Requiring operators to post a bond for each well and to condition the release of the bond
H. B. 2061
(By Delegate Manypenny)
[Introduced February 13, 2013; referred to the
Committee on the Judiciary then Finance.]
A BILL to amend and reenact §22-6A-15 of the Code of West Virginia,
1931, as amended, relating to a requirement that operators
post a bond for performance and recompense of landowners for
each well for the life of the well and until all performance
requirements and obligations to landowners have been
satisfied.
Be it enacted by the Legislature of West Virginia:
That §22-6A-15 of the Code of West Virginia, 1931, as amended,
be amended and reenacted to read as follows:
ARTICLE 6A. NATURAL GAS HORIZONTAL WELL CONTROL ACT.
§22-6A-15. Performance and recompense bonds; corporate surety or
other security.
(a) No permit may be issued pursuant to this article unless a
bond as described in subsection (d) (c) of this section which is required for a particular activity particular activities and
obligations by this article is or has been furnished as provided in
this section.
(b) A separate bond as described in subsection (d) (c)
of this
section may shall be furnished for each horizontal well drilled.
Each of these bonds shall be in the sum of $50,000 payable to the
State of West Virginia, conditioned on full compliance with all
laws, rules relating to the drilling, redrilling, deepening, casing
and stimulating of horizontal wells; and to the plugging of
horizontal wells when these become low or nonproducing or when
production ceases; to the abandonment and reclamation of horizontal
wells; compensation to landowners under article six-b of this
chapter; completion of a permanent water supply under section
eighteen of this article; and for furnishing reports and
information required by the secretary.
(c) When an operator makes or has made application for permits
to drill or stimulate a number of horizontal wells, the operator
may, in lieu of furnishing a separate bond, furnish a blanket bond
in the sum of $250,000 payable to the State of West Virginia, and
conditioned as provided in subsection (b) of this section.
(d) (c) The form of the bond required by this article shall be
approved by the secretary and may include, at the option of the
operator, surety bonding, collateral bonding, including cash and
securities, letters of credit, establishment of an escrow account, self-bonding or a combination of these methods. If collateral
bonding is used, the operator may elect to deposit cash, or
collateral securities or certificates as follows: Bonds of the
United States or its possessions, of the federal land bank, or of
the homeowners' loan corporation; full faith and credit general
obligation bonds of the State of West Virginia or other states or
of any county, district or municipality of the State of West
Virginia or other states; or certificates of deposit in a bank in
this state, which certificates shall be in favor of the department.
The cash deposit or market value of the securities or certificates
shall be equal to or greater than the amount of the bond. The
secretary shall, upon receipt of any deposit of cash, securities or
certificates, promptly place the same with the Treasurer of the
State of West Virginia whose duty it is to receive and hold them in
the name of the state in trust for the purpose of which the deposit
is made when the permit is issued. life of the well and until the
operator has discharged all obligations including those owed to
landowners. The operator is entitled to all interest and income
earned on the collateral securities filed by the operator. The
operator making the deposit is entitled from time to time to
receive from the State Treasurer, upon the written approval of the
secretary, the whole or any portion of any cash, securities or
certificates so deposited, upon depositing with the State Treasurer
in lieu thereof, cash or other securities or certificates of the classes herein specified having value equal to or greater than the
amount of the bond.
(e) (d) When an operator has furnished a separate bond from a
corporate bonding or surety company to drill, fracture or stimulate
a horizontal well and the well produces oil or gas or both, its
operator may deposit with the secretary cash from the sale of the
oil or gas or both until the total deposited is $50,000. When the
sum of the cash deposited is $50,000, the separate bond for the
well shall be released by the secretary. Upon receipt of that cash,
the secretary shall immediately deliver that amount to the State
Treasurer, who shall hold the cash in the name of the state in
trust for the purpose for which the bond was furnished and the
deposit was made. life of the well and until the operator has
discharged all obligations including those owed to landowners.
The
operator is entitled to all interest and income which may be earned
on the cash deposited so long as the operator is in full compliance
with all laws and rules relating to the drilling, redrilling,
deepening, casing, plugging of all wells including low and non
producing wells, abandonment and reclamation of the well for which
the cash was deposited, has compensated landowners under six-b of
this chapter, has satisfied its obligations under section eighteen
of this article and so long as the operator has furnished all
reports and information required by the secretary and any
litigation which has commenced under section eighteen of this article has reached final disposition. The secretary may establish
procedures under which an operator may substitute a new bond for an
existing bond or provide a new bond under certain circumstances
specified in a legislative rule promulgated in accordance with
chapter twenty-nine-a of this code.
(f) (e) Any separate bond furnished for a particular well
prior to the effective date of this article continues to be valid
for all work on the well permitted prior to the effective date of
this article; but no permit may be issued on such a particular well
without a bond complying with the provisions of this section. Any
blanket bond furnished prior to the effective date of this article
shall be replaced with a new blanket bond conforming to the
requirements of this section, at which time the prior bond is
discharged by operation of law; and if the secretary determines
that any operator has not furnished a new blanket bond, the
secretary shall notify the operator by registered mail or by any
method of delivery that requires a receipt or signature
confirmation of the requirement for a new blanket bond, and failure
to submit a new blanket bond within sixty days after receipt of the
notice from the secretary works a forfeiture under subsection (I)
(h) of this section of the blanket bond furnished prior to the
effective date of this article.
(g) (f) Any such A bond shall remain in force until released
by the secretary, and the secretary shall release the same upon satisfaction that the conditions thereof have been fully performed,
that landowners have been fully compensated for loss under article
six-b of this chapter, that the operator has satisfied his or her
obligations under section eighteen of this article and that any
litigation under section eighteen of this article has reached final
disposition. Upon the release of that bond, any cash or collateral
securities deposited shall be returned by the secretary to the
operator who deposited it.
(h) (g) (1) Whenever the right to operate a well is assigned
or otherwise transferred, the assignor or transferor shall notify
the department of the name and address of the assignee or
transferee by registered mail or by any method of delivery that
requires a receipt or signature confirmation not later than thirty
days after the date of the assignment or transfer. No assignment or
transfer by the owner relieves the assignor or transferor of the
obligations and liabilities unless and until the assignee or
transferee files with the department the well name and the permit
number of the subject well, the county and district in which the
subject well is located, the names and addresses of the assignor or
transferor, and assignee or transferee, a copy of the instrument of
assignment or transfer accompanied by the applicable bond, cash,
collateral security or other forms of security described in this
section, and the name and address of the assignee's or transferee's
designated agent if the assignee or transferee would be required to designate an agent under this article if the assignee or transferee
were an applicant for a permit under this article. Every well
operator required to designate an agent under this section shall,
within five days after the termination of the designation, notify
the department of the termination and designate a new agent.
(2) Upon compliance with the requirements of this section by
the assignor or transferor and assignee or transferee, the
secretary shall release the assignor or transferor from all duties
and requirements of this article and shall give written notice of
release to the assignor or transferor of any bond and return to the
assignor or transferor any cash or collateral securities deposited
pursuant to this section.
(I) (h) If any of the requirements of this article or rules
promulgated pursuant thereto or the orders of the secretary has not
been complied with within the time limit set by any notice of
violation issued pursuant to this article, the performance bond
shall then be forfeited.
(j) (I) When any bond is forfeited pursuant to the provisions
of this article or rules promulgated pursuant thereto, the
secretary shall collect the forfeiture without delay.
(k) (j) All forfeitures shall be deposited in the Treasury of
the State of West Virginia in the Oil and Gas Reclamation Fund as
defined in section twenty-nine, article six of this chapter.
NOTE: The purpose of this bill is to require operators to post
a bond for each well and to condition the release of the bond both
upon performance factors and recompense to landowners for loss of
property and contamination or diminution of water supply.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.