By: Sims S.B. No. 1205
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the salvage and disposition of oil and gas well-site or
1-2 other facility equipment upon state fund plugging or cleanup.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 89.002, Natural Resources Code, is
1-5 amended to read as follows:
1-6 (a) In this chapter:
1-7 (1) "Well" means a hole drilled for the purpose of:
1-8 (A) producing oil or gas;
1-9 (B) injecting fluid or gas in the ground in
1-10 connection with the exploration or production of oil or gas; or
1-11 (C) obtaining geological information by taking
1-12 cores or through seismic operations.
1-13 (2) "Operator" means a person who is responsible for
1-14 the physical operation and control of a well at the time the well
1-15 is about to be abandoned or ceases operation.
1-16 (3) "Nonoperator" means a person who owns a working
1-17 interest in a well at the time the well is about to be abandoned or
1-18 ceases operation and is not an operator as defined in Subdivision
1-19 (2) of this subsection.
1-20 (4) "Commission" means the Railroad Commission of
1-21 Texas.
1-22 (5) "Well-site equipment" means any production-related
1-23 equipment or materials specific to the well being plugged,
2-1 including but not limited to motors, pumps, pump jacks, tanks and
2-2 tank batteries, separators, compressors, casing, tubing, and rods,
2-3 as well as any hydrocarbons stored on the lease which were produced
2-4 from the well being plugged or recovered during plugging;
2-5 (6) "plugging contract" or "contract to plug" means an
2-6 agreement between the commission and a person who plugs a well, or
2-7 who plugs a well and cleans up any associated pollution originating
2-8 on the lease, in exchange for payment from the oilfield cleanup
2-9 fund or for well-site equipment, or both;
2-10 (7) "lease" means the lease on which a well made the
2-11 subject of a plugging contract is located;
2-12 (8) "delinquent inactive well" means any unplugged
2-13 well which has had no reported production, disposal, injection, or
2-14 other permitted activity for a period of greater than twelve months
2-15 and for which, after notice and opportunity for a hearing, no
2-16 extension of the plugging deadline has been obtained under
2-17 commission rules.
2-18 (b) In this chapter "plugging" includes replugging.
2-19 SECTION 2. Section 89.043, Natural Resources Code is amended
2-20 to read as follows:
2-21 Sec. 89.043. Plugging by Commission. (a) If the commission
2-22 determines at a hearing under Section 89.041 of this code that a
2-23 well has not been properly plugged or needs replugging, the
2-24 commission, through its employees or through a person acting as
2-25 agent for the commission, may plug or replug the well if:
3-1 (1) the well was properly plugged according to rules
3-2 in effect at the time the well was abandoned or ceased to be
3-3 operated; or
3-4 (2) neither the operator nor nonoperator properly
3-5 plugged the well, and
3-6 (A) neither the operator nor nonoperator can be
3-7 found; or
3-8 (B) neither the operator nor nonoperator has
3-9 assets with which to properly plug the well.
3-10 (b) If a well is leaking salt water, oil, or gas or is
3-11 likely to leak salt water, oil, or gas, and the leakage will cause
3-12 or is likely to cause a serious threat of pollution or injury to
3-13 the public health, the commission, through its employees or agents,
3-14 may direct the operator to take remedial action or to plug the well
3-15 or may plug or replug the well without holding a hearing under
3-16 Section 89.041 of this code.
3-17 (c) At least 30 days before entering into a contract to plug
3-18 an inactive well, the commission shall send a notice via certified
3-19 mail to the operator of the well at the address last reported to
3-20 the commission as required by Section 91.142 of this code and
3-21 commission rules. A copy of the notice shall be filed in the
3-22 office of the county clerk of the county in which the well is
3-23 located in the manner provided in Section 51.002 of the Property
3-24 Code. A copy shall also be sent to any lienholder upon request.
3-25 (d) The notice required by Subsection (d) of this section
4-1 shall direct the operator to plug the well and shall state:
4-2 (1) that unless the operator requests a hearing within
4-3 10 days of receipt of the letter, the well may be plugged by the
4-4 commission;
4-5 (2) that if the plugging is performed by the
4-6 commission, all well-site equipment will be presumed abandoned and
4-7 may be disposed of as provided by Section 89.085 of this code; and
4-8 (3) that the Attorney General of Texas is authorized
4-9 to file suit against the operator for recovery of plugging costs in
4-10 the event the commission plugs the well and reimbursement for all
4-11 costs is not made to the commission.
4-12 (f) Operators of wells made the subject of a commission
4-13 final order directing that the wells be plugged are not entitled to
4-14 another hearing under this section.
4-15 SECTION 3. Section 89.083, Natural Resources Code, is
4-16 amended to read as follows:
4-17 Sec. 89.083. First Lien and Cause of Action if Commission
4-18 Plugs. (a) If a well has not been plugged by the deadline for
4-19 plugging established by commission rules, the state has a first
4-20 lien, superior to all other preexisting and subsequent liens and
4-21 security interests, on the operator's and the nonoperators'
4-22 interests in well-site equipment, in the amount of the total costs
4-23 of removing well-site equipment from the well, plugging the well,
4-24 and transportation, storage, and disposition of the well-site
4-25 equipment. The lien arises on the later of the effective date of
5-1 this statute or the date by which the well is required to be
5-2 plugged under commission rules. The commission may foreclose on
5-3 the lien without notice to subordinate lienholders or opportunity
5-4 for a hearing by entering into a plugging contract. If the well is
5-5 plugged in accordance with commission rules by any person
5-6 authorized to do so before the commission enters into a contract to
5-7 plug the well, the lien given under this section is extinguished.
5-8 The lien is also extinguished as to any item of well-site equipment
5-9 that is lawfully removed by any person other than the operator or
5-10 nonoperator pursuant to a lien, lease, judgment, or security
5-11 agreement, before the commission enters into a plugging contract.
5-12 No equipment necessary to prevent the well from serving as a
5-13 conduit for the passage of oil, gas, saltwater, oil and gas wastes,
5-14 or freshwater from one stratum or formation to another or to the
5-15 surface or from the surface downward may be removed from any
5-16 inactive well-site except during the course of plugging in
5-17 accordance with commission rules. <If the commission plugs a well
5-18 under Sections 89.043 through 89.044 of this code, the state has a
5-19 cause of action for all reasonable expenses incurred in plugging or
5-20 replugging the well according to the rules of the commission in
5-21 effect at the time the well is plugged or replugged.>
5-22 (b) The state also has a cause of action <is:> for all
5-23 reasonable expenses incurred by the commission in plugging or
5-24 replugging a well and not recovered under Section 89.085 of this
5-25 chapter or through reimbursement to the commission. The cause of
6-1 action is:
6-2 (1) first, against the operator, to be secured by a
6-3 first lien, superior to all preexisting and subsequent liens and
6-4 security interests, on the operator's interest in the oil and gas
6-5 in the land and in the fixtures, machinery, and equipment found or
6-6 used on the land where the well is located; and
6-7 (2) second, against the nonoperators at the time the
6-8 well should have been plugged, to be secured by a lien on their
6-9 interest in the oil and gas in the land. Nonoperators may be made
6-10 parties defendant along with the operator in the same suit.
6-11 <(1) first, against the operator, to be secured by a
6-12 lien on his interest in the oil and gas in the land and his
6-13 fixtures, machinery, and equipment found or used on the land where
6-14 the well is located; and>
6-15 <(2) second, against the nonoperator at the time the
6-16 well should have been plugged, to be secured by a lien on his
6-17 interest in the oil and gas in the land.>
6-18 (c) The commission shall seek reimbursement for all
6-19 reasonable expenses incurred in plugging any well through an action
6-20 instituted by the attorney general.
6-21 (d) Money collected in a suit under this section shall be
6-22 deposited in the state oil-field cleanup fund.
6-23 (e) A civil action for reimbursement under this section may
6-24 be brought in Travis County, the county in which the plugged well
6-25 is located, or the county in which any defendant resides.
7-1 SECTION 4. Section 89.085, Natural Resources Code, is
7-2 amended to read as follows:
7-3 Sec. 89.085. Possession and Sale of Equipment to Cover
7-4 Plugging Costs<; Criminal Penalty>
7-5 (a) When the commission enters into a contract to plug an
7-6 delinquent inactive well, well-site equipment is presumed abandoned
7-7 and may be disposed of by the commission in a commercially
7-8 reasonable manner by either or both of the following methods:
7-9 (1) a plugging contract may provide that the person
7-10 plugging or cleaning up pollution, or both will take title to
7-11 well-site equipment in exchange for a sum of money deducted as a
7-12 credit from the contract price; or
7-13 (2) the well-site equipment may be sold at a public
7-14 auction or at a public or private sale.
7-15 (b) A plugging contract will assign separate costs to
7-16 removal of well-site equipment, plugging the well, and
7-17 transportation and storage of well-site equipment. Disposition of
7-18 well-site equipment under this section will be at a price or range
7-19 of prices reflecting the generally recognized market value of the
7-20 different items of equipment in place and with allowances for
7-21 physical condition.
7-22 (c) Cash proceeds realized from the disposition of well-site
7-23 equipment will be deposited into the oil-field cleanup fund. Cash
7-24 proceeds and credit received for each well will be separately
7-25 accounted for by the commission.
8-1 (d) A person who acquires well-site equipment under this
8-2 section receives a clear title, free of all prior legal or
8-3 equitable claims of whatever nature, whether perfected or inchoate.
8-4 (e) Within 30 days after well-site equipment is disposed of
8-5 under this section, the commission shall send a letter by first
8-6 class mail to the operator of the well at the address last reported
8-7 to commission as required by Section 91.142 of this code and
8-8 commission rules, and, upon request, to any lienholder.
8-9 (f) The letter required by Subsection (e) shall contain the
8-10 following information:
8-11 (1) the lease name, well number, county, and
8-12 commission lease or gas well identification number or drilling
8-13 permit number;
8-14 (2) a list of the equipment disposed of under this
8-15 section; and
8-16 (3) a statement that any person with a legal or
8-17 equitable ownership interest or security interest in the equipment
8-18 in existence on the date the commission entered into a contract to
8-19 plug or clean up, or both, may file a claim with the commission.
8-20 (g) Within 180 days after well-site equipment is disposed of
8-21 under this section, the commission shall publish a notice
8-22 containing;
8-23 (1) the lease name, well number, county, and
8-24 commission lease or gas well identification number or drilling
8-25 permit number; and
9-1 (2) a statement that equipment from the well and lease
9-2 was disposed of under this section and that any person with a legal
9-3 or equitable ownership interest or security interest in the
9-4 equipment in existence on the date the commission entered into a
9-5 contract to plug or clean, or both, may file a claim with the
9-6 commission.
9-7 (h) Publication of the notice required under Subsection (g)
9-8 of this section shall be in a paper of general circulation in the
9-9 county in which the lease is located. A single notice may contain
9-10 the information required for more than one well and lease and may
9-11 be combined with a notice published under Section 91.114 of this
9-12 code.
9-13 <(a) Well-site equipment is presumed abandoned if, for
9-14 longer than one year, the well has shown no activity in terms of
9-15 production, injection, disposal, testing, allowables, and has not
9-16 otherwise been maintained in compliance with plugging rules and
9-17 regulations.>
9-18 <(b) Before state funds are expended to plug or replug a
9-19 well that is not actively polluting but that is likely to pollute
9-20 fresh water above or below the ground, the attorney general shall
9-21 bring a suit within 30 days of the request of the commission
9-22 seeking a declaratory judgment that well-site equipment is
9-23 abandoned and that the commission has the right to possession of
9-24 the equipment and the authority to sell it or otherwise dispose of
9-25 it for the purpose of wholly or partially compensating the person
10-1 acting as agent for the commission for plugging or replugging the
10-2 well if the commission has determined that the equipment has a
10-3 salvageable value greater than the cost of suit.>
10-4 <(c) After state funds have been expended to plug or replug
10-5 a polluting well, the attorney general shall bring a suit within 30
10-6 days of the request of the commission seeking a declaratory
10-7 judgment that well-site equipment is abandoned and that the
10-8 commission has the right to possession of the equipment and the
10-9 authority to sell it or otherwise dispose of it for the purpose of
10-10 wholly or partially reimbursing the commission for plugging or
10-11 replugging the well if the commission has determined that the
10-12 equipment has a salvageable value greater than the cost of suit.>
10-13 <(d) Before a suit is filed as provided for in Subsections
10-14 (b) and (c) of this section, the commission shall give notice as
10-15 provided by the rules of civil procedure to the operator, lessor,
10-16 landowner, lienholders who have recorded a security interest in the
10-17 county in which the property is situated, or any other known
10-18 interested party that the commission intends to seek a court order
10-19 authorizing the reduction to possession and sale or disposal of the
10-20 well-site equipment. The notice shall provide a description of the
10-21 equipment and a statement that any claim thereto shall be made in
10-22 writing to the commission within 30 days after the date that notice
10-23 is given. Failure of the operator, lessor, landowner, lienholders,
10-24 or other known interested party to make such claim to the equipment
10-25 within the time provided shall be presumed a waiver of all right,
11-1 title, and interest in the well-site equipment and their consent to
11-2 entry of a judgment for possession and sale or disposal of the
11-3 equipment.>
11-4 <(e) If the court enters the declaratory judgment, the
11-5 commission may authorize its agent to take possession of the
11-6 equipment recovered following completion of plugging operations as
11-7 whole or partial compensation.>
11-8 <(f) Hydrocarbons contained in storage facilities located at
11-9 the abandoned well site or recovered during plugging operations are
11-10 presumed abandoned, and the commission's right to possession and
11-11 authority to sell the hydrocarbons shall be included in the suit
11-12 for declaratory judgment provided for in Subsections (b) and (c) of
11-13 this section.>
11-14 <(g) A suit for declaratory judgment under this section
11-15 shall be brought in Travis County, Texas. Upon request of the
11-16 attorney general, the court may appoint an attorney ad litem to
11-17 represent any interests not otherwise represented before the court.>
11-18 <(h) A suit under this section has priority on the court
11-19 calendar as provided by Section 23.101(a), Government Code.>
11-20 <(i) A person not authorized by the commission or its
11-21 authorized agent who knowingly removes well-site equipment after a
11-22 declaratory judgment has been obtained granting the commission
11-23 possession of the equipment commits a felony of the third degree.>
11-24 SECTION 5. Chapter 89, Natural Resources code, is amended by
11-25 adding Sections 89.086 and 89.087 to read as follows:
12-1 Sec. 89.086. Claims Against the Oil-Field Cleanup Fund.
12-2 (a) Claims based on legal or equitable ownership interests or
12-3 security interests in well-site equipment disposed of under Section
12-4 89.085 of this code may be made against the oil-field cleanup fund.
12-5 No such claim may be made if any element of the transaction giving
12-6 rise to the interest occurs after the commission enters into a
12-7 plugging contract.
12-8 (b) The commission shall prepare a form on which persons may
12-9 file a sworn claim with the commission.
12-10 (c) The commission may require, as a condition of filing,
12-11 documentation substantiating a claim, including the disclosure of
12-12 the claimant's status as operator or nonoperator of the well. A
12-13 claimant must identify the well-site equipment in which the
12-14 claimant has an interest and state the amount of the property
12-15 interest as of the date the commission entered into the plugging
12-16 contract.
12-17 (d) The commission may hold a hearing to receive evidence
12-18 concerning claims filed under this section. If a hearing is held,
12-19 a decision on the claim and a statement of findings, reporting the
12-20 substance of the evidence heard and the reasons for the decision
12-21 shall be issued by the commission.
12-22 (e) The commission shall consider the validity of claims in
12-23 the order filed. When a claim is filed, the full amount of the
12-24 claim shall be placed in suspense in the oil-field cleanup fund,
12-25 pending final resolution of the claim. If the provisions of
13-1 Subsection (g) of this section prevents suspension of the full
13-2 amount of the claim, the claim will be treated as two consecutively
13-3 filed claims, one in the amount of funds available for suspension
13-4 and the other in the remaining amount of the claim.
13-5 (f) Claims made by or on behalf of the operator or
13-6 nonoperator of a well, or any person or entity succeeding to the
13-7 rights of the operator or nonoperator, will be subject to a ratable
13-8 deduction from the proceeds or credit received for the well-site
13-9 equipment. The deduction shall cover the costs of removing the
13-10 equipment from the well and any costs incurred by the commission in
13-11 transporting, storing, and disposing of the equipment. Claims made
13-12 by other persons will be subject to a ratable deduction for the
13-13 costs, if any, of removing the equipment from the well. If a
13-14 claimant is responsible under law or commission rules for plugging
13-15 the well or cleaning up pollution originating on the lease related
13-16 to the claim, or if the claimant has any unpaid penalties assessed
13-17 by the commission or a court for violation of commission rules or
13-18 orders, the commission may recoup from or offset against a valid
13-19 claim, any nonreimbursed expenses incurred by the oil-field cleanup
13-20 fund or any penalties. Any amounts recouped from, deducted from,
13-21 or offset against the claim under this subsection shall be treated
13-22 as invalid portions of the claim and shall remain in suspense in
13-23 the manner provided for by Subsection (g) of this section.
13-24 (g) If the commission finds that a claim is valid in whole
13-25 or in part, it shall remove from suspense and pay the valid portion
14-1 of the claim within 30 days from the date of the commission's
14-2 decision. If a claim is found to be invalid in whole or in part,
14-3 an amount equal to the invalid portion of the claim will remain in
14-4 suspense in the oil-field cleanup fund until the commission's
14-5 decision cannot be appealed or, if appealed, until the final court
14-6 judgment becomes unappealable. If a claim is adjudged valid in
14-7 whole or in part, the valid portion will be paid from funds
14-8 suspended in the oil-field cleanup fund within 30 days from the
14-9 date the final court judgment becomes unappealable. If a claim can
14-10 no longer be appealed to the district court, or if it is adjudged
14-11 invalid in whole or in part and the final judgment becomes
14-12 unappealable, suspended funds equal to the amount of the claim or
14-13 any invalid portion shall be released to the oil-field cleanup
14-14 fund.
14-15 (h) When the aggregate of claims paid and funds suspended
14-16 relating to specific well-site equipment equals the total of the
14-17 actual proceeds and credit realized from the disposition of that
14-18 equipment, the liability of the oil-field cleanup fund under any
14-19 subsequently filed claims relating to the same equipment ceases
14-20 unless and until suspended funds relating to the specific equipment
14-21 are released to the oil-field cleanup fund. In the event funds are
14-22 released, then funds in the amount of such subsequently filed
14-23 claims will be suspended in the order of filing.
14-24 (i) Persons who inform potential claimants that they may be
14-25 entitled to file a claim under this section or who file such a
15-1 claim on behalf of a claimant may not contract for or receive from
15-2 the claimant for services, an amount greater than ten percent of
15-3 the paid claim.
15-4 Sec. 89.087. JUDICIAL APPEAL OF COMMISSION DECISION AND
15-5 STATE LIABILITY. (a) A claimant aggrieved by the commission's
15-6 decision on a claim may appeal the decision in a district court of
15-7 Travis County, on or before the 60th day after the day on which the
15-8 decision was issued. If a claim has not been decided by the
15-9 commission by the 90th day after the day on which it was filed, the
15-10 claimant may appeal within the 60-day period beginning on the 91st
15-11 day after the day of filing.
15-12 (b) The court shall try an action filed under this section
15-13 de novo and shall apply the rules of practice of the court.
15-14 (c) No interest shall accrue on the claim before an appeal
15-15 is filed under this section.
15-16 (e) Except to the extent permitted by this chapter, and
15-17 notwithstanding any other provision of law, the commission, its
15-18 employees or agents, and the State of Texas are immune from suits
15-19 and from liability based on the disposition of well-site equipment
15-20 in accordance with this chapter.
15-21 SECTION 5. Section 91.111(c), Natural Resources Code, is
15-22 amended to read as follows:
15-23 Sec. 91.111. Oil-Field Cleanup Fund.
15-24 (c) The fund consists of:
15-25 (1) penalties imposed under Section 85.381 of this
16-1 code for violation of a law, order, or rule relating to well
16-2 plugging requirements;
16-3 (2) proceeds from bonds and other financial assurances
16-4 required by this chapter, subject to the refund provisions of
16-5 Section 91.1091 of this code;
16-6 (3) private contributions, including contributions
16-7 made under Section 89.084 of this code;
16-8 (4) expenses collected under Section 89.083 of this
16-9 code;
16-10 (5) drilling permit fees imposed under Subsections (a)
16-11 and (c) of Section 85.2021 of this code;
16-12 (6) civil penalties collected for violations of
16-13 Chapter 89 of this code or of rules or orders relating to plugging
16-14 that are adopted under this code;
16-15 (7) proceeds collected under Sections 89.085 and
16-16 91.114 of this code;
16-17 (8) interest earned on the funds deposited in the
16-18 fund;
16-19 (9) fees collected under Section 91.104 of this code;
16-20 (10) civil penalties or costs recovered under Section
16-21 91.457 or Section 91.459 of this code;
16-22 (11) oil and gas waste hauler permit application fees
16-23 collected under Section 29.015, Water Code;
16-24 (12) costs recovered under Subsection (f) of Section
16-25 91.113 of this code;
17-1 (13) hazardous oil and gas waste generation fees
17-2 collected under Section 91.605 of this code;
17-3 (14) oil-field cleanup regulatory fees on oil
17-4 collected under Section 81.116 of this code;
17-5 (15) oil-field cleanup regulatory fees on gas
17-6 collected under Section 81.117 of this code;
17-7 (16) fees for a reissued certificate collected under
17-8 Section 85.167 of this code;
17-9 (17) fees collected under Subsection (b) of Section
17-10 91.1013 of this code; and
17-11 (18) legislative appropriations.
17-12 SECTION 6. Chapter 91, Natural Resources Code, is amended by
17-13 adding Section 91.114 to read as follows:
17-14 Sec. 91.114. FIRST LIEN ON SITE OR FACILITY EQUIPMENT.
17-15 (a) The State has a first lien, superior to all preexisting and
17-16 subsequent liens and security interests, on the interest of a
17-17 responsible person in any equipment located at an abandoned site or
17-18 facility which is cleaned up under Section 91.113 of this code if
17-19 the equipment was used by the responsible person in connection with
17-20 the activity that generated the pollution. The lien is in the
17-21 amount of the total costs of cleanup and arises on the later of the
17-22 effective date of this statute or the date of abandonment. For
17-23 purposes of this section, abandonment occurs on the date the site
17-24 or facility is required under law and commission rules or by an
17-25 order of the commission to be cleaned up after the oil and gas
18-1 operations under the jurisdiction of the commission have ceased.
18-2 The commission may foreclose on the lien without notice to
18-3 subordinate lien holders or opportunity for a hearing by entering
18-4 into a contract to clean up the site or facility. If the site or
18-5 facility is cleaned up in accordance with commission rules by any
18-6 person before the commission enters into a cleanup contract, the
18-7 lien is extinguished. The lien is also extinguished as to any item
18-8 of equipment that is lawfully removed by any person other than the
18-9 operator or nonoperator pursuant to a lien, lease, judgment, or
18-10 security agreement, before the commission enters into a cleanup
18-11 contract. No item of equipment may be removed from an abandoned
18-12 site or facility if the removal will cause the release of polluting
18-13 substances unless the substances are lawfully disposed of.
18-14 (b) Equipment subject to a lien under this section is
18-15 presumed abandoned when the commission enters into a cleanup
18-16 contract and may be disposed of by the commission in accordance
18-17 with the provisions of Sections 89.085, 89.086 and 89.087 of this
18-18 code for the disposition of well-site equipment.
18-19 SECTION 7. APPLICATION OF FORMER LAW. The changes made by
18-20 this Act do not affect suits filed or administrative hearings begun
18-21 before the effective date of this Act, and the former law is
18-22 continued in effect for that purpose.
18-23 SECTION 8. EFFECTIVE DATE. This Act takes effect on
18-24 January 1, 1994.
18-25 SECTION 9. The importance of this legislation and the
19-1 crowded condition of the calendars in both houses create an
19-2 emergency and an imperative public necessity that the
19-3 constitutional rule requiring bills to be read on three several
19-4 days in each house be suspended, and this rule is hereby suspended.