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TRC Passes Well Plugging Measure

TRC Passes Well Plugging Measure

The Texas Railroad Commission passed a sweeping measure last week that for the first time in the state's history dramatically overhauls how the state handles abandoned oil and gas wells. At the core of the plan is a requirement that financial assurance, such as a bond or a letter of credit, be in place for a well entering its third year of inactivity.

The plan, similar to those enacted in other states, also requires financial assurance when low-producing wells are transferred between operators, a practice that commissioners say may be a red flag that a well is "ripe for plugging." Currently, financial assurance mechanisms are not required statewide.

Statewide Rule 14, as it is known, also mandates that yearly fluid level testing be conducted to indicate whether a well is environmentally sound.

TRC Chairman Michael L. Williams called the proposal "a tough plan that strengthens our role as stewards of our state's natural resources. It's fair, balanced, and what's best for Texas." Commissioners Charles Matthews and Tony Garza both voted in favor of the proposal.

"We'll now be able to closely monitor a well as it nears the end of its productive life to make certain the state isn't forced to plug that well down the road," Williams said.

Williams, who serves as the TRC regulatory reform point man, applauded the collaborative process that resulted in the final proposal, saying, "I wholeheartedly believe that this sort of exchange of ideas is the only way to make truly fair and informed decisions." He first issued his proposal in March, and has worked with both Matthews and Garza in hammering out the details.

Garza attached an amendment to the plan, calling for full implementation of the measure following final adoption. That process is expected to take up to 90 days.

Matthews said that 36 producing states already enforce bonding requirements on oil and gas producers, and "universal bonding" is familiar to many Texas producers because so many of them have interests in other states with bonding programs.

In New Mexico, producers are required to carry a blanket bond of $50,000 or a per-well bond ranging from $5,000 to $12,500, depending on the well's depth. In Oklahoma, producers are required to carry a blanket bond of $25,000 or a per-well bond based on the estimated cost of plugging the well. In Texas, the City of Corpus Christi now requires individual bonds for active wells, plus additional bonds for wells that have been inactive for more than one year.

Carolyn Davis, Houston

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