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ENGROSSED HOUSE
BILL NO. 3534 By: Boles and Williams of the
House
and
Paxton of the Senate
An Act relating to oil and gas; amending 52 O.S.
2021, Section 318.1, which relates to evidence of
financial ability for drilling and oper ating wells;
phasing out category A surety; modifying surety
amounts; providing for tiered surety amount based on
number of operating wel ls; and providing an effective
date.
BE IT ENACTED BY THE PEOPLE OF THE STATE 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, h is or her
agreement to drill, operate and plug wells in compliance with the
rules of the Commission and the laws of this state, together with
evidence of financial abi lity to comply with the requirements for
plugging, closure of surface impoundments, remov al of trash and
equipment as established by the rules of the Commission and by law.
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To establish evidence of financial ability, the Commission sh all
require:
1. Category A surety which shall include a financial statement
listing assets and liabilities an d including a general release that
the information may be verified with banks a nd other financial
institutions. The statement shall prove a net w orth of not less
than Fifty Thousand Dollars ($50,000.00). Category A surety wil l no
longer be accepted as va lid form of surety for new operators to
select beginning November 1, 2024. All current operators who have
valid Category A sure ty and are in good s tanding with the Commission
will be able to retain their Category A surety for t he time they are
a valid operator in the State of Oklahoma ; 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 negotiable instrument ,
or, a blanket surety bond. Except as provided in paragraph 3 1 of
subsection A B or subsection C 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
discretion of the Director of the Oi l 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),
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b. for eleven to fifty wells, Fifty Thousand Dollars
($50,000.00),
c. for fifty-one to one hundred wells, One Hundred
Thousand Dollars ($100,000.00), and
d. for more than one hundred wells, One Hundred Fifty
Thousand Dollars ($150,000.00).
The Commission is authorize d to determine the amount of Category B
surety based upon the past performance of the operator and its
insiders and affiliates regarding compliance wi th the laws of this
state, and any rules promulgated thereto including but not l imited
to the drilling, operation and plugging of wells, closure of surface
impoundments or removal of tr ash and equipment. Any instrument
shall constitute an unconditional pr omise to pay and be in a form
negotiable by the Commission.
3. B. 1. The Commission upon certification b y any operator
subject to Category B surety that its plugging liab ility 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
currently the responsibility of that oper ator. The liability
certification referred to in this paragraph subsection shall take
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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-five-thousand-dollar total unless as provide d
previously One Hundred Fifty Thousand Dollars ($150,000.00) .
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 outstanding contempt citations or fines may post
Category A surety.
2. New operators, operators who have outstanding fines or
contempt citations and ope rators whose insiders or affiliates have
outstanding contempt citations or fines as of June 7, 1989, shall be
required to post Category B surety. Operators 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.
3. Operators using Category A surety who are assessed 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 Cate gory B
surety within thirty (30) days of notification by the Commission .
C. For good cause shown concerning pollution or impr oper
plugging of wells by the operator posting eith er Category A or B
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surety or by an insider or affiliate of such operator, the
Commission, upon application of the Director of the Oil and Gas
Conservation Division, af ter notice and hearing, may require th e
filing of additional Category B surety in an amou nt greater than
Twenty-five Thousand Dollars ($25,000.00) but not to exceed One
Hundred Thousand Dollars ($100,000.00) One Hundred Fifty Thousand
Dollars ($150,000.00).
D. If the Commission determines that a blanket su rety bond is
required, the bond shall be conditioned on the fact that the
operator shall cause the wells to be plugg ed and abandoned surface
impoundments to be closed, and tras h and equipment to be remove d in
accordance with the laws of this state and the rules of the
Commission. Each bond shall be executed by a corporate surety
authorized to do business in this state and shall be renewed and
continued in effect until the condi tions have been met or relea se of
the bond is authorized by the Commission.
E. The agreement provided for i n subsection A of this section
shall provide that if the Commission 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 an y
well or has neglected, failed or refused to close any surface
impoundment or removed or cause to be removed trash and equipment in
compliance with the rules of the Commission , then the person shall
forfeit from his or her bond, letter of credit or negoti able
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instrument or shall pay to this state, through the Commission, for
deposit in the State Treasury, a sum equal to t he cost of plugging
the well, closure of any surface impo undment or removal of trash and
equipment. The Commission may cause the remedia l work to be done,
issuing a warrant in payment of the cost thereof drawn against the
monies accruing in the State Trea sury from the forfeiture or
payment. Any monies accruing in the State Treasury by reaso n of a
determination that there has been a noncom pliance with the
provisions of the agreement or the rules of the Commission, in
excess of the cost of remedial action o rdered by the Commission,
shall be credited to the Oil an d Gas Revolving Fund. The Comm ission
shall also recover any costs arising from litigation to enforce this
provision. Provided, before a person is required to forfeit or pay
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, failur e or refusal to plug or replug any
well, or close any surface impoundment or remove trash and equipment
and said person shall have ten (10) days from the date of
notification within which to commence remedia l operations. Failure
to commence remedial opera tions shall result in forfeitur e or
payment as provided in this subsection.
F. It shall be unlawful for any person to drill or operate any
oil or gas well subject to the pr ovisions of this section, without
the evidence of financial ability required by this section. The
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Commission shall shut in, without notice, hearing or order of the
Commission, the wells of any such per son violating the provisions of
this subsection and su ch wells shall remain shut in for
noncompliance until the required evidence of C ategory B surety is
obtained and verified by the Commission.
G. If title to property or a well is transferred, the
transferee shall furnish the evidence of financial abilit y to plug
the well and close surface impoundments required by the provisions
of this section, prior to the tran sfer.
H. As used in this section:
1. "Affiliate" means an entity that owns twenty percent (2 0%)
or more of the operator, or an entity of whi ch twenty percent (20%)
or more is owned by the operator; and
2. "Insider" means officer, director, or person in control of
the operator; general partners of or in the operator; general 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 op erator;
corporation of which the operator is a director, officer, or person
in control; affiliate , or insider of an affiliate as if such
affiliate were the operator; or managing agent o f the operator.
SECTION 2. This act shall become effec tive November 1, 2024.
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Passed the House of Representatives the 4th day of March, 2024.
Presiding Officer of the House
of Representatives
Passed the Senate the ___ day of __________, 2024.
Presiding Officer of the Senate