| (d) Financial security. Except for those operators
exempted under subsection (g)(7) of this section, any person, including
any firm, partnership, joint stock association, corporation, or other
organization, required by Texas Natural Resources Code, §91.142,
to file an organization report with the Commission must also file
financial security in one of the following forms:
(1) an individual performance bond;
(2) a blanket performance bond; or
(3) a letter of credit or cash deposit in the same
amount as required for an individual performance bond or blanket performance
bond.
(e) Forms for financial security and insurance policies.
Operators shall submit well-specific plugging insurance policies,
bonds and letters of credit on forms prescribed by the Commission.
(f) Filing deadlines for financial security and insurance
policies. Operators shall submit required financial security or well-specific
plugging insurance policies at the time of filing an initial organization
report, as a condition of the issuance of a permit to drill, recomplete
or reenter, upon yearly renewal, or as otherwise required under this
section.
(g) Amount of financial security. An operator required
to file financial security under subsection (d) of this section shall
file financial security described in this subsection.
(1) Types and amounts of financial security required.
(A) A person operating one or more wells may file an
individual performance bond, letter of credit, or cash deposit in
an amount equal to the sum of $2.00 for each foot of total well depth
for each well operated, excluding any well bore included in a well-specific
plugging insurance policy.
(B) A person operating one or more wells may file a
blanket bond, letter of credit, or cash deposit to cover all wells
for which a bond, letter of credit, or cash deposit is required in
an amount equal to the sum of the base amount determined by the total
number of wells operated excluding any well bores and/or permits issued
to drill, recomplete, or reenter wells included in a well-specific
plugging insurance policy. A person performing multiple operations
shall be required to file only one blanket bond, letter of credit,
or cash deposit unless the person is operating a commercial facility,
in which case the person also shall comply with the financial security
requirements of subsection (l) of this section. The financial security
amount shall be at least the base amount determined by the total number
of wells operated or $25,000, whichever is greater. After excluding
any well bores and/or permits issued to drill, recomplete or reenter
wells included in a well-specific plugging insurance policy, the base
amount is determined as follows:
(i) The base amount for a person operating 10 or fewer
wells or performs other operations shall be $25,000.
(ii) The base amount for a person operating more than
10 but fewer than 100 wells shall be $50,000.
(iii) The base amount for a person operating 100 or
more wells shall be $250,000.
(2) Additional financial security for bay wells.
(A) All operators of bay wells shall file additional
financial security of no less than $60,000 in addition to any other
financial security that is required under this section for any other
Commission-regulated activities.
(B) For each bay well that is not currently producing
oil or gas and has not produced oil or gas within the past 12 months,
including injection and disposal wells, the operator shall file additional
financial security of $60,000, unless the well bore is included in
a well-specific plugging insurance policy that provides benefits of
at least $60,000. An operator shall not be required to file additional
financial security in addition to the $60,000 amount set under subparagraph
(A) of this paragraph if the operator operates only a single inactive
bay well.
(C) In the case of a bay well that has been inactive
for 12 consecutive months or longer and that is not used for disposal
or injection, the well shall remain subject to the provisions of subparagraph
(B) of this paragraph, regardless of any minimal activity, until the
well has reported production of at least 10 barrels of oil for oil
wells or 100 mcf of gas for gas wells each month for at least three
consecutive months.
(3) Additional financial security for offshore wells.
(A) All operators of offshore wells and operators of
both bay wells and offshore wells shall file additional financial
security of no less than $100,000 in addition to any other financial
security that is required under this section for any other Commission
regulated activities.
(B) For each offshore well that is not currently producing
oil or gas and has not produced oil or gas within the past 12 months,
including injection and disposal wells, the operator shall file an
additional amount of financial security of $100,000, unless the well
bore is included in a well-specific plugging insurance policy that
provides benefits of at least $100,000. An operator shall not be required
to file additional financial security in addition to the $100,000
amount set under subparagraph (A) of this paragraph if the operator
operates only a single inactive offshore well.
(C) In the case of an offshore well that has been inactive
for 12 consecutive months or longer and that is not used for disposal
or injection, the well shall remain classified as inactive for purposes
of this section, regardless of any minimal activity, until the well
has reported production of at least 10 barrels of oil for oil wells
or 100 mcf of gas for gas wells each month for at least three consecutive
months.
(4) Reduction of the additional financial security
that is required for bay and/or offshore wells. An operator may request
a reduction of either the additional $60,000 in financial security
required for all operators of bay wells, or the additional $100,000
in financial security required for all operators of offshore wells
and operators of both bay wells and offshore wells.
(A) The director may administratively approve the reduction
if the operator provides documentation that it currently has acceptable
financial assurance in place to satisfy any financial assurance requirements
established by local authorities. The operator must show that the
bond or other form of financial assurance can be called on by or assigned
to the Commission under the following circumstances:
(i) a well is likely to pollute or is polluting any
ground or surface water or is allowing the uncontrolled escape of
formation fluids from the strata in which they were originally located;
or
(ii) a well is not being maintained in compliance with
Commission rules or state law relating to plugging or the prevention
or control of pollution; or
(iii) the operator has failed to renew and maintain
an organization report filing as required by §3.1 of this title
(relating to Organization Report; Retention of Records; Notice Requirements)
and this section.
(B) If the director administratively denies a requested
reduction, the operator may request a hearing to determine whether
the reduction should be granted.
(5) Reduction in additional financial security required
for bay and/or offshore wells that are not actively producing oil
and natural gas. An operator may request that Commission consider
a reduction in any additional financial security requirement for the
operation of bay and/or offshore wells that are not actively producing
oil and natural gas or that are used for disposal or injection in
an amount not to exceed the remainder of 25% of the operator's certified
net worth based on the independently audited calculation for the most
recently completed fiscal year minus the Commission's estimate of
the operator's total plugging liability for all of the operator's
active bay and/or offshore wells.
(A) The director may administratively grant a full
or partial reduction if the operator meets the following criteria:
(i) the operator has either five or fewer bay and offshore
wells or at least half of the operator's bay and offshore wells are
actively producing oil and natural gas;
(ii) the operator provides to the Commission certification
of its net worth from an independent auditor that has employed generally
accepted accounting principles to confirm the operator's stated net
worth based on the most recently available and independently audited
calculation;
(iii) the reduction is less than or equal to the remainder
of 25% of the operator's certified net worth minus the Commission's
estimate of the operator's total plugging liability for all of the
operator's active bay and offshore wells;
(iv) none of the operator's wells or operations, including
any land-based wells, have been found by Commission staff to be violating
or to have violated any Commission rule that resulted in pollution
or in any hazard to the health or safety of the public in the last
12 months.
(B) If the director administratively denies the requested
reduction, an operator may request a hearing to determine if a full
or partial reduction should be granted.
(C) The operator may also request a hearing to challenge
the Commission's presumed estimate of the operator's plugging liability
for bay and offshore wells as applied to any additional financial
security required for any inactive bay and offshore wells. The operator
shall present clear and convincing evidence that the estimated plugging
liability is less than the amount estimated by the Commission. Notice
of the hearing shall be provided by the Commission to the owners of
the surface estate and the owners of the mineral estate for any well
that is a subject of the requested hearing, and all other affected
persons as identified by the operator or otherwise required by the
Commission.
(6) Persons with non-well operations not exempted under
paragraph (7) of this subsection. A person performing other operations
who is not an operator of wells and who is not a person whose only
activity is as a first purchaser, survey company, gas nominator, gas
purchaser or well plugger shall file financial security in the amount
of $25,000.
(7) Persons exempt from financial security requirements.
No financial security is required of a person who is not an operator
of wells if the person's only activity is as a first purchaser, survey
company, salt water hauler, gas nominator, gas purchaser and/or well
plugger.
(8) Persons with both well and non-well operations.
If a person is engaged in more than one activity or operation, including
well operation, for which financial security is required, the person
is not required to file financial security for each activity or operation
in which the person is engaged. The person is required to file financial
security only in the greatest amount required for any activity or
operation in which the person engages. The financial security filed
covers all of the activities and operations for which financial security
is required. The provisions of this paragraph do not exempt a person
from the financial security required under subsection (l) of this
section.
(9) Financial security amounts are the minimum amounts
required by this section to be filed. A person may file a greater
amount if desired.
(h) Financial security conditions. Any bond, letter
of credit, or cash deposit required under this section is subject
to the conditions that the operator will plug and abandon all wells
and control, abate, and clean up pollution associated with the oil
and gas operations and activities covered under the required financial
security in accordance with applicable state law and permits, rules,
and orders of the Commission. This section does not apply to a well-specific
plugging insurance policy.
(i) Conditions for cash deposits and escrow funds.
Operators must tender cash deposits and escrow funds in United States
currency or certified cashiers check only. The Commission or its delegate
will place all cash deposits and escrow funds in a special account
within the Oil and Gas Regulation and Cleanup Fund account. The Commission
or its delegate will deposit any interest accruing on cash deposits
and escrow funds into the Oil and Gas Regulation and Cleanup Fund
pursuant to Texas Natural Resources Code, §81.067. The Commission
or its delegate may not refund a cash deposit until either financial
security is accepted by the Commission or its delegate as provided
for under this section or an operator ceases all activity. The Commission
or its delegate may release escrow funds to the current operator of
the well only if the well for which the operator tendered the escrow
funds is either restored to active status or plugged in accordance
with Commission rules. In the event that the well is plugged through
the use of state funds, the Commission may collect from the escrow
account in the amount necessary to reimburse the state for any expenditure.
(j) Well or lease transfer.
(1) The Commission shall not approve a transfer of
operatorship submitted for any well or lease unless the operator acquiring
the well or lease has on file with the Commission financial security
in an amount sufficient to cover both its current operations and the
wells or leases being transferred.
(2) Any existing financial security covering the well
or lease proposed for transfer shall remain in effect and the prior
operator of the well remains responsible for compliance with all laws
and Commission rules covering the transferred well until the Commission
approves the transfer.
Cont'd... |
