81R23196 SMH-F
By: Crownover, Hardcastle, Farabee, Chisum, H.B. No. 2259
Gonzalez Toureilles, et al.
A BILL TO BE ENTITLED
AN ACT
relating to the plugging of certain inactive oil or gas wells.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 89.002(a), Natural Resources Code, is
amended by amending Subdivision (7) and adding Subdivisions (9),
(10), (11), (12), and (13) to read as follows:
(7) "Delinquent inactive well" means an inactive
[unplugged] well [that has had no reported production, disposal,
injection, or other permitted activity for a period of greater than
12 months and] for which, after notice and opportunity for a
hearing, the commission has not extended the plugging deadline.
(9) "Cost calculation for plugging an inactive well"
means the commission's calculated cost for each foot of well depth
plugged based on average actual plugging costs for wells reported
by the commission for the preceding state fiscal year for the
commission oil and gas division district in which the inactive well
is located.
(10) "Enhanced oil recovery project":
(A) means:
(i) a commission-approved project that uses
any process for the displacement of oil or other hydrocarbons from a
reservoir other than primary recovery and includes the use of an
immiscible, miscible, chemical, thermal, or biological process;
(ii) a certified project described by
Section 202.054, Tax Code; or
(iii) any other project approved by the
commission for enhanced oil recovery; and
(B) does not include a water disposal project.
(11) "Good faith claim" means a factually supported
claim based on a recognized legal theory to a continuing possessory
right in a mineral estate, such as evidence of a currently valid oil
and gas lease or a recorded deed conveying a fee interest in the
mineral estate.
(12) "Inactive well" means an unplugged well that has
had no reported production, disposal, injection, or other permitted
activity for a period of greater than 12 months.
(13) "Physical termination of electric lines to an
inactive well" means the disconnection of electric service to an
inactive well site at a point on the electric service lines most
distant from the production site toward the main supply line in a
manner that will not interfere with electrical supply to adjacent
operations, including cathodic protection units.
SECTION 2. Chapter 89, Natural Resources Code, is amended
by adding Subchapter B-1 to read as follows:
SUBCHAPTER B-1. PLUGGING OF CERTAIN INACTIVE WELLS
Sec. 89.021. APPLICABILITY. This subchapter does not apply
to a bay or offshore well as defined by commission rules.
Sec. 89.022. PLUGGING OF INACTIVE WELLS REQUIRED. (a)
Except as provided by Section 89.023, on or before the date the
operator is required to renew the operator's organization report
required by Section 91.142, an operator of an inactive well must
plug the well in accordance with statutes and commission rules in
effect at the time of plugging.
(b) Notwithstanding Subsection (a), a person who assumes
responsibility for the physical operation and control of an
existing inactive well must satisfy the requirements of Sections
89.023(a)(1) and (4) not later than six months after the date the
commission approves the initial form described by Section
89.002(a)(2) and filed with the commission under which the person
assumes responsibility for the well.
(c) The commission may not renew or approve the organization
report required by Section 91.142 for an operator that fails to
comply with the requirements of this subchapter.
Sec. 89.023. EXTENSION OF DEADLINE FOR PLUGGING INACTIVE
WELL. (a) The commission may grant an extension of the deadline
for plugging an inactive well if the operator maintains a current
organization report with the commission as required by Section
91.142 and if, on or before the date of renewal of the operator's
organization report as required by that section, the operator files
with the commission an application for an extension that includes:
(1) an affirmation that complies with Section 89.029;
(2) a statement that the well and associated
facilities are in compliance with all commission rules and orders;
(3) a statement that the operator has, and on request
will provide, evidence of a good faith claim to a continuing right
to operate the well; and
(4) at least one of the following:
(A) documentation that since the preceding date
that the operator's organization report was required to be renewed
the operator has plugged, or restored to active operation as
defined by commission rule, a number of inactive wells equal to or
greater than 10 percent of the number of inactive wells operated by
the operator on that date;
(B) an abeyance of plugging report on a form
approved by the commission that:
(i) is in the form of a certification signed
by a person licensed by the Texas Board of Professional Engineers or
the Texas Board of Professional Geoscientists;
(ii) includes:
(a) an affirmation by the licensed
person that the well has:
(1) a reasonable expectation of
economic value in excess of the cost of plugging the well for the
duration of the period covered by the report, based on the cost
calculation for plugging an inactive well; and
(2) a reasonable expectation of
being restored to a beneficial use that will prevent waste of oil or
gas resources that otherwise would not be produced if the well were
plugged; and
(b) appropriate documentation
demonstrating the basis for the affirmation of the well's future
utility; and
(iii) specifies the field and the covered
wells within that field in a format prescribed by the commission;
(C) a statement that the well is part of an
enhanced oil recovery project;
(D) if the operator of the well is not currently
otherwise required by commission rule or order to conduct a fluid
level or hydraulic pressure test of the well, documentation of the
results of a successful fluid level or hydraulic pressure test of
the well conducted in accordance with the commission's rules in
effect at the time the test is conducted;
(E) a supplemental bond, letter of credit, or
cash deposit sufficient for each well specified in the application
that:
(i) complies with the requirements of
Chapter 91; and
(ii) is of an amount at least equal to the
cost calculation for plugging an inactive well for each well
specified in the application;
(F) documentation of the deposit with the
commission each time the operator files an application of an amount
of escrow funds as prescribed by commission rule that equal at least
10 percent of the total cost calculation for plugging an inactive
well for each well specified in the application; or
(G) if the operator is a publicly traded entity:
(i) the following documents:
(a) a copy of the operator's federal
documents filed to comply with Financial Accounting Standards Board
Statement No. 143, Accounting for Asset Retirement Obligations; and
(b) an original, executed Uniform
Commercial Code Form 1 Financing Statement, filed with the
secretary of state, that:
(1) names the operator as the
"debtor" and the Railroad Commission of Texas as the "secured
creditor"; and
(2) specifies the funds covered
by the documents described by Sub-subparagraph (a) in the amount of
the cost calculation for plugging an inactive well for each well
specified in the application; or
(ii) a blanket bond in the amount of the
lesser of:
(a) the cost calculation for plugging
any inactive wells; or
(b) $2 million.
(b) Notwithstanding Subsection (a), an operator may not
obtain an extension of the deadline for plugging an inactive well by
complying with that subsection if the plugging of the well is
otherwise required by commission rules or orders.
Sec. 89.024. ABEYANCE OF PLUGGING REPORT. (a) An abeyance
of plugging report filed under Section 89.023(a)(4)(B) is valid for
a period of not more than five years.
(b) An abeyance of plugging report may cover more than one
well in a field but may not cover more than one field.
(c) An abeyance of plugging report may not be transferred to
a new operator of an existing inactive well. A new operator of an
existing inactive well must file a new abeyance of plugging report
or otherwise comply with the requirements of this subchapter on or
before the deadline provided by Section 89.022(b). This subsection
does not prohibit the transfer of an abeyance of plugging report in
the event of a change of name of an operator.
(d) An operator who files an abeyance of plugging report
must pay an annual fee of $100 for each well covered by the report.
A fee collected under this section shall be deposited in the
oil-field cleanup fund.
Sec. 89.025. ENHANCED OIL RECOVERY PROJECT. (a) For
purposes of Section 89.023(a)(4)(C), an inactive well is considered
to be part of an enhanced oil recovery project if the well is
located on a unit or lease or in a field associated with such a
project.
(b) A statement that an inactive well is part of an enhanced
oil recovery project may not be transferred to a new operator of an
existing inactive well. A new operator of an existing inactive well
must file a new statement that the well is part of such a project or
otherwise comply with the requirements of this subchapter on or
before the deadline provided by Section 89.022(b). This subsection
does not prohibit the transfer of a statement that a well is part of
an enhanced oil recovery project in the event of a change of name of
an operator.
Sec. 89.026. FLUID LEVEL OR HYDRAULIC PRESSURE TEST. (a)
Documentation filed under Section 89.023(a)(4)(D) of the results of
a successful fluid level test is valid for a period of one year from
the date of the test. Documentation filed under that section of the
results of a successful hydraulic pressure test is valid for a
period of not more than five years from the date of the test.
(b) The operator must notify the office of the commission
oil and gas division district in which an inactive well is located
at least three days before the date the operator conducts a fluid
level or hydraulic pressure test of the well and may not conduct the
test without the approval of the office. The commission may require
that a test be witnessed by a commission employee.
(c) Documentation of the results of a successful fluid level
or hydraulic pressure test may be transferred to a new operator of
an existing inactive well.
(d) An operator who files documentation described by
Subsection (a) must pay an annual fee of $50 for each well covered
by the documentation. A fee collected under this section shall be
deposited in the oil-field cleanup fund.
Sec. 89.027. SUPPLEMENTAL FINANCIAL ASSURANCE. (a) A
supplemental bond, letter of credit, or cash deposit filed under
Section 89.023(a)(4)(E) is in addition to any other financial
assurance otherwise required of the operator or for the well.
(b) A supplemental bond, letter of credit, or cash deposit
may not be transferred to a new operator of an existing inactive
well. A new operator of an existing inactive well must file a new
supplemental bond, letter of credit, or cash deposit or otherwise
comply with the requirements of this subchapter by the deadline
provided by Section 89.022(b).
Sec. 89.028. ESCROW FUNDS. (a) Escrow funds described by
Section 89.023(a)(4)(F) must be deposited with the commission each
time an operator files an application for an extension of the
deadline for plugging an inactive well.
(b) Escrow funds deposited with the commission may be
released only with the approval of the commission as prescribed by
commission rule.
Sec. 89.029. AFFIRMATION REGARDING SURFACE REQUIREMENTS.
(a) An application for an extension of the deadline for plugging an
inactive well must include a written affirmation by the operator:
(1) that the operator has physically terminated
electric service to the well's production site; and
(2) stating the following, as applicable, if the
operator does not own the surface of the land on which the well is
located:
(A) if the well has been inactive for at least
five years but for less than 10 years as of the date of renewal of
the operator's organization report, that the operator has emptied
or purged of production fluids all piping, tanks, vessels, and
equipment associated with and exclusive to the well; or
(B) if the well has been inactive for at least 10
years as of the date of renewal of the operator's organization
report, that the operator has removed all surface process equipment
and related piping, tanks, tank batteries, pump jacks, headers, and
fences, as well as junk and trash as defined by commission rule,
associated with and exclusive to the well.
(b) An operator of an inactive well shall leave a clearly
visible marker at the wellhead of the well.
(c) The commission shall adopt rules regulating the
transfer of material described by Subsection (a)(2)(B) and
restricting its accumulation on an active lease.
(d) Notwithstanding Subsection (a), an operator may be
eligible for a temporary extension of the deadline for plugging an
inactive well or a temporary exemption from the requirements of
Subsection (a) as provided by commission rule if the operator is
unable to comply with the requirements of that subsection because
of safety concerns or required maintenance of the well site and the
operator includes with the application a written affirmation of the
facts regarding the safety concerns or maintenance.
(e) An operator may be eligible for an extension of the
deadline for plugging a well without complying with Subsection
(a)(2)(B) if the well is located on a unit or lease or in a field
associated with an enhanced oil recovery project and the operator
includes a statement in the written affirmation that the well is
part of such a project. The exemption provided by this subsection
applies only to the equipment required for the project.
(f) Notwithstanding the other provisions of this
subchapter, the commission shall adopt rules providing for the
phase-in of the duty to comply with Subsection (a)(2)(B) over a
period of five years beginning September 1, 2010. The rules must
require the operators of one-fifth of the wells that are subject to
that subsection in each year during the phase-in period to comply
with that subsection.
Sec. 89.030. REVOCATION OF EXTENSION OF DEADLINE FOR
PLUGGING INACTIVE WELL. The commission may revoke an extension of
the deadline for plugging an inactive well granted under this
subchapter if the commission determines, after notice and an
opportunity for a hearing, that the applicant is ineligible for the
extension under the commission's rules or orders.
SECTION 3. Section 91.111(c), Natural Resources Code, is
amended to read as follows:
(c) The fund consists of:
(1) penalties imposed under Section 85.381 for
violation of a law, order, or rule relating to well plugging
requirements;
(2) proceeds from bonds and other financial security
required by this chapter and benefits under well-specific plugging
insurance policies described by Section 91.104(c) that are paid to
the state as contingent beneficiary of the policies, subject to the
refund provisions of Section 91.1091, if applicable;
(3) private contributions, including contributions
made under Section 89.084;
(4) expenses collected under Section 89.083;
(5) fees imposed under Section 85.2021;
(6) civil penalties collected for violations of
Chapter 89 or of rules or orders relating to plugging that are
adopted under this code;
(7) proceeds collected under Sections 89.085 and
91.115;
(8) interest earned on the funds deposited in the
fund;
(9) civil penalties or costs recovered under Section
91.457 or 91.459;
(10) oil and gas waste hauler permit application fees
collected under Section 29.015, Water Code;
(11) costs recovered under Section 91.113(f);
(12) hazardous oil and gas waste generation fees
collected under Section 91.605;
(13) oil-field cleanup regulatory fees on oil
collected under Section 81.116;
(14) oil-field cleanup regulatory fees on gas
collected under Section 81.117;
(15) fees for a reissued certificate collected under
Section 91.707;
(16) fees collected under Section 91.1013;
(17) fees collected under Section 89.088;
(18) penalties collected under Section 81.0531;
(19) fees collected under Section 91.142;
(20) fees collected under Section 91.654;
(21) costs recovered under Sections 91.656 and 91.657;
(22) two-thirds of the fees collected under Section
81.0521; [and]
(23) fees collected under Sections 89.024 and 89.026;
and
(24) legislative appropriations.
SECTION 4. (a) Not later than September 1, 2010, the
Railroad Commission of Texas shall be prepared to grant extensions
of the deadline for plugging an inactive well under Subchapter B-1,
Chapter 89, Natural Resources Code, as added by this Act.
(b) The change in law made by this Act applies only to the
renewal or approval of an organization report on or after September
1, 2010. The renewal or approval of an organization report before
September 1, 2010, is governed by the law as it existed immediately
before the effective date of this Act, and that law is continued in
effect for that purpose.
SECTION 5. This Act takes effect September 1, 2009.