ENGROSSED
H. B. 4622
(By Delegates Swartzmiller, Anderson,
Stemple and Ashley)
[Introduced February 17, 2006; referred to the
Committee on the Judiciary.]
A BILL to amend and reenact §22-6-26 of the Code of West Virginia,
1931, as amended; and to amend and reenact §22-21-6 and §22-
21-8 of said code, all relating to oil and gas well and
methane gas well performance bonds; reducing bond amounts; and
increasing certain permit fees.
Be it enacted by the Legislature of West Virginia:
That §22-6-26 of the Code of West Virginia, 1931, as amended,
be amended and reenacted; and that §22-21-6 and §22-21-8 of said
code be amended and reenacted, all to read as follows:
ARTICLE 6. OFFICE OF OIL AND GAS; OIL AND GAS WELLS;
ADMINISTRATION; ENFORCEMENT.
§22-6-26. Performance bonds; corporate surety or other security.
(a) No permit shall be issued pursuant to this article unless
a bond as described in subsection (d) of this section which is
required for a particular activity by this article is or has been furnished as provided in this section.
(b) A separate bond as described in subsection (d) of this
section may be furnished for a particular oil or gas well, or for
a particular well for the introduction of liquids for the purposes
provided in section twenty-five of this article. A separate bond
as described in subsection (d) of this section shall be furnished
for each well drilled or converted for the introduction of liquids
for the disposal of pollutants or the effluent therefrom. Every
such bond Each of these bonds shall be in the sum of ten five
thousand dollars, payable to the State of West Virginia,
conditioned on full compliance with all laws, rules relating to the
drilling, redrilling, deepening, casing and stimulating of oil and
gas wells (or, if applicable, with all laws, rules relating to
drilling or converting wells for the introduction of liquids for
the purposes provided for in section twenty-five of this article or
for the introduction of liquids for the disposal of pollutants or
the effluent therefrom) and to the plugging, abandonment and
reclamation of wells and for furnishing such reports and
information as may be required by the director.
(c) When an operator makes or has made application for permits
to drill or stimulate a number of oil and gas wells or to drill or
convert a number of wells for the introduction of liquids for the
purposes provided in section twenty-five of this article, the
operator may in lieu of furnishing a separate bond furnish a blanket bond in the sum of fifty thousand dollars, payable to the
State of West Virginia, and conditioned as aforesaid in subsection
(b) of this section.
(d) The form of the bond required by this article shall be
approved by the director and may include, at the option of the
operator, surety bonding, collateral bonding (including cash and
securities) letters of credit, establishment of an escrow account,
self-bonding or a combination of these methods. If collateral
bonding is used, the operator may elect to deposit cash, or
collateral securities or certificates as follows: Bonds of the
United States or its possessions, of the federal land bank, or the
homeowners' loan corporation; full faith and credit general
obligation bonds of the State of West Virginia, or other states,
and of any county, district or municipality of the State of West
Virginia or other states; or certificates of deposit in a bank in
this state, which certificates shall be in favor of the division.
The cash deposit or market value of such securities or certificates
shall be equal to or greater than the amount of the bond. The
director shall, upon receipt of any such deposit of cash,
securities or certificates, promptly place the same with the
treasurer of the State of West Virginia whose duty it shall be to
receive and hold the same in the name of the state in trust for the
purpose of which the deposit is made when the permit is issued.
The operator shall be entitled to all interest and income earned on the collateral securities filed by such operator. The operator
making the deposit shall be entitled from time to time to receive
from the State Treasurer, upon the written approval of the
director, the whole or any portion of any cash, securities or
certificates so deposited, upon depositing with the Treasurer in
lieu thereof, cash or other securities or certificates of the
classes herein specified having value equal to or greater than the
amount of the bond.
(e) When an operator has furnished a separate bond from a
corporate bonding or surety company to drill, fracture or stimulate
an oil or gas well and the well produces oil or gas or both, its
operator may deposit with the director cash from the sale of the
oil or gas or both until the total deposited is ten five thousand
dollars. When the sum of the cash deposited is ten five thousand
dollars, the separate bond for the well shall be released by the
director. Upon receipt of such cash, the director shall
immediately deliver the same to the Treasurer of the State of West
Virginia. The Treasurer shall hold such cash in the name of the
state in trust for the purpose for which the bond was furnished and
the deposit was made. The operator shall be entitled to all
interest and income which may be earned on the cash deposited so
long as the operator is in full compliance with all laws, rules
relating to the drilling, redrilling, deepening, casing, plugging,
abandonment and reclamation of the well for which the cash was deposited and so long as the operator has furnished all reports and
information as may be required by the director. If the cash
realized from the sale of oil or gas or both from the well is not
sufficient for the operator to deposit with the director the sum of
ten thousand dollars within one year of the day the well started
producing, the corporate or surety company which issued the bond on
the well may notify the operator and the director of its intent to
terminate its liability under its bond. The operator then shall
have thirty days to furnish a new bond from a corporate bonding or
surety company or collateral securities or other forms of security,
as provided in the next preceding paragraph of this section with
the director. If a new bond or collateral securities or other
forms of security are furnished by the operator, the liability of
the corporate bonding or surety company under the original bond
shall terminate as to any acts and operations of the operator
occurring after the effective date of the new bond or the date the
collateral securities or other forms of security are accepted by
the Treasurer of the State of West Virginia. If the operator does
not furnish a new bond or collateral securities or other forms of
security, as provided in the next preceding paragraph of this
section, with the director, the operator shall immediately plug,
fill and reclaim the well in accordance with all of the provisions
of law and rules applicable thereto. In such case, the corporate
or surety company which issued the original bond shall be liable for any plugging, filling or reclamation not performed in
accordance with such laws and rules.
(f) Any separate bond furnished for a particular well prior to
the effective date of this chapter shall continue to be valid for
all work on the well permitting prior to the eleventh day of July,
one thousand nine hundred eighty-five; but no permit shall
hereafter be issued on such a particular well without a bond
complying with the provisions of this section. Any blanket bond
furnished prior to the eleventh day of July, one thousand nine
hundred eighty-five shall be replaced with a new blanket bond
conforming to the requirements of this section, at which time the
prior bond shall be discharged by operation of law; and if the
director determines that any operator has not furnished a new
blanket bond, the director shall notify the operator by certified
mail, return receipt requested, of the requirement for a new
blanket bond; and failure to submit a new blanket bond within sixty
days after receipt of the notice from the director shall work a
forfeiture under subsection (i) of this section of the blanket bond
furnished prior to the eleventh day of July, one thousand nine
hundred eighty-five.
(g) Any such bond shall remain in force until released by the
director and the director shall release the same upon satisfaction
that the conditions thereof have been fully performed. Upon the
release of any such bond, any cash or collateral securities deposited shall be returned by the director to the operator who
deposited same.
(h) Whenever the right to operate a well is assigned or
otherwise transferred, the assignor or transferor shall notify the
department of the name and address of the assignee or transferee by
certified mail, return receipt requested, not later than five days
after the date of the assignment or transfer. No assignment or
transfer by the owner shall relieve the assignor or transferor of
the obligations and liabilities unless and until the assignee or
transferee files with the department the well name and the permit
number of the subject well, the county and district in which the
subject well is located, the names and addresses of the assignor or
transferor, and assignee or transferee, a copy of the instrument of
assignment or transfer accompanied by the applicable bond, cash,
collateral security or other forms of security, described in
section twelve, fourteen, twenty-three or twenty-six of this
article, and the name and address of the assignee's or transferee's
designated agent if assignee or transferee would be required to
designate such an agent under section six of this article, if
assignee or transferee were an applicant for a permit under said
section six. Every well operator required to designate an agent
under this section shall within five days after the termination of
such designation notify the department of such termination and
designate a new agent.
Upon compliance with the requirements of this section by
assignor or transferor and assignee or transferee, the director
shall release assignor or transferor from all duties and
requirements of this article, and the deputy director shall give
written notice of release unto assignor or transferor of any bond
and return unto assignor or transferor any cash or collateral
securities deposited pursuant to section twelve, fourteen, twenty-
three or twenty-six of this article.
(i) If any of the requirements of this article or rules
promulgated pursuant thereto or the orders of the director have not
been complied with within the time limit set by the violation
notice as defined in sections three, four and five of this article,
the performance bond shall then be forfeited.
(j) When any bond is forfeited pursuant to the provisions of
this article or rules promulgated pursuant thereto, the director
shall give notice to the Attorney General who shall collect the
forfeiture without delay.
(k) All forfeitures shall be deposited in the Treasury of the
State of West Virginia in the special reclamation fund as defined
in section twenty-nine of this article.
ARTICLE 21. COALBED METHANE WELLS AND UNITS.
§22-21-6. Permit required for coalbed methane well; permit fee;
application; soil erosion control plan; penalties.
(a) It is unlawful for any person to commence, operate, deepen
or stimulate any coalbed methane well, to conduct any horizontal
drilling of a well commenced from the surface for the purpose of
commercial production of coalbed methane, or to convert any
existing well, vent hole or other hole to a coalbed methane well,
including in any case site preparation work which involves any
disturbance of land, without first securing from the chief a permit
pursuant to this article.
(b) Every permit application filed under this section shall be
verified and shall contain the following:
(1) The names and addresses of (i) the well operator, (ii) the
agent required to be designated under subsection (e) of this
section, and (iii) every person or entity whom the applicant must
notify under any section of this article;
(2) The name and address of each coal operator and each coal
owner of record or providing a record declaration of notice
pursuant to section thirty-six, article six of this chapter of any
coal seam which is (i) to be penetrated by a proposed well, (ii)
within seven hundred fifty horizontal feet of any portion of the
proposed well bore; or (iii) within one hundred vertical feet of
the designated completion coal seams of the proposed well, except
that in the case of an application to convert a ventilation hole to
a gob well, the name and address only of such owner or operator of
the seams to be penetrated by a proposed well shall be necessary;
(3) The well name or such other identification as the chief
may require;
(4) The approximate depth to which the well is to be drilled,
deepened or converted, the coal seams (stating the depth and
thickness of each seam) in which the well will be completed for
production, and any other coal seams (including the depth and
thickness of each seam) which will be penetrated by the well;
(5) A description of any means to be used to stimulate the
well;
(6) If the proposed well will require casing or tubing to be
set, the entire casing program for the well, including the size of
each string of pipe, the starting point and depth to which each
string is to be set, and the extent to which each such string is to
be cemented;
(7) If the proposed operation is to convert an existing well,
as defined in section one, article six of this chapter, or to
convert a vertical ventilation hole to a coalbed methane well, all
information required by this section, all formations from which
production is anticipated, and any plans to plug any portion of the
well;
(8) Except for a gob well or vent hole proposed to be
converted to a well, if the proposed coalbed methane well will be
completed in some but not all coal seams for production, a plan and
design for the well which will protect all workable coal seams which will be penetrated by the well;
(9) If the proposed operations will include horizontal
drilling of a well commenced on the surface, a description of such
operations, including both the vertical and horizontal alignment
and extent of the well from the surface to total depth;
(10) Any other relevant information which the chief may
require by rule.
(c) Each application for a coalbed methane well permit shall
be accompanied by the following:
(1) The applicable bond prescribed by section eight of this
article;
(2) A permit application fee of
two
(3) The erosion and sediment control plan required under
subsection (d) of this section;
(4) The consent and agreement of the coal owner as required by
section seven and, if applicable, section twenty of this article;
(5) A plat prepared by a licensed land surveyor or registered
engineer showing the district and county in which the drill site is
located, the name of the surface owner of the drill site tract, the
acreage of the same, the names of the surface owners of adjacent
tracts, the names of all coal owners underlying the drill site
tract, the proposed or actual location of the well determined by a
survey, the courses and distances of such location from two
permanent points or landmarks on said tract, the location of any other existing or permitted coalbed methane well or any oil or gas
well located within two thousand five hundred feet of the drill
site, the number to be given the coalbed methane well, the proposed
date for completion of drilling, the proposed date for any
stimulation of the well, and if horizontal drilling of a well
commenced on the surface is proposed, the vertical and horizontal
alignment and extent of the well;
(6) A certificate by the applicant that the notice
requirements of section nine of this article have been satisfied by
the applicant. Such certification may be by affidavit of personal
service, or the return receipt card, or other postal receipt, for
certified mailing.
(d) An erosion and sediment control plan shall accompany each
application for a permit. Such plan shall contain methods of
stabilization and drainage, including a map of the project area
indicating the amount of acreage disturbed. The erosion and
sediment control plan shall meet the minimum requirements of the
West Virginia erosion and sediment control manual as adopted and
from time to time amended by the office of oil and gas in
consultation with the several soil conservation districts pursuant
to the control program established in this state through section
208 of the federal Water Pollution Control Act Amendments of 1972
[33 U.S.C. 1288]. The erosion and sediment control plan shall
become part of the terms and conditions of a permit and the provisions of the plan shall be carried out where applicable in
operations under the permit. The erosion and sediment control plan
shall set out the proposed method of reclamation which shall comply
with the requirements of section thirty, article six of this
chapter.
(e) The well operator named in such application shall
designate the name and address of an agent for such operator who
shall be the attorney-in-fact for the operator and who shall be a
resident of the state of West Virginia, upon whom notices, orders
or other communications issued pursuant to this article may be
served, and upon whom process may be served. Every well operator
required to designate an agent under this section shall within five
days after the termination of such designation notify the office of
such termination and designate a new agent.
(f) The well owner or operator shall install the permit number
as issued by the chief in a legible and permanent manner to the
well upon completion of any permitted work. The dimensions,
specifications and manner of installation shall be in accordance
with the rules of the chief.
(g) The chief shall deny the issuance of a permit if he or she
determines that the applicant has committed a substantial violation
of a previously issued permit, including the erosion and sediment
control plan, or a substantial violation of one or more of the
rules promulgated hereunder, and has failed to abate or seek review of the violation. In the event that the chief finds that a
substantial violation has occurred with respect to existing
operations and that the operator has failed to abate or seek review
of the violation in the time prescribed, he or she may suspend the
permit on which said violation exists, after which suspension the
operator shall forthwith cease all work being conducted under the
permit until the chief reinstates the permit, at which time the
work may be continued. The chief shall make written findings of any
such determination made by him or her and may enforce the same in
the circuit courts of this state and the operator may appeal such
suspension pursuant to the provisions of section twenty-five of
this article. The chief shall make a written finding of any such
determination.
(h) Any person who violates any provision of this section
shall be guilty of a misdemeanor, and, upon conviction thereof,
shall be fined not more than five thousand dollars, or be
imprisoned in the county jail not more than twelve months, or both
fined and imprisoned.
§22-21-8. Performance bonds; corporate surety or other
security.
(a) No permit shall be issued pursuant to this article unless
a bond is or has been furnished as provided in this section.
(b) A separate bond may be furnished for a particular coalbed
methane well in the sum of ten five thousand dollars, payable to the State of West Virginia, conditioned on full compliance with all
laws and rules relating to the drilling, operation and stimulation
of such wells, to the plugging, abandonment and reclamation
thereof, and for furnishing such reports and information as may be
required by the chief.
(c) When an operator makes or has made application for permits
to drill, operate or stimulate more than one coalbed methane well
or a combination of coalbed methane wells and wells regulated under
article one, chapter twenty-two-b of this code, the operator may in
lieu of furnishing a separate bond furnish a blanket bond in the
sum of fifty thousand dollars, payable to the State of West
Virginia, and conditioned as stated in subsection (b) of this
section.
(d) All bonds submitted hereunder shall have a corporate
bonding or surety company authorized to do business in the State of
West Virginia as surety thereon, or in lieu of a corporate surety,
the operator may elect to deposit with the chief cash, collateral
securities or any combination thereof as provided for in subsection
(d), section twenty-six, article six of this chapter.
(e) For purposes of bonding requirements, a coalbed methane
well shall be treated as a well, as defined and regulated in
article one, chapter twenty-two-b of this code, and the provisions
of subsections (e), (g), (h), (i) and (j) of section twenty-six
thereof shall apply.
NOTE: The purpose of this bill is to reduce certain oil and
gas well and methane gas well performance bonds.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.