Texas Senate Bill SB954

Texas 2021 - 87th Regular

Caption

Relating to the financial security requirements for operators of oil and gas wells.

Impact

This bill has significant implications for state laws governing oil and gas operations. By allowing operators to use insurance policies as a form of financial security, the legislation aims to facilitate easier compliance for smaller operators who may struggle with the financial burden of traditional bonding methods. The bill also establishes a framework for determining average plugging costs annually, ensuring that operators have a reliable basis for calculating their financial obligations under the law.

Summary

SB954 seeks to amend the financial security requirements for operators of oil and gas wells in Texas. Specifically, it updates the regulations surrounding the bonding, letter of credit, or cash deposit that operators must file to secure their operations. The bill introduces provisions that allow operators to meet their financial security requirements through a well-specific plugging insurance policy, provided certain conditions are met, such as the policy being fully prepaid, approved by the Texas Department of Insurance, and ensuring that Texas is named as a contingent beneficiary.

Contention

Points of contention surrounding SB954 may arise from concerns over the adequacy of insurance policies as financial security compared to traditional bonding methods, particularly when it comes to ensuring the proper abandonment and plugging of oil and gas wells. Opponents may argue that the insurance model could be less reliable and may not provide sufficient protection for the state or local communities when wells are abandoned. Additionally, the amendment of bonding amounts based on the number of wells could also lead to debate on whether these amounts are adequate to cover potential environmental impacts or liabilities associated with well operations.