulation and cleanup fund
  established under Section 81.067, if, after the operator is given
  the opportunity to complete the plugging and remediation, the
  commission plugs the well and remediates the well site to
  commission standards.
         (c)  This section does not apply to an operator whose
  operation results in the completion of a well as a dry hole. An
  operator described by this subsection must plug the well in
  accordance with the inactive well plugging requirements
  established under Chapter 81.
         SECTION 7.  Section 91.1042, Natural Resources Code, is
  repealed.
         SECTION 8.  (a) 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 89.023 or 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 89.023 or
  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.
         (b)  Notwithstanding Subsection (a), an operator of a well in
  existence on the effective date of this Act is not required to hold
  an individual bond that meets the requirements of Section 91.1041,
  Natural Resources Code, as amended by this Act, until September 1,
  2028, and the law as it existed immediately before the effective
  date of this Act is continued in effect for that purpose.
         SECTION 9.  This Act takes effect September 1, 2023.