Amended in Assembly June 24, 2013

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,begin delete and 3205.1 ofend deletebegin insert 3205.1, and 3205.2 of, and to add and repeal Section 3206.1 of,end insert the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 665, as amended, Wolk. Oil and gas: drilling:begin delete indemnity bonds.end deletebegin insert wells.end insert

begin delete

Existing

end delete

begin insert(1)end insertbegin insertend insertbegin insertExistingend insert 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 $100,000 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 specified. 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.

begin insert

(2) Existing law requires any person who engages in the operation of a class II commercial wastewater disposal well to file an indemnity bond with the supervisor for $50,000.

end insert
begin insert

This bill would raise the amount of the required bond to $100,000.

end insert
begin insert

(3) Under existing law, various provisions regulate idle oil and gas wells.

end insert
begin insert

This bill would require the Department of Conservation, in consultation with the State Water Resources Control Board and the regional water quality control boards, on or before September 30, 2014, to prepare a report to the Legislature and the Governor regarding the management, disposition, and potential repurposing of idle oil and gas and idle water wells.

end insert

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.  

(a) An 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.

9(b) The bond shall be filed with the supervisor at the time of
10the filing of the notice of intention to perform work on the well,
11as provided 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 against
17all losses, charges, and expenses incurred by it to obtain the
18compliance by the principal named in the bond.

P3    1(c) The conditions of the bond shall be stated in substantially
2the following language: “If the ____, the above bounden principal,
3shall well and truly comply with all the provisions of Division 3
4(commencing with Section 3000) of the Public Resources Code
5and shall obey all lawful orders of the State Oil and Gas Supervisor
6or the district deputy or deputies, subject to subsequent appeal as
7provided in that division, and shall pay all charges, costs, and
8expenses incurred by the supervisor or the district deputy or
9deputies in respect of the well or wells or the property or properties
10of the principal, or assessed against the well or wells or the property
11or properties of the principal, in pursuance of the provisions of
12that division, then this obligation shall be void; otherwise, it shall
13remain in full force and effect.”

14

SEC. 2.  

Section 3205 of the Public Resources Code is amended
15to read:

16

3205.  

An operator who engages in the drilling, redrilling,
17deepening, or in any operation permanently altering the casing, of
1820 or more wells at any time, may file with the supervisor one
19blanket indemnity bond to cover all the operations in any of its
20wells in the state in lieu of an individual indemnity bond for each
21operation as required by Section 3204. The bond shall be executed
22by the operator, as principal, and by an authorized surety company,
23as surety, and shall be in substantially the same language and upon
24the same conditions as provided in Section 3204, except as to the
25difference in the amount. The bond shall be provided in one of the
26following amounts, as applicable:

27(a) The sum of two million dollars ($2,000,000), which does
28not include the bond or fee required in Section 3206. A blanket
29cash bond or blanket surety bond provided prior to January 1,
302014, shall be increased to comply with this subdivision on or
31before January 1, 2016.

32(b) The sum of five million dollars ($5,000,000), which does
33include the bond or fee required in Section 3206.

34

SEC. 3.  

Section 3205.1 of the Public Resources Code is
35amended to read:

36

3205.1.  

(a) Notwithstanding Sections 3204 and 3205, a person
37who engages in the drilling, redrilling, deepening, or in any
38operation permanently altering the casing, of one or more wells
39located on submerged lands under ocean waters within the
40jurisdiction of this state, shall file with the supervisor a blanket
P4    1indemnity bond for one million dollars ($1,000,000) to cover all
2his or her operations in drilling, redrilling, deepening, or
3permanently altering the casing in any of his or her wells located
4on those submerged lands. The bond shall be executed by the
5person, as principal, and by an authorized surety company, as
6surety, and the conditions of the bond shall be the same as the
7conditions stated in Section 3204, except for the difference in the
8amount.

9(b) In addition to providing the bond required by subdivision
10(a), a person who operates one or more wells that are located on
11tide or submerged lands within the jurisdiction of this state shall
12provide an additional amount of security acceptable to the
13supervisor, covering the full costs of plugging and abandoning all
14of the operator’s wells. The supervisor shall determine the amount
15of the security required of each operator, based on his or her
16determination of the reasonable costs of that plugging and
17abandonment. The supervisor may not adjust the amount of security
18required of each operator more frequently than once every three
19years, to reflect changes in those costs. An operator may self-insure
20this security obligation if the supervisor, at his or her discretion,
21determines that the operator has sufficient financial resources to
22plug and abandon the wells for which the operator is responsible.
23The security shall remain in effect until all wells are plugged and
24abandoned in accordance with Section 3208, but the supervisor
25shall reduce the amount of the security required of an operator to
26reflect reduced obligations as wells are plugged and abandoned.

27(c) If the state lease or other agreement that sets forth obligations
28or performance requirements under the lease provides security that
29is equal to, or greater than, the total of the additional security
30required pursuant to subdivision (b), plus all other liabilities under
31the lease or other agreement, the supervisor shall not require the
32additional security.

33begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 3205.2 of the end insertbegin insertPublic Resources Codeend insertbegin insert is
34amended to read:end insert

35

3205.2.  

(a) Notwithstanding Section 3204, any person who
36engages in the operation of a class II commercial wastewater
37disposal well, as defined in subdivision (d), shall file an indemnity
38bond with the supervisor forbegin delete fiftyend deletebegin insert one hundredend insert thousand dollars
39begin delete ($50,000)end deletebegin insert ($100,000)end insert for each well so used. The bond shall cover
40all operations of drilling, redrilling, deepening, altering casing,
P5    1maintaining, or abandoning the well and attendant facilities. The
2bond shall be executed by the person as the principal, and by an
3authorized surety company as the surety, and, except for differences
4in the amount, shall be in substantially the same language and upon
5the same conditions as provided in Section 3204.

6(b) A blanket bond submitted under subdivision (a) or (c) of
7Section 3205 may be used in lieu of the bond required in
8subdivision (a), except that the termination and cancellation shall
9be in accordance with subdivision (c) of this section.

10(c) Notwithstanding Section 3207, any bond issued in
11compliance with this section may be terminated and canceled and
12the surety relieved of all obligations thereunder when the well is
13properly abandoned or another valid bond has been substituted
14therefor.

15(d) A class II commercial wastewater disposal well is a well
16that is used to dispose of oilfield wastewater for a fee and that is
17regulated by the division pursuant to this chapter and Subpart F
18(commencing with Section 147.250) of Part 147 of Title 40 of the
19Code of Federal Regulations.

20begin insert

begin insertSEC. 5.end insert  

end insert

begin insertSection 3206.1 is added to the end insertbegin insertPublic Resources Codeend insertbegin insert,
21to read:end insert

begin insert
22

begin insert3206.1.end insert  

(a) On or before September 30, 2014, the Department
23of Conservation, in consultation with the State Water Resources
24Control Board and the regional water quality control boards, shall
25prepare a report to the Legislature and the Governor regarding
26the management, disposition, and potential repurposing of idle oil
27and gas and water wells. The report shall include, but is not limited
28to, all of the following:

29(1) The number of idle wells and long-term idle wells, as defined
30in Section 3008, located in each district in the state.

31(2) The number of water wells, as defined in Section 13710 of
32the Water Code, located within an oil and gas field in each district
33within the state.

34(3) The surface and subsurface location of all idle oil and gas
35wells and water wells within an oil and gas field in the state.

36(4) A determination of the risks to ground water from idle oil
37and gas wells within the state.

38(5) Definitions of water quality designations used in the report.

39(6) An evaluation of the benefits and drawbacks of, and potential
40public health, safety, and environmental issues regarding, the
P6    1elimination or repurposing of idle oil, gas, and water wells in the
2state.

3(7) Options to eliminate, repurpose, or otherwise ensure the
4safe and proper management of idle wells in the state.

5(8) Determination of proper well construction and design for
6the options identified for repurposing wells.

7(9) Legislative, administrative, or rulemaking changes necessary
8to accomplish the options suggested under paragraph (7).

9(b) The report required pursuant to subdivision (a) shall be in
10compliance with Section 9795 of the Government Code.

11(c) Data collected and reviewed for this report shall be used to
12develop maps and accessory data to ensure the protection and
13directives under Section 3107.

14This section shall become inoperative on September 30, 2016,
15and, as of January 1, 2017, is repealed, unless a later enacted
16statute, that becomes operative on or before January 1, 2017,
17deletes or extends the dates on which it becomes inoperative and
18is repealed.

end insert


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