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ENGROSSED SENATE
BILL NO. 1368 By: Taylor of the Senate
and
Boles of the House
An Act relating to oil and gas; amending 5 2 O.S.
2021, Section 318.1, which relates to evidence of
financial ability for drilling and operating wells;
modifying Category B surety amount; providing for
tiered surety amount based on number of operating
wells; and providing an effective date.
BE IT ENACTED BY THE PEOPLE OF THE STAT E OF OKLAHOMA:
SECTION 1. AMENDATORY 52 O.S. 2021, Section 318.1, is
amended to read as follows:
Section 318.1. A. Any person who drills or operates any well
for the exploration, development or production of oil or gas, or as
an injection or disposal well, within this state, shall furnish in
writing, on forms approved by the Corporation Commission, his or her
agreement to drill, operate and plug wells in compliance with the
rules of the Commission and the laws of this state, toge ther with
evidence of financial ability to comply with the requirements for
plugging, closure of surface impoundments, removal of trash and
equipment as established by the rules of the Commission and by law.
To establish evidence of financial ability, the Commission shall
require:
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1. Category A surety which shall include a financial statement
listing assets and liabilities and including a general release that
the information may be verified with banks and other financ ial
institutions. The statement shall prove a net worth of not less
than Fifty Thousand Dollars ($50,000.00) ; or
2. Category B surety which shall include an irrevocable
commercial letter of credit, cash, a cashier 's check, a Certificate
of Deposit, Bank Joint Custody Receipt, other negotiabl e instrument
or, a blanket surety bond. Except as provided in paragrap h 3 of
subsection A of this section, amount of such letter of credit, cash,
cashier's check, certificate, bond, receipt or other negotiable
instrument shall be in the amount of Twenty -five Thousand Dollars
($25,000.00) but may be set higher at the discreti on of the Director
of the Oil and Gas Conservation Division based on the number of
wells that the person operates, as follows:
a. for one to ten wells, Twenty-five Thousand Dollars
($25,000.00),
b. for eleven to fifty wells, Fifty Thousand Dollars
($50,000.00),
c. for fifty-one to two hundred wells, One Hundred
Thousand Dollars ($100,000.00), and
d. for more than two hundred wells, One Hundred Fifty
Thousand Dollars ($150,000.00).
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The Commission is authorized to determine the amount of Category
B surety based upon the past performance of the operator and its
insiders and affiliates regarding compliance with the laws of this
state, and any rules promulgated thereto i ncluding but not limit ed
to the drilling, operation and plugging of wells, closure of surface
impoundments or removal of trash and equipment. Any instrument
shall constitute an unconditional promise to pay and be i n a form
negotiable by the Commission.
3. The Commission upon certification by any operator subject to
Category B surety that its plug ging liability statewide is less than
the twenty-five-thousand-dollar standard amount based on the number
of wells operated as specified in this section may allow said
operator to provide Category B type surety in an amount less than
the amount required Twenty-five Thousand Dollars ($25,000.00) by
this section, but at least sufficient to cover the estimated cost of
all plugging, closure, and removal operations curr ently the
responsibility of that operator. The liability certification
referred to in this pa ragraph shall take the form of an affidavit
from a licensed well plugger estimat ing the costs of all plugging,
closure, and removal operations of the operator requesting such
relief. This alternative amount shall be modified upward upon the
assumption of additional operations by such operator, the maximum
amount of Category B surety to be posted not to exceed the twenty-
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five-thousand-dollar total unless as provide d previously One Hundred
Fifty Thousand Dollars ($150,000.000).
B. Operators of record as of June 7, 1989, who do not have any
outstanding contempt citations or fines and whose insiders or
affiliates have no outsta nding contempt citations or fines may pos t
Category A surety.
New operators, operators who have outstanding fines or contempt
citations and operators whose insiders or affiliates have
outstanding contempt citations or fines as of June 7, 1989, shall be
required to post Category B surety. Operato rs who have posted
Category B surety and have operated under this type surety and have
no outstanding fines at the end of three (3) years may post Category
A surety.
Operators using Category A surety who are assesse d a fine of Two
Thousand Dollars ($2,000. 00) or more and who do not pay the fine
within the specified time shall be required to post a Category B
surety within thirty (30) days of notification by the Commission.
C. For good cause shown concerning pollutio n or improper
plugging of wells by the op erator posting either Category A or B
surety or by an insider or affiliate of such operator, t he
Commission, upon application of the Director of the Oil and Gas
Conservation Division, after notice and hearing, may r equire the
filing of additional Category B surety in an amount greater than
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Twenty-five Thousand Dollars ($25,000.00) but not to exceed One
Hundred Thousand Dollars ($100,000.00).
D. If the Commission determines that a blanket surety bond is
required, the bond shall be conditioned on the fact th at the
operator shall cause the wells to be plugged and abandoned surface
impoundments to be c losed, and trash and equipment to be removed in
accordance with the laws of this state and the rules of the
Commission. Each bond shall be executed by a corporat e surety
authorized to do business in this state and shall be renewed and
continued in effect until the conditions have been met or release of
the bond is authorized by the Commission.
E. The agreement provided for in subsection A of this section
shall provide that if the Comm ission determines that the person
furnishing the agreement has neglected , failed, or refused to plug
and abandon, or cause to be plugged and abandoned, or replug any
well or has neglected, fail ed or refused to close any surface
impoundment or removed or ca use to be removed trash and equipment in
compliance with the rules of th e Commission, then the person shall
forfeit from his or her bond, letter of credit or negotiable
instrument or shall pay to this state, through the Commission, fo r
deposit in the State Treasury, a sum equal to the cost of plugging
the well, closure of any surface impoundment or removal of trash and
equipment. The Commission may cause the remedial work to be done,
issuing a warrant in payment of the cost thereof drawn against the
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monies accruing in the State Treasury from the forfeiture or
payment. Any monies accruing in the State Treasury by reason of a
determination that there has been a noncompliance with the
provisions of the agreement or the rules of the Commi ssion, in
excess of the cost of remedial action ordered by the Commission,
shall be credited to the Oil and Gas Revolving Fund. The Commission
shall also recover any costs arising from litigation to enforce this
provision. Provided, before a person is re quired to forfeit or p ay
any monies to the state pursuant to this section, the Commission
shall notify the person at his or her last -known address of the
determination of neglect, failure or refusal to plug or replu g any
well, or close any surface impoundm ent or remove trash an d equipment
and said person shall have ten (10) days from the date of
notification within which to commence remedial operations. Failure
to commence remedial operations shall result in forfeit ure or
payment as provided in this subsec tion.
F. It shall be unlawful for any person to drill or operate any
oil or gas well subject to the provisions of this section, without
the evidence of financial ability required by this section. The
Commission shall shut in, without notice, hearing or o rder of the
Commission, the wells of any such person violating the provisions of
this subsection and such wells shall remain shut in for
noncompliance until the required evidence of Category B surety is
obtained and verified by the Commission.
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G. If title to property or a well is transferred, the
transferee shall furnish the evidence of financial ability to plug
the well and close surface impoundments required by the provisions
of this section, prior to the transfer .
H. As used in this section:
1. "Affiliate" means an entity that owns twenty percent (20%)
or more of the operator, or an entity of which twenty percent (20%)
or more is owned by the operator; and
2. "Insider" means officer, director, or person in cont rol of
the operator; general partners of or in the operator; ge neral or
limited partnership in which the operator is a general partner;
spouse of an officer, director, or person in control of the
operator; spouse of a general partner of or in the operator;
corporation of which the operator is a director, officer, or p erson
in control; affiliate, or insider of an affiliate as if such
affiliate were the operator; or managing agent of the operator.
SECTION 2. This act shall become effective No vember 1, 2022.
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Passed the Senate the 16th day of February, 2022.
Presiding Officer of the Senate
Passed the House of Representa tives the ____ day of __________,
2022.
Presiding Officer of the House
of Representatives