Bill Text: TX HB3839 | 2023-2024 | 88th Legislature | Introduced

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Bill Title: Relating to financial security requirements for operators of oil and gas wells.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced - Dead) 2023-03-20 - Referred to Energy Resources [HB3839 Detail]

Download: Texas-2023-HB3839-Introduced.html

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88R7366 ANG-D
By: Goodwin H.B. No. 3839

A BILL TO BE ENTITLED
AN ACT
relating to financial security requirements for operators of oil
and gas wells.
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) money transferred from a sinking fund under
Section 91.1045(b)(2).
SECTION 2. Section 89.023(a), Natural Resources Code, is
amended to read as follows:
(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 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 Section
91.1041(b) 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 Section 91.1041(b) 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].
SECTION 3. 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 4. 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 5. Sections 91.104(b) and (c), Natural Resources
Code, are amended to read as follows:
(b) A person required to file a bond, letter of credit, or
cash deposit under Section 91.103 who is an inactive operator or who
operates one or more wells must, at the time of filing or renewing
an organization report required by Section 91.142, file:
(1) an individual bond as provided under Section
91.1041; or
(2) [a blanket bond as provided under Section 91.1042;
or
[(3)] a letter of credit or cash deposit in the same
amount as required for an individual bond under Section 91.1041 [or
a blanket bond under Section 91.1042].
(c) A person required to file a bond, letter of credit, or
cash deposit under Section 91.103 who operates one or more wells is
considered to have met that requirement for a well if the well bore
is included in a well-specific plugging insurance policy that:
(1) is approved by the Texas Department of Insurance;
(2) names this state as the owner and contingent
beneficiary of the policy;
(3) names a primary beneficiary who agrees to plug the
specified well bore;
(4) is fully prepaid and cannot be canceled or
surrendered;
(5) provides that the policy continues in effect until
the specified well bore has been plugged;
(6) provides that benefits will be paid when, but not
before, the specified well bore has been plugged in accordance with
commission rules in effect at the time of plugging; and
(7) provides benefits that equal the greatest of:
(A) the [an] amount established by the commission
based on the decommissioning cost estimate established under
Section 91.1041(b) for the applicable region [equal to $2 for each
foot of well depth, as determined in the manner specified by the
commission, for the specified well];
(B) if the specified well is a bay well and
regardless of whether the well is producing oil or gas, the amount
required under commission rules for a bay well that is not producing
oil or gas;
(C) if the specified well is an offshore well and
regardless of whether the well is producing oil or gas, the amount
required under commission rules for an offshore well that is not
producing oil or gas; or
(D) the payment otherwise due under the policy
for plugging the well bore.
SECTION 6. Subchapter D, Chapter 91, Natural Resources
Code, is amended by amending Section 91.1041 and adding Section
91.1045 to read as follows:
Sec. 91.1041. INDIVIDUAL BOND. (a) A person required to
file a bond, letter of credit, or cash deposit under Section 91.103
who operates one or more wells may file a bond in an amount
established by the commission. The commission shall establish the
bond amount based on the decommissioning cost estimate established
under Subsection (b) for the applicable region [equal to $2 for each
foot of well depth for each well].
(b) Based on the information provided to the commission
under [Notwithstanding] Subsection (c) [(a)], the commission [by
rule] 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 [set the amount of the bond
for an operator of one or more bay or offshore wells at a reasonable
amount that exceeds the amount provided by Subsection (a)].
(c) 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.
(d) When calculating under Subsection (a) the amount of the
bond a person who operates one or more wells is required to file,
the commission shall exclude a well if the well bore is included in
a well-specific plugging insurance policy described by Section
91.104(c).
(e) [(d)] If the inclusion of a bay or offshore well whose
well bore is included in a well-specific plugging insurance policy
described by Section 91.104(c) in the calculation under Subsection
(b) of the amount of the bond an operator of one or more bay or
offshore wells is required to file would result in an increase in
the amount of the bond that would otherwise be required, the rules
must provide for the exclusion of the well from the calculation.
Sec. 91.1045. PAYMENT TO AND USE OF SINKING FUND. (a) A
person who files a bond under Section 91.1041 shall pay into a
sinking fund established by the commission an amount equal to the
full cost of decommissioning the well for which the bond was filed,
as determined by the commission under Section 91.1041(b), divided
into equal annual payments to be completed by the earlier of:
(1) 15 years; or
(2) the estimated number of years the well is expected
to be productive based on the projected production decline curve of
the well.
(b) Money in the sinking fund may be used by the operator or
the commission to pay the costs of plugging the well bore and
remediating the well site. Any amount remaining in the sinking fund
after the plugging and remediation is complete shall be transferred
to:
(1) the operator, if the operator plugs the well and
remediates the well site to commission standards; or
(2) the oil and gas regulation and cleanup fund
established under Section 81.067, if, after the operator is given
the opportunity to complete the plugging and remediation, the
commission plugs the well and remediates the well site to
commission standards.
(c) This section does not apply to an operator whose
operation results in the completion of a well as a dry hole. An
operator described by this subsection must plug the well in
accordance with the inactive well plugging requirements
established under Chapter 81.
SECTION 7. Section 91.1042, Natural Resources Code, is
repealed.
SECTION 8. (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 or 91.103, 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 or
91.103, 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 91.1041,
Natural Resources Code, as amended by this Act, until September 1,
2028, and the law as it existed immediately before the effective
date of this Act is continued in effect for that purpose.
SECTION 9. This Act takes effect September 1, 2023.