2015 Montana Legislature

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SENATE BILL NO. 173

INTRODUCED BY C. KAUFMANN

 

A BILL FOR AN ACT ENTITLED: "AN ACT REVISING BONDS AND FEES PAID FOR OIL AND GAS DEVELOPMENT; ESTABLISHING BONDS; SETTING AN IDLE WELL FEE; REQUIRING THE BOARD OF OIL AND GAS TO DEPOSIT IDLE WELL FEES IN THE DAMAGE MITIGATION ACCOUNT; AMENDING SECTIONS 82-11-123, 82-11-125, 82-11-134, 82-11-136, 82-11-161, AND 82-11-163, MCA; AND PROVIDING AN APPLICABILITY DATE."

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:

 

     Section 1.  Section 82-11-123, MCA, is amended to read:

     "82-11-123.  (Temporary) Requirements for oil and gas operations. (1) Subject to the administrative control of the department under 2-15-121, the board shall require:

     (1)(a)  identification of ownership of oil or gas wells, producing properties, and tanks;

     (2)(b)  the making and filing of acceptable well logs, including bottom-hole temperatures (in order to facilitate the discovery of potential geothermal energy sources), the making and filing of reports on well locations, and the filing of directional surveys, geological sample logs, mud logs, core descriptions, and ordinary core analysis, if made; however, logs of exploratory or wildcat wells need not be filed for a period of 6 months following completion of those wells;

     (3)(c)  the drilling, casing, producing, and plugging of wells and class II injection wells in a manner that prevents the escape of oil or gas out of one stratum into another, the intrusion of water into oil or gas strata, blowouts, cave-ins, seepages, and fires and the pollution of fresh water supplies by oil, gas, salt, or brackish water;

     (4)(d)  the restoration of surface lands to their previous grade and productive capability after a well is plugged or a seismographic shot hole has been utilized and necessary measures to prevent adverse hydrological effects from the well or hole, unless the surface owner agrees in writing, with the approval of the board or its representatives, to a different plan of restoration;

     (5)(e)  in accordance with subsections (2) and (3), the furnishing of a reasonable bond with good and sufficient surety, conditioned for performance of the duty to properly plug each dry or abandoned well. The bond may be forfeited in its entirety by the board for failure to perform the duty to properly plug each dry or abandoned well and may not be canceled or absolved if the well fails to produce oil or gas in commercial quantities, until:

     (a)(i)  the board determines the well is properly plugged and abandoned as provided in the board's rules; or

     (b)(ii)  the requirements of 82-11-163 are met.

     (6)(f)  proper gauging or other measuring of oil and gas produced and saved to determine the quantity and quality of oil and gas;

     (7)(g)  that every person who produces, transports, or stores oil or gas or injects or disposes of water in this state shall make available within this state for a period of 5 years complete and accurate records of the quantities. The records must be available for examination by the board or its employees at all reasonable times. The person shall file with the board reports as it may prescribe with respect to quantities, transportations, and storages of the oil, gas, or water.

     (8)(h)  the installation, use, and maintenance of monitoring equipment or methods in the operation of class II injection wells.

     (2) (a) Except as provided in subsections (2)(b) and (2)(c), the bond required under subsection (i)(e) may not be less than $60,000 for each well.

     (b) If a well is drilled solely for the purpose of exploring for oil and gas and is less then 2,000 feet deep, the bond may not be less than $20,000.

     (c) When providing bond or other surety for multiple wells, the bond may not be less than $250,000.

     (3) (a) A person providing bond for multiple wells in accordance with subsection (2)(c) shall also place $5,000 for each inactive well in escrow to properly plug each dry or abandoned well or pay an annual idle well fee per well to the board in accordance with 82-11-134.

     (b) The idle well fee is determined by the board and may not be more than $500 or less than $100 for each well.

     82-11-123.  (Effective on occurrence of contingency) Requirements for oil and gas and carbon dioxide injection operations. (1) Subject to the administrative control of the department under 2-15-121, the board shall require:

     (a)  identification of ownership of carbon dioxide injection wells, carbon dioxide, geologic storage reservoirs, and oil or gas wells, producing properties, and tanks;

     (b)  the making and filing of acceptable well logs, including bottom-hole temperatures, in order to facilitate the discovery of potential geothermal energy sources, the making and filing of reports on well locations, and the filing of directional surveys, geological sample logs, mud logs, core descriptions, and ordinary core analysis, if made. However, logs of exploratory or wildcat wells need not be filed for a period of 6 months following completion of those wells.

     (c)  the drilling, casing, producing, and plugging of wells, carbon dioxide injection wells, and class II injection wells in a manner that prevents the escape of carbon dioxide, oil, or gas out of one stratum into another, the intrusion of water into carbon dioxide, oil, or gas strata, blowouts, cave-ins, seepages, and fires and the pollution of fresh water supplies by carbon dioxide, oil, gas, salt, or brackish water;

     (d)  the restoration of surface lands to their previous grade and productive capability after a well is plugged or a seismographic shot hole has been utilized and necessary measures to prevent adverse hydrological effects from the well or hole, unless the surface owner agrees in writing, with the approval of the board or its representatives, to a different plan of restoration;

     (e)  except as provided in subsection (1)(f) and in accordance with subsections (2) and (3), the furnishing of a reasonable bond with good and sufficient surety, conditioned for performance of the duty to properly plug each dry or abandoned well. The bond may be forfeited in its entirety by the board for failure to perform the duty to properly plug each dry or abandoned well and may not be canceled or absolved if the well fails to produce oil or gas in commercial quantities, until:

     (i)  the board determines the well is properly plugged and abandoned as provided in the board's rules; or

     (ii) the requirements of 82-11-163 are met.

     (f)  the furnishing of reasonable bond or other surety for a carbon dioxide injection well, geologic storage reservoir, and the carbon dioxide stored in the reservoir with good and sufficient surety for performance of the duty to operate and manage a carbon dioxide injection well, geologic storage reservoir, and the carbon dioxide stored in the reservoir and to properly plug and reclaim each carbon dioxide injection well. The bond or other surety may be forfeited in its entirety by the board for failure to perform the duty to properly manage and operate a well, reservoir, and stored carbon dioxide or to plug a well. Except as provided in 82-11-183(8), the bond or other surety may not be canceled or absolved.

     (g)  proper gauging or other measuring of oil and gas produced and saved to determine the quantity and quality of oil and gas;

     (h)  that every person who produces, transports, or stores oil or gas or injects or disposes of water or carbon dioxide in this state shall make available within this state for a period of 5 years complete and accurate records of the quantities. The records must be available for examination by the board or its employees at all reasonable times. The person shall file with the board reports as it may prescribe with respect to quantities, transportations, and storages of the oil, gas, carbon dioxide, or water.

     (i)  the installation, use, and maintenance of monitoring equipment or methods in the operation of carbon dioxide injection wells and class II injection wells.

     (2) (a) Except as provided in subsections (2)(b) and (2)(c), the bond required under subsection (i)(e) may not be less than $60,000 for each well.

     (b) If a well is drilled solely for the purpose of exploring for oil and gas and is less then 2,000 feet deep, the bond may not be less than $20,000.

     (c) When providing bond or other surety for multiple wells, the bond may not be less than $250,000.

     (3) (a) A person providing bond for multiple wells in accordance with subsection (2)(c) shall also place $5,000 for each inactive well in escrow to properly plug each dry or abandoned well or pay an annual idle well fee per well to the board in accordance with 82-11-134.

     (b) The idle well fee is determined by the board and may not be more than $500 or less than $100 for each well.

     (2)(4)  In addition to the requirements of subsection (1), the geologic carbon dioxide injection well permitting system must include:

     (a)  recordkeeping and reporting requirements sufficient to measure the effectiveness of carbon dioxide injection wells and geologic storage reservoirs;

     (b)  characterization of the injection zone and aquifers above and below the injection zone that may be affected, including applicable pressure and fluid chemistry data to describe the projected effects of injection activities;

     (c)  verification and monitoring at geologic storage reservoirs;

     (d)  mitigation of leaks, including the ability to stop the leaking of carbon dioxide and to address impacts of leaks;

     (e)  adequate baseline monitoring of drinking water wells within 1 mile of the perimeter of the geologic storage reservoir; and

     (f)  at a minimum, requirements pursuant to applicable federal regulatory standards established by:

     (i)  the Energy Independence and Security Act of 2007, Public Law 110-140, and subsequent acts;

     (ii) the Safe Drinking Water Act, 42 U.S.C. 300f, et seq.; and

     (iii) the underground injection control program, 40 CFR, parts 144 through 147."

 

     Section 2.  Section 82-11-125, MCA, is amended to read:

     "82-11-125.  Availability of cores or chips, cuttings, and bottom-hole temperatures to board. (1) (a) An Except as provided in subsection (1)(b), an owner drilling a well for gas or oil shall make available to provide the board at its field offices representative cores or chips, when available, the cuttings from the well, and the bottom-hole temperatures of the wells, in order to facilitate the discovery of geothermal potential. However, cores, Cores, chips, or cuttings need not be so made available for a period of 6 months following completion or abandonment of the wells.

     (b) The board may, however, relieve the owner of a well of the obligation to furnish cores, If the board determines that submitting cores, chips, or cuttings when, in the opinion of the board, the furnishing thereof would be is unduly burdensome for the owner; however, then cores, chips, or cuttings do not need to be provided. the owner desiring relief must apply to If submitting the cores, chips, or cuttings is burdensome, the owner shall request and receive permission from the board to not so furnish meet the requirements of subsection (1)(a).

     (2) (a)  The owner of a stratigraphic test well drilled for the purpose of obtaining lithologic information useful in potential oil and gas operations, as such well is defined by the board's rules, shall within 3 years from the date of the cessation of the drilling of the well make available to the board complete sets of sample cuttings and representative cores or chips and well logs of the wells, which logs shall. Logs must include, among other information, the size of casing used, the type and depth of water, if any, located, and bottom-hole temperatures for geothermal purposes. The

      (b) Except as provided in 82-11-123, the board shall require and the owner of a stratigraphic test well shall furnish to provide, prior to the commencement of drilling of the well, a good and sufficient surety bond, to be approved prior to the commencement of the drilling,. The bond must be conditioned upon the proper plugging of the well prior to abandonment. Except as provided in 82-11-123, the amount of the bond to must be determined by the estimated depth as in of the test well and in accordance with the board's rules provided for oil and gas wells; prior. Prior to abandonment, the wells shall must be plugged by the owner thereof of the wells or by the surety should if the owner be is in default, the. The plugging to must conform to the standards set down and determined by the board."

 

     Section 3.  Section 82-11-134, MCA, is amended to read:

     "82-11-134.  Permit fees. In addition to the privilege and license tax, before commencing the drilling of an oil or gas well or stratigraphic test well or core hole, a person shall secure from the board a drilling permit and shall pay to the board therefor the following amounts:

     (1)  for each well whose estimated depth is:

     (a) 3,500 feet or less, $25;

     (2)(b) from 3,501 feet to 7,000 feet, $75;

     (3)(c)  7,000 feet and deeper, $150;

     (2) idle well fees, if required, pursuant to 82-11-123(3)."

 

     Section 4.  Section 82-11-136, MCA, is amended to read:

     "82-11-136.  (Temporary) Expenditure of funds from bonds for plugging wells. The board may accept and expend all funds received by it from bonds for properly plugging dry or abandoned wells as authorized in 82-11-123(5) 82-11-123(1)(e) or held in escrow in accordance with 82-11-123(3)(a).

     82-11-136.  (Effective on occurrence of contingency) Expenditure of funds from bonds for plugging wells. (1) The board may accept and expend all funds received by it from bonds for properly plugging dry or abandoned wells as authorized in 82-11-123(1)(e) or held in escrow in accordance with 82-11-123(3)(a).

     (2)  The board may accept and expend all funds received by it from bonds for properly plugging abandoned carbon dioxide injection wells as authorized in 82-11-123(1)(f)."

 

     Section 5.  Section 82-11-161, MCA, is amended to read:

     "82-11-161.  (Temporary) Oil and gas production damage mitigation account -- statutory appropriation. (1) There is an oil and gas production damage mitigation account within the state special revenue fund established in 17-2-102. The oil and gas production damage mitigation account is controlled by the board.

     (2)  At the beginning of each biennium, there must be allocated to the oil and gas production damage mitigation account $50,000 from the interest income of the resource indemnity trust fund, except that if at the beginning of a biennium the unobligated cash balance in the oil and gas production damage mitigation account:

     (a)  equals or exceeds $200,000, no allocation will be made; or

     (b)  is less than $200,000, then an amount less than or equal to the difference between the unobligated cash balance and $200,000, but not more than $50,000, must be allocated to the oil and gas production damage mitigation account from the interest income of the resource indemnity trust fund.

     (3)  In addition to the allocation provided in subsection (2), there must be deposited in the oil and gas production damage mitigation account all funds received by the board pursuant to 82-11-136 and pursuant to 82-11-134(2).

     (4)  If a sufficient balance exists in the account, funds are statutorily appropriated, as provided in 17-7-502, from the oil and gas production damage mitigation account, upon the authorization of the board, to pay the reasonable costs of properly plugging a well and either reclaiming or restoring, or both, a drill site or other drilling or producing area damaged by oil and gas operations if the board determines that the well, sump, hole, drill site, or drilling or producing area has been abandoned and the responsible person cannot be identified or located or if the responsible person fails or refuses to properly plug, reclaim, or restore the well, sump, hole, drill site, or drilling or producing area within a reasonable time after demand by the board. The responsible person shall, however, pay costs to the extent of that person's available resources and is subsequently liable to fully reimburse the account or is subject to a lien on property as provided in 82-11-164 for costs expended from the account to properly plug, reclaim, or restore the well, sump, hole, drill site, or drilling or producing area and to mitigate any damage for which the person is responsible.

     (5)  Interest from funds in the oil and gas production damage mitigation account accrues to that account.

     82-11-161.  (Effective on occurrence of contingency) Oil and gas production damage mitigation account -- statutory appropriation. (1) There is an oil and gas production damage mitigation account within the state special revenue fund established in 17-2-102. The oil and gas production damage mitigation account is controlled by the board.

     (2)  At the beginning of each biennium, there must be allocated to the oil and gas production damage mitigation account $50,000 from the interest income of the resource indemnity trust fund, except that if at the beginning of a biennium the unobligated cash balance in the oil and gas production damage mitigation account:

     (a)  equals or exceeds $200,000, no allocation will be made; or

     (b)  is less than $200,000, then an amount less than or equal to the difference between the unobligated cash balance and $200,000, but not more than $50,000, must be allocated to the oil and gas production damage mitigation account from the interest income of the resource indemnity trust fund.

     (3)  In addition to the allocation provided in subsection (2), there must be deposited in the oil and gas production damage mitigation account all funds received by the board pursuant to 82-11-136(1) and pursuant to 82-11-134(2).

     (4)  If a sufficient balance exists in the account, funds are statutorily appropriated, as provided in 17-7-502, from the oil and gas production damage mitigation account, upon the authorization of the board, to pay the reasonable costs of properly plugging a well and either reclaiming or restoring, or both, a drill site or other drilling or producing area damaged by oil and gas operations if the board determines that the well, sump, hole, drill site, or drilling or producing area has been abandoned and the responsible person cannot be identified or located or if the responsible person fails or refuses to properly plug, reclaim, or restore the well, sump, hole, drill site, or drilling or producing area within a reasonable time after demand by the board. However, the responsible person shall pay costs to the extent of that person's available resources and is subsequently liable to fully reimburse the account or is subject to a lien on property as provided in 82-11-164 for costs expended from the account to properly plug, reclaim, or restore the well, sump, hole, drill site, or drilling or producing area and to mitigate any damage for which the person is responsible.

     (5)  Interest from funds in the oil and gas production damage mitigation account accrues to that account."

 

     Section 6.  Section 82-11-163, MCA, is amended to read:

     "82-11-163.  (Temporary) Landowner's bond on noncommercial well. If Except as provided in 82-11-123(2), if the owner of the surface land upon which has been drilled a well that fails to produce oil or gas in commercial quantities acquires the well for domestic purposes, the board may cancel and absolve the bond required in 82-11-123 82-11-123(1)(e) upon its acceptance of surety in the form of a certificate of deposit or a surety bond in the amount of $5,000 for a single well or in the amount of $10,000 for more than one well or in the form of a property bond of two times the value of the required certificate of deposit or surety bond. The release of the certificate of deposit, surety bond, or property bond must be conditioned on proof provided by the landowner that the well has been properly plugged.

     82-11-163.  (Effective on occurrence of contingency) Landowner's bond on noncommercial well. If Except as provided in 82-11-123(2), if the owner of the surface land upon which has been drilled a well that fails to produce oil or gas in commercial quantities acquires the well for domestic purposes, the board may cancel and absolve the bond required in 82-11-123(1)(e) upon its acceptance of surety in the form of a certificate of deposit or a surety bond in the amount of $5,000 for a single well or in the amount of $10,000 for more than one well or in the form of a property bond of two times the value of the required certificate of deposit or surety bond. The release of the certificate of deposit, surety bond, or property bond must be conditioned on proof provided by the landowner that the well has been properly plugged."

 

     NEW SECTION.  Section 7.  Notification to tribal governments. The secretary of state shall send a copy of [this act] to each tribal government located on the seven Montana reservations and to the Little Shell Chippewa tribe.

 

     NEW SECTION.  Section 8.  Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].

 

     NEW SECTION.  Section 9.  Applicability. [This act] applies to permits issued on or after [the effective date of this act].

- END -

 


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