1. (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 enforcement orders issued; and
         2. (ii) 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 enforcement orders issued other than those that are resolved in the order referenced in clause (i) of this subparagraph;
         3. (iii) 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.
   5. (5) Financial security--An individual performance bond, blanket performance bond, letter of credit, or cash deposit filed with the Commission.
   6. (6) Alternate form of financial security--Payment of a nonrefundable annual fee to the Commission.

   7. (7) Bay well--Any well under the jurisdiction of the Commission for which the surface location is either:

      1. (A) located in or on a lake, river, stream, canal, estuary, bayou, or other inland navigable waters of the state; or,
      2. (B) located on state lands seaward of the mean high tide line of the Gulf of Mexico in water of a depth at mean high tide of not more than 100 feet that is sheltered from the direct action of the open seas of the Gulf of Mexico.
   8. (8) Land well--Any well subject to Commission jurisdiction for which the surface location is not in or on inland or coastal waters.
   9. (9) Offshore well--Any well subject to Commission jurisdiction for which the surface location is on state lands in or on the Gulf of Mexico, that is not a bay well.
   10. (10) Officers and owners--Any persons owning or controlling an organization including officers, directors, general partners, sole proprietors, owners of more than 25% ownership interest, any trustee of an organization, and any person determined by a final judgment or final administrative order to have exercised control over the organization.

   11. (11) Letter of credit--An irrevocable letter of credit issued:

       1. (A) on a Commission-approved form;
       2. (B) by and drawn on a third party bank authorized under state or federal law to do business in Texas; and
       3. (C) renewed and continued in effect until the conditions of the letter of credit have been met or its release is approved by the Commission or its authorized delegate.

   12. (12) Bond--A surety instrument issued:

       1. (A) on a Commission-approved form;
       2. (B) by and drawn on a third party corporate surety authorized under state law to issue surety bonds in Texas; and
       3. (C) renewed and continued in effect until the conditions of the bond have been met or its release is approved by the Commission or its authorized delegate.

2. (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) $200 if the proposed total depth of the well is 2,000 feet or less;
      2. (B) $225 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) $250 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) $300 if the proposed total depth of the well is greater than 9,000 feet.

   2. (2) An application for a permit to drill, deepen, plug back, or reenter a well will be considered materially amended if the amendment is made for a purpose other than:

      1. (A) to add omitted required information;
      2. (B) to correct typographical errors; or
      3. (C) to correct clerical errors.
   3. (3) An applicant shall submit an additional nonrefundable fee of $150 when requesting that the Commission expedite the application for a permit to drill, deepen, plug back, or reenter a well.
   4. (4) With each individual application for an exception to any rule or rules in this chapter, the applicant shall submit to the Commission a nonrefundable fee of $150, except as provided in paragraph (5) of this subsection.
   5. (5) With each application for an exception to any rule or rules in this chapter that includes an exception to §3.37 of this title (relating to Statewide Spacing Rule) (Statewide Rule 37) or §3.38 of this title (relating to Well Densities) (Statewide Rule 38), the applicant shall submit a nonrefundable fee of $200.
   6. (6) With each application for an extension of time to plug a well pursuant to Commission rules, an applicant who has filed an alternate form of financial security as provided for under this rule, shall submit to the Commission a nonrefundable fee of $300.
   7. (7) 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.
   8. (8) With each application for a fluid injection well permit, the applicant shall submit to the Commission a nonrefundable fee of $200 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.
   9. (9) 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 $300.
   10. (10) If a certificate of compliance for an oil lease or gas well has been canceled for violation of one or more Commission rules, the operator shall submit to the Commission a nonrefundable fee of $300 for each severance or seal order issued for the well or lease 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).
   11. (11) 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.
   12. (12) With each Natural Gas Policy Act (15 United States Code §§3301-3432) application, the applicant shall submit to the Commission a nonrefundable fee of $150.
   13. (13) 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 §3.98(z).
   14. (14) A check or money order for any of the aforementioned fees shall be made payable to the Railroad Commission 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, the certificate of compliance reissued, or the Natural Gas Policy Act category determination made on the basis of the application may be suspended or revoked.
   15. (15) If an operator submits a check that is not honored on presentment, the operator shall, for a period of 24 months after the check was presented, submit any payments in the form of a credit card, cashier's check, or cash.

3. (c) Organization Report Fee. An organization report required by Texas Natural Resources Code, §91.142, shall be accompanied by a fee as follows:

   1. (1) for an operator of:

      1. (A) not more than 25 wells, $300;
      2. (B) more than 25 but not more than 100 wells, $500; or
      3. (C) more than 100 wells, $1,000;
   2. (2) for an operator of one or more natural gas pipelines, $225;
   3. (3) for an operator of one or more of the following service activities: pollution cleanup contractor; directional surveying; approved cementer for plugging wells; or physically moving or storing crude or condensate, $300;
   4. (4) for an operator of one or more liquids pipelines, $625;
   5. (5) for an operator of all other service activities or facilities, $500;
   6. (6) for an operator with multiple activities, a total fee equal to the sum of the separate fees applicable to each category of service activity, facility, pipeline, or number of wells operated shall be submitted, provided that the total fee for an operator of wells shall not exceed $1,125; and
   7. (7) for an entity not currently performing operations under the jurisdiction of the Commission, $300.

4. (d) Financial security and alternate forms of financial security. Any person, including any firm, partnership, joint stock association, corporation, or other organization, required by Texas Natural Resources Code, §91.142, to file an organization report with the Commission must also file financial security in one of the following forms:

   1. (1) an individual performance bond;
   2. (2) a blanket performance bond;

   3. (3) a nonrefundable annual fee of $1,000, if:

      1. (A) the Commission or its designee determines that individual and blanket performance bonds as specified by this section are not obtainable at reasonable prices as provided for under subsection (f) of this section;
      2. (B) 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; and
      3. (C) 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 12.5% of the face amount of the performance bond that otherwise would be required; or
   5. (5) a letter of credit or cash deposit in the same amount as required for an individual performance bond or blanket performance bond.

5. (e) Eligibility for nonrefundable $1,000 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 file the nonrefundable fee of $1,000.
   2. (2) A person who filed an initial organization report less than 48 months prior to the current filing is not eligible to file the nonrefundable fee of $1,000.
   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 determines that only a name change has occurred, then a person operating under a new name may file the nonrefundable fee of $1,000 if the person meets all other eligibility requirements.
   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 to have satisfied the 48-month eligibility requirement for filing the nonrefundable fee of $1,000.

   5. (5) A surviving or new corporation or other entity resulting from a merger under the Texas Business Corporation Act, Part Five, may file the nonrefundable fee of $1,000 if:

      1. (A) the existing record of compliance for each entity that is a party to the merger qualifies;
      2. (B) the records of compliance for the officers and owners of the surviving or new entities qualify; and
      3. (C) the number of surviving or new entities eligible does not exceed the number of parties registered with the Commission at the time of the merger.
   6. (6) In any Commission 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.

6. (f) Availability of bonds.

   1. (1) In determining the applicability of the $1,000 nonrefundable fee as provided for under this section, the Commission presumes that individual and blanket performance bonds are obtainable at reasonable prices.
   2. (2) An operator who is otherwise eligible under this section to file a $1,000 nonrefundable annual fee may request an administrative determination that individual and blanket performance bonds are not available to that operator at reasonable prices. In order to support an administrative determination that bonds are not obtainable by a requesting operator at reasonable prices, the operator must submit declination letters to the Commission's P-5/Financial Assurance Department establishing that three companies from a list maintained by the Commission that have issued a bond filed with the Commission in the past 12 months will not issue a bond to the requesting operator or will only issue a bond to the operator for an annual fee in excess of 6% of the face amount of the bond.
   3. (3) If an operator requesting a determination that bonds are not available to it has a bond as its current financial assurance, one of the three declination letters must be from that operator's current surety.
   4. (4) If an operator's application for the $1,000 nonrefundable fee is administratively denied, the operator may request a hearing to determine eligibility for the $1,000 nonrefundable fee. The Commission shall consider cash or other collateral requirements, along with the premium and any other surety company requirements, in determining if bonds are available to the requesting operator at a reasonable price.
7. (g) Forms for financial security. Operators shall submit bonds and letters of credit on forms prescribed by the Commission.
8. (h) Filing deadlines for financial security. Operators shall submit required financial security at the time of filing an initial organization report or upon yearly renewal, or as required under subsection (m) of this section.
9. (i) New operators. A person filing an organization report for the first time is a new organization and is not eligible to file an individual performance bond for the first year of operation.

10. (j) Amount of bond, letter of credit, or cash deposit.

    1. (1) A person who operates one or more wells may file an individual performance bond, letter of credit or cash deposit in an amount equal to $2.00 for each foot of total well depth for each well, plus an additional amount to be determined by the Commission in a subsequent rulemaking for each bay and offshore well operated.

    2. (2) A person operating wells may file a blanket bond, letter of credit or cash deposit to cover all wells for which a bond, letter of credit or cash deposit is required in an amount equal to the sum of:

       1. (A) A base amount determined by the total number of wells operated, as follows:

          1. (i) a person who operates 10 or fewer wells shall have a base amount of $25,000;
          2. (ii) a person who operates more than 10 but fewer than 100 wells shall have a base amount of $50,000; and
          3. (iii) a person who operates 100 or more wells shall have a base amount of $250,000, plus;
       2. (B) an additional amount, to be determined by the Commission in a subsequent rulemaking, for each bay well operated, plus
       3. (C) an additional amount, to be determined by the Commission in a subsequent rulemaking, for each offshore well operated.
    3. (3) A person performing other operations who is not an operator of wells and who is not a person whose only activity is as a first purchaser, survey company, salt water hauler, gas nominator, gas purchaser or well plugger choosing to cover all operations by a blanket performance bond, letter of credit or cash deposit shall file a bond, letter of credit or cash deposit in the amount of $25,000.
    4. (4) No bond, letter of credit, cash deposit or alternate form of financial security is required of a person who is not an operator of wells if the person's only activity is as a first purchaser, survey company, salt water hauler, gas nominator, gas purchaser and/or well plugger.
    5. (5) A person who engages in more than one activity or operation, including well operation, for which a bond or alternate form of financial security is required is not required to file a separate bond or alternate form of financial security for each activity or operation in which the person is engaged. The person is required to file a bond or alternate form of financial security only in the amount required for the activity or operation in which the person engages for which a bond or alternate form of financial security in the greatest amount is required. The bond or alternate form of financial security filed covers all of the activities and operations for which a bond or alternate form of financial security is required. The provisions of this paragraph do not exempt a person from the financial security required under subsection (o) of this section.
    6. (6) Financial security amounts are the minimum amounts required by this section to be filed. A person may file a greater amount if desired.
11. (k) Bond Conditions. Any financial security required under this section is subject to the conditions that the operator 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 required financial security in accordance with applicable state law and permits, rules, and orders of the Commission.
12. (l) Conditions for cash deposits. Operators shall tender cash deposits in United States currency or certified cashiers check only. All cash deposits will be placed in a special account within the Oil Field Clean Up Fund account. Any interest accruing on cash deposits will be deposited into the Oil Clean Up Fund pursuant to Texas Natural Resources Code, §91.111(c)(8). The Commission will not refund a cash deposit until either financial security or an alternate form of financial security is accepted by the Commission as provided for under this section or an operator ceases all activity.

13. (m) Well or lease transfer.

    1. (1) The Commission shall not approve a transfer of operatorship submitted for any well or lease unless the operator acquiring the well or lease has on file with the Commission one of the following approved forms of financial security in an amount sufficient to cover both its current operations and the wells being transferred:

       1. (A) an individual performance bond, letter of credit or cash deposit; or
       2. (B) a blanket performance bond, letter of credit or cash deposit.
    2. (2) Any existing financial security covering the well or lease proposed for transfer shall remain 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 approves the transfer.
    3. (3) A transfer of a well or lease from one entity to another entity under common ownership is a transfer for the purposes of this section.
    4. (4) An operator who has accepted a transfer of operatorship of any well or lease on or after September 1, 2001, with Commission approval based on filing of an individual or blanket performance bond, letter of credit, or cash deposit is deemed to have elected to file one of these forms of financial security and shall file or have on file one of these forms of financial security for each successive year during which it remains the designated operator of any such well or lease.
14. (n) Reimbursement liability. Filing any 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.

15. (o) 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 original 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 original effective date of this subsection, the holder of any commercial facility permit issued on or before the original 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 original 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 original 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 original 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 original effective date of this section, a commercial facility permitted on or before the original 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 original effective date of this subsection to continue to receive oil field fluids or oil and gas waste after one year after the original 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 original 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 one or more commercial facilities may reduce the amount of financial security required under this subsection for one such facility by the amount, if any, it filed as financial assurance under subsection (j)(3) of this section. The full amount of financial security required under subparagraph (A) of this paragraph shall be required for the remaining commercial facilities.
       3. (C) Except for the facilities specifically exempted under subparagraph (D) of this paragraph, 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.
       4. (D) A facility permitted under §3.57 of this title (relating to Reclaiming Tank Bottoms, Other Hydrocarbon Wastes, and Other Waste Materials) that does not utilize on-site waste storage or disposal that requires a permit under §3.8 of this title (relating to Water Protection) is exempt from subparagraph (C) of this paragraph.
       5. (E) 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 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, §§5.101-5.118. 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.

16. (p) Effect of outstanding violations.

    1. (1) Except as provided in paragraph (2) of this subsection, the Commission shall not accept an organization report or an application for a permit or approve a certificate of compliance for an oil lease or gas well submitted by an organization if:

       1. (A) the organization has outstanding violations; or
       2. (B) an officer or director of the organization was, within seven years preceding the filing of the report, application, or certificate, an officer or director of an organization and during that period, the organization committed a violation that remains an outstanding violation.

    2. (2) The Commission shall accept a report or application or approve a certificate filed by an organization covered by paragraph (1) of this subsection if:

       1. (A) the conditions that constituted the violation have been corrected or are being corrected in accordance with a schedule agreed to by the organization and the Commission;
       2. (B) all administrative, civil, and criminal penalties, and all plugging and cleanup costs incurred by the state relating to those conditions have been paid or are being paid in accordance with a schedule agreed to by the organization and the Commission; and
       3. (C) the report, application or certificate is in compliance with all other requirements of law and Commission rules.
    3. (3) All fees tendered in connection with a report or application that is rejected under this subsection are nonrefundable.

Source Note:The provisions of this §3.78 adopted to be effective July 10, 2000, 25 TexReg 6487; amended to be effective November 1, 2000, 25 TexReg 9924; amended to be effective June 11, 2001, 26 TexReg 4088; amended to be effective January 9, 2002, 27 TexReg 139; amended to be effective October 12, 2003, 28 TexReg 8890.