H.B. No. 2259

	AN ACT
	relating to the plugging of certain inactive oil or gas wells and to
	standards for electrical power lines serving certain oil and gas
	facilities.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1.  Section 89.002(a), Natural Resources Code, is
	amended by amending Subdivision (7) and adding Subdivisions (9),
	(10), (11), (12), and (13) to read as follows:
	(7)  "Delinquent inactive well" means an inactive
	[unplugged] well [that has had no reported production, disposal,
	injection, or other permitted activity for a period of greater than
	12 months and] for which, after notice and opportunity for a
	hearing, the commission has not extended the plugging deadline.
	(9)  "Cost calculation for plugging an inactive well"
	means the commission's calculated cost for each foot of well depth
	plugged based on average actual plugging costs for wells reported
	by the commission for the preceding state fiscal year for the
	commission oil and gas division district in which the inactive well
	is located.
	(10)  "Enhanced oil recovery project":
	(A)  means:
	(i)  a commission-approved project that uses
	any process for the displacement of oil or other hydrocarbons from a
	reservoir other than primary recovery and includes the use of an
	immiscible, miscible, chemical, thermal, or biological process;
	(ii)  a certified project described by
	Section 202.054, Tax Code; or
	(iii)  any other project approved by the
	commission for enhanced oil recovery; and
	(B)  does not include a water disposal project.
	(11)  "Good faith claim" means a factually supported
	claim based on a recognized legal theory to a continuing possessory
	right in a mineral estate, such as evidence of a currently valid oil
	and gas lease or a recorded deed conveying a fee interest in the
	mineral estate.
	(12)  "Inactive well" means an unplugged well that has
	had no reported production, disposal, injection, or other permitted
	activity for a period of greater than 12 months.
	(13)  "Physically terminated electric service to the
	well's production site" means that electric service to an inactive
	well site has been disconnected at a point on the electric service
	lines most distant from the production site toward the main supply
	line in a manner that will not interfere with electrical supply to
	adjacent operations, including cathodic protection units.
	SECTION 2.  Chapter 89, Natural Resources Code, is amended
	by adding Subchapter B-1 to read as follows:
	SUBCHAPTER B-1. PLUGGING OF CERTAIN INACTIVE WELLS
	Sec. 89.021.  APPLICABILITY.  This subchapter does not apply
	to a bay or offshore well as defined by commission rules.
	Sec. 89.022.  PLUGGING OF INACTIVE WELLS REQUIRED. (a)
	Except as provided by Section 89.023, on or before the date the
	operator is required to renew the operator's organization report
	required by Section 91.142, an operator of an inactive well must
	plug the well in accordance with statutes and commission rules in
	effect at the time of plugging.
	(b)  Notwithstanding Subsection (a), a person who assumes
	responsibility for the physical operation and control of an
	existing inactive well must satisfy the requirements of Sections
	89.023(a)(1) and (4) not later than six months after the date the
	commission approves the initial form described by Section
	89.002(a)(2) and filed with the commission under which the person
	assumes responsibility for the well.
	(c)  The commission may not renew or approve the organization
	report required by Section 91.142 for an operator that fails to
	comply with the requirements of this subchapter.
	Sec. 89.023.  EXTENSION OF DEADLINE FOR PLUGGING INACTIVE
	WELL. (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 well and associated
	facilities are in compliance with all commission rules and orders;
	(3)  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
	(4)  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 or
	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
	(G)  if the operator is a publicly traded entity:
	(i)  the following documents:
	(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
	(b)  an original, executed Uniform
	Commercial Code Form 1 Financing Statement, filed with the
	secretary of state, that:
	(1)  names the operator as the
	"debtor" and the Railroad Commission of Texas as the "secured
	creditor"; and
	(2)  specifies the funds covered
	by the documents described by Sub-subparagraph (a) in the amount 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.
	(b)  Notwithstanding Subsection (a), an operator may not
	obtain an extension of the deadline for plugging an inactive well by
	complying with that subsection if the plugging of the well is
	otherwise required by commission rules or orders.
	Sec. 89.024.  ABEYANCE OF PLUGGING REPORT. (a)  An abeyance
	of plugging report filed under Section 89.023(a)(4)(B) is valid for
	a period of not more than five years.
	(b)  An abeyance of plugging report may cover more than one
	well in a field but may not cover more than one field.
	(c)  An abeyance of plugging report may not be transferred to
	a new operator of an existing inactive well. A new operator of an
	existing inactive well must file a new abeyance of plugging report
	or otherwise comply with the requirements of this subchapter on or
	before the deadline provided by Section 89.022(b). This subsection
	does not prohibit the transfer of an abeyance of plugging report in
	the event of a change of name of an operator.
	(d)  An operator who files an abeyance of plugging report
	must pay an annual fee of $100 for each well covered by the report.
	A fee collected under this section shall be deposited in the
	oil-field cleanup fund.
	Sec. 89.025.  ENHANCED OIL RECOVERY PROJECT. (a)  For
	purposes of Section 89.023(a)(4)(C), an inactive well is considered
	to be part of an enhanced oil recovery project if the well is
	located on a unit or lease or in a field associated with such a
	project.
	(b)  A statement that an inactive well is part of an enhanced
	oil recovery project may not be transferred to a new operator of an
	existing inactive well. A new operator of an existing inactive well
	must file a new statement that the well is part of such a project or
	otherwise comply with the requirements of this subchapter on or
	before the deadline provided by Section 89.022(b).  This subsection
	does not prohibit the transfer of a statement that a well is part of
	an enhanced oil recovery project in the event of a change of name of
	an operator.
	Sec. 89.026.  FLUID LEVEL OR HYDRAULIC PRESSURE TEST. (a)
	Documentation filed under Section 89.023(a)(4)(D) of the results of
	a successful fluid level test is valid for a period of one year from
	the date of the test.  Documentation filed under that section of the
	results of a successful hydraulic pressure test is valid for a
	period of not more than five years from the date of the test.
	(b)  The operator must notify the office of the commission
	oil and gas division district in which an inactive well is located
	at least three days before the date the operator conducts a fluid
	level or hydraulic pressure test of the well and may not conduct the
	test without the approval of the office. The commission may require
	that a test be witnessed by a commission employee.
	(c)  Documentation of the results of a successful fluid level
	or hydraulic pressure test may be transferred to a new operator of
	an existing inactive well.
	(d)  An operator who files documentation described by
	Subsection (a) must pay an annual fee of $50 for each well covered
	by the documentation. A fee collected under this section shall be
	deposited in the oil-field cleanup fund.
	Sec. 89.027.  SUPPLEMENTAL FINANCIAL ASSURANCE. (a)  A
	supplemental bond, letter of credit, or cash deposit filed under
	Section 89.023(a)(4)(E) is in addition to any other financial
	assurance otherwise required of the operator or for the well.
	(b)  A supplemental bond, letter of credit, or cash deposit
	may not be transferred to a new operator of an existing inactive
	well. A new operator of an existing inactive well must file a new
	supplemental bond, letter of credit, or cash deposit or otherwise
	comply with the requirements of this subchapter by the deadline
	provided by Section 89.022(b).
	Sec. 89.028.  ESCROW FUNDS. (a)  Escrow funds described by
	Section 89.023(a)(4)(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.
	(b)  Escrow funds deposited with the commission may be
	released only with the approval of the commission as prescribed by
	commission rule.
	Sec. 89.029.  AFFIRMATION REGARDING SURFACE REQUIREMENTS.
	(a)  An application for an extension of the deadline for plugging an
	inactive well must include a written affirmation by the operator:
	(1)  that the operator has physically terminated
	electric service to the well's production site; and
	(2)  stating the following, as applicable, if the
	operator does not own the surface of the land on which the well is
	located:
	(A)  if the well has been inactive for at least
	five years but for less than 10 years as of the date of renewal of
	the operator's organization report, that the operator has emptied
	or purged of production fluids all piping, tanks, vessels, and
	equipment associated with and exclusive to the well; or
	(B)  if the well has been inactive for at least 10
	years as of the date of renewal of the operator's organization
	report, that the operator has removed all surface process equipment
	and related piping, tanks, tank batteries, pump jacks, headers, and
	fences, as well as junk and trash as defined by commission rule,
	associated with and exclusive to the well.
	(b)  An operator of an inactive well shall leave a clearly
	visible marker at the wellhead of the well.
	(c)  The commission shall adopt rules regulating the
	transfer of material described by Subsection (a)(2)(B) and
	restricting its accumulation on an active lease.
	(d)  Notwithstanding Subsection (a), an operator may be
	eligible for a temporary extension of the deadline for plugging an
	inactive well or a temporary exemption from the requirements of
	Subsection (a) as provided by commission rule if the operator is
	unable to comply with the requirements of that subsection because
	of safety concerns or required maintenance of the well site and the
	operator includes with the application a written affirmation of the
	facts regarding the safety concerns or maintenance.
	(e)  An operator may be eligible for an extension of the
	deadline for plugging a well without complying with Subsection
	(a)(2)(B) if the well is located on a unit or lease or in a field
	associated with an enhanced oil recovery project and the operator
	includes a statement in the written affirmation that the well is
	part of such a project. The exemption provided by this subsection
	applies only to the equipment required for the project.
	(f)  Notwithstanding the other provisions of this
	subchapter, the commission shall adopt rules providing for the
	phase-in of the duty to comply with Subsection (a)(2)(B) over a
	period of five years beginning September 1, 2010. The rules must
	require the operators of one-fifth of the wells that are subject to
	that subsection in each year during the phase-in period to comply
	with that subsection.
	Sec. 89.030.  REVOCATION OF EXTENSION OF DEADLINE FOR
	PLUGGING INACTIVE WELL. The commission may revoke an extension of
	the deadline for plugging an inactive well granted under this
	subchapter if the commission determines, after notice and an
	opportunity for a hearing, that the applicant is ineligible for the
	extension under the commission's rules or orders.
	SECTION 3.  Subchapter B, Chapter 91, Natural Resources
	Code, is amended by adding Section 91.019 to read as follows:
	Sec. 91.019.  STANDARDS FOR CONSTRUCTION, OPERATION, AND
	MAINTENANCE OF ELECTRICAL POWER LINES. An operator shall
	construct, operate, and maintain an electrical power line serving a
	well site or other surface facility employed in operations incident
	to oil and gas development and production in accordance with the
	National Electrical Code published by the National Fire Protection
	Association and adopted by the Texas Commission of Licensing and
	Regulation under Chapter 1305, Occupations Code.
	SECTION 4.  Section 91.111(c), Natural Resources Code, is
	amended to read as follows:
	(c)  The fund consists of:
	(1)  penalties imposed under Section 85.381 for
	violation of a law, order, or rule relating to well plugging
	requirements;
	(2)  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;
	(3)  private contributions, including contributions
	made under Section 89.084;
	(4)  expenses collected under Section 89.083;
	(5)  fees imposed under Section 85.2021;
	(6)  civil penalties collected for violations of
	Chapter 89 or of rules or orders relating to plugging that are
	adopted under this code;
	(7)  proceeds collected under Sections 89.085 and
	91.115;
	(8)  interest earned on the funds deposited in the
	fund;
	(9)  civil penalties or costs recovered under Section
	91.457 or 91.459;
	(10)  oil and gas waste hauler permit application fees
	collected under Section 29.015, Water Code;
	(11)  costs recovered under Section 91.113(f);
	(12)  hazardous oil and gas waste generation fees
	collected under Section 91.605;
	(13)  oil-field cleanup regulatory fees on oil
	collected under Section 81.116;
	(14)  oil-field cleanup regulatory fees on gas
	collected under Section 81.117;
	(15)  fees for a reissued certificate collected under
	Section 91.707;
	(16)  fees collected under Section 91.1013;
	(17)  fees collected under Section 89.088;
	(18)  penalties collected under Section 81.0531;
	(19)  fees collected under Section 91.142;
	(20)  fees collected under Section 91.654;
	(21)  costs recovered under Sections 91.656 and 91.657;
	(22)  two-thirds of the fees collected under Section
	81.0521; [and]
	(23)  fees collected under Sections 89.024 and 89.026;
	and
	(24)  legislative appropriations.
	SECTION 5.  (a)  Not later than September 1, 2010, the
	Railroad Commission of Texas shall be prepared to grant extensions
	of the deadline for plugging an inactive well under Subchapter B-1,
	Chapter 89, Natural Resources Code, as added by this Act.
	(b)  The change in law made by this Act applies only to the
	renewal or approval of an organization report on or after September
	1, 2010.  The renewal or approval of an organization report before
	September 1, 2010, 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.
	SECTION 6.  This Act takes effect September 1, 2009.
	______________________________	______________________________
	President of the Senate	Speaker of the House
	I certify that H.B. No. 2259 was passed by the House on April
	29, 2009, by the following vote:  Yeas 144, Nays 0, 1 present, not
	voting; and that the House concurred in Senate amendments to H.B.
	No. 2259 on May 20, 2009, by the following vote:  Yeas 138, Nays 0,
	1 present, not voting.
	______________________________
	Chief Clerk of the House
	I certify that H.B. No. 2259 was passed by the Senate, with
	amendments, on May 18, 2009, by the following vote:  Yeas 31, Nays
	0.
	______________________________
	Secretary of the Senate
	APPROVED: __________________
	Date
	__________________
	Governor