1 STATE OF OKLAHOMA
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2 2nd Session of the 59th Legislature (2024)
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3 HOUSE BILL 3534 By: Boles
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6 AS INTRODUCED
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7 An Act relating to oil and gas; amending 52 O.S.
7 2021, Section 318.1, which relates to evidence of
8 financial ability for drilling and operating wells;
8 phasing out category A surety; modifying surety
9 amounts; providing for tiered surety amount based on
9 number of operating wells; and providing effective
10 date.
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13 BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
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14 SECTION 1. AMENDATORY 52 O.S. 2021, Section 318.1, is
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15 amended to read as follows:
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16 Section 318.1 A. Any person who drills or operates any well
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17 for the exploration, development or production of oil or gas, or as
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18 an injection or disposal well, within this state, shall furnish in
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19 writing, on forms approved by the Corporation Commission, his or her
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20 agreement to drill, operate and plug wells in compliance with the
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21 rules of the Commission and the laws of this state, together with
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22 evidence of financial ability to comply with the requirements for
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23 plugging, closure of surface impoundments, removal of trash and
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24 equipment as established by the rules of the Commission and by law.
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 1 To establish evidence of financial ability, the Commission shall
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2 require:
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3 1. Category A surety which shall include a financial statement
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4 listing assets and liabilities and including a general release that
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5 the information may be verified with banks and other financial
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6 institutions. The statement shall prove a net worth of not less
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7 than Fifty Thousand Dollars ($50,000.00). Category A surety will no
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8 longer be accepted as valid form of surety for new operators to
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9 select beginning November 1, 2024. All current operators who have
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10 valid Category A surety and are in good standing with the Commission
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11 will be able to retain their Category A surety for the time they are
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12 a valid operator in the State of Oklahoma; or
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13 2. Category B surety which shall include an irrevocable
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14 commercial letter of credit, cash, a cashier's check, a Certificate
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15 of Deposit, Bank Joint Custody Receipt, other negotiable instrument,
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16 or, a blanket surety bond. Except as provided in paragraph 3 1 of
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17 subsection A B or subsection C of this section, amount of such
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18 letter of credit, cash, cashier's check, certificate, bond, receipt
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19 or other negotiable instrument shall be in the amount of Twenty-five
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20 Thousand Dollars ($25,000.00) but may be set higher at the
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21 discretion of the Director of the Oil and Gas Conservation Division
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22 based on the number of wells that the person operates as follows:
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23 a. for one to ten wells, Twenty-five Thousand Dollars
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24 ($25,000.00),
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 1 b. for eleven to fifty wells, Fifty Thousand Dollars
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2 ($50,000.00),
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3 c. for fifty-one to one hundred wells, One Hundred
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4 Thousand Dollars ($100,000.00), and
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5 d. for more than one hundred wells, One Hundred Fifty
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6 Thousand Dollars ($150,000.00).
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7 The Commission is authorized to determine the amount of Category B
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8 surety based upon the past performance of the operator and its
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9 insiders and affiliates regarding compliance with the laws of this
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10 state, and any rules promulgated thereto including but not limited
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11 to the drilling, operation and plugging of wells, closure of surface
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12 impoundments or removal of trash and equipment. Any instrument
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13 shall constitute an unconditional promise to pay and be in a form
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14 negotiable by the Commission.
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15 3. B. 1. The Commission upon certification by any operator
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16 subject to Category B surety that its plugging liability statewide
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17 is less than the twenty-five-thousand-dollar standard amount based
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18 on the number of wells operated as specified in this section may
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19 allow said operator to provide Category B type surety in an amount
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20 less than the amount required Twenty-five Thousand Dollars
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21 ($25,000.00) by this section, but at least sufficient to cover the
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22 estimated cost of all plugging, closure, and removal operations
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23 currently the responsibility of that operator. The liability
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24 certification referred to in this paragraph subsection shall take
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Req. No. 8883 Page 3
 1 the form of an affidavit from a licensed well plugger estimating the
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2 costs of all plugging, closure, and removal operations of the
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3 operator requesting such relief. This alternative amount shall be
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4 modified upward upon the assumption of additional operations by such
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5 operator, the maximum amount of Category B surety to be posted not
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6 to exceed the twenty-five-thousand-dollar total unless as provided
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7 previously One Hundred Fifty Thousand Dollars ($150,000.00).
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8 B. Operators of record as of June 7, 1989, who do not have any
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9 outstanding contempt citations or fines and whose insiders or
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10 affiliates have no outstanding contempt citations or fines may post
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11 Category A surety.
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12 2. New operators, operators who have outstanding fines or
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13 contempt citations and operators whose insiders or affiliates have
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14 outstanding contempt citations or fines as of June 7, 1989, shall be
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15 required to post Category B surety. Operators who have posted
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16 Category B surety and have operated under this type surety and have
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17 no outstanding fines at the end of three (3) years may post Category
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18 A surety.
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19 3. Operators using Category A surety who are assessed a fine of
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20 Two Thousand Dollars ($2,000.00) or more and who do not pay the fine
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21 within the specified time shall be required to post a Category B
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22 surety within thirty (30) days of notification by the Commission.
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23 C. For good cause shown concerning pollution or improper
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24 plugging of wells by the operator posting either Category A or B
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 1 surety or by an insider or affiliate of such operator, the
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2 Commission, upon application of the Director of the Oil and Gas
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3 Conservation Division, after notice and hearing, may require the
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4 filing of additional Category B surety in an amount greater than
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5 Twenty-five Thousand Dollars ($25,000.00) but not to exceed One
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6 Hundred Thousand Dollars ($100,000.00) One Hundred Fifty Thousand
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7 Dollars ($150,000.00).
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8 D. If the Commission determines that a blanket surety bond is
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9 required, the bond shall be conditioned on the fact that the
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10 operator shall cause the wells to be plugged and abandoned surface
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11 impoundments to be closed, and trash and equipment to be removed in
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12 accordance with the laws of this state and the rules of the
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13 Commission. Each bond shall be executed by a corporate surety
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14 authorized to do business in this state and shall be renewed and
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15 continued in effect until the conditions have been met or release of
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16 the bond is authorized by the Commission.
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17 E. The agreement provided for in subsection A of this section
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18 shall provide that if the Commission determines that the person
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19 furnishing the agreement has neglected, failed, or refused to plug
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20 and abandon, or cause to be plugged and abandoned, or replug any
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21 well or has neglected, failed or refused to close any surface
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22 impoundment or removed or cause to be removed trash and equipment in
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23 compliance with the rules of the Commission, then the person shall
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24 forfeit from his or her bond, letter of credit or negotiable
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 1 instrument or shall pay to this state, through the Commission, for
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2 deposit in the State Treasury, a sum equal to the cost of plugging
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3 the well, closure of any surface impoundment or removal of trash and
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4 equipment. The Commission may cause the remedial work to be done,
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5 issuing a warrant in payment of the cost thereof drawn against the
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6 monies accruing in the State Treasury from the forfeiture or
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7 payment. Any monies accruing in the State Treasury by reason of a
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8 determination that there has been a noncompliance with the
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9 provisions of the agreement or the rules of the Commission, in
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10 excess of the cost of remedial action ordered by the Commission,
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11 shall be credited to the Oil and Gas Revolving Fund. The Commission
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12 shall also recover any costs arising from litigation to enforce this
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13 provision. Provided, before a person is required to forfeit or pay
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14 any monies to the state pursuant to this section, the Commission
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15 shall notify the person at his or her last-known address of the
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16 determination of neglect, failure or refusal to plug or replug any
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17 well, or close any surface impoundment or remove trash and equipment
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18 and said person shall have ten (10) days from the date of
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19 notification within which to commence remedial operations. Failure
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20 to commence remedial operations shall result in forfeiture or
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21 payment as provided in this subsection.
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22 F. It shall be unlawful for any person to drill or operate any
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23 oil or gas well subject to the provisions of this section, without
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24 the evidence of financial ability required by this section. The
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 1 Commission shall shut in, without notice, hearing or order of the
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2 Commission, the wells of any such person violating the provisions of
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3 this subsection and such wells shall remain shut in for
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4 noncompliance until the required evidence of Category B surety is
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5 obtained and verified by the Commission.
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6 G. If title to property or a well is transferred, the
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7 transferee shall furnish the evidence of financial ability to plug
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8 the well and close surface impoundments required by the provisions
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9 of this section, prior to the transfer.
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10 H. As used in this section:
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11 1. "Affiliate" means an entity that owns twenty percent (20%)
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12 or more of the operator, or an entity of which twenty percent (20%)
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13 or more is owned by the operator; and
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14 2. "Insider" means officer, director, or person in control of
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15 the operator; general partners of or in the operator; general or
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16 limited partnership in which the operator is a general partner;
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17 spouse of an officer, director, or person in control of the
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18 operator; spouse of a general partner of or in the operator;
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19 corporation of which the operator is a director, officer, or person
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20 in control; affiliate, or insider of an affiliate as if such
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21 affiliate were the operator; or managing agent of the operator.
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22 SECTION 2. This act shall become effective November 1, 2024.
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24 59-2-8883 JL 01/17/24
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