88R7367 ANG-D
By: Goodwin H.B. No. 3840
A BILL TO BE ENTITLED
AN ACT
relating to the extension of the deadline for plugging certain
inactive wells under the jurisdiction of the Railroad Commission of
Texas.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 89.023, Natural Resources Code, is
amended by amending Subsection (a) and adding Subsections (a-1),
(a-2), (c), (d), and (e) to read as follows:
(a) Subject to Subsection (c), the [The] commission may
grant an extension of not more than five years 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 operator has, and on request
will provide, evidence of a good faith claim to a continuing right
to operate the well; [and]
(3) 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
and Land Surveyors as an engineer or by 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
(F) [(G)] if the operator is a publicly traded
entity,[:
[(i)] the following documents:
(i) [(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
(ii) [(b)] an original, executed Uniform
Commercial Code Form 1 Financing Statement, filed with the
secretary of state, that:
(a) [(1)] names the operator as the
"debtor" and the Railroad Commission of Texas as the "secured
creditor"; and
(b) [(2)] specifies the funds covered
by the documents described by Subparagraph (i) [Sub-subparagraph
(a)] in the amount at least equal to the applicable decommissioning
cost estimate established by the commission under Subsection (a-1)
for each well specified in the application; and
(4) a supplemental bond, letter of credit, or cash
deposit sufficient for each well specified in the application that:
(A) complies with the requirements of Chapter 91;
and
(B) is of an amount at least equal to the
applicable decommissioning cost estimate established by the
commission under Subsection (a-1) for each well specified in the
application [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].
(a-1) Based on the information provided to the commission
under Subsection (a-2), the commission shall establish
decommissioning cost estimates for each oil and gas producing
region of the state, as determined by the commission, annually and
post the estimates on the commission's publicly accessible Internet
website.
(a-2) The commission shall require each operator to provide
decommissioning cost information to the commission on an annual
basis, including, for each well site:
(1) the depth of the well;
(2) the age of the well bore;
(3) a summary explaining factors or complications
related to the well or well site that may influence the cost of
plugging or cleanup at the well site;
(4) an estimated cost of materials and equipment
necessary to plug the well bore and clean up the well site;
(5) an estimated cost of labor necessary to plug the
well bore, clean up the well site, and remove any equipment;
(6) overhead expenses; and
(7) whether the well bore or site has undergone
reworking operations during the preceding year.
(c) If an operator has previously obtained an extension of
the deadline for plugging an inactive well of five years or more,
the commission may only grant two additional one-year extensions.
(d) The commission may deny a request for an extension of
the deadline for plugging an inactive well if the operator has not
demonstrated financial solvency.
(e) Notwithstanding Section 89.021, this section applies to
bay and offshore wells.
SECTION 2. Section 89.027(a), Natural Resources Code, is
amended to read as follows:
(a) A supplemental bond, letter of credit, or cash deposit
filed under Section 89.023(a)(4) [89.023(a)(3)(E)] is in addition
to any other financial assurance otherwise required of the operator
or for the well.
SECTION 3. Section 89.028(a), Natural Resources Code, is
amended to read as follows:
(a) Escrow funds described by Section 89.023(a)(3)(E)
[89.023(a)(3)(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.
SECTION 4. (a) The changes in law made by this Act apply
only to a person required to file a bond, letter of credit, or cash
deposit under Section 89.023, Natural Resources Code, on or after
the effective date of this Act. A person required to file a bond,
letter of credit, or cash deposit under Section 89.023, Natural
Resources Code, before the effective date of this Act 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.
(b) Notwithstanding Subsection (a), an operator of a well in
existence on the effective date of this Act is not required to hold
an individual bond that meets the requirements of Section 89.023,
Natural Resources Code, as amended by this Act, until September 1,
2026. The law as it existed immediately before the effective date
of this Act is continued in effect for that purpose.
SECTION 5. This Act takes effect September 1, 2023.