By: Haywood S.R. No. 1250
SENATE RESOLUTION
1-1 BE IT RESOLVED by the Senate of the State of Texas, 77th
1-2 Legislature, Regular Session, 2001, That Senate Rule 12.03 be
1-3 suspended in part as provided by Senate Rule 12.08 to enable the
1-4 conference committee appointed to resolve the differences on House
1-5 Bill No. 1317, relating to financial security requirements for
1-6 certain oil well operators, to consider and take action on the
1-7 following matters:
1-8 (1) Senate Rule 12.03(4) is suspended to permit the
1-9 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) Senate Rule 12.03(4) is suspended to permit the
1-23 committee to add a new section to the bill to read as follows:
1-24 SECTION 2. Effective September 1, 2004, Section
1-25 89.002(a)(2), Natural Resources Code, is amended to read as
2-1 follows:
2-2 (2) "Operator" means a person who assumes
2-3 responsibility for the physical operation and control of a well as
2-4 shown by a form the person files with the commission and the
2-5 commission approves. The commission may not require a person to
2-6 assume responsibility for a well as a condition to being permitted
2-7 to assume responsibility for another well. In the event of a sale
2-8 or conveyance of an unplugged well or the right to operate an
2-9 unplugged well, a person ceases being the operator for the purpose
2-10 of Section 89.011 only if the well was in compliance with
2-11 commission rules relating to safety or the prevention or control of
2-12 pollution at the time of sale or conveyance and once the person who
2-13 acquires the well or right to operate the well:
2-14 (A) specifically identifies the well as a well
2-15 for which the person assumes plugging responsibility on forms
2-16 required and approved by the commission;
2-17 (B) has a commission-approved organization
2-18 report as required by Section 91.142;
2-19 (C) has a commission-approved bond, letter of
2-20 credit, or cash deposit [or other form of financial security] under
2-21 Sections 91.103-91.107 covering the well; and
2-22 (D) places the well in compliance with
2-23 commission rules.
2-24 This addition is necessary to conform to the amendment of
2-25 Sections 91.103 and 91.104, Natural Resources Code, effective
2-26 September 1, 2004, limiting the permissible forms of financial
3-1 security to a bond, letter of credit, or cash deposit.
3-2 (3) Senate Rule 12.03(4) is suspended to permit the
3-3 committee to add a new section to the bill to read as follows:
3-4 SECTION 3. Effective September 1, 2004, Section 91.103,
3-5 Natural Resources Code, is amended to read as follows:
3-6 Sec. 91.103. PERSONS REQUIRED TO EXECUTE BOND, LETTER OF
3-7 CREDIT, OR CASH DEPOSIT [OR ALTERNATE FORM OF FINANCIAL SECURITY].
3-8 Any person, including any firm, partnership, joint stock
3-9 association, corporation, or other organization, required to file
3-10 an organization report under Section 91.142 of this code shall
3-11 execute and file with the commission a bond, letter of credit, or
3-12 cash deposit [or alternate form of financial security].
3-13 This addition is necessary to require as of September 1,
3-14 2004, a person who is required to file an organization report to
3-15 execute and file with the railroad commission a bond, letter of
3-16 credit, or cash deposit.
3-17 (4) Senate Rule 12.03(1) is suspended to permit the
3-18 committee to change, alter, or amend text that is not in
3-19 disagreement to read as follows:
3-20 SECTION 4. Sections 91.104(b) and (c), Natural Resources
3-21 Code, are amended to read as follows:
3-22 (b) A person required to file a bond or alternate form of
3-23 financial security under Section 91.103 may choose to file:
3-24 (1) an individual bond as provided under Section
3-25 91.1041;
3-26 (2) a blanket bond as provided under Section 91.1042;
4-1 (3) a letter of credit or cash deposit in the same
4-2 amount as required for an individual bond under Section 91.1041 or
4-3 a blanket bond under Section 91.1042;
4-4 (4) a nonrefundable annual fee of $1,000 [$100], if:
4-5 (A) the commission determines that individual
4-6 and blanket bonds as specified by Subdivisions (1) and (2) are
4-7 not obtainable at reasonable prices; and
4-8 (B) the person can demonstrate to the commission
4-9 an acceptable record of compliance with all commission rules,
4-10 orders, licenses, permits, or certificates that relate to safety or
4-11 the prevention or control of pollution for the previous 48 months
4-12 and the person and, if a firm, partnership, joint stock
4-13 association, corporation, or other organization, its officers,
4-14 directors, general partners, or owners of more than 25 percent
4-15 ownership interest or any trustee:
4-16 (i) [(A)] has no outstanding violations of
4-17 such commission rules, orders, licenses, permits, or certificates;
4-18 (ii) [(B)] has paid all administrative,
4-19 civil, and criminal penalties, if any, relating to any violation of
4-20 such commission rules, orders, licenses, permits, or certificates;
4-21 and
4-22 (iii) [(C)] has paid all reimbursements of
4-23 any costs and expenses incurred by the commission in relation to
4-24 any violation of such commission rules, orders, licenses, permits,
4-25 or certificates; or
4-26 (5) [(4)] a nonrefundable annual fee equal to 12-1/2
5-1 [three] percent of the bond that otherwise would be required[; or]
5-2 [(5) to give a first lien on tangible personal
5-3 property associated with oil and gas production whose salvage value
5-4 equals the value of an individual bond under Section 91.1041 or the
5-5 value of a blanket bond under Section 91.1042 that otherwise would
5-6 be required].
5-7 (c) A person who chooses to file a form of financial
5-8 security other than a bond, letter of credit, or cash deposit shall
5-9 also submit a fee of $100 for each application to extend the time
5-10 to plug a well in accordance with Section 85.2021 [of this code].
5-11 This change is necessary to authorize as of September 1,
5-12 2001, a person to satisfy the financial security requirement by
5-13 filing a bond, letter of credit, cash deposit, nonrefundable annual
5-14 fee of $1,000, or nonrefundable annual fee equal to 12-1/2 percent
5-15 of the bond that would otherwise be required and to require a
5-16 person who chooses to file a form of financial security other than
5-17 a bond, letter of credit, or cash deposit to submit a fee for an
5-18 application for an extension of time to plug a well.
5-19 (5) Senate Rule 12.03(1) is suspended to permit the
5-20 committee to change, alter, or amend text that is not in
5-21 disagreement to read as follows:
5-22 SECTION 5. Effective September 1, 2004, Section 91.104,
5-23 Natural Resources Code, is amended to read as follows:
5-24 Sec. 91.104. BONDS, LETTERS OF CREDIT, AND CASH DEPOSITS
5-25 [AND ALTERNATE FORMS OF FINANCIAL SECURITY]. (a) The commission
5-26 shall require a bond, letter of credit, or cash deposit [or an
6-1 alternate form of financial security] to be filed with the
6-2 commission as provided by Subsection (b) of this section.
6-3 (b) A person required to file a bond, letter of credit, or
6-4 cash deposit under Section 91.103 who is an inactive operator or
6-5 who operates one or more wells and is not involved in any other
6-6 activities that require the filing of a bond, letter of credit, or
6-7 cash deposit must, at the time of filing or renewing an
6-8 organization report required by Section 91.142, [may choose to]
6-9 file:
6-10 (1) an individual bond as provided under Section
6-11 91.1041;
6-12 (2) a blanket bond as provided under Section 91.1042;
6-13 or
6-14 (3) a letter of credit or cash deposit in the same
6-15 amount as required for an individual bond under Section 91.1041 or
6-16 a blanket bond under Section 91.1042 [nonrefundable annual fee of
6-17 $100, if the person can demonstrate to the commission an acceptable
6-18 record of compliance with all commission rules, orders, licenses,
6-19 permits, or certificates that relate to safety or the prevention or
6-20 control of pollution for the previous 48 months and the person and,
6-21 if a firm, partnership, joint stock association, corporation, or
6-22 other organization, its officers, directors, general partners, or
6-23 owners of more than 25 percent ownership interest or any trustee:]
6-24 [(A) has no outstanding violations of such
6-25 commission rules, orders, licenses, permits, or certificates;]
6-26 [(B) has paid all administrative, civil, and
7-1 criminal penalties, if any, relating to any violation of such
7-2 commission rules, orders, licenses, permits, or certificates; and]
7-3 [(C) has paid all reimbursements of any costs
7-4 and expenses incurred by the commission in relation to any
7-5 violation of such commission rules, orders, licenses, permits, or
7-6 certificates;]
7-7 [(4) a nonrefundable annual fee equal to three percent
7-8 of the bond that otherwise would be required; or]
7-9 [(5) to give a first lien on tangible personal
7-10 property associated with oil and gas production whose salvage value
7-11 equals the value of an individual bond under Section 91.1041 or the
7-12 value of a blanket bond under Section 91.1042 that otherwise would
7-13 be required].
7-14 [(c) A person who chooses to file a form of financial
7-15 security other than a bond shall also submit a fee of $100 for each
7-16 application to extend the time to plug a well in accordance with
7-17 Section 85.2021 of this code.]
7-18 This change is necessary to authorize as of September 1,
7-19 2004, a person to satisfy the financial security requirement by
7-20 filing a bond, letter of credit, or cash deposit.
7-21 (6) Senate Rule 12.03(4) is suspended to permit the
7-22 committee to add new sections to the bill to read as follows:
7-23 SECTION 6. Section 91.1041, Natural Resources Code, is
7-24 amended to read as follows:
7-25 Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
7-26 file a bond or alternate form of financial security under Section
8-1 91.103 who operates one or more wells may file a bond in an amount
8-2 equal to $2 for each foot of well depth for each well.
8-3 (b) Notwithstanding Subsection (a), the commission by rule
8-4 shall set the amount of the bond for an operator of one or more bay
8-5 or offshore wells at a reasonable amount that exceeds the amount
8-6 provided by Subsection (a).
8-7 SECTION 7. Effective September 1, 2004, Section 91.1041,
8-8 Natural Resources Code, is amended to read as follows:
8-9 Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
8-10 file a bond, letter of credit, or cash deposit under Section 91.103
8-11 who operates one or more wells may file a bond in an amount equal
8-12 to $2 for each foot of well depth for each well.
8-13 (b) Notwithstanding Subsection (a), the commission by rule
8-14 shall set the amount of the bond for an operator of one or more bay
8-15 or offshore wells at a reasonable amount that exceeds the amount
8-16 provided by Subsection (a).
8-17 SECTION 8. Section 91.1042, Natural Resources Code, is
8-18 amended to read as follows:
8-19 Sec. 91.1042. BLANKET BOND. (a) A person required to file
8-20 a bond or alternate form of financial security under Section 91.103
8-21 may file a blanket bond to cover all wells and operations for which
8-22 a bond or alternate form of financial security is required as
8-23 follows:
8-24 (1) a person who operates 10 or fewer wells or
8-25 performs other operations shall file a $25,000 blanket bond;
8-26 (2) a person who operates more than 10 but fewer than
9-1 100 wells shall file a $50,000 blanket bond; and
9-2 (3) a person who operates 100 or more wells shall file
9-3 a $250,000 blanket bond.
9-4 (b) Notwithstanding Subsection (a), the commission by rule
9-5 shall set the amount of the bond for an operator of bay or offshore
9-6 wells at a reasonable amount that exceeds the amount provided by
9-7 Subsection (a)(1), (2), or (3), as applicable.
9-8 SECTION 9. Effective September 1, 2004, Section 91.1042,
9-9 Natural Resources Code, is amended to read as follows:
9-10 Sec. 91.1042. BLANKET BOND. (a) A person required to file
9-11 a bond, letter of credit, or cash deposit under Section 91.103 may
9-12 file a blanket bond to cover all wells [and operations] for which a
9-13 bond, letter of credit, or cash deposit is required as follows:
9-14 (1) a person who operates 10 or fewer wells [or
9-15 performs other operations] shall file a $25,000 blanket bond;
9-16 (2) a person who operates more than 10 but fewer than
9-17 100 wells shall file a $50,000 blanket bond; and
9-18 (3) a person who operates 100 or more wells shall file
9-19 a $250,000 blanket bond.
9-20 (b) Notwithstanding Subsection (a), the commission by rule
9-21 shall set the amount of the bond for an operator of bay or offshore
9-22 wells at a reasonable amount that exceeds the amount provided by
9-23 Subsection (a)(1), (2), or (3), as applicable.
9-24 These additions are necessary to require the railroad
9-25 commission by rule to set the amount of the individual or blanket
9-26 bond for an operator of one or more bay or offshore wells at a
10-1 reasonable amount that exceeds the amount provided by law for land
10-2 wells.
10-3 (7) Senate Rule 12.03(4) is suspended to permit the
10-4 committee to add new sections to the bill to read as follows:
10-5 SECTION 10. Effective immediately, Section 91.107, Natural
10-6 Resources Code, is amended to read as follows:
10-7 Sec. 91.107. NEW BOND [OR ALTERNATE FORM OF FINANCIAL
10-8 SECURITY]. Notwithstanding Section 91.104, if an active or
10-9 inactive [If a] well [covered by a bond or alternate form of
10-10 financial security] is transferred, sold, or assigned by its
10-11 operator, the commission shall require the party acquiring the well
10-12 to file a new bond [or alternate form of financial security] as
10-13 provided by Section 91.104(b)(1) or (2) [this subchapter], and the
10-14 [bond or alternate form of] financial security of the prior
10-15 operator shall continue to be required and to remain in effect, and
10-16 the commission may not approve the transfer of operatorship, until
10-17 the new bond [or alternate form of financial security] is provided
10-18 or the commission determines that the bond [financial security]
10-19 previously submitted to the commission by the person acquiring the
10-20 well complies with this subchapter. A transfer of a well from one
10-21 entity to another entity under common ownership is a transfer for
10-22 purposes of this section.
10-23 SECTION 11. Effective September 1, 2001, Section 91.107,
10-24 Natural Resources Code, is amended to read as follows:
10-25 Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT [OR
10-26 ALTERNATE FORM OF FINANCIAL SECURITY]. Notwithstanding Section
11-1 91.104, if an active or inactive [If a] well [covered by a bond or
11-2 alternate form of financial security] is transferred, sold, or
11-3 assigned by its operator, the commission shall require the party
11-4 acquiring the well to file a new bond, letter of credit, or cash
11-5 deposit [or alternate form of financial security] as provided by
11-6 Section 91.104(b)(1), (2), or (3) [this subchapter], and the [bond
11-7 or alternate form of] financial security of the prior operator
11-8 shall continue to be required and to remain in effect, and the
11-9 commission may not approve the transfer of operatorship, until the
11-10 new bond, letter of credit, or cash deposit [or alternate form of
11-11 financial security] is provided or the commission determines that
11-12 the bond, letter of credit, or cash deposit [financial security]
11-13 previously submitted to the commission by the person acquiring the
11-14 well complies with this subchapter. A transfer of a well from one
11-15 entity to another entity under common ownership is a transfer for
11-16 purposes of this section.
11-17 SECTION 12. Effective September 1, 2004, Section 91.107,
11-18 Natural Resources Code, is amended to read as follows:
11-19 Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT [OR
11-20 ALTERNATE FORM OF FINANCIAL SECURITY]. If an active or inactive
11-21 [a] well [covered by a bond or alternate form of financial
11-22 security] is transferred, sold, or assigned by its operator, the
11-23 commission shall require the party acquiring the well to file a new
11-24 bond, letter of credit, or cash deposit [or alternate form of
11-25 financial security] as provided by Section 91.104(b) [this
11-26 subchapter], and the [bond or alternate form of] financial security
12-1 of the prior operator shall continue to be required and to remain
12-2 in effect, and the commission may not approve the transfer of
12-3 operatorship, until the new bond, letter of credit, or cash deposit
12-4 [or alternate form of financial security] is provided or the
12-5 commission determines that the bond, letter of credit, or cash
12-6 deposit [financial security] previously submitted to the commission
12-7 by the person acquiring the well complies with this subchapter. A
12-8 transfer of a well from one entity to another entity under common
12-9 ownership is a transfer for purposes of this section.
12-10 These additions are necessary to require a person to whom a
12-11 well is transferred to provide a bond if the transfer is made
12-12 before September 1, 2001, or to provide a bond, letter of credit,
12-13 or cash deposit if the transfer is made after that date, before the
12-14 commission approves the transfer and to treat transfers of a well
12-15 from one entity to another entity under common ownership as a
12-16 transfer for purposes of that requirement.
12-17 (8) Senate Rule 12.03(4) is suspended to permit the
12-18 committee to add a new section to the bill to read as follows:
12-19 SECTION 13. Section 91.108, Natural Resources Code, is
12-20 amended to read as follows:
12-21 Sec. 91.108. DEPOSIT AND USE OF FUNDS. Subject to the
12-22 refund provisions of Section 91.1091 [of this code], proceeds from
12-23 bonds and other financial security required pursuant to this
12-24 chapter shall be deposited in the oil-field cleanup fund and,
12-25 notwithstanding Sections 91.112 and 91.113, may be used only for
12-26 actual well plugging and surface remediation.
13-1 This addition is necessary to provide that although proceeds
13-2 from bonds and other financial security required under Chapter 91,
13-3 Natural Resources Code, are required to be deposited in the
13-4 oil-field cleanup fund, they may be used only for actual well
13-5 plugging and surface remediation.
13-6 (9) Senate Rule 12.03(1) is suspended to permit the
13-7 committee to change, alter, or amend text that is not in
13-8 disagreement to read as follows:
13-9 SECTION 14. Effective September 1, 2004, Section 91.109,
13-10 Natural Resources Code, is amended to read as follows:
13-11 Sec. 91.109. FINANCIAL SECURITY FOR PERSONS INVOLVED IN
13-12 ACTIVITIES OTHER THAN OPERATION OF WELLS [DISPOSAL SITE BOND].
13-13 (a) A person applying for or acting under a commission permit to
13-14 store, handle, treat, reclaim, or dispose of oil and gas waste may
13-15 be required by the commission to maintain a performance bond or
13-16 other form of financial security conditioned that the permittee
13-17 will operate and close the storage, handling, treatment,
13-18 reclamation, or disposal site in accordance with state law,
13-19 commission rules, and the permit to operate the site. However,
13-20 this section does not authorize the commission to require a bond or
13-21 other form of financial security for saltwater disposal pits,
13-22 emergency saltwater storage pits (including blow-down pits),
13-23 collecting pits, or skimming pits provided that such pits are used
13-24 in conjunction with the operation of an individual oil or gas
13-25 lease. Subject to the refund provisions of Section 91.1091 of this
13-26 code, proceeds from any bond or other form of financial security
14-1 required by this section shall be placed in the oil-field cleanup
14-2 fund. Each bond or other form of financial security shall be
14-3 renewed and continued in effect until the conditions have been met
14-4 or release is authorized by the commission.
14-5 (b) In addition to the financial security requirements of
14-6 Subsection (a) and Section 91.104(b), a person required to file a
14-7 bond, letter of credit, or cash deposit under Section 91.103 who is
14-8 involved in activities other than the operation of wells must file
14-9 the bond, letter of credit, or cash deposit at the time of filing
14-10 or renewing an organization report required by Section 91.142 in an
14-11 amount equal to:
14-12 (1) $250,000; or
14-13 (2) a lesser amount determined by the commission if
14-14 the person is able to demonstrate that the risk associated with an
14-15 operation or group of operations warrants a lesser amount.
14-16 This change is necessary to conform to the limitation of the
14-17 permissible forms of financial security after September 1, 2004, to
14-18 a bond, letter of credit, or cash deposit.
14-19 (10) Senate Rule 12.03(4) is suspended to permit the
14-20 committee to add a new section to the bill to read as follows:
14-21 SECTION 15. Effective September 1, 2004, Section
14-22 85.2021(c), Natural Resources Code, is repealed.
14-23 This change is necessary to conform to the amendment of
14-24 Sections 91.103 and 91.104, Natural Resources Code, effective
14-25 September 1, 2004, limiting the permissible forms of financial
14-26 security to a bond, letter of credit, or cash deposit. Since a
15-1 person is required to pay a fee in connection with an application
15-2 for an extension of time to plug a well unless the person has filed
15-3 a bond, letter of credit, or cash deposit and by that date those
15-4 are the only permissible forms of financial security, the provision
15-5 imposing the requirement to pay the fee may be repealed.
15-6 (11) Senate Rule 12.03(1) is suspended to permit the
15-7 committee to change, alter, or amend text that is not in
15-8 disagreement to read as follows:
15-9 SECTION 16. (a) Except as otherwise provided by this Act,
15-10 this Act takes effect September 1, 2001.
15-11 (b) Section 10 of this Act takes effect immediately if this
15-12 Act receives a vote of two-thirds of all the members elected to
15-13 each house, as provided by Section 39, Article III, Texas
15-14 Constitution. If this Act does not receive the vote necessary for
15-15 immediate effect, that section does not take effect.
15-16 (c) The changes in law made by Sections 91.104, 91.107, and
15-17 91.109, Natural Resources Code, as amended by this Act, apply only
15-18 to a person required on or after the effective date of the
15-19 applicable amendment to file a bond or alternate form of financial
15-20 security. A person required to file a bond or alternate form of
15-21 financial security before that date is governed by the law in
15-22 effect on the date the bond or other security is required to be
15-23 filed, and the former law is continued in effect for that purpose.
15-24 This change is necessary to provide that if the Act does not
15-25 receive the vote necessary for immediate effect, the provision
15-26 regarding transfer of a well that by its terms takes effect
16-1 immediately does not take effect and to clarify the effect of the
16-2 provisions governing bonds and alternate forms of financial
16-3 security on a person required to file financial security before or
16-4 after the effective dates of those provisions.
16-5 ______________________________________
16-6 President of the Senate
16-7 I hereby certify that the above
16-8 Resolution was adopted by the Senate
16-9 on May 27, 2001, by the following
16-10 vote: Yeas 30, Nays 0, one present
16-11 not voting.
16-12 ______________________________________
16-13 Secretary of the Senate