Senate BillNo. 665


Introduced by Senator Wolk

February 22, 2013


An act to amend Sections 3204, 3205, 3205.1, and 3205.2 of the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 665, as introduced, Wolk. Oil and gas: drilling: indemnity bonds.

Existing law requires an operator of an oil or gas well, or a well located on submerged lands under ocean waters, or a class II commercial wastewater disposal well, who engages in the drilling, redrilling, deepening, or in any operation altering the casing, of any well, or in maintaining or abandoning the well or attendant facilities in regard to the wastewater disposal wells, to file with the State Oil and Gas Supervisor an indemnity bond in a specified amount, but permits the operator, with the approval of the supervisor, to make certain deposits in lieu of the bond.

This bill would delete the amounts specified in these provisions for indemnity bonds and deposits in lieu of indemnity bonds, leaving those amounts unspecified.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P1    1

SECTION 1.  

Section 3204 of the Public Resources Code is
2amended to read:

3

3204.  

Any operator who, on or after January 1,begin delete 1999end deletebegin insert 2014end insert,
4engages in the drilling, redrilling, deepening, or in any operation
5permanently altering the casing, of any well shall file with the
P2    1supervisor an individual indemnity bond in the specified sum for
2each well so drilled, redrilled, deepened, or permanently altered.
3This sum shall bebegin delete fifteen thousand dollars ($15,000)end deletebegin insert ______end insert for
4each well less than 5,000 feet deep,begin delete twenty thousand dollars
5($20,000)end delete
begin insert ______end insert for each well at least 5,000 feet but less than
610,000 feet deep, andbegin delete thirty thousand dollars ($30,000)end deletebegin insert ______end insert
7 for each well 10,000 or more feet deep. The bond shall be filed
8with the supervisor at the time of the filing of the notice of intention
9to perform work on the well, as provided in Section 3203. The
10bond shall be executed by the operator, as principal, and by an
11authorized surety company, as surety, conditioned that the principal
12named in the bond shall faithfully comply with all the provisions
13of this chapter, in drilling, redrilling, deepening, or permanently
14altering the casing in any well or wells covered by the bond, and
15shall secure the state against all losses, charges, and expenses
16incurred by it to obtain such compliance by the principal named
17in the bond.

18The conditions of the bond shall be stated in substantially the
19following language: “If the ____, the above bounden principal,
20shall well and truly comply with all the provisions of Division 3
21(commencing with Section 3000) of the Public Resources Code
22and shall obey all lawful orders of the State Oil and Gas Supervisor
23or the district deputy or deputies, subject to subsequent appeal as
24provided in that division, and shall pay all charges, costs, and
25expenses incurred by the supervisor or the district deputy or
26deputies in respect of the well or wells or the property or properties
27of the principal, or assessed against the well or wells or the property
28or properties of the principal, in pursuance of the provisions of
29that division, then this obligation shall be void; otherwise, it shall
30remain in full force and effect.”

31

SEC. 2.  

Section 3205 of the Public Resources Code is amended
32to read:

33

3205.  

Any operator who engages in the drilling, redrilling,
34deepening, or in any operation permanently altering the casing, of
35one or more wells at any time, may file with the supervisor one
36blanket indemnity bond to cover all the operations in any of its
37wells in the state in lieu of an individual indemnity bond for each
38operation as required by Section 3204. The bond shall be executed
39by the operator, as principal, and by an authorized surety company,
40as surety, and shall be in substantially the same language and upon
P3    1the same conditions as provided in Section 3204, except as to the
2difference in the amount. The bond shall be provided in one of the
3following amounts, as applicable:

4(a) The sum ofbegin delete two hundred fifty thousand dollars ($250,000)end delete
5begin insert ______end insert, which does not include the bond or fee required in Section
63206. A blanket surety bond provided prior to January 1,begin delete 1999end delete
7begin insert 2014end insert, shall be increased to comply with this subdivision on or
8before January 1,begin delete 2001end deletebegin insert 2016end insert. A blanket cash bond provided prior
9to January 1,begin delete 1999end deletebegin insert 2014end insert, shall be increased by a minimum ofbegin delete thirty
10thousand dollars ($30,000)end delete
begin insert ______end insert per year, initially payable
11January 1,begin delete 2000end deletebegin insert 2015end insert, and yearly on January 1, thereafter, until
12the amount on deposit is sufficient to comply with this subdivision.

13(b) The sum ofbegin delete one hundred thousand dollars ($100,000)end delete
14begin insert ______end insert, which does not include the bond or fee required in Section
153206, for any operator having 50 or fewer wells in the state,
16exclusive of properly abandoned wells.

17(c) The sum ofbegin delete one million dollars ($1,000,000)end deletebegin insert ______end insert, which
18does include the bond or fee required in Section 3206.

19

SEC. 3.  

Section 3205.1 of the Public Resources Code is
20amended to read:

21

3205.1.  

(a) Notwithstanding Sections 3204 and 3205, any
22person who engages in the drilling, redrilling, deepening, or in any
23operation permanently altering the casing, of one or more wells
24located on submerged lands under ocean waters within the
25jurisdiction of this state, shall file with the supervisor a blanket
26indemnity bond forbegin delete two hundred fifty thousand dollars ($250,000)end delete
27begin insert ______end insert to cover all his or her operations in drilling, redrilling,
28deepening, or permanently altering the casing in any of his or her
29wells located on those submerged lands. The bond shall be
30executed by the person, as principal, and by an authorized surety
31company, as surety, and the conditions of the bond shall be the
32same as the conditions stated in Section 3204, except for the
33difference in the amount.

34(b) In addition to providing the bond required by subdivision
35(a), any person who operates one or more wells that are located
36on tide or submerged lands within the jurisdiction of this state shall
37provide an additional amount of security acceptable to the
38supervisor, covering the full costs of plugging and abandoning all
39of the operator’s wells. The supervisor shall determine the amount
40of the security required of each operator, based on his or her
P4    1determination of the reasonable costs of that plugging and
2abandonment. The supervisor may not adjust the amount of security
3required of each operator more frequently than once every three
4years, to reflect changes in those costs. An operator may self-insure
5this security obligation if the supervisor, at his or her discretion,
6 determines that the operator has sufficient financial resources to
7plug and abandon the wells for which the operator is responsible.
8The security shall remain in effect until all wells are plugged and
9abandoned in accordance with Section 3208, but the supervisor
10shall reduce the amount of the security required of an operator to
11reflect reduced obligations as wells are plugged and abandoned.

12(c) If the state lease or other agreement that sets forth obligations
13or performance requirements under the lease provides security that
14is equal to, or greater than, the total of the additional security
15required pursuant to subdivision (b), plus all other liabilities under
16the lease or other agreement, the supervisor shall not require the
17additional security.

18

SEC. 4.  

Section 3205.2 of the Public Resources Code is
19amended to read:

20

3205.2.  

(a) Notwithstanding Section 3204, any person who
21engages in the operation of a class II commercial wastewater
22disposal well, as defined in subdivision (d), shall file an indemnity
23bond with the supervisor forbegin delete fifty thousand dollars ($50,000)end delete
24begin insert ______end insert for each well so used. The bond shall cover all operations
25of drilling, redrilling, deepening, altering casing, maintaining, or
26abandoning the well and attendant facilities. The bond shall be
27executed by the person as the principal, and by an authorized surety
28company as the surety, and, except for differences in the amount,
29shall be in substantially the same language and upon the same
30conditions as provided in Section 3204.

31(b) A blanket bond submitted under subdivision (a) or (c) of
32Section 3205 may be used in lieu of the bond required in
33subdivision (a), except that the termination and cancellation shall
34be in accordance with subdivision (c) of this section.

35(c) Notwithstanding Section 3207, any bond issued in
36compliance with this section may be terminated and canceled and
37the surety relieved of all obligations thereunder when the well is
38properly abandoned or another valid bond has been substituted
39therefor.

P5    1(d) A class II commercial wastewater disposal well is a well
2that is used to dispose of oilfield wastewater for a fee and that is
3regulated by the division pursuant to this chapter and Subpart F
4(commencing with Section 147.250) of Part 147 of Title 40 of the
5 Code of Federal Regulations.



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