Oklahoma 2022 Regular Session

Oklahoma Senate Bill SB1368 Compare Versions

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3		-	ENGR. S. B. NO. 1368 Page 1 1
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28		-	~~ENGROSSED~~ SENATE
29		-	~~BILL NO.~~ ~~1368 By: Taylor of the Senate~~
	29	+	SENATE FLOOR VERSION
	30	+	February 10, 2022
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31		-	and
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33		-	Boles of the House
	33	+	SENATE BILL NO. 1368 By: Taylor
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38	39		An Act relating to oil and gas; amending 5 2 O.S.
39	40		2021, Section 318.1, which relates to evidence of
40	41		financial ability for drilling and operating wells;
41	42		modifying Category B surety amount; providing for
42	43		tiered surety amount based on number of operating
43	44		wells; and providing an effective date.
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48	49		BE IT ENACTED BY THE PEOPLE OF THE STAT E OF OKLAHOMA:
49	50		SECTION 1. AMENDATORY 52 O.S. 2021, Sectio n 318.1, is
50	51		amended to read as follows:
51	52		Section 318.1. A. Any person who drills or operates any well
52	53		for the exploration, development or production of oil or gas, or as
53	54		an injection or disposal well, within this state, shall furnish in
54	55		writing, on forms approved by the Corporation Commission, his or her
55	56		agreement to drill, operate and plug wells in compliance with the
56	57		rules of the Commission and the laws of this state, toge ther with
57	58		evidence of financial ability to comply with the requirements for
58	59		plugging, closure of surface impoundments, removal of trash and
59	60		equipment as established by the rules of the Commission and by law.
60	61		To establish evidence of financial ability, the Commission shall
61	62		require:
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88	90		1. Category A surety which shall include a financial st atement
89	91		listing assets and liabilities and including a general release that
90	92		the information may be verified with banks and other financ ial
91	93		institutions. The statement shall prove a net worth of not less
92	94		than Fifty Thousand Dollars ($50,000.00); or
93	95		2. Category B surety which shall include an irrevocable
94	96		commercial letter of credit, cash, a cashier 's check, a Certificate
95	97		of Deposit, Bank Joint Custody Receipt, other negotiabl e instrument
96	98		or, a blanket surety bond. Except as provided in paragraph 3 of
97	99		subsection A of this section, amount of such letter of credit, cash,
98	100		cashier's check, certificate, bond, receipt or other negotiable
99	101		instrument shall be in the amount of Twenty -five Thousand Dollars
100	102		($25,000.00) but may be set higher at the discretion of the Di rector
101	103		of the Oil and Gas Conservation Division based on the number of
102	104		wells that the person operates, as follows:
103	105		a. for one to ten wells, Twenty-five Thousand Dollars
104	106		($25,000.00),
105	107		b. for eleven to fifty wells, Fifty Thousand Dollars
106	108		($50,000.00),
107	109		c. for fifty-one to two hundred wells, One Hundred
108	110		Thousand Dollars ($100,000.00), and
109	111		d. for more than two hundred wells, One Hundred Fifty
110	112		Thousand Dollars ($150,000.00).
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137	140		The Commission is authorized to determine the amount of Category
138	141		B surety based upon t he past performance of the operator and its
139	142		insiders and affiliates regarding compliance with the laws of this
140	143		state, and any rules promulgated thereto i ncluding but not limit ed
141	144		to the drilling, operation and plugging of wells, closure of surface
142	145		impoundments or removal of trash and equipment. Any instrument
143	146		shall constitute an unconditional promise to pay and be i n a form
144	147		negotiable by the Commission.
145	148		3. The Commission upon certification by any operator subject to
146	149		Category B surety that its plugging liab ility statewide is less than
147	150		the twenty-five-thousand-dollar standard amount based on the number
148	151		of wells operated as specified in this section may allow said
149	152		operator to provide Category B type surety in an amount less than
150		-	the amount required Twenty-five Thousand Dollars ~~($25,000.00) by~~
151		-	~~this section~~, but at least sufficient to cover the estimated cost of
	153	+	the amount required by this section Twenty-five Thousand Dollars
	154	+	($25,000.00), but at least sufficient to cover the estimated cost of
152	155		all plugging, closure, and removal operations curr ently the
153	156		responsibility of that operator. The liability certification
154	157		referred to in this paragraph shal l take the form of an affidavit
155	158		from a licensed well plugger estimat ing the costs of all plugging,
156	159		closure, and removal operations of the operator requesting such
157	160		relief. This alternative amount shall be modified upward upon the
158	161		assumption of additional o perations by such operator, the maximum
159	162		amount of Category B surety to be posted not to exceed the twenty-
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186	190		five-thousand-dollar total unless as provide d previously One Hundred
187	191		Fifty Thousand Dollars ($150,000.000).
188	192		B. Operators of record as of June 7, 1989 , who do not have any
189	193		outstanding contempt citations or fines and whose insiders or
190	194		affiliates have no outsta nding contempt citations or fines may pos t
191	195		Category A surety.
192	196		New operators, operators who have outstanding fines or contempt
193	197		citations and operato rs whose insiders or affiliates have
194	198		outstanding contempt citations or fines as of June 7, 1989, shall be
195	199		required to post Category B surety. Operato rs who have posted
196	200		Category B surety and have operated under this type surety and have
197	201		no outstanding fines at the end of three (3) years may post Category
198	202		A surety.
199	203		Operators using Category A surety who are assesse d a fine of Two
200	204		Thousand Dollars ($2,000. 00) or more and who do not pay the fine
201	205		within the specified time shall be required to post a Category B
202	206		surety within thirty (30) days of notification by the Commission.
203	207		C. For good cause shown concerning pollutio n or improper
204	208		plugging of wells by the op erator posting either Category A or B
205	209		surety or by an insider or affiliate of such operator, the
206	210		Commission, upon application of the Director of the Oil and Gas
207	211		Conservation Division, after notice and hearing, may r equire the
208	212		filing of additional Category B surety in an amount greater than
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235	240		Twenty-five Thousand Dollars ($25,000.00) but not to exceed One
236	241		Hundred Thousand Dollars ($100,000.00).
237	242		D. If the Commission determines that a blanket surety bond is
238	243		required, the bond shall be conditioned on the fact th at the
239	244		operator shall cause the wells to be plugged and abandoned surface
240	245		impoundments to be closed, and t rash and equipment to be removed in
241	246		accordance with the laws of this state and the rules of the
242	247		Commission. Each bond shall be executed by a corporat e surety
243	248		authorized to do business in this state and shall be renewed and
244	249		continued in effect until the co nditions have been met or release of
245	250		the bond is authorized by the Commission.
246	251		E. The agreement provided for in subsection A of this section
247	252		shall provide that if the Comm ission determines that the person
248	253		furnishing the agreement has neglected, failed, or refused to plug
249	254		and abandon, or cause to be plugged and abandoned, or replug any
250	255		well or has neglected, fail ed or refused to close any surface
251	256		impoundment or removed or ca use to be removed trash and equipment in
252	257		compliance with the rules of the Commission , then the person shall
253	258		forfeit from his or her bond, letter of credit or negotiable
254	259		instrument or shall pay to this state, through the Commission, fo r
255	260		deposit in the State Treasury, a sum equal to the cost of plugging
256	261		the well, closure of any surface impo undment or removal of trash and
257	262		equipment. The Commission may cause the remedial work to be done,
258	263		issuing a warrant in payment of the cost thereof drawn against the
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285	291		monies accruing in the State Treasury from the forfeiture or
286	292		payment. Any monies accruing in the State Treasury by reason of a
287	293		determination that there has been a noncompliance with the
288	294		provisions of the agreement or the rules of the Commi ssion, in
289	295		excess of the cost of remedial action ordered by the Commission,
290	296		shall be credited to the Oil an d Gas Revolving Fund. The Commission
291	297		shall also recover any costs arising from litigation to enforce this
292	298		provision. Provided, before a person is re quired to forfeit or p ay
293	299		any monies to the state pursuant to this section, the Commission
294	300		shall notify the person at his or her last-known address of the
295	301		determination of neglect, failure or refusal to plug or replu g any
296	302		well, or close any surface impoundm ent or remove trash an d equipment
297	303		and said person shall have ten (10) days from the date of
298	304		notification within which to commence remedial operations. Failure
299	305		to commence remedial operations shall result in forfeit ure or
300	306		payment as provided in this subsec tion.
301	307		F. It shall be unlawful for any person to drill or operate any
302	308		oil or gas well subject to the provi sions of this section, without
303	309		the evidence of financial ability required by this section. The
304	310		Commission shall shut in, without notice, hearing or o rder of the
305	311		Commission, the wells of any such person violating the provisions of
306	312		this subsection and such wells shall remain shut in for
307	313		noncompliance until the required evidence of Category B surety is
308	314		obtained and verified by the Commission.
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335	342		G. If title to property or a well is transferred, the
336	343		transferee shall furnish the evidence of financial ability to p lug
337	344		the well and close surface impoundments required by the provisions
338	345		of this section, prior to the transfer .
339	346		H. As used in this section:
340	347		1. "Affiliate" means an entity that owns twenty percent (20%)
341	348		or more of the operator, or an entity of which twenty percent (20%)
342	349		or more is owned by the operator; and
343	350		2. "Insider" means officer, director, or person in cont rol of
344	351		the operator; general partners of or in the operator; ge neral or
345	352		limited partnership in which the operator is a general partner;
346	353		spouse of an officer, director, or person in control of the
347	354		operator; spouse of a general partner of or in the operator;
348	355		corporation of which the operator is a director, officer, or p erson
349	356		in control; affiliate, or insider of an affiliate as if such
350	357		affiliate were the operator; or managing agent of the operator.
351	358		SECTION 2. This act shall become effective No vember 1, 2022.
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378		-	Passed the Senate the 16th day of February, 2022.
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380		-
381		-
382		-	Presiding Officer of the Senate
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385		-	Passed the House of Representa tives the ____ day of __________,
386		-	2022.
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388		-
389		-
390		-	Presiding Officer of the House
391		-	of Representatives
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	359	+	COMMITTEE REPORT BY: COMMITTEE ON ENERGY
	360	+	February 10, 2022 - DO PASS