By: Cook H.B. No. 2705
73R5267 SMH-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the salvage and disposition of oil and gas well-site or
1-3 other facility equipment or hydrocarbons upon state fund plugging
1-4 or cleanup.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. Section 89.002(a), Natural Resources Code, is
1-7 amended by adding Subdivisions (5), (6), (7), and (8) to read as
1-8 follows:
1-9 (5) "Well-site equipment" means any production-related
1-10 equipment or materials specific to the well being plugged,
1-11 including motors, pumps, pump jacks, tanks, tank batteries,
1-12 separators, compressors, casing, tubing, and rods.
1-13 (6) "Lease" means the lease on which a well made the
1-14 subject of a plugging contract is located.
1-15 (7) "Delinquent inactive well" means an unplugged well
1-16 that has had no reported production, disposal, injection, or other
1-17 permitted activity for a period of greater than 12 months and for
1-18 which, after notice and opportunity for a hearing, the commission
1-19 has not extended the plugging deadline.
1-20 (8) "Plugging" includes replugging.
1-21 SECTION 2. Section 89.043, Natural Resources Code, is
1-22 amended by amending Subsection (b) and adding Subsections (c) and
1-23 (d) to read as follows:
1-24 (b) If a well is leaking salt water, oil, or gas or is
2-1 likely to leak salt water, oil, or gas, and the leakage will cause
2-2 or is likely to cause a serious threat of pollution or injury to
2-3 the public health, the commission, through its employees or agents,
2-4 may direct the operator to take remedial action or to plug the well
2-5 or may plug or replug the well without holding a hearing under
2-6 Section 89.041 of this code or giving notice under Subsection (c)
2-7 of this section.
2-8 (c) On or before the 30th day before the date the commission
2-9 enters into a contract to plug a delinquent inactive well, the
2-10 commission shall send a notice by certified mail to the operator of
2-11 the well at the address last reported to the commission as required
2-12 by Section 91.142 of this code and commission rules. The notice
2-13 shall direct the operator to plug the well and shall state that:
2-14 (1) the commission may plug the well unless the
2-15 operator requests a hearing not later than the 10th day after the
2-16 date the operator receives the notice;
2-17 (2) if the commission plugs the well, all well-site
2-18 equipment will be presumed to have been abandoned and the
2-19 commission may dispose of the equipment and hydrocarbons from the
2-20 well as provided by Section 89.085 of this code; and
2-21 (3) the attorney general may file suit against the
2-22 operator to recover the plugging costs if the commission plugs the
2-23 well and the operator fails to reimburse the commission for the
2-24 plugging costs.
2-25 (d) The commission shall file a copy of the notice in the
2-26 office of the county clerk of the county in which the well is
2-27 located in the manner provided by Section 51.002, Property Code.
3-1 The commission shall furnish a copy of the notice to a holder of a
3-2 lien on the well on that person's request.
3-3 SECTION 3. Section 89.083, Natural Resources Code, is
3-4 amended to read as follows:
3-5 Sec. 89.083. FIRST LIEN ON EQUIPMENT; CAUSE OF ACTION IF
3-6 COMMISSION PLUGS. (a) If a well has not been plugged by the
3-7 deadline for plugging established by commission rules, the state
3-8 has a first lien, superior to all other preexisting and subsequent
3-9 liens and security interests, on the operator's and nonoperators'
3-10 interests in well-site equipment, in the amount of the total costs
3-11 of removing well-site equipment from the well, plugging the well,
3-12 and transporting, storing, and disposing of the well-site
3-13 equipment.
3-14 (b) The lien arises on the date by which the well is
3-15 required to be plugged under commission rules.
3-16 (c) The commission may foreclose on the lien by entering
3-17 into a plugging contract. The commission is not required to give
3-18 notice or an opportunity for a hearing to subordinate lienholders
3-19 before entering into a plugging contract.
3-20 (d) The lien is extinguished if the well is plugged in
3-21 accordance with commission rules by any person authorized to do so
3-22 before the commission enters into a plugging contract.
3-23 (e) The lien is extinguished as to any item of well-site
3-24 equipment that is lawfully removed by any person other than the
3-25 operator or a nonoperator pursuant to a lien, lease, judgment, or
3-26 security agreement before the commission enters into a plugging
3-27 contract. Equipment necessary to prevent the well from serving as
4-1 a conduit for the passage of oil, gas, saltwater, oil and gas
4-2 wastes, or freshwater from one stratum or formation to another or
4-3 to the surface or from the surface downward may not be removed from
4-4 an inactive well site except in the course of plugging in
4-5 accordance with commission rules.
4-6 (f) If the commission plugs a well under Sections 89.043
4-7 through 89.044 of this code, the state has a cause of action for
4-8 all reasonable expenses incurred in plugging or replugging the well
4-9 and not recovered under Section 89.085 of this code or through
4-10 reimbursement to the commission <according to the rules of the
4-11 commission in effect at the time the well is plugged or replugged>.
4-12 (g) <(b)> The cause of action is:
4-13 (1) first, against the operator, to be secured by a
4-14 first lien, superior to all preexisting and subsequent liens and
4-15 security interests, on the operator's <his> interest in the oil and
4-16 gas in the land and the <his> fixtures, machinery, and equipment
4-17 found or used on the land where the well is located; and
4-18 (2) second, against a <the> nonoperator at the time
4-19 the well should have been plugged, to be secured by a lien on the
4-20 nonoperator's <his> interest in the oil and gas in the land. A
4-21 nonoperator may be made a party defendant in the suit against the
4-22 operator.
4-23 (h) <(c)> The commission shall seek reimbursement for all
4-24 reasonable expenses incurred in plugging any well through an action
4-25 instituted by the attorney general.
4-26 (i) <(d)> Money collected in a suit under this section shall
4-27 be deposited in the state oil-field cleanup fund.
5-1 (j) <(e)> A civil action for reimbursement under this
5-2 section may be brought in Travis County, the county in which the
5-3 plugged well is located, or the county in which any defendant
5-4 resides.
5-5 SECTION 4. Section 89.085, Natural Resources Code, is
5-6 amended to read as follows:
5-7 Sec. 89.085. POSSESSION AND SALE OF EQUIPMENT TO COVER
5-8 PLUGGING COSTS<; CRIMINAL PENALTY>. (a) When the commission
5-9 enters into a contract to plug a delinquent inactive well,
5-10 well-site equipment and any amount of hydrocarbons from the well
5-11 that is stored on the lease are presumed to have been abandoned and
5-12 may be disposed of by the commission in a commercially reasonable
5-13 manner by either or both of the following methods:
5-14 (1) a plugging contract may provide that the person
5-15 plugging or cleaning up pollution, or both, will take title to
5-16 well-site equipment, hydrocarbons from the well that are stored on
5-17 the lease, or hydrocarbons recovered during the plugging operation
5-18 in exchange for a sum of money deducted as a credit from the
5-19 contract price; or
5-20 (2) the well-site equipment, hydrocarbons from the
5-21 well that are stored on the lease, or hydrocarbons recovered during
5-22 the plugging operation may be sold at a public auction or a public
5-23 or private sale.
5-24 (b) The commission shall assign separate costs to:
5-25 (1) removing well-site equipment;
5-26 (2) plugging the well; and
5-27 (3) transporting, storing, and disposing of the
6-1 well-site equipment.
6-2 (c) The commission shall dispose of well-site equipment or
6-3 hydrocarbons under this section at a price or value that reflects
6-4 the generally recognized market value of the equipment or
6-5 hydrocarbons, with allowances for physical condition.
6-6 (d) The commission shall deposit money received from the
6-7 sale of well-site equipment or hydrocarbons under this section to
6-8 the credit of the oil-field cleanup fund. The commission shall
6-9 separately account for money and credit received for each well.
6-10 (e) A person who acquires well-site equipment or
6-11 hydrocarbons under this section by sale or contract receives a
6-12 clear title, free of all prior legal or equitable claims of
6-13 whatever nature, whether perfected or inchoate.
6-14 (f) Not later than the 30th day after the date well-site
6-15 equipment or hydrocarbons are disposed of under this section, the
6-16 commission shall mail a notice by first class mail to the operator
6-17 of the well at the address last reported to the commission as
6-18 required by Section 91.142 of this code and commission rules and,
6-19 on request, to any lienholder.
6-20 (g) The notice required by Subsection (f) of this section
6-21 shall state:
6-22 (1) the lease name;
6-23 (2) the well number;
6-24 (3) the county in which the well is located;
6-25 (4) the commission lease or gas well identification
6-26 number or drilling permit number;
6-27 (5) a list of the property disposed of under this
7-1 section; and
7-2 (6) a statement that any person who has a legal or
7-3 equitable ownership or security interest in the equipment or
7-4 hydrocarbons that was in existence on the date the commission
7-5 entered into a contract to plug or clean up the well may file a
7-6 claim with the commission.
7-7 (h) Not later than the 180th day after the date the
7-8 well-site equipment or hydrocarbons are disposed of under this
7-9 section, the commission shall publish a notice that states:
7-10 (1) the lease name;
7-11 (2) the well number;
7-12 (3) the county in which the well is located;
7-13 (4) the commission lease or gas well identification
7-14 number or drilling permit number; and
7-15 (5) that equipment or hydrocarbons if applicable from
7-16 the well and lease were disposed of under this section and that any
7-17 person who has a legal or equitable ownership or security interest
7-18 in the equipment or hydrocarbons that was in existence on the date
7-19 the commission entered into a contract to plug or clean up the well
7-20 may file a claim with the commission.
7-21 (i) The commission shall publish the notice required under
7-22 Subsection (h) of this section in a newspaper of general
7-23 circulation in the county in which the lease is located. A single
7-24 notice may contain the information required for more than one well
7-25 and lease. A notice given under this section following the
7-26 plugging of a well may be combined with a notice given under
7-27 Section 91.114 of this code following the cleanup of a site or
8-1 facility. <Well-site equipment is presumed abandoned if, for
8-2 longer than one year, the well has shown no activity in terms of
8-3 production, injection, disposal, testing, allowables, and has not
8-4 otherwise been maintained in compliance with plugging rules and
8-5 regulations.>
8-6 <(b) Before state funds are expended to plug or replug a
8-7 well that is not actively polluting but that is likely to pollute
8-8 fresh water above or below the ground, the attorney general shall
8-9 bring a suit within 30 days of the request of the commission
8-10 seeking a declaratory judgment that well-site equipment is
8-11 abandoned and that the commission has the right to possession of
8-12 the equipment and the authority to sell it or otherwise dispose of
8-13 it for the purpose of wholly or partially compensating the person
8-14 acting as agent for the commission for plugging or replugging the
8-15 well if the commission has determined that the equipment has a
8-16 salvageable value greater than the cost of suit.>
8-17 <(c) After state funds have been expended to plug or replug
8-18 a polluting well, the attorney general shall bring a suit within 30
8-19 days of the request of the commission seeking a declaratory
8-20 judgment that well-site equipment is abandoned and that the
8-21 commission has the right to possession of the equipment and the
8-22 authority to sell it or otherwise dispose of it for the purpose of
8-23 wholly or partially reimbursing the commission for plugging or
8-24 replugging the well if the commission has determined that the
8-25 equipment has a salvageable value greater than the cost of suit.>
8-26 <(d) Before a suit is filed as provided for in Subsections
8-27 (b) and (c) of this section, the commission shall give notice as
9-1 provided by the rules of civil procedure to the operator, lessor,
9-2 landowner, lienholders who have recorded a security interest in the
9-3 county in which the property is situated, or any other known
9-4 interested party that the commission intends to seek a court order
9-5 authorizing the reduction to possession and sale or disposal of the
9-6 well-site equipment. The notice shall provide a description of the
9-7 equipment and a statement that any claim thereto shall be made in
9-8 writing to the commission within 30 days after the date that notice
9-9 is given. Failure of the operator, lessor, landowner, lienholders,
9-10 or other known interested party to make such claim to the equipment
9-11 within the time provided shall be presumed a waiver of all right,
9-12 title, and interest in the well-site equipment and their consent to
9-13 entry of a judgment for possession and sale or disposal of the
9-14 equipment.>
9-15 <(e) If the court enters the declaratory judgment, the
9-16 commission may authorize its agent to take possession of the
9-17 equipment recovered following completion of plugging operations as
9-18 whole or partial compensation.>
9-19 <(f) Hydrocarbons contained in storage facilities located at
9-20 the abandoned well site or recovered during plugging operations are
9-21 presumed abandoned, and the commission's right to possession and
9-22 authority to sell the hydrocarbons shall be included in the suit
9-23 for declaratory judgment provided for in Subsections (b) and (c) of
9-24 this section.>
9-25 <(g) A suit for declaratory judgment under this section
9-26 shall be brought in Travis County, Texas. Upon request of the
9-27 attorney general, the court may appoint an attorney ad litem to
10-1 represent any interests not otherwise represented before the court.>
10-2 <(h) A suit under this section has priority on the court
10-3 calendar as provided by Section 23.101(a), Government Code.>
10-4 <(i) A person not authorized by the commission or its
10-5 authorized agent who knowingly removes well-site equipment after a
10-6 declaratory judgment has been obtained granting the commission
10-7 possession of the equipment commits a felony of the third degree.>
10-8 SECTION 5. Subchapter D, Chapter 89, Natural Resources Code,
10-9 is amended by adding Sections 89.086 and 89.087 to read as follows:
10-10 Sec. 89.086. CLAIMS AGAINST THE OIL-FIELD CLEANUP FUND. (a)
10-11 A person with a legal or equitable ownership or security interest
10-12 in well-site equipment or hydrocarbons disposed of under Section
10-13 89.085 of this code may make a claim against the oil-field cleanup
10-14 fund unless an element of the transaction giving rise to the
10-15 interest occurs after the commission enters into a plugging
10-16 contract.
10-17 (b) The commission shall adopt a form on which a person may
10-18 file a sworn claim with the commission.
10-19 (c) A claimant must identify the well-site equipment or
10-20 hydrocarbons in which the claimant has an interest and state the
10-21 amount of the property interest as of the date the commission
10-22 entered into the plugging contract.
10-23 (d) The commission may require a person to include with a
10-24 claim documentation that substantiates the claim or to disclose
10-25 whether the claimant was an operator or nonoperator of the well.
10-26 (e) The commission shall set a hearing to receive evidence
10-27 on a claim filed under this section. The commission shall notify
11-1 the claimant of the date, time, and place of the hearing.
11-2 (f) After the claimant has an opportunity for hearing, the
11-3 commission shall issue:
11-4 (1) a decision on the claim;
11-5 (2) a statement of findings of fact that includes the
11-6 substance of the evidence heard; and
11-7 (3) the conclusions of law that support the decision.
11-8 (g) The commission shall consider the validity of claims in
11-9 the order in which the claims are filed.
11-10 (h) The commission shall suspend an amount of money in the
11-11 oil-field cleanup fund equal to the amount of the claim until the
11-12 claim is finally resolved. If the provisions of Subsection (k) of
11-13 this section prevent suspension of the full amount of the claim,
11-14 the commission shall treat the claim as two consecutively filed
11-15 claims, one in the amount of funds available for suspension and the
11-16 other in the remaining amount of the claim.
11-17 (i) A claim made by or on behalf of the operator or a
11-18 nonoperator of a well or a successor to the rights of the operator
11-19 or nonoperator is subject to a ratable deduction from the proceeds
11-20 or credit received for the well-site equipment to cover the costs
11-21 incurred by the commission in removing the equipment or
11-22 hydrocarbons from the well or in transporting, storing, or
11-23 disposing of the equipment or hydrocarbons. A claim made by a
11-24 person who is not an operator or nonoperator is subject to a
11-25 ratable deduction for the costs incurred by the commission in
11-26 removing the equipment from the well. If a claimant is a person
11-27 who is responsible under law or commission rules for plugging the
12-1 well or cleaning up pollution originating on the lease or if the
12-2 claimant owes a penalty assessed by the commission or a court for a
12-3 violation of a commission rule or order, the commission may recoup
12-4 from or offset against a valid claim an expense incurred by the
12-5 oil-field cleanup fund that is not otherwise reimbursed or any
12-6 penalties owed. An amount recouped from, deducted from, or offset
12-7 against a claim under this subsection shall be treated as an
12-8 invalid portion of the claim and shall remain suspended in the
12-9 oil-field cleanup fund in the manner provided by Subsection (j) of
12-10 this section.
12-11 (j) If the commission finds that a claim is valid in whole
12-12 or in part, the commission shall pay the valid portion of the claim
12-13 from the suspended amount in the oil-field cleanup fund not later
12-14 than the 30th day after the date of the commission's decision. If
12-15 the commission finds that a claim is invalid in whole or in part,
12-16 the commission shall continue to suspend in the oil-field cleanup
12-17 fund an amount equal to the invalid portion of the claim until the
12-18 period during which the commission's decision may be appealed has
12-19 expired or, if appealed, during the period the case is under
12-20 judicial review. If on appeal the district court finds the claim
12-21 valid in whole or in part, the commission shall pay the valid
12-22 portion of the claim from the suspended amount in the oil-field
12-23 cleanup fund not later than 30 days after the date the court's
12-24 judgment becomes unappealable. On the date the commission's
12-25 decision is not subject to judicial review, the commission shall
12-26 release from the suspended amount in the oil-field cleanup fund the
12-27 amount of the claim held to be invalid.
13-1 (k) If the aggregate of claims paid and money suspended that
13-2 relates to well-site equipment or hydrocarbons from a particular
13-3 well equals the total of the actual proceeds and credit realized
13-4 from the disposition of that equipment or those hydrocarbons, the
13-5 oil-field cleanup fund is not liable for any subsequently filed
13-6 claims that relate to the same equipment or hydrocarbons unless and
13-7 until the commission releases from the suspended amount money
13-8 derived from the disposition of that equipment or those
13-9 hydrocarbons. If the commission releases money, then the
13-10 commission shall suspend money in the amount of subsequently filed
13-11 claims in the order of filing.
13-12 (l) A person who informs a potential claimant that the
13-13 potential claimant may be entitled to file a claim under this
13-14 section or who files a claim on behalf of a claimant may not
13-15 contract for or receive from the claimant for services an amount
13-16 greater than 10 percent of the paid claim.
13-17 Sec. 89.087. JUDICIAL REVIEW OF COMMISSION DECISIONS;
13-18 IMMUNITY FROM SUIT AND LIABILITY. (a) A claimant aggrieved by the
13-19 commission's decision on a claim may appeal the decision in a
13-20 district court of Travis County on or before the 60th day after the
13-21 date the decision was issued. If the commission does not decide a
13-22 claim by the 90th day after the date it was filed, the claimant may
13-23 appeal within the 60-day period beginning on the 91st day after the
13-24 date of filing.
13-25 (b) Judicial review under this section is by trial de novo.
13-26 (c) No interest accrues on a claim before an appeal is filed
13-27 under this section.
14-1 (d) Except to the extent permitted by this chapter, and
14-2 notwithstanding any other provision of law, the commission, its
14-3 employees or agents, and the State of Texas are immune from suit
14-4 and from liability based on the distribution of well-site equipment
14-5 or hydrocarbons in accordance with this chapter.
14-6 SECTION 6. Section 91.111(c), Natural Resources Code, is
14-7 amended to read as follows:
14-8 (c) The fund consists of:
14-9 (1) penalties imposed under Section 85.381 of this
14-10 code for violation of a law, order, or rule relating to well
14-11 plugging requirements;
14-12 (2) proceeds from bonds and other financial assurances
14-13 required by this chapter, subject to the refund provisions of
14-14 Section 91.1091 of this code;
14-15 (3) private contributions, including contributions
14-16 made under Section 89.084 of this code;
14-17 (4) expenses collected under Section 89.083 of this
14-18 code;
14-19 (5) drilling permit fees imposed under Subsections (a)
14-20 and (c) of Section 85.2021 of this code;
14-21 (6) civil penalties collected for violations of
14-22 Chapter 89 of this code or of rules or orders relating to plugging
14-23 that are adopted under this code;
14-24 (7) proceeds collected under Sections <Section> 89.085
14-25 and 91.114 of this code;
14-26 (8) interest earned on the funds deposited in the
14-27 fund;
15-1 (9) fees collected under Section 91.104 of this code;
15-2 (10) civil penalties or costs recovered under Section
15-3 91.457 or Section 91.459 of this code;
15-4 (11) oil and gas waste hauler permit application fees
15-5 collected under Section 29.015, Water Code;
15-6 (12) costs recovered under Subsection (f) of Section
15-7 91.113 of this code;
15-8 (13) hazardous oil and gas waste generation fees
15-9 collected under Section 91.605 of this code;
15-10 (14) oil-field cleanup regulatory fees on oil
15-11 collected under Section 81.116 of this code;
15-12 (15) oil-field cleanup regulatory fees on gas
15-13 collected under Section 81.117 of this code;
15-14 (16) fees for a reissued certificate collected under
15-15 Section 85.167 of this code;
15-16 (17) fees collected under Subsection (b) of Section
15-17 91.1013 of this code; and
15-18 (18) legislative appropriations.
15-19 SECTION 7. Subchapter D, Chapter 91, Natural Resources Code,
15-20 is amended by adding Section 91.114 to read as follows:
15-21 Sec. 91.114. FIRST LIEN ON EQUIPMENT. (a) If a responsible
15-22 person fails to clean up a site or facility that has ceased oil and
15-23 gas operations under the commission's jurisdiction on or before the
15-24 date the site or facility is required to be cleaned up by law or by
15-25 a rule adopted or order issued by the commission, the state has a
15-26 first lien, superior to all preexisting and subsequent liens and
15-27 security interests, on the responsible person's interest in
16-1 equipment that is:
16-2 (1) located at the site or facility; and
16-3 (2) used by the responsible person in connection with
16-4 the activity that generated the pollution.
16-5 (b) The lien is in the amount of the total costs of cleaning
16-6 up the oil and gas wastes or other substances from the site or
16-7 facility and arises on the date the site or facility is required by
16-8 law or by a rule or order of the commission to be cleaned up.
16-9 (c) The commission may foreclose on the lien by entering
16-10 into a contract to clean up the site or facility. The commission
16-11 is not required to give notice or an opportunity for a hearing to
16-12 subordinate lienholders before entering into a contract to clean up
16-13 the site or facility.
16-14 (d) The lien is extinguished if the site or facility is
16-15 cleaned up in accordance with commission rules by any person before
16-16 the commission enters into a contract to clean up the site or
16-17 facility.
16-18 (e) The lien is extinguished as to any item of equipment
16-19 that is lawfully removed by any person other than the operator or a
16-20 nonoperator according to a lien, lease, judgment, or security
16-21 agreement before the commission enters into a cleanup contract. An
16-22 item of equipment may not be removed from an abandoned site or
16-23 facility if the removal will cause the release of a substance that
16-24 may cause pollution unless the substance is lawfully disposed of.
16-25 (f) Equipment subject to a lien under this section is
16-26 presumed to have been abandoned on the date the commission enters
16-27 into a contract to clean up the site or facility on which the
17-1 equipment is located. The commission may dispose of the equipment
17-2 in accordance with the provisions of Sections 89.085, 89.086, and
17-3 89.087 of this code for the disposition of well-site equipment.
17-4 (g) In this section "responsible person" has the meaning
17-5 assigned by Section 91.113 of this code.
17-6 SECTION 8. (a) This Act does not apply to a suit filed or
17-7 an administrative proceeding begun before the effective date of
17-8 this Act. A suit filed or an administrative proceeding begun
17-9 before the effective date of this Act is governed by the law in
17-10 effect at the time the suit was filed or the administrative
17-11 proceeding was begun, and the former law is continued in effect for
17-12 that purpose.
17-13 (b) The lien provided by Section 89.083, Natural Resources
17-14 Code, as amended by this Act, arises on the later of the effective
17-15 date of this Act or the date by which the well is required to be
17-16 plugged under the rules of the Railroad Commission of Texas.
17-17 (c) The lien provided by Section 91.114, Natural Resources
17-18 Code, as added by this Act, arises on the later of the effective
17-19 date of this Act or the date the site or facility is required by
17-20 law or by a rule or order of the commission to be cleaned up after
17-21 oil and gas operations under the jurisdiction of the commission
17-22 have ceased.
17-23 SECTION 9. This Act takes effect January 1, 1994.
17-24 SECTION 10. The importance of this legislation and the
17-25 crowded condition of the calendars in both houses create an
17-26 emergency and an imperative public necessity that the
17-27 constitutional rule requiring bills to be read on three several
18-1 days in each house be suspended, and this rule is hereby suspended.