Texas Senate Bill SB2108

Texas 2021 - 87th Regular

Caption

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

Impact

The changes introduced by SB2108 are set to streamline the process for oil and gas operators in Texas by providing an insurance-based alternative to the traditional bond systems. This could potentially ease the financial burden on smaller operators who may find conventional bonding to be a financial stretch. Additionally, the bill mandates that the Texas commission is responsible for annually determining the average plugging costs, ensuring that the financial obligations align with current market conditions and operational expectations.

Summary

SB2108 addresses the financial security obligations of operators of oil and gas wells in Texas, specifically amending the Natural Resources Code. The core of the legislation involves allowing operators to fulfill their financial security requirements through a well-specific plugging insurance policy, which must meet several criteria including being approved by the Texas Department of Insurance and ensuring that the state is named as a beneficiary. This marks a significant shift in how operators can secure their obligations regarding well plugging, moving from traditional financial means such as bonds or letters of credit to insurance.

Contention

There are notable points of contention regarding the implementation of SB2108. Opposition arises from concerns that the reliance on insurance policies may not provide sufficient security in the event of well failures or environmental accidents. Critics argue that insurance policies might be less reliable than bonds, particularly if they are canceled or if companies go bankrupt. Questions surrounding the adequacy of the insurance amounts and whether the policies will genuinely protect the state and the environment in the case of default have been raised during discussions. Ensuring that these policies remain in force and cannot be transferred or canceled adds a layer of complexity that operators will need to navigate carefully.