1-1 By: Farabee, Clark (Senate Sponsor - Haywood) H.B. No. 1317
1-2 (In the Senate - Received from the House May 9, 2001;
1-3 May 10, 2001, read first time and referred to Committee on Natural
1-4 Resources; May 11, 2001, reported favorably by the following vote:
1-5 Yeas 5, Nays 0; May 11, 2001, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to financial security requirements for certain oil well
1-9 operators.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 91.104, Natural Resources Code, is
1-12 amended to read as follows:
1-13 Sec. 91.104. FINANCIAL SECURITY REQUIRED FOR INACTIVE
1-14 OPERATORS AND CERTAIN ACTIVE OPERATORS. (a) A person required to
1-15 file a bond or alternate form of financial security under Section
1-16 91.103 who is an inactive operator or who operates one or more land
1-17 wells and is not involved in any other activities that require the
1-18 filing of a bond or alternate form of financial security must file
1-19 a bond, a letter of credit, or a cash deposit at the time of filing
1-20 or renewing an organization report required by Section 91.142 in an
1-21 amount equal to:
1-22 (1) $25,000, if the person operates not more than 10
1-23 wells;
1-24 (2) $50,000, if the person operates at least 11 but
1-25 not more than 100 wells; or
1-26 (3) $250,000, if the person operates more than 100
1-27 wells.
1-28 (b) In addition to the financial security requirements of
1-29 Subsection (a), a person required to file a bond or alternate form
1-30 of financial security under Section 91.103 who operates one or more
1-31 bay or offshore wells must file the bond, letter of credit, or cash
1-32 deposit at the time of filing or renewing an organization report
1-33 required by Section 91.142 in a reasonable amount established by
1-34 commission rule that exceeds the amount provided by Subsection
1-35 (a)(1), (2), or (3), as applicable.
1-36 (c) An operator seeking to assume operatorship of an active
1-37 or inactive well must file a bond, letter of credit, or cash
1-38 deposit in the appropriate amount under this section before the
1-39 commission may approve the transfer of operatorship. A transfer of
1-40 a well from one entity to another entity under common operatorship
1-41 is a transfer for purposes of this subsection.
1-42 (d) The bond, letter of credit, or cash deposit amounts
1-43 prescribed by this section may be used only for actual well
1-44 plugging and surface remediation. [BONDS AND ALTERNATE FORMS OF
1-45 FINANCIAL SECURITY. (a) The commission shall require a bond or an
1-46 alternate form of financial security to be filed with the
1-47 commission as provided by Subsection (b) of this section.]
1-48 [(b) A person required to file a bond under Section 91.103
1-49 may choose to file:]
1-50 [(1) an individual bond as provided under Section
1-51 91.1041;]
1-52 [(2) a blanket bond as provided under Section 91.1042;]
1-53 [(3) a nonrefundable annual fee of $100, if the person
1-54 can demonstrate to the commission an acceptable record of
1-55 compliance with all commission rules, orders, licenses, permits, or
1-56 certificates that relate to safety or the prevention or control of
1-57 pollution for the previous 48 months and the person and, if a firm,
1-58 partnership, joint stock association, corporation, or other
1-59 organization, its officers, directors, general partners, or owners
1-60 of more than 25 percent ownership interest or any trustee:]
1-61 [(A) has no outstanding violations of such
1-62 commission rules, orders, licenses, permits, or certificates;]
1-63 [(B) has paid all administrative, civil, and
1-64 criminal penalties, if any, relating to any violation of such
2-1 commission rules, orders, licenses, permits, or certificates; and]
2-2 [(C) has paid all reimbursements of any costs
2-3 and expenses incurred by the commission in relation to any
2-4 violation of such commission rules, orders, licenses, permits, or
2-5 certificates;]
2-6 [(4) a nonrefundable annual fee equal to three percent
2-7 of the bond that otherwise would be required; or]
2-8 [(5) to give a first lien on tangible personal
2-9 property associated with oil and gas production whose salvage value
2-10 equals the value of an individual bond under Section 91.1041 or the
2-11 value of a blanket bond under Section 91.1042 that otherwise would
2-12 be required.]
2-13 [(c) A person who chooses to file a form of financial
2-14 security other than a bond shall also submit a fee of $100 for each
2-15 application to extend the time to plug a well in accordance with
2-16 Section 85.2021 of this code.]
2-17 SECTION 2. Section 91.109, Natural Resources Code, is
2-18 amended to read as follows:
2-19 Sec. 91.109. FINANCIAL SECURITY FOR PERSONS INVOLVED IN
2-20 ACTIVITIES OTHER THAN OPERATION OF WELLS [DISPOSAL SITE BOND]. (a)
2-21 A person applying for or acting under a commission permit to store,
2-22 handle, treat, reclaim, or dispose of oil and gas waste may be
2-23 required by the commission to maintain a performance bond or other
2-24 form of financial security conditioned that the permittee will
2-25 operate and close the storage, handling, treatment, reclamation, or
2-26 disposal site in accordance with state law, commission rules, and
2-27 the permit to operate the site. However, this section does not
2-28 authorize the commission to require a bond or other form of
2-29 financial security for saltwater disposal pits, emergency saltwater
2-30 storage pits (including blow-down pits), collecting pits, or
2-31 skimming pits provided that such pits are used in conjunction with
2-32 the operation of an individual oil or gas lease. Subject to the
2-33 refund provisions of Section 91.1091 of this code, proceeds from
2-34 any bond or other form of financial security required by this
2-35 section shall be placed in the oil-field cleanup fund. Each bond
2-36 or other form of financial security shall be renewed and continued
2-37 in effect until the conditions have been met or release is
2-38 authorized by the commission.
2-39 (b) In addition to the financial security requirements of
2-40 Subsection (a) and Section 91.104(b), a person required to file a
2-41 bond or alternate form of financial security under Section 91.103
2-42 who is involved in activities other than the operation of wells
2-43 must file the bond, letter of credit, or cash deposit at the time
2-44 of filing or renewing an organization report required by Section
2-45 91.142 in an amount equal to:
2-46 (1) $250,000; or
2-47 (2) a lesser amount determined by the commission if
2-48 the person is able to demonstrate that the risk associated with an
2-49 operation or group of operations warrants a lesser amount.
2-50 SECTION 3. (a) This Act takes effect immediately if it
2-51 receives a vote of two-thirds of all the members elected to each
2-52 house, as provided by Section 39, Article III, Texas Constitution.
2-53 If this Act does not receive the vote necessary for immediate
2-54 effect, this Act takes effect September 1, 2001.
2-55 (b) The changes in law made by Sections 91.104(a) and (b)
2-56 and 91.109, Natural Resources Code, as amended by this Act, apply
2-57 only to a person required on or after September 1, 2004, to file a
2-58 bond or alternate financial security under Section 91.103, Natural
2-59 Resources Code. The changes made by Section 91.104(c), Natural
2-60 Resources Code, as added by this Act, apply on or after the
2-61 effective date of this Act to a person required by that section to
2-62 file a bond, letter of credit, or cash deposit.
2-63 * * * * *