Goodwin Bill Ends Blanket Bonds, Existing Wells Wait Until 2030

The text as introduced · 2,428 words

89R7992 ANG-D

By: Goodwin
H.B. No. 2256

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,

2030, 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, 2025.