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

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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

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BILL NUMBER: SB 665	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 16, 2013

INTRODUCED BY   Senator Wolk

                        FEBRUARY 22, 2013

   An act to amend Sections 3204, 3205,  and  3205.1
 , and 3205.2  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.
   Existing law requires an operator of an oil or gas well, or a well
located on submerged lands under ocean waters,  or a class
II commercial wastewater disposal well,  who engages in the
drilling, redrilling, deepening, or in any operation altering the
casing, of any well  , or in maintaining or abandoning the
well or attendant facilities in regard to the wastewater disposal
wells,  to file with the State Oil and Gas Supervisor an
indemnity bond  in a specified amount   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  delete the amounts specified in these
provisions for indemnity bonds and deposits in lieu of indemnity
bonds, leaving those amounts unspecified   instead
require the amount of the indemnity bond for any well to be $100,000.
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 .
   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.   Any   An  operator who, on or
after January 1,  1999   2014  , engages in
the drilling, redrilling, deepening, or in any operation permanently
altering the casing, of  any   a  well
shall file with the supervisor an individual indemnity bond in the
 specified  sum  of one hundred thousand dollars
($100,000)  for each well so drilled, redrilled, deepened, or
permanently altered.  This sum shall be fifteen thousand
dollars ($15,000) for each well less than 5,000 feet deep, twenty
thousand dollars ($20,000) for each well at least 5,000 feet but less
than 10,000 feet deep, and thirty thousand dollars ($30,000) for
each well 10,000 or more feet deep. 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, conditioned 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 such compliance by the principal named in the bond.

   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.   Any   An  operator who engages
in the drilling, redrilling, deepening, or in any operation
permanently altering the casing, of  one   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 hundred fifty thousand  
two million  dollars  ($250,000)  
($2,000,000)  , which does not include the bond or fee required
in Section 3206. A blanket surety bond provided prior to January 1,
1999, shall be increased to comply with this subdivision on or before
January 1,  2001   2014  . A blanket cash
bond provided prior to January 1,  1999   2015
 , shall be increased  by a minimum of thirty thousand
dollars ($30,000) per year, initially payable January 1, 2000, and
yearly on January 1, thereafter, until the amount on deposit is
sufficient  to comply with this subdivision  on or
before January 1, 2016  . 
   (b) The sum of one hundred thousand dollars ($100,000), which does
not include the bond or fee required in Section 3206, for any
operator having 50 or fewer wells in the state, exclusive of properly
abandoned wells.  
   (c) 
    (b)  The sum of  one   five 
million dollars  ($1,000,000)   ($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,  any
  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  two hundred fifty
thousand   one million  dollars ($250,000)
  ($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),
 any   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. 
  SECTION 1.    Section 3204 of the Public Resources
Code is amended to read:
   3204.  Any operator who, on or after January 1, 2014, engages in
the drilling, redrilling, deepening, or in any operation permanently
altering the casing, of any well shall file with the supervisor an
individual indemnity bond in the specified sum for each well so
drilled, redrilled, deepened, or permanently altered. This sum shall
be ______ for each well less than 5,000 feet deep, ______ for each
well at least 5,000 feet but less than 10,000 feet deep, and ______
for each well 10,000 or more feet deep. 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, conditioned 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 such compliance by the principal named in the bond.
   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.  Any operator who engages in the drilling, redrilling,
deepening, or in any operation permanently altering the casing, of
one 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 ______, which does not include the bond or fee
required in Section 3206. A blanket surety bond provided prior to
January 1, 2014, shall be increased to comply with this subdivision
on or before January 1, 2016. A blanket cash bond provided prior to
January 1, 2014, shall be increased by a minimum of ______ per year,
initially payable January 1, 2015, and yearly on January 1,
thereafter, until the amount on deposit is sufficient to comply with
this subdivision.
   (b) The sum of ______, which does not include the bond or fee
required in Section 3206, for any operator having 50 or fewer wells
in the state, exclusive of properly abandoned wells.
   (c) The sum of ______, 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, any 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 ______ 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),
any 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 ______ 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.