| disapprove the amount of financial
security proposed to be filed by the owner or operator under this
subsection one year after the original effective date of the section,
the period for filing financial security under this subsection is
automatically extended to a date 45 days after such final Commission
action.
(4) Amount.
(A) Except as provided in subparagraphs (B) or (C)
of this paragraph, the amount of financial security required to be
filed under this subsection shall be an amount based on a written
estimate approved by the Commission or its delegate as being equal
to or greater than the maximum amount necessary to close the commercial
facility, exclusive of plugging costs for any well or wells at the
facility, at any time during the permit term in accordance with all
applicable state laws, Commission rules and orders, and the permit,
but shall in no event be less than $10,000.
(B) The owner or operator of one or more commercial
facilities may reduce the amount of financial security required under
this subsection for one such facility by the amount, if any, it filed
as financial security under subsection (g)(6) of this section. The
full amount of financial security required under subparagraph (A)
of this paragraph shall be required for the remaining commercial facilities.
(C) Except for the facilities specifically exempted
under subparagraph (D) of this paragraph, a qualified professional
engineer licensed by the State of Texas shall prepare or supervise
the preparation of a written estimate of the maximum amount necessary
to close the commercial facility as provided in subparagraph (A) of
this paragraph. The owner or operator of a commercial facility shall
submit the written estimate under seal of a qualified licensed professional
engineer to the Commission as required under paragraph (1) of this
subsection.
(D) A facility permitted under §3.57 of this title
(relating to Reclaiming Tank Bottoms, Other Hydrocarbon Wastes, and
Other Waste Materials) that does not utilize on-site waste storage
or disposal that requires a permit under §3.8 of this title (relating
to Water Protection) is exempt from subparagraph (C) of this paragraph.
(E) Notwithstanding the fact that the maximum amount
necessary to close the commercial facility as determined under this
paragraph is exclusive of plugging costs, the proceeds of financial
security filed under this subsection may be used by the Commission
to pay the costs of plugging any well or wells at the facility if
the financial security for plugging costs filed with the Commission
is insufficient to pay for the plugging of such well or wells.
(5) Issuer and form.
(A) Bond. The issuer of any commercial facility bond
filed in satisfaction of the requirements of this subsection shall
be a corporate surety authorized to do business in Texas. The form
of bond filed under this subsection shall provide that the bond be
renewed and continued in effect until the conditions of the bond have
been met or its release is authorized by the Commission or its delegate.
(B) Letter of credit. Any letter of credit filed in
satisfaction of the requirements of this subsection shall be issued
by and drawn on a bank authorized under state or federal law to operate
in Texas. The letter of credit shall be an irrevocable, standby letter
of credit subject to the requirements of Texas Business and Commerce
Code, §§5.101-5.118. The letter of credit shall provide
that it will be renewed and continued in effect until the conditions
of the letter of credit have been met or its release is authorized
by the Commission or its delegate.
(m) Effect of outstanding violations.
(1) Except as provided in paragraph (2) of this subsection,
the Commission shall not accept an organization report or an application
for a permit or approve a certificate of compliance for an oil lease
or gas well submitted by an organization if:
(A) the organization has outstanding violations; or
(B) an officer or owner of the organization, as defined
in subsection (a) of this section, was, within seven years preceding
the filing of the report, application, or certificate, an officer
or owner of an organization and during that period, the organization
committed a violation that remains an outstanding violation.
(2) The Commission shall accept a report or application
or approve a certificate filed by an organization covered by paragraph
(1) of this subsection if:
(A) the conditions that constituted the violation have
been corrected or are being corrected in accordance with a schedule
agreed to by the organization and the Commission;
(B) all administrative, civil, and criminal penalties,
and all plugging and cleanup costs incurred by the state relating
to those conditions have been paid or are being paid in accordance
with a schedule agreed to by the organization and the Commission;
and
(C) the report, application or certificate is in compliance
with all other requirements of law and Commission rules.
(3) All fees tendered in connection with a report or
application that is rejected under this subsection are nonrefundable.
(n) Mandatory surcharges. The Commission adopts this
subsection pursuant to Texas Natural Resources Code, §81.070,
to impose reasonable surcharges as necessary on fees collected by
the Commission that are required to be deposited to the credit of
the Oil and Gas Regulation and Cleanup Fund, as provided by Texas
Natural Resources Code, §81.067, in an amount sufficient to enable
the Commission to recover the costs of performing the functions specified
by Texas Natural Resources Code, §81.068, from those fees and
surcharges. This subsection establishes the methodology the Commission
shall use to determine the amount of the surcharge on each fee, as
required by Texas Natural Resources Code, §81.070(c).
(1) For all fees subject to a surcharge under this
section, the Commission shall employ a projected cost-based recovery
methodology derived from budgeted cost projections approved by the
Legislature in the General Appropriations Act, which is dependent
upon revenue projections issued by the Comptroller in the most recent
Biennial Revenue Estimate. In establishing the surcharge amounts,
the Commission shall consider the factors and values set forth in
the following subparagraphs.
(A) The Commission shall ascertain the time required
to complete the regulatory work associated with the activity in connection
with which the surcharge is imposed using the number of full-time
equivalent positions (FTEs) appropriated by the Legislature for that
purpose during the applicable biennium, multiplied by the work hours
in a fiscal year, divided by the anticipated number of permit applications
processed in a fiscal year.
(B) The Commission shall use the number of P-5 Organization
Reports as a proxy to determine the number of individual or entities
from which the Commission's costs may be recovered. An Organization
Report is required to be filed and renewed annually by any organization,
including any person, firm, partnership, corporation, or other organization,
domestic or foreign, operating wholly or partially within this state,
that performs operations within the jurisdiction of the agency.
(C) The Commission shall determine how the surcharge
will affect operators considered to be large, based on operating more
than 10,000 oil or gas wells; operators considered to be medium, based
on operating more than 1,000 oil or gas wells, but fewer than 10,000
wells; and operators considered to be small, based on operating fewer
than 1,000 oil or gas wells.
(D) The Commission shall consider the balance of the
Oil and Gas Regulation and Cleanup Fund at the beginning of the fiscal
year in which the surcharge is assessed.
(E) The Commission shall assume that the Legislature
intended that the agency's oil and gas regulatory program should be
self-funded. The Commission shall maintain an adequate balance in
the Oil and Gas Regulation and Cleanup Fund such that the regulatory
program can withstand a decrease in industry activity without sacrificing
the health and public safety aspects of its regulatory work, while
also having funds available to respond to any emergency related to
oil and gas activity throughout the state. The Commission shall also
maintain a fund balance that is within the statutory fund limits as
determined by the Legislature.
(2) The Commission shall consider the factors set forth
in paragraph (1) of this subsection to determine the surcharge applicable
to all fees deposited to the Oil and Gas Regulation and Cleanup Fund
in the following manner:
(A) the Commission shall first apply the premise that
the oil and gas regulatory program should be self-funded;
(B) the Commission shall then apply a cost-based recovery
analysis to the funding levels determined by the Legislature. The
Commission shall rely primarily on these two factors, but shall also
review all factors and values set forth in subparagraph (A) of this
paragraph; and
(C) the Commission will apply the surcharge rate to
all applicable fees as detailed in paragraph (3) of this subsection.
(3) Based on the factors and methodology set forth
in this subsection, the Commission has determined that a surcharge
rate of 150 percent will be necessary on all fees required to be deposited
to the credit of the Oil and Gas Regulation and Cleanup Fund.
(4) The Commission shall review the surcharge rate
determination under this subsection periodically but not less than
each biennium to confirm that the imposed surcharge is reasonable.
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| Source Note: The provisions of this §3.78 adopted to be effective July 10, 2000, 25 TexReg 6487; amended to be effective November 1, 2000, 25 TexReg 9924; amended to be effective June 11, 2001, 26 TexReg 4088; amended to be effective January 9, 2002, 27 TexReg 139; amended to be effective October 12, 2003, 28 TexReg 8890; amended to be effective September 1, 2004, 29 TexReg 8271; amended to be effective December 19, 2005, 30 TexReg 8426; amended to be effective November 26, 2007, 32 TexReg 8452; amended to be effective September 13, 2010, 35 TexReg 8332; amended to be effective May 1, 2012, 37 TexReg 1315; amended to be effective August 27, 2012, 37 TexReg 6538; amended to beeffective December 16, 2013, 38 TexReg 9010; amended to be effective February 1, 2016, 41 TexReg 792 |
