88R8005 JAM-F
By: Blanco S.B. No. 1686
A BILL TO BE ENTITLED
AN ACT
relating to the reduction and plugging of orphaned oil and gas
wells; providing for the imposition of a fee and an exemption from
certain taxes and fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 81.067(c), Natural Resources Code, is
amended to read as follows:
(c) The fund consists of:
(1) 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;
(2) private contributions, including contributions
made under Section 89.084;
(3) expenses collected under Section 89.083;
(4) fees imposed under Section 85.2021;
(5) costs recovered under Section 91.457 or 91.459;
(6) proceeds collected under Sections 89.085 and
91.115;
(7) interest earned on the funds deposited in the
fund;
(8) oil and gas waste hauler permit application fees
collected under Section 29.015, Water Code;
(9) costs recovered under Section 91.113(f);
(10) hazardous oil and gas waste generation fees
collected under Section 91.605;
(11) oil-field cleanup regulatory fees on oil
collected under Section 81.116;
(12) oil-field cleanup regulatory fees on gas
collected under Section 81.117;
(13) fees for a reissued certificate collected under
Section 91.707;
(14) fees collected under Section 91.1013;
(15) fees collected under Section 89.088;
(16) fees collected under Section 91.142;
(17) fees collected under Section 91.654;
(18) costs recovered under Sections 91.656 and 91.657;
(19) fees collected under Section 81.0521;
(20) fees collected under Sections 89.024 and 89.026;
(21) legislative appropriations;
(22) any surcharges collected under Section 81.070;
(23) fees collected under Section 91.0115;
(24) fees collected under Subchapter E, Chapter 121,
Utilities Code;
(25) fees collected under Section 27.0321, Water Code;
(26) fees collected under Section 81.071; [and]
(27) money collected under Section 81.021; and
(28) fees collected under Section 89.0475.
SECTION 2. Section 89.002(a), Natural Resources Code, is
amended by adding Subdivision (14) to read as follows:
(14) "Operator affected by an orphaned well" means:
(A) an operator of an oil or gas well that
accesses a productive horizon also accessed by an orphaned well; or
(B) an operator of an oil or gas well with a good
faith claim to access a productive horizon also accessed by an
orphaned well.
SECTION 3. Section 89.044(a), Natural Resources Code, is
amended to read as follows:
(a) The commission [or its employees or agents], the
operator, an operator affected by an orphaned well, [or] the
nonoperator, or an employee or agent of one of those persons, on
proper identification, may enter the land of another for the
purpose of plugging or replugging a well that has not been properly
plugged. An action to prevent the entry of land of another for the
purpose of plugging or replugging a well that has not been properly
plugged may not be sustained against a person authorized by this
subsection to enter the land for that purpose.
SECTION 4. The heading to Section 89.047, Natural Resources
Code, is amended to read as follows:
Sec. 89.047. ORPHANED WELL REDUCTION PROGRAM: OPERATORS
DESIGNATED IN 2006 OR 2007.
SECTION 5. Subchapter C, Chapter 89, Natural Resources
Code, is amended by adding Section 89.0475 to read as follows:
Sec. 89.0475. REDUCTION AND PLUGGING OF ORPHANED WELLS:
OPERATORS DESIGNATED BEGINNING IN 2024. (a) In this section,
"operator in good standing" and "orphaned well" have the meanings
assigned by Section 89.047.
(b) The commission shall designate a person who is an
operator in good standing as the operator of an orphaned well if the
person files with the commission:
(1) a factually supported claim based on a recognized
legal theory to a continuing possessory right in the mineral estate
accessed by the well, such as evidence of a current oil and gas
lease or a recorded deed conveying a fee interest in the mineral
estate;
(2) a completed certificate of compliance; and
(3) a nonrefundable fee in the amount of $250.
(c) A fee collected under Subsection (b)(3) shall be
deposited to the credit of the oil and gas regulation and cleanup
fund.
(d) A person who is designated as the operator of an
orphaned well on or after January 1, 2024, is entitled to receive:
(1) a nontransferable exemption from severance taxes
for production from the well as provided by Section 202.060, Tax
Code, until the fifth anniversary of the date the commission
designates the person as the operator of the well;
(2) a nontransferable exemption from the fees provided
by Sections 81.116 and 81.117 for production from the well until the
fifth anniversary of the date the commission designates the person
as the operator of the well; and
(3) a payment from the commission in the amount
described by Subsection (f) using money from the oil and gas
regulation and cleanup fund.
(e) A person who is designated as the operator of an
orphaned well is entitled to a payment under Subsection (d)(3) only
if:
(1) not later than the first anniversary of the date
the commission designates the person as the operator of the well:
(A) the person plugs the well in accordance with
commission rules; or
(B) the commission approves the application of
the owner of the surface estate of the tract of land on which the
well is located to condition the well for fresh water production and
the person designated as the operator of the well plugs the well in
accordance with commission rules up to the base of the usable
quality water stratum; and
(2) not later than the end of the state fiscal year
following the state fiscal year in which the person plugs the well,
the person submits to the commission:
(A) a request for reimbursement for plugging the
well; and
(B) documentation of the cost of plugging the
well.
(f) The amount to which a person is entitled under
Subsection (d)(3) is equal to 50 percent of the lesser of:
(1) the documented well-plugging costs; or
(2) the average cost incurred by the commission in the
preceding 24 months in plugging similar wells located in the same
county or general area.
(g) The commission shall make payments to persons under
Subsection (d)(3) annually in the same order the commission
determines the persons to be entitled to the payments. The
aggregate amount of payments in a state fiscal year under
Subsection (d)(3) may not exceed $500,000. The commission may, in
its discretion, make a payment to a person under Subsection (d)(3)
in the fiscal year following the fiscal year in which the well was
plugged. A person may not receive:
(1) more than one payment under Subsection (d)(3) for
the same well; or
(2) cumulative payments in an amount that exceeds the
amount of the bond, letter of credit, or cash deposit the person has
filed with the commission under Section 91.104.
(h) The commissioner shall include wells plugged under this
section in:
(1) the commission's well-plugging performance
metrics; and
(2) any monthly report produced by the commission
relating to well-plugging activity.
SECTION 6. The heading to Section 89.048, Natural Resources
Code, is amended to read as follows:
Sec. 89.048. PLUGGING OF WELL BY SURFACE ESTATE OWNER OR
AFFECTED OPERATOR.
SECTION 7. Section 89.048, Natural Resources Code, is
amended by amending Subsections (b), (c), and (d) and adding
Subsections (c-1) and (d-1) to read as follows:
(b) The owner of an interest in the surface estate of a tract
of land on which an orphaned well is located or an operator affected
by an orphaned well may contract with a commission-approved well
plugger to plug the well.
(c) If the surface estate owner or an operator affected by
an orphaned well enters into a contract under Subsection (b), the
surface estate owner, operator affected by an orphaned well, or
well plugger shall:
(1) not later than the 15th [30th] day before the date
the well is plugged, mail notice of its intent to plug the well to
the operator of the well at the operator's address as shown by the
records of the commission;
(2) assume responsibility for the physical operation
and control of the well as shown by a form the person files with the
commission and the commission approves;
(3) file a bond, letter of credit, or cash deposit
covering the well as required by Section 91.107; and
(4) plug the well in accordance with commission rules.
(c-1) On satisfaction of commission requirements, the
commission shall issue to a surface estate owner, operator affected
by an orphaned well, or well plugger, regardless of whether the
person has a good faith claim to the mineral estate accessed by an
orphaned well, a certificate of compliance and transportation
authority or similar authorization showing the person's assumption
of control of the well under Subsection (c)(2) for the purpose of
plugging or replugging the well.
(d) On successful plugging of the well by the well plugger,
the surface estate owner or an operator affected by an orphaned well
may submit documentation to the commission of the cost of the
well-plugging operation. The commission shall reimburse the
surface estate owner or an operator affected by an orphaned well
from money in the oil and gas regulation and cleanup fund in an
amount not to exceed 50 percent of the lesser of:
(1) the documented well-plugging costs; or
(2) the average cost incurred by the commission in the
preceding 24 months in plugging similar wells located in the same
county or general area.
(d-1) The commissioner shall include wells plugged under
this section in:
(1) the commission's well-plugging performance
metrics; and
(2) any monthly report produced by the commission
relating to well-plugging activity.
SECTION 8. Sections 202.060(b) and (c), Tax Code, are
amended to read as follows:
(b) The commission shall issue a certificate to a person who
is designated by the commission under Section 89.047 or 89.0475,
Natural Resources Code, as the operator of an orphaned well. The
certificate must identify the operator to whom and the well for
which the certificate is issued.
(c) Hydrocarbons produced from the well identified in the
certificate qualify for a severance tax exemption for the period
described by Section 89.047 or 89.0475, Natural Resources Code, as
applicable.
SECTION 9. This Act takes effect January 1, 2024.