By Farabee H.R. No. 1399
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
R E S O L U T I O N
1-1 BE IT RESOLVED by the House of Representatives of the State
1-2 of Texas, 77th Legislature, Regular Session, 2001, That House Rule
1-3 13, Section 9(a), be suspended in part as provided by House Rule
1-4 13, Section 9(f), to enable the conference committee appointed to
1-5 resolve the differences on House Bill No. 1317, relating to
1-6 financial security requirements for certain oil well operators, to
1-7 consider and take action on the following matters:
1-8 (1) House Rule 13, Section 9(a)(4), is suspended to permit
1-9 the committee to add a new section to the bill to read as follows:
1-10 SECTION 1. Section 85.2021(c), Natural Resources Code, is
1-11 amended to read as follows:
1-12 (c) With each application for an extension of time to plug a
1-13 well pursuant to commission rules, an applicant shall submit to the
1-14 commission a nonrefundable fee of $100, unless the applicant has
1-15 filed a bond, letter of credit, or cash deposit under Section
1-16 91.104(b)(1), (2), or (3) [under Section 91.1041 or Section 91.1042
1-17 of this code].
1-18 Explanation: This addition is necessary to exempt an
1-19 applicant for an extension of time to plug a well from the
1-20 requirement to pay a fee if the applicant has filed a bond, letter
1-21 of credit, or cash deposit.
1-22 (2) House Rule 13, Section 9(a)(4), is suspended to permit
1-23 the committee to add a new section to the bill to read as follows:
2-1 SECTION 2. Effective September 1, 2004, Section 89.002(a)(2),
2-2 Natural Resources Code, is amended to read as follows:
2-3 (2) "Operator" means a person who assumes
2-4 responsibility for the physical operation and control of a well as
2-5 shown by a form the person files with the commission and the
2-6 commission approves. The commission may not require a person to
2-7 assume responsibility for a well as a condition to being permitted
2-8 to assume responsibility for another well. In the event of a sale
2-9 or conveyance of an unplugged well or the right to operate an
2-10 unplugged well, a person ceases being the operator for the purpose
2-11 of Section 89.011 only if the well was in compliance with
2-12 commission rules relating to safety or the prevention or control of
2-13 pollution at the time of sale or conveyance and once the person who
2-14 acquires the well or right to operate the well:
2-15 (A) specifically identifies the well as a well
2-16 for which the person assumes plugging responsibility on forms
2-17 required and approved by the commission;
2-18 (B) has a commission-approved organization
2-19 report as required by Section 91.142;
2-20 (C) has a commission-approved bond, letter of
2-21 credit, or cash deposit [or other form of financial security] under
2-22 Sections 91.103-91.107 covering the well; and
2-23 (D) places the well in compliance with
2-24 commission rules.
2-25 This addition is necessary to conform to the amendment of
2-26 Sections 91.103 and 91.104, Natural Resources Code, effective
3-1 September 1, 2004, limiting the permissible forms of financial
3-2 security to a bond, letter of credit, or cash deposit.
3-3 (3) House Rule 13, Section 9(a)(4), is suspended to permit
3-4 the committee to add a new section to the bill to read as follows:
3-5 SECTION 3. Effective September 1, 2004, Section 91.103,
3-6 Natural Resources Code, is amended to read as follows:
3-7 Sec. 91.103. PERSONS REQUIRED TO EXECUTE BOND, LETTER OF
3-8 CREDIT, OR CASH DEPOSIT [OR ALTERNATE FORM OF FINANCIAL SECURITY].
3-9 Any person, including any firm, partnership, joint stock
3-10 association, corporation, or other organization, required to file
3-11 an organization report under Section 91.142 of this code shall
3-12 execute and file with the commission a bond, letter of credit, or
3-13 cash deposit [or alternate form of financial security].
3-14 This addition is necessary to require as of September 1,
3-15 2004, a person who is required to file an organization report to
3-16 execute and file with the railroad commission a bond, letter of
3-17 credit, or cash deposit.
3-18 (4) House Rule 13, Section 9(a)(1), is suspended to permit
3-19 the committee to change, alter, or amend text that is not in
3-20 disagreement to read as follows:
3-21 SECTION 4. Sections 91.104(b) and (c), Natural Resources
3-22 Code, are amended to read as follows:
3-23 (b) A person required to file a bond or alternate form of
3-24 financial security under Section 91.103 may choose to file:
3-25 (1) an individual bond as provided under Section
3-26 91.1041;
4-1 (2) a blanket bond as provided under Section 91.1042;
4-2 (3) a letter of credit or cash deposit in the same
4-3 amount as required for an individual bond under Section 91.1041 or
4-4 a blanket bond under Section 91.1042;
4-5 (4) a nonrefundable annual fee of $1,000 [$100], if:
4-6 (A) the commission determines that individual
4-7 and blanket bonds as specified by Subdivisions (1) and (2) are not
4-8 obtainable at reasonable prices; and
4-9 (B) the person can demonstrate to the commission
4-10 an acceptable record of compliance with all commission rules,
4-11 orders, licenses, permits, or certificates that relate to safety or
4-12 the prevention or control of pollution for the previous 48 months
4-13 and the person and, if a firm, partnership, joint stock
4-14 association, corporation, or other organization, its officers,
4-15 directors, general partners, or owners of more than 25 percent
4-16 ownership interest or any trustee:
4-17 (i) [(A)] has no outstanding violations of
4-18 such commission rules, orders, licenses, permits, or certificates;
4-19 (ii) [(B)] has paid all administrative,
4-20 civil, and criminal penalties, if any, relating to any violation of
4-21 such commission rules, orders, licenses, permits, or certificates;
4-22 and
4-23 (iii) [(C)] has paid all reimbursements of
4-24 any costs and expenses incurred by the commission in relation to
4-25 any violation of such commission rules, orders, licenses, permits,
4-26 or certificates; or
5-1 (5) [(4)] a nonrefundable annual fee equal to 12-1/2 [three]
5-2 percent of the bond that otherwise would be required[; or]
5-3 [(5) to give a first lien on tangible personal
5-4 property associated with oil and gas production whose salvage value
5-5 equals the value of an individual bond under Section 91.1041 or the
5-6 value of a blanket bond under Section 91.1042 that otherwise would
5-7 be required].
5-8 (c) A person who chooses to file a form of financial
5-9 security other than a bond, letter of credit, or cash deposit shall
5-10 also submit a fee of $100 for each application to extend the time
5-11 to plug a well in accordance with Section 85.2021 [of this code].
5-12 This change is necessary to authorize as of September 1,
5-13 2001, a person to satisfy the financial security requirement by
5-14 filing a bond, letter of credit, cash deposit, nonrefundable annual
5-15 fee of $1,000, or nonrefundable annual fee equal to 12-1/2 percent
5-16 of the bond that would otherwise be required and to require a
5-17 person who chooses to file a form of financial security other than
5-18 a bond, letter of credit, or cash deposit to submit a fee for an
5-19 application for an extension of time to plug a well.
5-20 (5) House Rule 13, Section 9(a)(1), is suspended to permit
5-21 the committee to change, alter, or amend text that is not in
5-22 disagreement to read as follows:
5-23 SECTION 5. Effective September 1, 2004, Section 91.104,
5-24 Natural Resources Code, is amended to read as follows:
5-25 Sec. 91.104. BONDS, LETTERS OF CREDIT, AND CASH DEPOSITS
5-26 [AND ALTERNATE FORMS OF FINANCIAL SECURITY]. (a) The commission
6-1 shall require a bond, letter of credit, or cash deposit [or an
6-2 alternate form of financial security] to be filed with the
6-3 commission as provided by Subsection (b) of this section.
6-4 (b) A person required to file a bond, letter of credit, or
6-5 cash deposit under Section 91.103 who is an inactive operator or
6-6 who operates one or more wells and is not involved in any other
6-7 activities that require the filing of a bond, letter of credit, or
6-8 cash deposit must, at the time of filing or renewing an
6-9 organization report required by Section 91.142, [may choose to]
6-10 file:
6-11 (1) an individual bond as provided under Section
6-12 91.1041;
6-13 (2) a blanket bond as provided under Section 91.1042;
6-14 or
6-15 (3) a letter of credit or cash deposit in the same
6-16 amount as required for an individual bond under Section 91.1041 or
6-17 a blanket bond under Section 91.1042 [nonrefundable annual fee of
6-18 $100, if the person can demonstrate to the commission an acceptable
6-19 record of compliance with all commission rules, orders, licenses,
6-20 permits, or certificates that relate to safety or the prevention or
6-21 control of pollution for the previous 48 months and the person and,
6-22 if a firm, partnership, joint stock association, corporation, or
6-23 other organization, its officers, directors, general partners, or
6-24 owners of more than 25 percent ownership interest or any trustee:]
6-25 [(A) has no outstanding violations of such
6-26 commission rules, orders, licenses, permits, or certificates;]
7-1 [(B) has paid all administrative, civil, and
7-2 criminal penalties, if any, relating to any violation of such
7-3 commission rules, orders, licenses, permits, or certificates; and]
7-4 [(C) has paid all reimbursements of any costs
7-5 and expenses incurred by the commission in relation to any
7-6 violation of such commission rules, orders, licenses, permits, or
7-7 certificates;]
7-8 [(4) a nonrefundable annual fee equal to three percent
7-9 of the bond that otherwise would be required; or]
7-10 [(5) to give a first lien on tangible personal
7-11 property associated with oil and gas production whose salvage value
7-12 equals the value of an individual bond under Section 91.1041 or the
7-13 value of a blanket bond under Section 91.1042 that otherwise would
7-14 be required].
7-15 [(c) A person who chooses to file a form of financial
7-16 security other than a bond shall also submit a fee of $100 for each
7-17 application to extend the time to plug a well in accordance with
7-18 Section 85.2021 of this code.]
7-19 This change is necessary to authorize as of September 1,
7-20 2004, a person to satisfy the financial security requirement by
7-21 filing a bond, letter of credit, or cash deposit.
7-22 (6) House Rule 13, Section 9(a)(4), is suspended to permit
7-23 the committee to add new sections to the bill to read as follows:
7-24 SECTION 6. Section 91.1041, Natural Resources Code, is
7-25 amended to read as follows:
7-26 Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
8-1 file a bond or alternate form of financial security under Section
8-2 91.103 who operates one or more wells may file a bond in an amount
8-3 equal to $2 for each foot of well depth for each well.
8-4 (b) Notwithstanding Subsection (a), the commission by rule
8-5 shall set the amount of the bond for an operator of one or more bay
8-6 or offshore wells at a reasonable amount that exceeds the amount
8-7 provided by Subsection (a).
8-8 SECTION 7. Effective September 1, 2004, Section 91.1041,
8-9 Natural Resources Code, is amended to read as follows:
8-10 Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
8-11 file a bond, letter of credit, or cash deposit under Section 91.103
8-12 who operates one or more wells may file a bond in an amount equal
8-13 to $2 for each foot of well depth for each well.
8-14 (b) Notwithstanding Subsection (a), the commission by rule
8-15 shall set the amount of the bond for an operator of one or more bay
8-16 or offshore wells at a reasonable amount that exceeds the amount
8-17 provided by Subsection (a).
8-18 SECTION 8. Section 91.1042, Natural Resources Code, is
8-19 amended to read as follows:
8-20 Sec. 91.1042. BLANKET BOND. (a) A person required to file
8-21 a bond or alternate form of financial security under Section 91.103
8-22 may file a blanket bond to cover all wells and operations for which
8-23 a bond or alternate form of financial security is required as
8-24 follows:
8-25 (1) a person who operates 10 or fewer wells or
8-26 performs other operations shall file a $25,000 blanket bond;
9-1 (2) a person who operates more than 10 but fewer than
9-2 100 wells shall file a $50,000 blanket bond; and
9-3 (3) a person who operates 100 or more wells shall file
9-4 a $250,000 blanket bond.
9-5 (b) Notwithstanding Subsection (a), the commission by rule
9-6 shall set the amount of the bond for an operator of bay or offshore
9-7 wells at a reasonable amount that exceeds the amount provided by
9-8 Subsection (a)(1), (2), or (3), as applicable.
9-9 SECTION 9. Effective September 1, 2004, Section 91.1042,
9-10 Natural Resources Code, is amended to read as follows:
9-11 Sec. 91.1042. BLANKET BOND. (a) A person required to file
9-12 a bond, letter of credit, or cash deposit under Section 91.103 may
9-13 file a blanket bond to cover all wells [and operations] for which a
9-14 bond, letter of credit, or cash deposit is required as follows:
9-15 (1) a person who operates 10 or fewer wells [or
9-16 performs other operations] shall file a $25,000 blanket bond;
9-17 (2) a person who operates more than 10 but fewer than
9-18 100 wells shall file a $50,000 blanket bond; and
9-19 (3) a person who operates 100 or more wells shall file
9-20 a $250,000 blanket bond.
9-21 (b) Notwithstanding Subsection (a), the commission by rule
9-22 shall set the amount of the bond for an operator of bay or offshore
9-23 wells at a reasonable amount that exceeds the amount provided by
9-24 Subsection (a)(1), (2), or (3), as applicable.
9-25 These additions are necessary to require the railroad
9-26 commission by rule to set the amount of the individual or blanket
10-1 bond for an operator of one or more bay or offshore wells at a
10-2 reasonable amount that exceeds the amount provided by law for land
10-3 wells.
10-4 (7) House Rule 13, Section 9(a)(4), is suspended to permit
10-5 the committee to add new sections to the bill to read as follows:
10-6 SECTION 10. Effective immediately, Section 91.107, Natural
10-7 Resources Code, is amended to read as follows:
10-8 Sec. 91.107. NEW BOND [OR ALTERNATE FORM OF FINANCIAL
10-9 SECURITY]. Notwithstanding Section 91.104, if an active or
10-10 inactive [If a] well [covered by a bond or alternate form of
10-11 financial security] is transferred, sold, or assigned by its
10-12 operator, the commission shall require the party acquiring the well
10-13 to file a new bond [or alternate form of financial security] as
10-14 provided by Section 91.104(b)(1) or (2) [this subchapter], and the
10-15 [bond or alternate form of] financial security of the prior
10-16 operator shall continue to be required and to remain in effect, and
10-17 the commission may not approve the transfer of operatorship, until
10-18 the new bond [or alternate form of financial security] is provided
10-19 or the commission determines that the bond [financial security]
10-20 previously submitted to the commission by the person acquiring the
10-21 well complies with this subchapter. A transfer of a well from one
10-22 entity to another entity under common ownership is a transfer for
10-23 purposes of this section.
10-24 SECTION 11. Effective September 1, 2001, Section 91.107,
10-25 Natural Resources Code, is amended to read as follows:
10-26 Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT [OR
11-1 ALTERNATE FORM OF FINANCIAL SECURITY]. Notwithstanding Section
11-2 91.104, if an active or inactive [If a] well [covered by a bond or
11-3 alternate form of financial security] is transferred, sold, or
11-4 assigned by its operator, the commission shall require the party
11-5 acquiring the well to file a new bond, letter of credit, or cash
11-6 deposit [or alternate form of financial security] as provided by
11-7 Section 91.104(b)(1), (2), or (3) [this subchapter], and the [bond
11-8 or alternate form of] financial security of the prior operator
11-9 shall continue to be required and to remain in effect, and the
11-10 commission may not approve the transfer of operatorship, until the
11-11 new bond, letter of credit, or cash deposit [or alternate form of
11-12 financial security] is provided or the commission determines that
11-13 the bond, letter of credit, or cash deposit [financial security]
11-14 previously submitted to the commission by the person acquiring the
11-15 well complies with this subchapter. A transfer of a well from one
11-16 entity to another entity under common ownership is a transfer for
11-17 purposes of this section.
11-18 SECTION 12. Effective September 1, 2004, Section 91.107,
11-19 Natural Resources Code, is amended to read as follows:
11-20 Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT [OR
11-21 ALTERNATE FORM OF FINANCIAL SECURITY]. If an active or inactive
11-22 [a] well [covered by a bond or alternate form of financial
11-23 security] is transferred, sold, or assigned by its operator, the
11-24 commission shall require the party acquiring the well to file a new
11-25 bond, letter of credit, or cash deposit [or alternate form of
11-26 financial security] as provided by Section 91.104(b) [this
12-1 subchapter], and the [bond or alternate form of] financial security
12-2 of the prior operator shall continue to be required and to remain
12-3 in effect, and the commission may not approve the transfer of
12-4 operatorship, until the new bond, letter of credit, or cash deposit
12-5 [or alternate form of financial security] is provided or the
12-6 commission determines that the bond, letter of credit, or cash
12-7 deposit [financial security] previously submitted to the commission
12-8 by the person acquiring the well complies with this subchapter. A
12-9 transfer of a well from one entity to another entity under common
12-10 ownership is a transfer for purposes of this section.
12-11 These additions are necessary to require a person to whom a
12-12 well is transferred to provide a bond if the transfer is made
12-13 before September 1, 2001, or to provide a bond, letter of credit,
12-14 or cash deposit if the transfer is made after that date, before the
12-15 commission approves the transfer and to treat transfers of a well
12-16 from one entity to another entity under common ownership as a
12-17 transfer for purposes of that requirement.
12-18 (8) House Rule 13, Section 9(a)(4), is suspended to permit
12-19 the committee to add a new section to the bill to read as follows:
12-20 SECTION 13. Section 91.108, Natural Resources Code, is
12-21 amended to read as follows:
12-22 Sec. 91.108. DEPOSIT AND USE OF FUNDS. Subject to the
12-23 refund provisions of Section 91.1091 [of this code], proceeds from
12-24 bonds and other financial security required pursuant to this
12-25 chapter shall be deposited in the oil-field cleanup fund and,
12-26 notwithstanding Sections 91.112 and 91.113, may be used only for
13-1 actual well plugging and surface remediation.
13-2 This addition is necessary to provide that although proceeds
13-3 from bonds and other financial security required under Chapter 91,
13-4 Natural Resources Code, are required to be deposited in the
13-5 oil-field cleanup fund, they may be used only for actual well
13-6 plugging and surface remediation.
13-7 (9) House Rule 13, Section 9(a)(1), is suspended to permit
13-8 the committee to change, alter, or amend text that is not in
13-9 disagreement to read as follows:
13-10 SECTION 14. Effective September 1, 2004, Section 91.109,
13-11 Natural Resources Code, is amended to read as follows:
13-12 Sec. 91.109. FINANCIAL SECURITY FOR PERSONS INVOLVED IN
13-13 ACTIVITIES OTHER THAN OPERATION OF WELLS [DISPOSAL SITE BOND]. (a)
13-14 A person applying for or acting under a commission permit to store,
13-15 handle, treat, reclaim, or dispose of oil and gas waste may be
13-16 required by the commission to maintain a performance bond or other
13-17 form of financial security conditioned that the permittee will
13-18 operate and close the storage, handling, treatment, reclamation, or
13-19 disposal site in accordance with state law, commission rules, and
13-20 the permit to operate the site. However, this section does not
13-21 authorize the commission to require a bond or other form of
13-22 financial security for saltwater disposal pits, emergency saltwater
13-23 storage pits (including blow-down pits), collecting pits, or
13-24 skimming pits provided that such pits are used in conjunction with
13-25 the operation of an individual oil or gas lease. Subject to the
13-26 refund provisions of Section 91.1091 of this code, proceeds from
14-1 any bond or other form of financial security required by this
14-2 section shall be placed in the oil-field cleanup fund. Each bond
14-3 or other form of financial security shall be renewed and continued
14-4 in effect until the conditions have been met or release is
14-5 authorized by the commission.
14-6 (b) In addition to the financial security requirements of
14-7 Subsection (a) and Section 91.104(b), a person required to file a
14-8 bond, letter of credit, or cash deposit under Section 91.103 who is
14-9 involved in activities other than the operation of wells must file
14-10 the bond, letter of credit, or cash deposit at the time of filing
14-11 or renewing an organization report required by Section 91.142 in an
14-12 amount equal to:
14-13 (1) $250,000; or
14-14 (2) a lesser amount determined by the commission if
14-15 the person is able to demonstrate that the risk associated with an
14-16 operation or group of operations warrants a lesser amount.
14-17 This change is necessary to conform to the limitation of the
14-18 permissible forms of financial security after September 1, 2004, to
14-19 a bond, letter of credit, or cash deposit.
14-20 (10) House Rule 13, Section 9(a)(4), is suspended to permit
14-21 the committee to add a new section to the bill to read as follows:
14-22 SECTION 15. Effective September 1, 2004, Section 85.2021(c),
14-23 Natural Resources Code, is repealed.
14-24 This change is necessary to conform to the amendment of
14-25 Sections 91.103 and 91.104, Natural Resources Code, effective
14-26 September 1, 2004, limiting the permissible forms of financial
15-1 security to a bond, letter of credit, or cash deposit. Since a
15-2 person is required to pay a fee in connection with an application
15-3 for an extension of time to plug a well unless the person has filed
15-4 a bond, letter of credit, or cash deposit and by that date those
15-5 are the only permissible forms of financial security, the provision
15-6 imposing the requirement to pay the fee may be repealed.
15-7 (11) House Rule 13, Section 9(a)(1), is suspended to permit
15-8 the committee to change, alter, or amend text that is not in
15-9 disagreement to read as follows:
15-10 SECTION 16. (a) Except as otherwise provided by this Act,
15-11 this Act takes effect September 1, 2001.
15-12 (b) Section 10 of this Act takes effect immediately if this
15-13 Act receives a vote of two-thirds of all the members elected to
15-14 each house, as provided by Section 39, Article III, Texas
15-15 Constitution. If this Act does not receive the vote necessary for
15-16 immediate effect, that section does not take effect.
15-17 (c) The changes in law made by Sections 91.104, 91.107, and
15-18 91.109, Natural Resources Code, as amended by this Act, apply only
15-19 to a person required on or after the effective date of the
15-20 applicable amendment to file a bond or alternate form of financial
15-21 security. A person required to file a bond or alternate form of
15-22 financial security before that date is governed by the law in
15-23 effect on the date the bond or other security is required to be
15-24 filed, and the former law is continued in effect for that purpose.
15-25 This change is necessary to provide that if the Act does not
15-26 receive the vote necessary for immediate effect, the provision
16-1 regarding transfer of a well that by its terms takes effect
16-2 immediately does not take effect and to clarify the effect of the
16-3 provisions governing bonds and alternate forms of financial
16-4 security on a person required to file financial security before or
16-5 after the effective dates of those provisions.