Amended in Senate April 30, 2013

Amended in Senate April 16, 2013

Senate BillNo. 665


Introduced by Senator Wolk

February 22, 2013


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

LEGISLATIVE COUNSEL’S DIGEST

SB 665, as amended, 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, who engages in the drilling, redrilling, deepening, or in any operation altering the casing, of any well to file with the State Oil and Gas Supervisor an indemnity bond in an amount based on the depth of the well or a blanket 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 instead require the amount of the indemnity bond for any well to be $100,000begin insert and to be filed with the supervisor at the time of the filing of the notice of intention to perform work on a well, as specifiedend insert. The bill would authorize an operator operating 20 or more wells at any time to file a blanket indemnity bond to cover the operation of all the operator’s wells, in lieu of an individual indemnity bond for each well, in an amount of either $2,000,000, which would not include bonds or fees required for idled wells, or $5,000,000, which would include bonds or fees required for idled wells. The bill would increase the amount of the blanket indemnity bond required to be filed by an operator operating one or more wells located on submerged lands under ocean waters to $1,000,000.

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

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

P2    1

SECTION 1.  

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

3

3204.  

begin insert(a)end insertbegin insertend insertAn operator who, on or after January 1, 2014,
4engages in the drilling, redrilling, deepening, or in any operation
5permanently altering the casing, of a well shall file with the
6supervisor an individual indemnity bond in the sum of one hundred
7thousand dollars ($100,000) for each well so drilled, redrilled,
8deepened, or permanently altered.

begin insert

9(b) The bond shall be filed with the supervisor at the time of the
10filing of the notice of intention to perform work on the well, as
11provided in Section 3203. The bond shall be executed by the
12operator, as principal, and by an authorized surety company, as
13surety, on the condition that the principal named in the bond shall
14faithfully comply with all the provisions of this chapter, in drilling,
15redrilling, deepening, or permanently altering the casing in any
16well or wells covered by the bond, and shall secure the state
17against all losses, charges, and expenses incurred by it to obtain
18the compliance by the principal named in the bond.

end insert
begin delete

19The

end delete

20begin insert(c)end insertbegin insertend insertbegin insertTheend insert conditions of the bond shall be stated in substantially
21the following language: “If the ____, the above bounden principal,
22shall well and truly comply with all the provisions of Division 3
23(commencing with Section 3000) of the Public Resources Code
24and shall obey all lawful orders of the State Oil and Gas Supervisor
25or the district deputy or deputies, subject to subsequent appeal as
26provided in that division, and shall pay all charges, costs, and
27expenses incurred by the supervisor or the district deputy or
28deputies in respect of the well or wells or the property or properties
29of the principal, or assessed against the well or wells or the property
30or properties of the principal, in pursuance of the provisions of
31that division, then this obligation shall be void; otherwise, it shall
32remain in full force and effect.”

33

SEC. 2.  

Section 3205 of the Public Resources Code is amended
34to read:

P3    1

3205.  

An operator who engages in the drilling, redrilling,
2deepening, or in any operation permanently altering the casing, of
320 or more wells at any time, may file with the supervisor one
4blanket indemnity bond to cover all the operations in any of its
5wells in the state in lieu of an individual indemnity bond for each
6operation as required by Section 3204. The bond shall be executed
7by the operator, as principal, and by an authorized surety company,
8as surety, and shall be in substantially the same language and upon
9the same conditions as provided in Section 3204, except as to the
10difference in the amount. The bond shall be provided in one of the
11following amounts, as applicable:

12(a) The sum of two million dollars ($2,000,000), which does
13not include the bond or fee required in Section 3206. A blanket
14begin insert cash bond or blanketend insert surety bond provided prior to January 1,
15begin delete 1999,end deletebegin insert 2014,end insert shall be increased to comply with this subdivision on
16or before January 1,begin delete 2014end deletebegin insert 2016end insert.begin delete A blanket cash bond provided
17prior to January 1, 2015, shall be increased to comply with this
18subdivision on or before January 1, 2016.end delete

19(b) The sum of five million dollars ($5,000,000), which does
20include the bond or fee required in Section 3206.

21

SEC. 3.  

Section 3205.1 of the Public Resources Code is
22amended to read:

23

3205.1.  

(a) Notwithstanding Sections 3204 and 3205, a person
24who engages in the drilling, redrilling, deepening, or in any
25operation permanently altering the casing, of one or more wells
26located on submerged lands under ocean waters within the
27jurisdiction of this state, shall file with the supervisor a blanket
28indemnity bond for one million dollars ($1,000,000) to cover all
29his or her operations in drilling, redrilling, deepening, or
30permanently altering the casing in any of his or her wells located
31on those submerged lands. The bond shall be executed by the
32person, as principal, and by an authorized surety company, as
33surety, and the conditions of the bond shall be the same as the
34conditions stated in Section 3204, except for the difference in the
35amount.

36(b) In addition to providing the bond required by subdivision
37(a), a person who operates one or more wells that are located on
38tide or submerged lands within the jurisdiction of this state shall
39provide an additional amount of security acceptable to the
40supervisor, covering the full costs of plugging and abandoning all
P4    1of the operator’s wells. The supervisor shall determine the amount
2of the security required of each operator, based on his or her
3determination of the reasonable costs of that plugging and
4abandonment. The supervisor may not adjust the amount of security
5required of each operator more frequently than once every three
6years, to reflect changes in those costs. An operator may self-insure
7this security obligation if the supervisor, at his or her discretion,
8determines that the operator has sufficient financial resources to
9plug and abandon the wells for which the operator is responsible.
10The security shall remain in effect until all wells are plugged and
11abandoned in accordance with Section 3208, but the supervisor
12shall reduce the amount of the security required of an operator to
13reflect reduced obligations as wells are plugged and abandoned.

14(c) If the state lease or other agreement that sets forth obligations
15or performance requirements under the lease provides security that
16is equal to, or greater than, the total of the additional security
17required pursuant to subdivision (b), plus all other liabilities under
18the lease or other agreement, the supervisor shall not require the
19additional security.



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