78R8463 T

By:  Armbrister                                                   S.B. No. 1386



A BILL TO BE ENTITLED

AN ACT

relating to the filing of financial security by entities engaging 
in oil and gas exploration and production related activities.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 91.103, Natural Resources Code, is 
amended to read as follows:
	(a)  Except as provided in subsection (b) below, any [Any] 
person, including any firm, partnership, joint stock association, 
corporation, or other organization, required to file an 
organization report under Section 91.142 of this code shall execute 
and file with the commission a bond or alternate form of financial 
security.
	(b)  An entity that is required to file an organization 
report under Section 91.142 of this code is not required to file a 
bond or alternate form of financial security if:
		(1)  the entity is not the designated operator of any 
wells, facilities, or activities associated with the production, 
transportation, injection, or disposal of oil and gas, oil and gas 
wastes, or associated materials; and
		(2)  the commission determines that the activities of 
the entity that are within commission jurisdiction do not pose a 
risk of pollution of surface or sub-surface water.
	(c)  The commission shall not grant authority to operators to 
conduct operations under the jurisdiction of the commission unless 
appropriate financial assurance is filed pursuant to this section 
prior to commencement of any regulated activities.
	SECTION 2.  Section 91.103, Natural Resources Code, as 
enacted to be effective September 1, 2004, is amended to read as 
follows:
	(a)  Except as provided in subsection (b) below, any [Any] 
person, including any firm, partnership, joint stock association, 
corporation, or other organization, required to file an 
organization report under Section 91.142 of this code shall execute 
and file with the commission a bond, letter of credit or cash 
deposit.
	(b)  An entity that is required to file an organization 
report under Section 91.142 of this code is not required to file a 
bond or alternate form of financial security if:
		(1)  the entity is not the designated operator of any 
wells, facilities, or activities associated with the production, 
transportation, injection, or disposal of oil and gas, oil and gas 
wastes, or associated materials; and
		(2)  the commission determines that the activities of 
the entity that are within commission jurisdiction do not pose a 
risk of pollution of surface or sub-surface water.
	(c)  The commission shall not grant authority to operators to 
conduct operations under the jurisdiction of the commission unless 
appropriate financial assurance is filed pursuant to this section 
prior to commencement of any regulated activities.
	SECTION 3.  Section 91.109(b), Texas Natural Resources Code, 
as enacted to be effective September 1, 2004, is amended to add 
sub-part (3) as follows:
	(b)  In addition to the financial security requirements of 
Subsection (a) and Section 91.104(b), a person required to file a 
bond, letter of credit, or cash deposit under Section 91.103 who is 
involved in activities other than the operation of wells must file 
the bond, letter of credit, or cash deposit at the time of filing or 
renewing an organization report required by Section 91.142 in an 
amount equal to:
		(1)  $250,000[; or]                                          
		(2)  a lesser amount determined by the commission if 
the person is able to demonstrate that the risk associated with an 
operation or group of operations warrants a lesser amount; or
		(3)  a lesser amount determined by the commission by 
rule to be sufficient to cover the risk for any person engaging in a 
specific class of activities that does not involve the operation of 
wells.
	SECTION 4.  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 September 1, 2003.