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SENATE FLOOR VERSION
March 28, 2024
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 operating wells;
phasing out category A surety; modifying surety
amounts; providing for tiered surety amount based on
number of operating wells; 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 dispos al 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, together 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.
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To establish evidence of financial ability, the Commission shall
require:
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 fi nancial
institutions. The statement shall prove a net worth o f not less
than Fifty Thousand Dollars ($50,000.00) . Category A surety will no
longer be accepted as valid form of surety for new operators to
select beginning November 1, 2024. All current operators who have
valid Category A surety and are in good stand ing with the Commission
will be able to retain their Category A surety for the time they are
a valid operator in the State of Oklahoma ; or
2. Category B surety which shall include an irrevocabl e
commercial letter of credit, cash, a cashier's check, a Cert ificate
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, certific ate, 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 Oil and Gas C onservation Division
based on the number of wells that the per son 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 well s, One Hundred Fifty
Thousand Dollars ($150,000.00) .
The Commission is authorized to determine the amount of Category B
surety based upon the past performance of the oper ator and its
insiders and affiliates regarding compliance with the laws of this
state, and any rules promulgated thereto including but not limited
to the drilling, operation and plugging of wells, closure of surface
impoundments or removal of trash and equipment. Any instrument
shall constitute an unconditional prom ise to pay and be in a form
negotiable by the Commission.
3. B. 1. The Commission upon certification by any operator
subject to Category B surety that its plugging 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
currently the responsibility of that operator. 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 estimating 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 b e posted not
to exceed the twenty-five-thousand-dollar total unless as provided
previously One Hundred Fifty Thousand Dollars ($150,000.00) .
B. Operators of record as of June 7, 1989, who do no t have any
outstanding contempt citations or fines and whose i nsiders 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 operators whose insiders or affiliates have
outstanding contempt citations o r 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 th e 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 Category B
surety within thirty (30) days of notification by the Commission.
C. For good cause shown concerning pollution or improper
plugging of wells by the operator posting either 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, after notice and hearing, may require the
filing of additional Category B surety in an amount 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 surety bond is
required, the bond shall be conditioned on the fact that the
operator shall cause the wells to be plugged and aban doned surface
impoundments to be closed, and trash and equipme nt to be removed 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 conditions have be en 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 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 any
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 perso n shall
forfeit from his or her bond, letter of credit or negotiable
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instrument or shall pay to this state, through the Commission, for
deposit in the State Treasury, a sum equal to the cost of plugging
the well, closure of any surface impoundment or remov al 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
monies accruing in the State Treasury from the forfeiture or
payment. Any monies accruing in the State Tr easury by reason of a
determination that there has been a noncompliance with the
provisions of the agreement or the rules of the Commission, in
excess of the cost of remedial action ordered by t he 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 required to forfeit or pay
any monies to the state pursuant to this section, the Commission
shall notify the person at his o r her last-known address of the
determination of neglect, failure 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 c ommence remedial operations. Failure
to commence remedial operations shall result in forfeiture 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 provisions of this se ction, 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 person violati ng the provisions of
this subsection and such wells shall rema in shut in for
noncompliance until the required evidence of Category 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 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 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, direc tor, 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 person
in control; affiliate, or inside r of an affiliate as if such
affiliate were the operator; or m anaging agent of the operator.
SECTION 2. This act shall become effective November 1, 2024.
COMMITTEE REPORT BY: COMMITTEE ON ENERGY AND TELECOMMUNICATIONS
March 28, 2024 - DO PASS