Bill Text: CA SB665 | 2013-2014 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Oil and gas: drilling: indemnity bonds: wells.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Passed) 2013-09-20 - Chaptered by Secretary of State. Chapter 315, Statutes of 2013. [SB665 Detail]

Download: California-2013-SB665-Amended.html
BILL NUMBER: SB 665	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 24, 2013
	AMENDED IN SENATE  APRIL 30, 2013
	AMENDED IN SENATE  APRIL 16, 2013

INTRODUCED BY   Senator Wolk

                        FEBRUARY 22, 2013

   An act to amend Sections 3204, 3205,  and 3205.1 of
  3205.1, and 320  5.2 of, and to add and
repeal Section 3206.1 of,  the Public Resources Code, relating
to oil and gas.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 665, as amended, Wolk. Oil and gas: drilling: 
indemnity bonds.   wells.  
   Existing 
    (1)     Existing  law requires an
operator of an oil or gas well, or a well located on submerged lands
under ocean waters, who engages in the drilling, redrilling,
deepening, or in any operation altering the casing, of any well to
file with the State Oil and Gas Supervisor an indemnity bond in an
amount based on the depth of the well or a blanket indemnity bond in
a specified amount, but permits the operator, with the approval of
the supervisor, to make certain deposits in lieu of the bond.
   This bill would instead require the amount of the indemnity bond
for any well to be $100,000 and to be filed with the supervisor at
the time of the filing of the notice of intention to perform work on
a well, as specified. The bill would authorize an operator operating
20 or more wells at any time to file a blanket indemnity bond to
cover the operation of all the operator's wells, in lieu of an
individual indemnity bond for each well, in an amount of either
$2,000,000, which would not include bonds or fees required for idled
wells, or $5,000,000, which would include bonds or fees required for
idled wells. The bill would increase the amount of the blanket
indemnity bond required to be filed by an operator operating one or
more wells located on submerged lands under ocean waters to
$1,000,000. 
   (2) Existing law requires any person who engages in the operation
of a class II commercial wastewater disposal well to file an
indemnity bond with the supervisor for $50,000.  
   This bill would raise the amount of the required bond to $100,000.
 
   (3) Under existing law, various provisions regulate idle oil and
gas wells.  
   This bill would require the Department of Conservation, in
consultation with the State Water Resources Control Board and the
regional water quality control boards, on or before September 30,
2014, to prepare a report to the Legislature and the Governor
regarding the management, disposition, and potential repurposing of
idle oil and gas and idle water wells. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 3204 of the Public Resources Code is amended to
read:
   3204.  (a) An operator who, on or after January 1, 2014, engages
in the drilling, redrilling, deepening, or in any operation
permanently altering the casing, of a well shall file with the
supervisor an individual indemnity bond in the sum of one hundred
thousand dollars ($100,000) for each well so drilled, redrilled,
deepened, or permanently altered.
   (b) The bond shall be filed with the supervisor at the time of the
filing of the notice of intention to perform work on the well, as
provided in Section 3203. The bond shall be executed by the operator,
as principal, and by an authorized surety company, as surety, on the
condition that the principal named in the bond shall faithfully
comply with all the provisions of this chapter, in drilling,
redrilling, deepening, or permanently altering the casing in any well
or wells covered by the bond, and shall secure the state against all
losses, charges, and expenses incurred by it to obtain the
compliance by the principal named in the bond.
   (c) The conditions of the bond shall be stated in substantially
the following language: "If the ____, the above bounden principal,
shall well and truly comply with all the provisions of Division 3
(commencing with Section 3000) of the Public Resources Code and shall
obey all lawful orders of the State Oil and Gas Supervisor or the
district deputy or deputies, subject to subsequent appeal as provided
in that division, and shall pay all charges, costs, and expenses
incurred by the supervisor or the district deputy or deputies in
respect of the well or wells or the property or properties of the
principal, or assessed against the well or wells or the property or
properties of the principal, in pursuance of the provisions of that
division, then this obligation shall be void; otherwise, it shall
remain in full force and effect."
  SEC. 2.  Section 3205 of the Public Resources Code is amended to
read:
   3205.  An operator who engages in the drilling, redrilling,
deepening, or in any operation permanently altering the casing, of 20
or more wells at any time, may file with the supervisor one blanket
indemnity bond to cover all the operations in any of its wells in the
state in lieu of an individual indemnity bond for each operation as
required by Section 3204. The bond shall be executed by the operator,
as principal, and by an authorized surety company, as surety, and
shall be in substantially the same language and upon the same
conditions as provided in Section 3204, except as to the difference
in the amount. The bond shall be provided in one of the following
amounts, as applicable:
   (a) The sum of two million dollars ($2,000,000), which does not
include the bond or fee required in Section 3206. A blanket cash bond
or blanket surety bond provided prior to January 1, 2014, shall be
increased to comply with this subdivision on or before January 1,
2016.
   (b) The sum of five million dollars ($5,000,000), which does
include the bond or fee required in Section 3206.
  SEC. 3.  Section 3205.1 of the Public Resources Code is amended to
read:
   3205.1.  (a) Notwithstanding Sections 3204 and 3205, a person who
engages in the drilling, redrilling, deepening, or in any operation
permanently altering the casing, of one or more wells located on
submerged lands under ocean waters within the jurisdiction of this
state, shall file with the supervisor a blanket indemnity bond for
one million dollars ($1,000,000) to cover all his or her operations
in drilling, redrilling, deepening, or permanently altering the
casing in any of his or her wells located on those submerged lands.
The bond shall be executed by the person, as principal, and by an
authorized surety company, as surety, and the conditions of the bond
shall be the same as the conditions stated in Section 3204, except
for the difference in the amount.
   (b) In addition to providing the bond required by subdivision (a),
a person who operates one or more wells that are located on tide or
submerged lands within the jurisdiction of this state shall provide
an additional amount of security acceptable to the supervisor,
covering the full costs of plugging and abandoning all of the
operator's wells. The supervisor shall determine the amount of the
security required of each operator, based on his or her determination
of the reasonable costs of that plugging and abandonment. The
supervisor may not adjust the amount of security required of each
operator more frequently than once every three years, to reflect
changes in those costs. An operator may self-insure this security
obligation if the supervisor, at his or her discretion, determines
that the operator has sufficient financial resources to plug and
abandon the wells for which the operator is responsible. The security
shall remain in effect until all wells are plugged and abandoned in
accordance with Section 3208, but the supervisor shall reduce the
amount of the security required of an operator to reflect reduced
obligations as wells are plugged and abandoned.
   (c) If the state lease or other agreement that sets forth
obligations or performance requirements under the lease provides
security that is equal to, or greater than, the total of the
additional security required pursuant to subdivision (b), plus all
other liabilities under the lease or other agreement, the supervisor
shall not require the additional security.
   SEC. 4.    Section 3205.2 of the  Public
Resources Code   is amended to read: 
   3205.2.  (a) Notwithstanding Section 3204, any person who engages
in the operation of a class II commercial wastewater disposal well,
as defined in subdivision (d), shall file an indemnity bond with the
supervisor for  fifty   one hundred 
thousand dollars  ($50,000)   ($100,000) 
for each well so used. The bond shall cover all operations of
drilling, redrilling, deepening, altering casing, maintaining, or
abandoning the well and attendant facilities. The bond shall be
executed by the person as the principal, and by an authorized surety
company as the surety, and, except for differences in the amount,
shall be in substantially the same language and upon the same
conditions as provided in Section 3204.
   (b) A blanket bond submitted under subdivision (a) or (c) of
Section 3205 may be used in lieu of the bond required in subdivision
(a), except that the termination and cancellation shall be in
accordance with subdivision (c) of this section.
   (c) Notwithstanding Section 3207, any bond issued in compliance
with this section may be terminated and canceled and the surety
relieved of all obligations thereunder when the well is properly
abandoned or another valid bond has been substituted therefor.
   (d) A class II commercial wastewater disposal well is a well that
is used to dispose of oilfield wastewater for a fee and that is
regulated by the division pursuant to this chapter and Subpart F
(commencing with Section 147.250) of Part 147 of Title 40 of the Code
of Federal Regulations.
   SEC. 5.    Section 3206.1 is added to the  
Public Resources Code   , to read:  
   3206.1.  (a) On or before September 30, 2014, the Department of
Conservation, in consultation with the State Water Resources Control
Board and the regional water quality control boards, shall prepare a
report to the Legislature and the Governor regarding the management,
disposition, and potential repurposing of idle oil and gas and water
wells. The report shall include, but is not limited to, all of the
following:
   (1) The number of idle wells and long-term idle wells, as defined
in Section 3008, located in each district in the state.
   (2) The number of water wells, as defined in Section 13710 of the
Water Code, located within an oil and gas field in each district
within the state.
   (3) The surface and subsurface location of all idle oil and gas
wells and water wells within an oil and gas field in the state.
   (4) A determination of the risks to ground water from idle oil and
gas wells within the state.
   (5) Definitions of water quality designations used in the report.
   (6) An evaluation of the benefits and drawbacks of, and potential
public health, safety, and environmental issues regarding, the
elimination or repurposing of idle oil, gas, and water wells in the
state.
   (7) Options to eliminate, repurpose, or otherwise ensure the safe
and proper management of idle wells in the state.
   (8) Determination of proper well construction and design for the
options identified for repurposing wells.
   (9) Legislative, administrative, or rulemaking changes necessary
to accomplish the options suggested under paragraph (7).
   (b) The report required pursuant to subdivision (a) shall be in
compliance with Section 9795 of the Government Code.
   (c) Data collected and reviewed for this report shall be used to
develop maps and accessory data to ensure the protection and
directives under Section 3107.
   This section shall become inoperative on September 30, 2016, and,
as of January 1, 2017, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2017, deletes or
extends the dates on which it becomes inoperative and is repealed.
                                       
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