BILL ANALYSIS �
SB 665
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Date of Hearing: August 21, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 665 (Wolk) - As Amended: August 5, 2013
Policy Committee: Natural
ResourcesVote:6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases the required amount of indemnity bonds an
oil and gas operator must file with the Division of Oil, Gas and
Geothermal Resources (DOGGR) for its well operations.
Specifically, this bill:
1)Increases the individual indemnity bond amount to $100,000 for
each well, regardless of well depth. Current amounts range
from $15,000 to $30,000 depending on well depth.
2)Increases the number of operating wells necessary to be
eligible for a blanket indemnity bond from one or more to 20
or more wells.
3)Increases the blanket indemnity bond amount to $2 million
regardless of the number of wells. Currently, blanket
indemnity requirements are $100,000 for fewer than 50 wells
and 250,000 for 50 wells or more.
4)Increases the blanket indemnity bond amount for a bond that
includes coverage for idle wells from $1 million to $5
million.
5)Increases the class II commercial wastewater disposal well
indemnity bond amount from $50,000 to $100,000.
FISCAL EFFECT
Negligible state costs.
COMMENTS
SB 665
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1)Purpose. According to the author, this bill is intended to
update and increase indemnity bond requirements to ensure that
adequate funds are available to address any necessary
environmental clean-up resulting from well drilling and
plugging.
2)Background. DOGGR is responsible for supervising the
drilling, operation, maintenance, and abandonment of oil and
gas wells in the state and, to the extent possible, preventing
damage to life, health, property, and natural resources,
including underground and surface waters suitable for
irrigation or domestic purposes.
DOGGR is governed by state and federal law with regard to
wells that inject fluids associated with oil and natural gas
production operations (Class II wells).
The federal Safe Drinking Water Act requires the United States
Environmental Protection Agency to develop minimum federal
requirements for the Underground Injection Control (UIC)
programs designed to control the injection of wastes into
underground sources of drinking water.
Under DOGGR's Class II UIC primacy program, an oil and gas
well operator may demonstrate financial responsibility by
filing an individual indemnity or cash bond for each well
drilled or a blanket bond covering all well operations.
Individual bonds are normally released after an injection well
has injected fluids for a six-month continuous period if DOGGR
is satisfied that a well is mechanically sound. Blanket bonds
are normally not released until all of the operator's wells
are abandoned or until the operator specifically requests the
release of a well from bond coverage. After the release of a
bond, DOGGR still has the authority to order an operator to
perform remedial or corrective work on a well.
3)Support and Opposition. This bill is supported by
environmental organizations and opposed by independent oil and
gas operators.
4)Amendments. The author has agreed to accept amendments to
reduce the individual indemnity bond amounts charged for
individual onshore wells from $100,000 to $25,000 for wells
SB 665
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less than 5,000 feet deep and $40,000 for wells 5,000 feet
deep or more.
Analysis Prepared by : Jennifer Galehouse / APPR. / (916)
319-2081