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  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