Amended in Assembly August 30, 2013

Amended in Assembly August 5, 2013

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, 3205.1, and 3205.2 of the Public Resources Code, relating to oil and gas.

LEGISLATIVE COUNSEL’S DIGEST

SB 665, as amended, Wolk. Oil and gas: drilling: wells.

(1) 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 bondbegin delete for any wellend delete to bebegin delete $100,000 andend deletebegin insert $25,000 for each well that is less than 10,000 feet deep, and $40,000 for each well that is 10,000 or more feet deep. The bill would also require the bondend insert 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.

(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.

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

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.  

(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 bondbegin delete in the sum of one hundred
7thousand dollars ($100,000)end delete
for each well so drilled, redrilled,
8deepened, or permanentlybegin delete altered.end deletebegin insert altered, in the following amount:end insert

begin insert

9(1) Twenty-five thousand dollars ($25,000) for each well that
10is less than 10,000 feet deep.

end insert
begin insert

11(2) Forty thousand dollars ($40,000) for each well that is 10,000
12or more feet deep.

end insert

13(b) The bond shall be filed with the supervisor at the time of
14the filing of the notice of intention to perform work on the well,
15as provided in Section 3203. The bond shall be executed by the
16operator, as principal, and by an authorized surety company, as
17surety, on the condition that the principal named in the bond shall
18faithfully comply with all the provisions of this chapter, in drilling,
19redrilling, deepening, or permanently altering the casing in any
20well or wells covered by the bond, and shall secure the state against
21all losses, charges, and expenses incurred by it to obtain the
22compliance by the principal named in the bond.

23(c) The conditions of the bond shall be stated in substantially
24the following language: “If the ____, the above bounden principal,
P3    1shall well and truly comply with all the provisions of Division 3
2(commencing with Section 3000) of the Public Resources Code
3and shall obey all lawful orders of the State Oil and Gas Supervisor
4or the district deputy or deputies, subject to subsequent appeal as
5provided in that division, and shall pay all charges, costs, and
6expenses incurred by the supervisor or the district deputy or
7deputies in respect of the well or wells or the property or properties
8of the principal, or assessed against the well or wells or the property
9or properties of the principal, in pursuance of the provisions of
10that division, then this obligation shall be void; otherwise, it shall
11remain in full force and effect.”

12

SEC. 2.  

Section 3205 of the Public Resources Code is amended
13to read:

14

3205.  

An operator who engages in the drilling, redrilling,
15deepening, or in any operation permanently altering the casing, of
1620 or more wells at any time, may file with the supervisor one
17blanket indemnity bond to cover all the operations in any of its
18wells in the state in lieu of an individual indemnity bond for each
19operation as required by Section 3204. The bond shall be executed
20by the operator, as principal, and by an authorized surety company,
21as surety, and shall be in substantially the same language and upon
22the same conditions as provided in Section 3204, except as to the
23difference in the amount. The bond shall be provided in one of the
24following amounts, as applicable:

25(a) The sum of two million dollars ($2,000,000), which does
26not include the bond or fee required in Section 3206. A blanket
27cash bond or blanket surety bond provided prior to January 1,
282014, shall be increased to comply with this subdivision on or
29before January 1, 2016.

30(b) The sum of five million dollars ($5,000,000), which does
31include the bond or fee required in Section 3206.

32

SEC. 3.  

Section 3205.1 of the Public Resources Code is
33amended to read:

34

3205.1.  

(a) Notwithstanding Sections 3204 and 3205, a person
35who engages in the drilling, redrilling, deepening, or in any
36operation permanently altering the casing, of one or more wells
37located on submerged lands under ocean waters within the
38jurisdiction of this state, shall file with the supervisor a blanket
39indemnity bond for one million dollars ($1,000,000) to cover all
40his or her operations in drilling, redrilling, deepening, or
P4    1permanently altering the casing in any of his or her wells located
2on those submerged lands. The bond shall be executed by the
3person, as principal, and by an authorized surety company, as
4surety, and the conditions of the bond shall be the same as the
5conditions stated in Section 3204, except for the difference in the
6amount.

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

25(c) If the state lease or other agreement that sets forth obligations
26or performance requirements under the lease provides security that
27is equal to, or greater than, the total of the additional security
28required pursuant to subdivision (b), plus all other liabilities under
29the lease or other agreement, the supervisor shall not require the
30additional security.

31

SEC. 4.  

Section 3205.2 of the Public Resources Code is
32amended to read:

33

3205.2.  

(a) Notwithstanding Section 3204, any person who
34engages in the operation of a class II commercial wastewater
35disposal well, as defined in subdivision (d), shall file an indemnity
36bond with the supervisor for one hundred thousand dollars
37($100,000) for each well so used. The bond shall cover all
38operations of drilling, redrilling, deepening, altering casing,
39maintaining, or abandoning the well and attendant facilities. The
40bond shall be executed by the person as the principal, and by an
P5    1authorized surety company as the surety, and, except for differences
2in the amount, shall be in substantially the same language and upon
3the same conditions as provided in Section 3204.

4(b) A blanket bond submitted under subdivision (a) or (b) of
5Section 3205 may be used in lieu of the bond required in
6subdivision (a), except that the termination and cancellation shall
7be in accordance with subdivision (c) of this section.

8(c) Notwithstanding Section 3207, any bond issued in
9compliance with this section may be terminated and canceled and
10the surety relieved of all obligations thereunder when the well is
11properly abandoned or another valid bond has been substituted
12therefor.

13(d) A class II commercial wastewater disposal well is a well
14that is used to dispose of oilfield wastewater for a fee and that is
15regulated by the division pursuant to this chapter and Subpart F
16(commencing with Section 147.250) of Part 147 of Title 40 of the
17Code of Federal Regulations.



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