16 Tex. Admin. Code § 3.76 – Fees, Performance Bonds and Alternate Forms of Financial Security Required To Be Filed

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise:
1. (1) Violation--Noncompliance with a commission rule, order, license, permit, or certificate relating to safety or the prevention or control of pollution.
2. (2) Outstanding violation--A violation for which:
  1. (A) either:
    1. (i) a commission order finding a violation has been entered and all appeals have been exhausted; or
    2. (ii) an agreed order between the commission and the organization relating to a violation has been entered; and
  2. (B) one or more of the following conditions still exist:
    1. (i) the conditions that constituted the violation have not been corrected;
    2. (ii) all administrative, civil, and criminal penalties, if any, relating to the violation of such commission rules, orders, licenses, permits, or certificates have not been paid; or
    3. (iii) all reimbursements of any costs and expenses assessed by the commission relating to the violation of such commission rules, orders, licenses, permits, or certificates have not been paid.
3. (3) An acceptable record of compliance--
  1. (A) A record of compliance showing:
    1. (i) No referrals to the commission's enforcement section relating to a violation;
    2. (ii) No pending legal enforcement action relating to a violation; and
    3. (iii) No outstanding violations; or
  2. (B) A record of compliance showing:
    1. (i) Only one enforcement order, provided the order specifies that it shall not be considered to meet the elements of subparagraph (A) of this definition and provided the requirements of the order are met;
    2. (ii) No referrals to enforcement other than those that are resolved in the order referenced in clause (i) of this subparagraph;
    3. (iii) No pending enforcement actions other than those resolved in the order referenced in clause (i) of this subparagraph; and
    4. (iv) No outstanding violations other than those resolved in the order referenced in clause (i) of this subparagraph.
4. (4) Commercial facility--A facility whose owner or operator receives compensation from others for the storage, reclamation, treatment, or disposal of oil field fluids or oil and gas wastes that are wholly or partially trucked or hauled to the facility and whose primary business purpose is to provide these services for compensation if:
  1. (A) the facility is permitted under §3.8 of this title (relating to Water Protection);
  2. (B) the facility is permitted under §3.57 of this title (relating to Reclaiming Tank Bottoms, Other Hydrocarbon Wastes, and Other Waste Materials);
  3. (C) the facility is permitted under §3.9 of this title (relating to Disposal Wells) and a collecting pit permitted under §3.8 is located at the facility; or
  4. (D) the facility is permitted under §3.46 of this title (relating to Fluid Injection into Productive Reservoirs) and a collecting pit permitted under §3.8 is located at the facility.
(b) Filing fees. The following filing fees are required to be paid to the Railroad Commission.
1. (1) With each application or materially amended application for a permit to drill, deepen, plug back, or reenter a well, the applicant shall submit to the commission a nonrefundable fee of:
  1. (A) $100 if the proposed total depth of the well is 2,000 feet or less;
  2. (B) $125 if the proposed total depth of the well is greater than 2,000 feet but less than or equal to 4,000 feet;
  3. (C) $150 if the proposed total depth of the well is greater than 4,000 feet but less than or equal to 9,000 feet; or
  4. (D) $200 if the proposed total depth of the well is greater than 9,000 feet.
2. (2) An application will be considered materially amended if the amendment requires the issuance of a new permit. A materially amended application includes an application in which an additional field or a change in location or field is sought for a previously permitted well. However, if a new application and/or permit becomes necessary because of commission action, the fee may be waived.
3. (3) An applicant shall submit an additional nonrefundable fee of $50 when requesting that the commission expedite the application for a permit to drill, deepen, plug back, or reenter a well.
4. (4) With each application for an extension of time to plug a well pursuant to commission rules, an applicant shall submit to the commission a nonrefundable fee of $100, unless the applicant has filed a bond or letter of credit pursuant to subsection (c) of this section.
5. (5) With each application for an exception to any commission statewide rule, the applicant shall submit to the commission a nonrefundable fee of $50. If the permit application is for an exception to §§3.37, 3.38, or 3.39 of this title (relating to Statewide Spacing Rule; Well Densities; and Proration and Drilling Units: Contiguity of Acreage and Exception Thereto) (Statewide Rule 37, 38, or 39), or for any combination of exceptions to such rules, the applicant shall submit one nonrefundable fee of $50.
6. (6) With each application for an oil and gas waste disposal well permit, the applicant shall submit to the commission a nonrefundable fee of $100 per well.
7. (7) With each application for a fluid injection well permit, the applicant shall submit to the commission a nonrefundable fee of $100 per well. Fluid injection well means any well used to inject fluid or gas into the ground in connection with the exploration or production of oil or gas other than an oil and gas waste disposal well.
8. (8) With each application for a permit to discharge to surface water other than a permit for a discharge that meets national pollutant discharge elimination system (NPDES) requirements for agricultural or wildlife use, the applicant shall submit to the commission a nonrefundable fee of $200.
9. (9) If a certificate of compliance has been canceled, the operator shall submit to the commission a nonrefundable fee of $100 before the commission may reissue the certificate pursuant to §3.58 of this title (relating to Oil, Gas, or Geothermal Resource Producer's Reports) (Statewide Rule 58).
10. (10) With each application for issuance, renewal, or material amendment of an oil and gas waste hauler's permit, the applicant shall submit to the commission a nonrefundable fee of $100.
11. (11) With each Natural Gas Policy Act (15 United States Code §§3301-3432) application, the applicant shall submit to the commission a nonrefundable fee of $50.
12. (12) A check or money order for any of the aforementioned fees shall be made payable to the state treasurer of Texas. If the check accompanying an application is not honored upon presentment, the permit issued on the basis of that application, the allowable assigned, the exception to a statewide rule granted on the basis of the application, the extension of time to plug a well, or the Natural Gas Policy Act category determination made on the basis of the application may be suspended or revoked.
(c) Financial security. Any person, including any firm, partnership, joint stock association, corporation, or other organization, required to file an organization report with the commission must also file a performance bond or alternate form of financial security. A person may choose to file:
1. (1) an individual performance bond;
2. (2) a blanket performance bond;
3. (3) a nonrefundable annual fee of $100, if the person can demonstrate to the commission an acceptable record of compliance with all commission rules, orders, licenses, permits, or certificates that relate to safety or the prevention or control of pollution for the previous 48 months and the person has no outstanding violations; additionally, if the person is a firm, partnership, joint stock association, corporation, or other organization, its officers, directors, general partners, or owners of more than 25% ownership interest or any trustee must also not have any outstanding violations;
4. (4) a nonrefundable annual fee equal to 3.0% of the bond that otherwise would be required; or
5. (5) a first lien on tangible personal property associated with oil and gas production whose salvage value equals the value of the bond that otherwise would be required.
(d) Letter of credit. A letter of credit may be submitted in lieu of either an individual or blanket performance bond, subject to the same requirements for bonds where applicable.
(e) Forms for financial security. Performance bonds, liens, and letters of credit shall be submitted on forms prescribed by the commission.
(f) Filing deadlines for financial security. Performance bonds or an alternate form of financial security shall be filed at the time of filing an initial organization report or upon yearly renewal.
(g) New well operators. A person filing an organization report for the first time in order to operate wells is a new organization and is not eligible to file an individual bond for the first year of operation.
(h) Bond amount.
1. (1) A person required to file a bond who operates one or more wells may file an individual bond in an amount equal to $2.00 for each foot of well depth for each well.
2. (2) A person required to file a bond may file a blanket bond to cover all wells and other commission-regulated operations for which a bond is required as follows:
  1. (A) a person who operates 10 or fewer wells or performs other operations shall file a $25,000 blanket bond;
  2. (B) a person who operates more than 10 but fewer than 100 wells shall file a $50,000 blanket bond; and
  3. (C) a person who operates 100 or more wells shall file a $250,000 blanket bond.
3. (3) A person operating wells and performing other operations, who chooses to cover all operations by a blanket performance bond, shall file a bond in an amount determined by the total number of wells, but not less than $25,000. Only one blanket performance bond is required for a person performing multiple operations.
4. (4) Bond amounts are the minimum amounts required by law to be filed. A person may file a bond in a greater amount if desired.
(i) Expiration of bond obligations. Obligations to pay part or all of a bond amount are deemed released after four years from the expiration date of the bond if no noncompliant operations or activities subject to a bond have been discovered by the commission within that four-year period, and no enforcement action against any operations or activities subject to a bond is pending. A person whose activities are covered by a bond, as the principal, and the surety on a bond may also be relieved of their obligations to pay part or all of a bond amount by written agreement between the Railroad Commission of Texas, principal and surety.
(j) Bond conditions. Each performance bond required under this section is subject to the conditions that the principal will plug and abandon all wells and control, abate, and clean up pollution associated with the oil and gas operations and activities covered under the bond in accordance with applicable state law and permits, rules, and orders of the commission.
(k) Eligibility for nonrefundable $100 fee.
1. (1) A person filing an organization report for the first time in order to perform any commission-regulated operations is a new organization and is not eligible to choose to file the nonrefundable fee of $100 under subsection (c)(3) of this section.
2. (2) A person that filed an initial organization report less than 48 months prior to the current filing is not eligible to choose to file the nonrefundable fee of $100 under subsection (c)(3) of this section.
3. (3) A change in name, without any other organizational change, of a person registered with the commission does not indicate a new organization. If the commission or its representative determines that only a name change has occurred, a person operating under a new name may choose to file under subsection (c)(3) of this section, if otherwise qualified.
4. (4) An individual, registered with the commission as a sole proprietor or who is a general partner of a partnership that is registered with the commission, and who reorganizes his or her oil and gas operations under a new legal entity or establishes a new and separate entity, will be considered eligible to choose to file under subsection (c)(3) of this section, if otherwise qualified based on the individual's existing record of compliance as well as the records of any other owners or officers of the new entity.
5. (5) A surviving or new corporation or other entity resulting from a merger under the Texas Business Corporation Act, Part Five, may choose to file under subsection (c)(3) of this section, only if otherwise qualified on the basis of the existing records of compliance, considered as a whole, of all corporations and other entities that are parties to the merger as well as the records of the officers and owners of the surviving or new entities. The number of surviving or new corporations or other entities eligible under this paragraph is limited to no more than the total number of parties to the merger who were currently registered with the commission at the time of the merger.
6. (6) For the purposes of this subsection, "officers and owners" include directors, general partners, owners of more than 25% ownership interest, or any trustee of an organization.
(l) Compliance certification. The commission or a commission representative may require an applicant organization to file a compliance certification in connection with filing the nonrefundable $100 fee under subsection (c)(3) of this section.
1. (1) The certification shall include a statement that:
  1. (A) the applicant organization at the time of application or during the 48 months prior to the application has no referrals to the commission's legal enforcement section relating to a violation, or has no pending legal enforcement action relating to a violation; and
  2. (B) the applicant organization or any officer, director, general partner, or owner of more than 25% ownership interest, or trustee of the named organization has no outstanding violations.
2. (2) If the certification is signed by an agent of an applicant organization, the certification is binding on the agent and the organization as if signed by a person holding a position of ownership or control in the organization.
(m) Dismissed violations. In any legal enforcement proceeding, if a person is determined not to be the responsible party for a violation and is dismissed from the proceeding for that reason, that violation shall not be considered in determining whether that person has an acceptable record of compliance.
(n) Fee for inactive wells subject to §3.14 of this title (relating to Plugging) (Statewide Rule 14(B)(2)). A person who chooses to file a form of financial security other than a bond or letter of credit shall also submit, pursuant to subsection (b)(4) of this section, a fee of $100 for each well for which an application to extend the time to plug a well has been filed under §3.14(b)(2) (Statewide Rule 14).
(o) Well transfer. A transfer of any well is not complete unless the operator acquiring the well has on file with the commission an approved form of financial security covering the well. An existing bond or alternate form of financial security remains in effect and the prior operator of the well remains responsible for compliance with all laws and commission rules covering the transferred well until the commission determines that the well is covered by proper financial security and the acquiring operator has assumed full responsibility for the well in accordance with all applicable statutes and commission rules.
(p) Reimbursement liability. Filing a bond or alternate form of financial security does not extinguish a person's liability for reimbursement for the expenditure of state oilfield clean-up funds pursuant to the Texas Natural Resources Code, §89.083 and §91.113.
(q) Hazardous waste generation fee. A person who generates hazardous oil and gas waste, as that term is defined in §3.98 of this title (relating to Standards for Management of Hazardous Oil and gas Waste), shall pay to the commission the fees specified in subsection (z) of §3.98.
(r) Financial security for commercial facilities. The provisions of this subsection shall apply to the holder of any permit for a commercial facility.
1. (1) Application.
  1. (A) New permits. Any application for a new or amended commercial facility permit filed after the effective date of this subsection shall include:
    1. (i) a written estimate of the maximum dollar amount necessary to close the facility prepared in accordance with the provisions of paragraph (4) of this subsection that shows all assumptions and calculations used to develop the estimate;
    2. (ii) a copy of the form of the bond or letter of credit that will be filed with the commission; and
    3. (iii) information concerning the issuer of the bond or letter of credit as required under paragraph (5) of this subsection including the issuer's name and address and evidence of authority to issue bonds or letters of credit in Texas.
  2. (B) Existing permits. Within 180 days of the effective date of this subsection, the holder of any commercial facility permit issued on or before the effective date of this subsection shall file with the commission the information specified in subparagraph (A)(i)-(iii) of this paragraph.
2. (2) Notice and hearing.
  1. (A) New permits. For commercial facility permits issued after the effective date of this subsection, the provisions of §3.8 or §3.57 of this title (relating to Water Protection; and Reclaiming Tank Bottoms, Other Hydrocarbon Wastes, and Other Waste Materials), as applicable, regarding notice and opportunity for hearing, shall apply to review and approval of financial security proposed to be filed to meet the requirements of this subsection.
  2. (B) Existing permits. Notice of filing of information required under paragraph (1)(B) of this subsection shall not be required. In the event approval of the financial security proposed to be filed for a commercial facility operating under a permit in effect as of the effective date of this subsection is denied administratively, the applicant shall have the right to a hearing upon written request. After hearing, the examiner shall recommend a final action by the commission.
3. (3) Filing of instrument.
  1. (A) New permits. A commercial facility permitted after the effective date of this subsection may not receive oil field fluids or oil and gas waste until a bond or letter of credit in an amount approved by the commission or its delegate under this subsection and meeting the requirements of this subsection as to form and issuer has been filed with the commission.
  2. (B) Existing permits. Except as otherwise provided in this subsection, after one year from the effective date of this section, a commercial facility permitted on or before the effective date of this subsection may not continue to receive oil field fluids or oil and gas waste unless a bond or letter of credit in an amount approved by the commission or its delegate under this subsection and meeting the requirements of this subsection as to form and issuer has been filed with and approved by the commission or its delegate.
  3. (C) Extensions for existing permits. On written request and for good cause shown, the commission or its delegate may authorize a commercial facility permitted before the effective date of this subsection to continue to receive oil field fluids or oil and gas waste after one year after the effective date of this section even though financial security required under this subsection has not been filed. In the event the commission or its delegate has not taken final action to approve or disapprove the amount of financial security proposed to be filed by the owner or operator under this subsection one year after the effective date of the section, the period for filing financial security under this subsection is automatically extended to a date 45 days after such final commission action.
4. (4) Amount.
  1. (A) Except as provided in subparagraphs (B) or (C) of this paragraph, the amount of financial security required to be filed under this subsection shall be an amount based on a written estimate approved by the commission or its delegate as being equal to or greater than the maximum amount necessary to close the commercial facility, exclusive of plugging costs for any well or wells at the facility, at any time during the permit term in accordance with all applicable state laws, commission rules and orders, and the permit, but shall in no event be less than $10,000.
  2. (B) The owner or operator of a commercial facility may reduce the amount of financial security required under this subsection by $25,000 if the owner or operator holds only one commercial facility permit.
  3. (C) The owner or operator of more than one commercial facility may reduce the amount of financial security required under this subsection for one such facility by $25,000. The full amount of financial security required under subparagraph (A) of this paragraph shall be required for the remaining commercial facilities.
  4. (D) Except for the facilities specifically exempted under subparagraph (E), a qualified professional engineer licensed by the State of Texas shall prepare or supervise the preparation of a written estimate of the maximum amount necessary to close the commercial facility as provided in subparagraph (A) of this paragraph. The owner or operator of a commercial facility shall submit the written estimate under seal of a qualified licensed professional engineer to the commission as required under paragraph (1) of this subsection.
  5. (E) A facility permitted under §3.57 of this title that does not utilize on-site waste storage or disposal that requires a permit under §3.8 of this title is exempt from subparagraph (D) of this paragraph.
  6. (F) Notwithstanding the fact that the maximum amount necessary to close the commercial facility as determined under this paragraph is exclusive of plugging costs, the proceeds of financial security filed under this subsection may be used by the commission to pay the costs of plugging any well or wells at the facility if the financial security for plugging costs filed with the commission under subsection (c) of this section is insufficient to pay for the plugging of such well or wells.
5. (5) Issuer and form.
  1. (A) Bond. The issuer of any commercial facility bond filed in satisfaction of the requirements of this subsection shall be a corporate surety authorized to do business in Texas. The form of bond filed under this subsection shall provide that the bond be renewed and continued in effect until the conditions of the bond have been met or its release is authorized by the commission or its delegate.
  2. (B) Letter of credit. Any letter of credit filed in satisfaction of the requirements of this subsection shall be issued by and drawn on a bank authorized under state or federal law to operate in Texas. The letter of credit shall be an irrevocable, standby letter of credit subject to the requirements of Texas Business and Commerce Code, §§5.101-5.117. The letter of credit shall provide that it will be renewed and continued in effect until the conditions of the letter of credit have been met or its release is authorized by the commission or its delegate.

Source Note:The provisions of this §3.76 adopted to be effective March 10, 1986, 11 TexReg 901; amended to be effective February 24, 1992, 17 TexReg 1229; amended to be effective April 1, 1996, 20 TexReg 9423; amended to be effective June 1, 1998, 23 TexReg 5656.