| 1 | 1 | | 87R3272 SLB-F |
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| 2 | 2 | | By: Longoria H.B. No. 2868 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the financial security requirements for operators of |
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| 8 | 8 | | oil and gas wells. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 91.104(c), Natural Resources Code, is |
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| 11 | 11 | | amended to read as follows: |
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| 12 | 12 | | (c) A person required to file a bond, letter of credit, or |
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| 13 | 13 | | cash deposit under Section 91.103 who operates one or more wells is |
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| 14 | 14 | | considered to have met that requirement for a well if the well bore |
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| 15 | 15 | | is included in a well-specific plugging insurance policy that: |
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| 16 | 16 | | (1) is approved by the Texas Department of Insurance; |
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| 17 | 17 | | (2) names this state as the owner and contingent |
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| 18 | 18 | | beneficiary of the policy; |
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| 19 | 19 | | (3) names a primary beneficiary who agrees to plug the |
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| 20 | 20 | | specified well bore; |
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| 21 | 21 | | (4) is fully prepaid and cannot be canceled or |
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| 22 | 22 | | surrendered; |
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| 23 | 23 | | (5) provides that the policy continues in effect until |
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| 24 | 24 | | the specified well bore has been plugged; |
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| 25 | 25 | | (6) provides that benefits will be paid when, but not |
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| 26 | 26 | | before, the specified well bore has been plugged in accordance with |
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| 27 | 27 | | commission rules in effect at the time of plugging; and |
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| 28 | 28 | | (7) provides benefits that equal the greatest of: |
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| 29 | 29 | | (A) an amount equal to the amount determined by |
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| 30 | 30 | | the commission under Section 91.1043 for the oil and gas division |
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| 31 | 31 | | district in which the specified well is located multiplied by the |
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| 32 | 32 | | number of feet [$2 for each foot] of well depth, as determined in |
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| 33 | 33 | | the manner specified by the commission, for the [specified] well; |
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| 34 | 34 | | (B) if the specified well is a bay well and |
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| 35 | 35 | | regardless of whether the well is producing oil or gas, the amount |
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| 36 | 36 | | required under commission rules for a bay well that is not producing |
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| 37 | 37 | | oil or gas; |
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| 38 | 38 | | (C) if the specified well is an offshore well and |
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| 39 | 39 | | regardless of whether the well is producing oil or gas, the amount |
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| 40 | 40 | | required under commission rules for an offshore well that is not |
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| 41 | 41 | | producing oil or gas; or |
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| 42 | 42 | | (D) the payment otherwise due under the policy |
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| 43 | 43 | | for plugging the well bore. |
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| 44 | 44 | | SECTION 2. Section 91.1041(a), Natural Resources Code, is |
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| 45 | 45 | | amended to read as follows: |
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| 46 | 46 | | (a) A person required to file a bond, letter of credit, or |
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| 47 | 47 | | cash deposit under Section 91.103 who operates one or more wells may |
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| 48 | 48 | | file a bond in an amount equal to the amount determined by the |
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| 49 | 49 | | commission under Section 91.1043 for the oil and gas division |
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| 50 | 50 | | district in which each well is located multiplied by the number of |
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| 51 | 51 | | feet [$2 for each foot] of well depth for each well. |
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| 52 | 52 | | SECTION 3. Sections 91.1042(a) and (b), Natural Resources |
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| 53 | 53 | | Code, are amended to read as follows: |
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| 54 | 54 | | (a) A person required to file a bond, letter of credit, or |
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| 55 | 55 | | cash deposit under Section 91.103 may file a blanket bond to cover |
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| 56 | 56 | | all wells for which a bond, letter of credit, or cash deposit is |
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| 57 | 57 | | required as follows: |
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| 58 | 58 | | (1) a person who operates 10 or fewer wells shall file |
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| 59 | 59 | | a $35,000 [$25,000] blanket bond; |
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| 60 | 60 | | (2) a person who operates more than 10 but not more |
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| 61 | 61 | | [fewer] than 20 [100] wells shall file a $50,000 blanket bond; |
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| 62 | 62 | | (3) a person who operates more than 20 but not more |
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| 63 | 63 | | than 35 wells shall file a $75,000 blanket bond; |
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| 64 | 64 | | (4) a person who operates more than 35 but not more |
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| 65 | 65 | | than 60 wells shall file a $130,000 blanket bond; |
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| 66 | 66 | | (5) a person who operates more than 60 but fewer than |
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| 67 | 67 | | 100 wells shall file a $215,000 blanket bond; and |
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| 68 | 68 | | (6) [(3)] a person who operates 100 or more wells |
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| 69 | 69 | | shall file a $250,000 blanket bond. |
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| 70 | 70 | | (b) Notwithstanding Subsection (a), the commission by rule |
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| 71 | 71 | | shall set the amount of the bond for an operator of bay or offshore |
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| 72 | 72 | | wells at a reasonable amount that exceeds the amount provided by |
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| 73 | 73 | | Subsection (a)(1), (2), [or] (3), (4), (5), or (6), as applicable. |
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| 74 | 74 | | SECTION 4. Subchapter D, Chapter 91, Natural Resources |
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| 75 | 75 | | Code, is amended by adding Section 91.1043 to read as follows: |
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| 76 | 76 | | Sec. 91.1043. DETERMINATION OF AVERAGE PLUGGING COSTS. At |
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| 77 | 77 | | the beginning of each state fiscal year, the commission shall |
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| 78 | 78 | | determine the average cost for each foot of well depth of plugging a |
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| 79 | 79 | | well located in each oil and gas division district during the |
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| 80 | 80 | | preceding state fiscal year. |
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| 81 | 81 | | SECTION 5. (a) The changes in law made by this Act apply |
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| 82 | 82 | | only to a person required to file a bond, letter of credit, or cash |
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| 83 | 83 | | deposit under Section 91.103, Natural Resources Code, on or after |
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| 84 | 84 | | the effective date of this Act. A person required to file a bond, |
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| 85 | 85 | | letter of credit, or cash deposit under Section 91.103, Natural |
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| 86 | 86 | | Resources Code, before the effective date of this Act is governed by |
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| 87 | 87 | | the law as it existed immediately before the effective date of this |
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| 88 | 88 | | Act, and that law is continued in effect for that purpose. |
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| 89 | 89 | | (b) The changes in law made by this Act apply to each well |
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| 90 | 90 | | for which a person is required to file a bond, letter of credit, or |
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| 91 | 91 | | cash deposit under Section 91.103, Natural Resources Code, on or |
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| 92 | 92 | | after the effective date of this Act regardless of whether the |
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| 93 | 93 | | person was required to file a bond, letter of credit, or cash |
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| 94 | 94 | | deposit under that section for the well before the effective date of |
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| 95 | 95 | | this Act. |
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| 96 | 96 | | SECTION 6. This Act takes effect September 1, 2021. |
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