78R5333 SMH-F
By: Duncan S.B. No. 1408
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;
(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 indicates 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 the amount of
the bond that otherwise would be required multiplied by the lesser
of:
(A) the sum of four percent plus the prime
interest rate prevailing late in the year preceding the year in
which the fee is due; or
(B) 12 [12-1/2] percent [of the bond that
otherwise would be required].
(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) The commission by rule shall establish the method for
determining the prime interest rate for purposes of Subsection
(b)(5)(A).
SECTION 3. Effective January 1, 2006, 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 equal to the amount of
the bond that otherwise would be required multiplied by the lesser
of the sum of one percent plus the prime interest rate prevailing
late in the year preceding the year in which the fee is due or 10
percent [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 indicates 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 the amount of
the bond that otherwise would be required multiplied by the lesser
of:
(A) the sum of four percent plus the prime
interest rate prevailing late in the year preceding the year in
which the fee is due; or
(B) 12 [12-1/2] percent [of the bond that
otherwise would be required].
(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) The commission by rule shall establish the method for
determining the prime interest rate for purposes of Subsections
(b)(4) and (5)(A).
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
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 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 $30,000 [$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.
(c) The commission may require a person described by
Subsection (a)(6) to file a supplemental bond in addition to the
bond required under Subsection (a)(6) or (b) if the commission
determines that such a requirement is appropriate in that case and
the amount computed by dividing the number of wells operated by the
person that are inactive by the number of wells operated by the
person that are active is more than 0.75.
(d) The amount of a supplemental bond under Subsection (c)
is equal to the amount of the bond required under Subsection (a)(6)
or (b), multiplied by the inactive well ratio factor, which is:
(1) one if the amount computed by dividing the number
of wells operated by the person that are inactive by the number of
wells operated by the person that are active is not more than 0.9;
or
(2) two if the amount computed by dividing the number
of wells operated by the person that are inactive by the number of
wells operated by the person that are active is more than 0.9.
(e) Notwithstanding Subsection (d), if the commission
requires a supplemental bond under Subsection (c), the commission
may require a bond in an amount equal to the sum of:
(1) the amount determined under Subsection (d); and
(2) the amount computed by multiplying:
(A) the amount of the bond required under
Subsection (a)(6) or (b); times
(B) the sum of the low production factor, the
compliance factor, and the inactive well number factor prescribed
by this section.
(f) The low production factor is:
(1) one if the average production of all of the active
and inactive wells operated by the person that have not been plugged
is more than one-quarter of a barrel of oil equivalent per day but
not more than one-half of a barrel of oil equivalent per day; or
(2) two if the average production of all of the active
and inactive wells operated by the person that have not been plugged
is not more than one-quarter of a barrel of oil equivalent per day.
(g) The compliance factor is one if the person does not have
an acceptable record of compliance for the preceding 48 months with
regard to safety and the prevention or control of pollution.
(h) The inactive well number factor is:
(1) one if the person operates 100 or more but fewer
than 200 inactive wells;
(2) two if the person operates 200 or more but fewer
than 300 inactive wells; or
(3) three if the person operates 300 or more inactive
wells.
SECTION 5. Effective September 1, 2004, Section 91.1042(a),
Natural Resources Code, is amended to read as follows:
(a) A person required to file a bond or alternate form of
financial security under Section 91.103 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 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 $30,000 [$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.
SECTION 6. 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 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, if applicable,
Section 91.1042(c), 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
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 7. Effective September 1, 2004, Section 91.109,
Natural Resources Code, is amended to read as follows:
Sec. 91.109. FINANCIAL SECURITY FOR PERSONS INVOLVED IN
ACTIVITIES OTHER THAN OPERATION OF WELLS [DISPOSAL SITE BOND]. (a)
A person applying for or acting under a commission permit to store,
handle, treat, reclaim, or dispose of oil and gas waste may be
required by the commission to maintain a performance bond or other
form of financial security conditioned that the permittee will
operate and close the storage, handling, treatment, reclamation, or
disposal site in accordance with state law, commission rules, and
the permit to operate the site. However, this section does not
authorize the commission to require a bond or other form of
financial security for saltwater disposal pits, emergency
saltwater storage pits (including blow-down pits), collecting
pits, or skimming pits provided that such pits are used in
conjunction with the operation of an individual oil or gas lease.
Subject to the refund provisions of Section 91.1091 of this code,
proceeds from any bond or other form of financial security required
by this section shall be placed in the oil-field cleanup fund. Each
bond or other form of financial security shall be renewed and
continued in effect until the conditions have been met or release is
authorized by the commission.
(b) In addition to the financial security requirements of
Subsection (a) and Section 91.104(b), a person required to file a
bond or alternate form of financial security under Section 91.103
who is involved in activities other than the operation of wells must
file a 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.
SECTION 8. Sections 10, 18, 20, 22, 24, 27, and 29, Chapter
1233, Acts of the 77th Legislature, Regular Session, 2001, are
repealed.
SECTION 9. (a) This Act takes effect September 1, 2003.
(b) 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, 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, 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.