78S10065 SMH-D
By: Keffer of Eastland H.B. No. 34
A BILL TO BE ENTITLED
AN ACT
relating to financial security requirements for certain persons
performing operations within the jurisdiction of the Railroad
Commission of Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Effective September 1, 2004, Section 85.2021,
Natural Resources Code, is amended to read as follows:
Sec. 85.2021. DRILLING PERMIT FEE. (a) With each
application or materially amended application for a permit to
drill, deepen, plug back, or reenter a well, the applicant shall
submit to the commission a nonrefundable fee of:
(1) $200 if the total depth of the well is 2,000 feet
or less;
(2) $225 if the total depth of the well is greater than
2,000 feet but less than or equal to 4,000 feet;
(3) $250 if the total depth of the well is greater than
4,000 feet but less than or equal to 9,000 feet; or
(4) $300 if the total depth of the well is greater than
9,000 feet.
(b) An applicant shall submit an additional nonrefundable
fee of $200 when a Rule 37 spacing or a Rule 38 density exception
review is requested [required].
(c) An applicant shall submit an additional nonrefundable
fee of $150 when requesting that the commission expedite the
application for a permit to drill, deepen, plug back, or reenter a
well.
(d) With each application for an extension of time to plug a
well pursuant to commission rules, an applicant shall submit to the
commission a nonrefundable fee of $300, unless the applicant has
filed a bond, letter of credit, or cash deposit under Section
91.104(b)(1), (2), or (3).
(e) All fees collected under this section shall be deposited
in the state oil-field cleanup fund.
SECTION 2. Section 91.104, Natural Resources Code, is
amended to read as follows:
Sec. 91.104. BONDS AND ALTERNATE FORMS OF FINANCIAL
SECURITY. (a) The commission shall require a bond or an alternate
form of financial security to be filed with the commission as
provided by Subsection (b) [of this section].
(b) A person required to file a bond or alternate form of
financial security under Section 91.103 may choose to file:
(1) an individual bond as provided under Section
91.1041;
(2) a blanket bond as provided under Section 91.1042;
(3) a letter of credit or cash deposit in the same
amount as required for an individual bond under Section 91.1041 or a
blanket bond under Section 91.1042;
(4) a nonrefundable annual fee of $1,000, if[:
[(A) the commission determines that individual
and blanket bonds as specified by Subdivisions (1) and (2) are not
obtainable at reasonable prices; and
[(B)] the person states and commission records
confirm that the person has [can demonstrate to the commission] an
acceptable record of compliance with all commission rules, orders,
licenses, permits, or certificates that relate to safety or the
prevention or control of pollution for the previous 48 months and
the person and, if a firm, partnership, joint stock association,
corporation, or other organization, its officers, directors,
general partners, or owners of more than 25 percent ownership
interest or any trustee:
(A) [(i)] has no outstanding violations of such
commission rules, orders, licenses, permits, or certificates;
(B) [(ii)] has paid all administrative, civil,
and criminal penalties, if any, relating to any violation of such
commission rules, orders, licenses, permits, or certificates; and
(C) [(iii)] has paid all reimbursements of any
costs and expenses incurred by the commission in relation to any
violation of such commission rules, orders, licenses, permits, or
certificates; [or]
(5) a nonrefundable annual fee equal to seven [12-1/2]
percent of the bond that otherwise would be required; or
(6) if the person operates one or more wells, another
form of financial security authorized by rules adopted by the
commission under Subsection (b-1).
(b-1) The commission by rule may authorize a person who
operates one or more wells to file a form of financial security
other than those provided by Subsections (b)(1)-(5), including
insurance. The rules must require the security to be in an amount
sufficient to ensure the plugging of the person's wells.
(c) A person who chooses to file a form of financial
security other than a bond, letter of credit, or cash deposit shall
also submit a fee of $300 for each application to extend the time to
plug a well in accordance with Section 85.2021. A person may not be
required to file a bond, letter of credit, or cash deposit as a
condition of receiving an extension under that section.
(d) This subsection does not apply to the operation of bay
or offshore wells or the storage, handling, treatment, reclamation,
or disposal of oil and gas waste. A person who engages in more than
one activity or operation for which a bond or alternate form of
financial security is required under this subchapter is not
required to file a separate bond or alternate form of financial
security for each activity or operation in which the person is
engaged. The person is required to file a bond or alternate form of
financial security only in the amount required for the activity or
operation in which the person engages for which a bond or alternate
form of financial security in the greatest amount is required. The
bond or alternate form of financial security filed covers all of the
activities and operations for which a bond or alternate form of
financial security is required under this subchapter.
SECTION 3. Effective September 1, 2004, Section 91.104,
Natural Resources Code, is amended to read as follows:
Sec. 91.104. BONDS AND ALTERNATE FORMS OF FINANCIAL
SECURITY. (a) The commission shall require a bond or an alternate
form of financial security to be filed with the commission as
provided by Subsection (b) [of this section].
(b) A person required to file a bond or alternate form of
financial security under Section 91.103 who is an inactive operator
or who operates one or more wells must, at the time of filing or
renewing an organization report required by Section 91.142, [may
choose to] file:
(1) an individual bond as provided under Section
91.1041;
(2) a blanket bond as provided under Section 91.1042;
(3) a letter of credit or cash deposit in the same
amount as required for an individual bond under Section 91.1041 or a
blanket bond under Section 91.1042;
(4) a nonrefundable annual fee [of $1,000, if:
[(A) the commission determines that individual
and blanket bonds as specified by Subdivisions (1) and (2) are not
obtainable at reasonable prices; and
[(B) the person can demonstrate to the commission
an acceptable record of compliance with all commission rules,
orders, licenses, permits, or certificates that relate to safety or
the prevention or control of pollution for the previous 48 months
and the person and, if a firm, partnership, joint stock
association, corporation, or other organization, its officers,
directors, general partners, or owners of more than 25 percent
ownership interest or any trustee:
[(i) has no outstanding violations of such
commission rules, orders, licenses, permits, or certificates;
[(ii) has paid all administrative, civil,
and criminal penalties, if any, relating to any violation of such
commission rules, orders, licenses, permits, or certificates; and
[(iii) has paid all reimbursements of any
costs and expenses incurred by the commission in relation to any
violation of such commission rules, orders, licenses, permits, or
certificates; or
[(5) a nonrefundable annual fee] equal to:
(A) eight [12-1/2] percent of the bond that
otherwise would be required if the financial security is required
to be filed before September 1, 2005;
(B) nine percent of the bond that otherwise would
be required if the financial security is required to be filed on or
after September 1, 2005, and before September 1, 2006; and
(C) 10 percent of the bond that otherwise would
be required if the financial security is required to be filed on or
after September 1, 2006; or
(5) if the person operates one or more wells, another
form of financial security authorized by rules adopted by the
commission under Subsection (b-1).
(b-1) The commission by rule may authorize a person who
operates one or more wells to file a form of financial security
other than those provided by Subsections (b)(1)-(4), including
insurance. The rules must require the security to be in an amount
sufficient to ensure the plugging of the person's wells.
(c) A person who chooses to file a form of financial
security other than a bond, letter of credit, or cash deposit shall
also submit a fee of $300 for each application to extend the time to
plug a well in accordance with Section 85.2021. A person may not be
required to file a bond, letter of credit, or cash deposit as a
condition of receiving an extension under that section.
(d) This subsection does not apply to the operation of bay
or offshore wells or the storage, handling, treatment, reclamation,
or disposal of oil and gas waste. A person who engages in more than
one activity or operation for which a bond or alternate form of
financial security is required under this subchapter is not
required to file a separate bond or alternate form of financial
security for each activity or operation in which the person is
engaged. The person is required to file a bond or alternate form of
financial security only in the amount required for the activity or
operation in which the person engages for which a bond or alternate
form of financial security in the greatest amount is required. The
bond or alternate form of financial security filed covers all of the
activities and operations for which a bond or alternate form of
financial security is required under this subchapter.
SECTION 4. Section 91.1042, Natural Resources Code, is
amended to read as follows:
Sec. 91.1042. BLANKET BOND. (a) A person required to file
a bond or alternate form of financial security under Section 91.103
who operates wells may file a blanket bond to cover all wells and
operations for which a bond or alternate form of financial security
is required as follows:
(1) a person who operates at least one well but not
more than 10 wells [10 or fewer wells or performs other operations]
shall file a $15,000 [$25,000] blanket bond;
(2) a person who operates more than 10 but fewer than
25 [100] wells shall file a $35,000 [$50,000] blanket bond; [and]
(3) a person who operates 25 [100] or more wells but
fewer than 100 wells shall file a $50,000 [$250,000] blanket bond;
(4) a person who operates 100 or more wells but fewer
than 150 wells shall file a $100,000 blanket bond;
(5) a person who operates 150 or more wells but fewer
than 200 wells shall file a $175,000 blanket bond; and
(6) a person who operates 200 or more wells shall file
a $250,000 blanket bond.
(b) Notwithstanding Subsection (a), the commission by rule
shall set the amount of the bond for an operator of bay or offshore
wells at a reasonable amount that exceeds the amount provided by
Subsection (a)(1), (2), [or] (3), (4), (5), or (6), as applicable.
SECTION 5. Section 91.107, Natural Resources Code, is
amended to read as follows:
Sec. 91.107. NEW BOND, LETTER OF CREDIT, OR CASH DEPOSIT.
Notwithstanding Section 91.104, if an active or inactive well is
transferred, sold, or assigned by its operator, the commission
shall require the party acquiring the well to provide financial
security by means of a [file a new] bond, letter of credit, or cash
deposit in an appropriate amount as provided by Section
91.104(b)(1), (2), or (3), and the financial security of the prior
operator shall continue to be required and to remain in effect, and
the commission may not approve the transfer of operatorship, until
a [the new] bond, letter of credit, or cash deposit is provided or
the commission determines that the bond, letter of credit, or cash
deposit previously submitted to the commission by the person
acquiring the well complies with this subchapter. A transfer of a
well from one entity to another entity under common ownership is a
transfer for purposes of this section.
SECTION 6. The following provisions are repealed:
(1) Section 1, H.B. No. 942, Acts of the 78th
Legislature, Regular Session, 2003;
(2) Section 91.109(c), Natural Resources Code, as
added by Section 2, H.B. No. 942, Acts of the 78th Legislature,
Regular Session, 2003;
(3) Section 91.109(c), Natural Resources Code, as
added by Section 3, H.B. No. 942, Acts of the 78th Legislature,
Regular Session, 2003; and
(4) Sections 10, 18, 20, 22, 24, and 27, Chapter 1233,
Acts of the 77th Legislature, Regular Session, 2001.
SECTION 7. The changes in law made by this Act apply only to
a person required to file a bond or alternate form of financial
security under Section 91.103, 91.107, or 91.109, Natural Resources
Code, on or after the effective date of this Act. A person required
to file a bond or alternate form of financial security under Section
91.103, 91.107, or 91.109, Natural Resources Code, before the
effective date of this Act is governed by the law as it existed
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
SECTION 8. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect on the 91st day after the last day of the
legislative session.