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
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
Carolyn Davis, Houston