88R7367 ANG-D     By: Goodwin H.B. No. 3840       A BILL TO BE ENTITLED   AN ACT   relating to the extension of the deadline for plugging certain   inactive wells under the jurisdiction of the Railroad Commission of   Texas.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Section 89.023, Natural Resources Code, is   amended by amending Subsection (a) and adding Subsections (a-1),   (a-2), (c), (d), and (e) to read as follows:          (a)  Subject to Subsection (c), the [The] commission may   grant an extension of not more than five years 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 Subsection (a-1)   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 Subsection (a-1) 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].          (a-1)  Based on the information provided to the commission   under Subsection (a-2), the commission 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.          (a-2)  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.          (c)  If an operator has previously obtained an extension of   the deadline for plugging an inactive well of five years or more,   the commission may only grant two additional one-year extensions.          (d)  The commission may deny a request for an extension of   the deadline for plugging an inactive well if the operator has not   demonstrated financial solvency.          (e)  Notwithstanding Section 89.021, this section applies to   bay and offshore wells.          SECTION 2.  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 3.  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 4.  (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, 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, 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 89.023,   Natural Resources Code, as amended by this Act, until September 1,   2026. The law as it existed immediately before the effective date   of this Act is continued in effect for that purpose.          SECTION 5.  This Act takes effect September 1, 2023.