Texas 2023 - 88th Regular

Texas House Bill HB3839 Compare Versions

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1	1	88R7366 ANG-D
2	2	By: Goodwin H.B. No. 3839
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to financial security requirements for operators of oil
8	8	and gas wells.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 81.067(c), Natural Resources Code, is
11	11	amended to read as follows:
12	12	(c) The fund consists of:
13	13	(1) proceeds from bonds and other financial security
14	14	required by this chapter and benefits under well-specific plugging
15	15	insurance policies described by Section 91.104(c) that are paid to
16	16	the state as contingent beneficiary of the policies, subject to the
17	17	refund provisions of Section 91.1091, if applicable;
18	18	(2) private contributions, including contributions
19	19	made under Section 89.084;
20	20	(3) expenses collected under Section 89.083;
21	21	(4) fees imposed under Section 85.2021;
22	22	(5) costs recovered under Section 91.457 or 91.459;
23	23	(6) proceeds collected under Sections 89.085 and
24	24	91.115;
25	25	(7) interest earned on the funds deposited in the
26	26	fund;
27	27	(8) oil and gas waste hauler permit application fees
28	28	collected under Section 29.015, Water Code;
29	29	(9) costs recovered under Section 91.113(f);
30	30	(10) hazardous oil and gas waste generation fees
31	31	collected under Section 91.605;
32	32	(11) oil-field cleanup regulatory fees on oil
33	33	collected under Section 81.116;
34	34	(12) oil-field cleanup regulatory fees on gas
35	35	collected under Section 81.117;
36	36	(13) fees for a reissued certificate collected under
37	37	Section 91.707;
38	38	(14) fees collected under Section 91.1013;
39	39	(15) fees collected under Section 89.088;
40	40	(16) fees collected under Section 91.142;
41	41	(17) fees collected under Section 91.654;
42	42	(18) costs recovered under Sections 91.656 and 91.657;
43	43	(19) fees collected under Section 81.0521;
44	44	(20) fees collected under Sections 89.024 and 89.026;
45	45	(21) legislative appropriations;
46	46	(22) any surcharges collected under Section 81.070;
47	47	(23) fees collected under Section 91.0115;
48	48	(24) fees collected under Subchapter E, Chapter 121,
49	49	Utilities Code;
50	50	(25) fees collected under Section 27.0321, Water Code;
51	51	(26) fees collected under Section 81.071; [and]
52	52	(27) money collected under Section 81.021; and
53	53	(28) money transferred from a sinking fund under
54	54	Section 91.1045(b)(2).
55	55	SECTION 2. Section 89.023(a), Natural Resources Code, is
56	56	amended to read as follows:
57	57	(a) The commission may grant an extension of the deadline
58	58	for plugging an inactive well if the operator maintains a current
59	59	organization report with the commission as required by Section
60	60	91.142 and if, on or before the date of renewal of the operator's
61	61	organization report as required by that section, the operator files
62	62	with the commission an application for an extension that includes:
63	63	(1) an affirmation that complies with Section 89.029;
64	64	(2) a statement that the operator has, and on request
65	65	will provide, evidence of a good faith claim to a continuing right
66	66	to operate the well; [and]
67	67	(3) at least one of the following:
68	68	(A) documentation that since the preceding date
69	69	that the operator's organization report was required to be renewed
70	70	the operator has plugged, or restored to active operation as
71	71	defined by commission rule, a number of inactive wells equal to or
72	72	greater than 10 percent of the number of inactive wells operated by
73	73	the operator on that date;
74	74	(B) an abeyance of plugging report on a form
75	75	approved by the commission that:
76	76	(i) is in the form of a certification signed
77	77	by a person licensed by the Texas Board of Professional Engineers
78	78	and Land Surveyors as an engineer or by the Texas Board of
79	79	Professional Geoscientists;
80	80	(ii) includes:
81	81	(a) an affirmation by the licensed
82	82	person that the well has:
83	83	(1) a reasonable expectation of
84	84	economic value in excess of the cost of plugging the well for the
85	85	duration of the period covered by the report, based on the cost
86	86	calculation for plugging an inactive well; and
87	87	(2) a reasonable expectation of
88	88	being restored to a beneficial use that will prevent waste of oil or
89	89	gas resources that otherwise would not be produced if the well were
90	90	plugged; and
91	91	(b) appropriate documentation
92	92	demonstrating the basis for the affirmation of the well's future
93	93	utility; and
94	94	(iii) specifies the field and the covered
95	95	wells within that field in a format prescribed by the commission;
96	96	(C) a statement that the well is part of an
97	97	enhanced oil recovery project;
98	98	(D) if the operator of the well is not currently
99	99	otherwise required by commission rule or order to conduct a fluid
100	100	level or hydraulic pressure test of the well, documentation of the
101	101	results of a successful fluid level or hydraulic pressure test of
102	102	the well conducted in accordance with the commission's rules in
103	103	effect at the time the test is conducted;
104	104	(E) [a supplemental bond, letter of credit, or
105	105	cash deposit sufficient for each well specified in the application
106	106	that:
107	107	[(i) complies with the requirements of
108	108	Chapter 91; and
109	109	[(ii) is of an amount at least equal to the
110	110	cost calculation for plugging an inactive well for each well
111	111	specified in the application;
112	112	[(F)] documentation of the deposit with the
113	113	commission each time the operator files an application of an amount
114	114	of escrow funds as prescribed by commission rule that equal at least
115	115	10 percent of the total cost calculation for plugging an inactive
116	116	well for each well specified in the application; or
117	117	(F) [(G)] if the operator is a publicly traded
118	118	entity, [:
119	119	[(i)] the following documents:
120	120	(i) [(a)] a copy of the operator's federal
121	121	documents filed to comply with Financial Accounting Standards Board
122	122	Statement No. 143, Accounting for Asset Retirement Obligations;
123	123	and
124	124	(ii) [(b)] an original, executed Uniform
125	125	Commercial Code Form 1 Financing Statement, filed with the
126	126	secretary of state, that:
127	127	(a) [(1)] names the operator as the
128	128	"debtor" and the Railroad Commission of Texas as the "secured
129	129	creditor"; and
130	130	(b) [(2)] specifies the funds covered
131	131	by the documents described by Subparagraph (i) [Sub-subparagraph
132	132	(a)] in the amount at least equal to the applicable decommissioning
133	133	cost estimate established by the commission under Section
134	134	91.1041(b) for each well specified in the application; and
135	135	(4) a supplemental bond, letter of credit, or cash
136	136	deposit sufficient for each well specified in the application that:
137	137	(A) complies with the requirements of Chapter 91;
138	138	and
139	139	(B) is of an amount at least equal to the
140	140	applicable decommissioning cost estimate established by the
141	141	commission under Section 91.1041(b) for each well specified in the
142	142	application [of the cost calculation for plugging an inactive well
143	143	for each well specified in the application; or
144	144	[(ii) a blanket bond in the amount of the
145	145	lesser of:
146	146	[(a) the cost calculation for
147	147	plugging any inactive wells; or
148	148	[(b) $2 million].
149	149	SECTION 3. Section 89.027(a), Natural Resources Code, is
150	150	amended to read as follows:
151	151	(a) A supplemental bond, letter of credit, or cash deposit
152	152	filed under Section 89.023(a)(4) [89.023(a)(3)(E)] is in addition
153	153	to any other financial assurance otherwise required of the operator
154	154	or for the well.
155	155	SECTION 4. Section 89.028(a), Natural Resources Code, is
156	156	amended to read as follows:
157	157	(a) Escrow funds described by Section 89.023(a)(3)(E)
158	158	[89.023(a)(3)(F)] must be deposited with the commission each time
159	159	an operator files an application for an extension of the deadline
160	160	for plugging an inactive well.
161	161	SECTION 5. Sections 91.104(b) and (c), Natural Resources
162	162	Code, are amended to read as follows:
163	163	(b) A person required to file a bond, letter of credit, or
164	164	cash deposit under Section 91.103 who is an inactive operator or who
165	165	operates one or more wells must, at the time of filing or renewing
166	166	an organization report required by Section 91.142, file:
167	167	(1) an individual bond as provided under Section
168	168	91.1041; or
169	169	(2) [a blanket bond as provided under Section 91.1042;
170	170	or
171	171	[(3)] a letter of credit or cash deposit in the same
172	172	amount as required for an individual bond under Section 91.1041 [or
173	173	a blanket bond under Section 91.1042].
174	174	(c) A person required to file a bond, letter of credit, or
175	175	cash deposit under Section 91.103 who operates one or more wells is
176	176	considered to have met that requirement for a well if the well bore
177	177	is included in a well-specific plugging insurance policy that:
178	178	(1) is approved by the Texas Department of Insurance;
179	179	(2) names this state as the owner and contingent
180	180	beneficiary of the policy;
181	181	(3) names a primary beneficiary who agrees to plug the
182	182	specified well bore;
183	183	(4) is fully prepaid and cannot be canceled or
184	184	surrendered;
185	185	(5) provides that the policy continues in effect until
186	186	the specified well bore has been plugged;
187	187	(6) provides that benefits will be paid when, but not
188	188	before, the specified well bore has been plugged in accordance with
189	189	commission rules in effect at the time of plugging; and
190	190	(7) provides benefits that equal the greatest of:
191	191	(A) the [an] amount established by the commission
192	192	based on the decommissioning cost estimate established under
193	193	Section 91.1041(b) for the applicable region [equal to $2 for each
194	194	foot of well depth, as determined in the manner specified by the
195	195	commission, for the specified well];
196	196	(B) if the specified well is a bay well and
197	197	regardless of whether the well is producing oil or gas, the amount
198	198	required under commission rules for a bay well that is not producing
199	199	oil or gas;
200	200	(C) if the specified well is an offshore well and
201	201	regardless of whether the well is producing oil or gas, the amount
202	202	required under commission rules for an offshore well that is not
203	203	producing oil or gas; or
204	204	(D) the payment otherwise due under the policy
205	205	for plugging the well bore.
206	206	SECTION 6. Subchapter D, Chapter 91, Natural Resources
207	207	Code, is amended by amending Section 91.1041 and adding Section
208	208	91.1045 to read as follows:
209	209	Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
210	210	file a bond, letter of credit, or cash deposit under Section 91.103
211	211	who operates one or more wells may file a bond in an amount
212	212	established by the commission. The commission shall establish the
213	213	bond amount based on the decommissioning cost estimate established
214	214	under Subsection (b) for the applicable region [equal to $2 for each
215	215	foot of well depth for each well].
216	216	(b) Based on the information provided to the commission
217	217	under [Notwithstanding] Subsection (c) [(a)], the commission [by
218	218	rule] shall establish decommissioning cost estimates for each oil
219	219	and gas producing region of the state, as determined by the
220	220	commission, annually and post the estimates on the commission's
221	221	publicly accessible Internet website [set the amount of the bond
222	222	for an operator of one or more bay or offshore wells at a reasonable
223	223	amount that exceeds the amount provided by Subsection (a)].
224	224	(c) The commission shall require each operator to provide
225	225	decommissioning cost information to the commission on an annual
226	226	basis, including, for each well site:
227	227	(1) the depth of the well;
228	228	(2) the age of the well bore;
229	229	(3) a summary explaining factors or complications
230	230	related to the well or well site that may influence the cost of
231	231	plugging or cleanup at the well site;
232	232	(4) an estimated cost of materials and equipment
233	233	necessary to plug the well bore and clean up the well site;
234	234	(5) an estimated cost of labor necessary to plug the
235	235	well bore, clean up the well site, and remove any equipment;
236	236	(6) overhead expenses; and
237	237	(7) whether the well bore or site has undergone
238	238	reworking operations during the preceding year.
239	239	(d) When calculating under Subsection (a) the amount of the
240	240	bond a person who operates one or more wells is required to file,
241	241	the commission shall exclude a well if the well bore is included in
242	242	a well-specific plugging insurance policy described by Section
243	243	91.104(c).
244	244	(e) [(d)] If the inclusion of a bay or offshore well whose
245	245	well bore is included in a well-specific plugging insurance policy
246	246	described by Section 91.104(c) in the calculation under Subsection
247	247	(b) of the amount of the bond an operator of one or more bay or
248	248	offshore wells is required to file would result in an increase in
249	249	the amount of the bond that would otherwise be required, the rules
250	250	must provide for the exclusion of the well from the calculation.
251	251	Sec. 91.1045. PAYMENT TO AND USE OF SINKING FUND. (a) A
252	252	person who files a bond under Section 91.1041 shall pay into a
253	253	sinking fund established by the commission an amount equal to the
254	254	full cost of decommissioning the well for which the bond was filed,
255	255	as determined by the commission under Section 91.1041(b), divided
256	256	into equal annual payments to be completed by the earlier of:
257	257	(1) 15 years; or
258	258	(2) the estimated number of years the well is expected
259	259	to be productive based on the projected production decline curve of
260	260	the well.
261	261	(b) Money in the sinking fund may be used by the operator or
262	262	the commission to pay the costs of plugging the well bore and
263	263	remediating the well site. Any amount remaining in the sinking fund
264	264	after the plugging and remediation is complete shall be transferred
265	265	to:
266	266	(1) the operator, if the operator plugs the well and
267	267	remediates the well site to commission standards; or
268	268	(2) the oil and gas regulation and cleanup fund
269	269	established under Section 81.067, if, after the operator is given
270	270	the opportunity to complete the plugging and remediation, the
271	271	commission plugs the well and remediates the well site to
272	272	commission standards.
273	273	(c) This section does not apply to an operator whose
274	274	operation results in the completion of a well as a dry hole. An
275	275	operator described by this subsection must plug the well in
276	276	accordance with the inactive well plugging requirements
277	277	established under Chapter 81.
278	278	SECTION 7. Section 91.1042, Natural Resources Code, is
279	279	repealed.
280	280	SECTION 8. (a) The changes in law made by this Act apply
281	281	only to a person required to file a bond, letter of credit, or cash
282	282	deposit under Section 89.023 or 91.103, Natural Resources Code, on
283	283	or after the effective date of this Act. A person required to file a
284	284	bond, letter of credit, or cash deposit under Section 89.023 or
285	285	91.103, Natural Resources Code, before the effective date of this
286	286	Act is governed by the law as it existed immediately before the
287	287	effective date of this Act, and that law is continued in effect for
288	288	that purpose.
289	289	(b) Notwithstanding Subsection (a), an operator of a well in
290	290	existence on the effective date of this Act is not required to hold
291	291	an individual bond that meets the requirements of Section 91.1041,
292	292	Natural Resources Code, as amended by this Act, until September 1,
293	293	2028, and the law as it existed immediately before the effective
294	294	date of this Act is continued in effect for that purpose.
295	295	SECTION 9. This Act takes effect September 1, 2023.