The Texas Railroad Commission yesterday passed a sweepingmeasure that for the first time in the state’s history dramaticallyoverhauls how the state handles abandoned oil and gas wells. At thecore of the plan is a requirement that financial assurance, such asa bond or a letter of credit, be in place for a well entering itsthird year of inactivity.

The plan, similar to those enacted in other states, alsorequires financial assurance when low-producing wells aretransferred between operators, a practice that commissioners saymay 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 yearlyfluid level testing be conducted to indicate whether a well isenvironmentally sound.

TRC Chairman Michael L. Williams called the proposal “a toughplan that strengthens our role as stewards of our state’s naturalresources. It’s fair, balanced, and what’s best for Texas.”Commissioners Charles Matthews and Tony Garza both voted in favorof the proposal.

“We’ll now be able to closely monitor a well as it nears the endof its productive life to make certain the state isn’t forced toplug that well down the road,” Williams said.

Williams, who serves as the TRC regulatory reform point man,hailed the collaborative process that resulted in the finalproposal, saying, “I wholeheartedly believe that this sort ofexchange of ideas is the only way to make truly fair and informeddecisions.” He first issued his proposal in March, and has workedwith both Matthews and Garza in hammering out the details.

Garza attached an amendment to the plan, calling for fullimplementation of the measure following final adoption. Thatprocess is expected to take up to 90 days.

Matthews said that 36 producing states already enforce bondingrequirements on oil and gas producers, and “universal bonding” isfamiliar to many Texas producers because so many of them haveinterests in other states with bonding programs.

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

Public hearings and a comment period To learn more about thewell plugging proposal, visit the TRRC website, or call (512) 475-1295.

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