Bill Text: TX HB3839 | 2023-2024 | 88th Legislature | Introduced
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
88R7366 ANG-D | ||
By: Goodwin | H.B. No. 3839 |
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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; [ |
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(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; [ |
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(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) [ |
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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) [ |
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entity, [ |
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(i) [ |
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documents filed to comply with Financial Accounting Standards Board | ||
Statement No. 143, Accounting for Asset Retirement Obligations; | ||
and | ||
(ii) [ |
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Commercial Code Form 1 Financing Statement, filed with the | ||
secretary of state, that: | ||
(a) [ |
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"debtor" and the Railroad Commission of Texas as the "secured | ||
creditor"; and | ||
(b) [ |
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by the documents described by Subparagraph (i) [ |
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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 [ |
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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) [ |
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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) | ||
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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) [ |
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amount as required for an individual bond under Section 91.1041 [ |
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(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 [ |
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based on the decommissioning cost estimate established under | ||
Section 91.1041(b) for the applicable region [ |
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(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 [ |
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(b) Based on the information provided to the commission | ||
under [ |
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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 [ |
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(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) [ |
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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. |