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 bond to be $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 bond 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 ofbegin delete either $2,000,000,end deletebegin insert $400,000,end insert which would not include bonds or fees required for idled wells,begin delete or $5,000,000,end deletebegin insert $200,000, for an operator having 50 or fewer wells in the state, which would not include bonds or fees required for idled wells, or $2,000,000,end insert 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:
Section 3204 of the Public Resources Code is
2amended to read:
(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 for each well so drilled,
7redrilled, deepened, or permanently altered, in the following
8amount:
9(1) Twenty-five thousand dollars ($25,000) for each well that
10is less than 10,000 feet deep.
11(2) Forty thousand dollars ($40,000) for each well that is 10,000
12or more feet deep.
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
P3 1all losses, charges, and expenses incurred by it to obtain the
2compliance by the principal named in the bond.
3(c) The conditions of the bond shall be stated in substantially
4the following language: “If the ____, the above bounden principal,
5shall well and truly comply with all the provisions of Division 3
6(commencing with Section 3000) of the Public
Resources Code
7and shall obey all lawful orders of the State Oil and Gas Supervisor
8or the district deputy or deputies, subject to subsequent appeal as
9provided in that division, and shall pay all charges, costs, and
10expenses incurred by the supervisor or the district deputy or
11deputies in respect of the well or wells or the property or properties
12of the principal, or assessed against the well or wells or the property
13or properties of the principal, in pursuance of the provisions of
14that division, then this obligation shall be void; otherwise, it shall
15remain in full force and effect.”
Section 3205 of the Public Resources Code is amended
17to read:
begin insert(a)end insertbegin insert end insertAn operator who engages in the drilling, redrilling,
19deepening, or in any operation permanently altering the casing, of
2020 or more wells at any time, may file with the supervisor one
21blanket indemnity bond to cover all the operations in any of its
22wells in the state in lieu of an individual indemnity bond for each
23operation as required by Section 3204. The bond shall be executed
24by the operator, as principal, and by an authorized surety company,
25as surety, and shall be in substantially the same language and upon
26the same conditions as provided in Section 3204, except as to the
27difference in the amount. The bond
shall be provided in one of the
28following amounts, as applicable:
29(a)
end delete
30begin insert(1)end insert The sum ofbegin delete two million dollars ($2,000,000),end deletebegin insert four hundred
31thousand dollars ($400,000),end insert which does not include the bond or
32fee required in Section 3206.begin delete A blanket cash bond or blanket surety
33bond provided prior to January 1, 2014, shall be increased to
34comply with this subdivision on or before January 1, 2016.end delete
35(2) The sum of two hundred thousand dollars ($200,000), which
36does not include the bond or fee required in Section 3206, for any
37operator having 50 or fewer wells in the state, exclusive of properly
38abandoned wells.
39(b)
end delete
P4 1begin insert(3)end insert The sum ofbegin delete fiveend deletebegin insert twoend insert million dollarsbegin delete ($5,000,000),end delete
2begin insert
($2,000,000),end insert which does include the bond or fee required in
3Section 3206.
4(b) A blanket cash bond or blanket surety bond provided prior
5to January 1, 2014, shall be increased to comply with this section
6on or before January 1, 2016.
Section 3205.1 of the Public Resources Code is
8amended to read:
(a) Notwithstanding Sections 3204 and 3205, a person
10who engages in the drilling, redrilling, deepening, or in any
11operation permanently altering the casing, of one or more wells
12located on submerged lands under ocean waters within the
13jurisdiction of this state, shall file with the supervisor a blanket
14indemnity bond for one million dollars ($1,000,000) to cover all
15his or her operations in drilling, redrilling, deepening, or
16permanently altering the casing in any of his or her wells located
17on those submerged lands. The bond shall be executed by the
18person, as principal, and by an authorized surety company, as
19surety, and the conditions of the bond shall be the same as the
20conditions stated in
Section 3204, except for the difference in the
21amount.
22(b) In addition to providing the bond required by subdivision
23(a), a person who operates one or more wells that are located on
24tide or submerged lands within the jurisdiction of this state shall
25provide an additional amount of security acceptable to the
26supervisor, covering the full costs of plugging and abandoning all
27of the operator’s wells. The supervisor shall determine the amount
28of the security required of each operator, based on his or her
29determination of the reasonable costs of that plugging and
30abandonment. The supervisor may not adjust the amount of security
31required of each operator more frequently than once every three
32years, to reflect changes in those costs. An operator may self-insure
33this security obligation if the supervisor, at his or her discretion,
34determines that
the operator has sufficient financial resources to
35plug and abandon the wells for which the operator is responsible.
36The security shall remain in effect until all wells are plugged and
37abandoned in accordance with Section 3208, but the supervisor
38shall reduce the amount of the security required of an operator to
39reflect reduced obligations as wells are plugged and abandoned.
P5 1(c) If the state lease or other agreement that sets forth obligations
2or performance requirements under the lease provides security that
3is equal to, or greater than, the total of the additional security
4required pursuant to subdivision (b), plus all other liabilities under
5the lease or other agreement, the supervisor shall not require the
6additional security.
Section 3205.2 of the Public Resources Code is
8amended to read:
(a) Notwithstanding Section 3204, any person who
10engages in the operation of a class II commercial wastewater
11disposal well, as defined in subdivision (d), shall file an indemnity
12bond with the supervisor for one hundred thousand dollars
13($100,000) for each well so used. The bond shall cover all
14operations of drilling, redrilling, deepening, altering casing,
15maintaining, or abandoning the well and attendant facilities. The
16bond shall be executed by the person as the principal, and by an
17authorized surety company as the surety, and, except for differences
18in the amount, shall be in substantially the same language and upon
19the same conditions as provided in Section 3204.
20(b) A blanket bond submitted under subdivision (a)begin delete or (b)end delete of
21Section 3205 may be used in lieu of the bond required in
22subdivision (a), except that the termination and cancellation shall
23be in accordance with subdivision (c) of this section.
24(c) Notwithstanding Section 3207, any bond issued in
25compliance with this section may be terminated and canceled and
26the surety relieved of all obligations thereunder when the well is
27properly abandoned or another valid bond has been substituted
28therefor.
29(d) A class II commercial wastewater disposal well is a well
30that is used to dispose of oilfield wastewater for a fee and that is
31regulated by the division
pursuant to this chapter and Subpart F
32(commencing with Section 147.250) of Part 147 of Title 40 of the
33Code of Federal Regulations.
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