KRS § 353.590 — KY Code / Title XXVIII / Chapter 353 / Section 353.590
353.590 Application for permit -- Fees-- Plat -- Plugging and restoration bonds -- Blanket bonds -- Corporate guarantee -- Use of forfeited funds -- Oil and gas well plugging fund -- Well closure orders -- Requirements for permitted stratigraphic test wells -- Wells not included in "water supply well" -- Review under KRS 353.700
Status: in_force

353.590 Application for permit -- Fees-- Plat -- Plugging and restoration bonds --

Blanket bonds -- Corporate guarantee -- Use of forfeited funds -- Oil and gas

well plugging fund -- Well closure orders -- Requirements for permitted

stratigraphic test wells -- Wells not included in "water supply well" -- Review

under KRS 353.700.

(1) Any person seeking a permit required by KRS 353.570 shall submit to the

department a written application in a form prescribed by the department. A person

under eighteen (18) years old shall not be eligible for a permit issued under this

chapter.

(2) Each application shall be accompanied by a specified fee as follows:

(a) The fee shall be three hundred dollars ($300) for each well to be drilled,

deepened, or reopened for any purpose relating to the production,

repressuring, or storage of oil or gas, and for each water supply well,

observation well, and geological or structure test hole.

(b) If the department receives delegation of authority for administration of the

underground injection control program under Section 1425 of the Safe

Drinking Water Act (Pub. L. 93-523 as amended), the department may, by

administrative regulation, establish a fee or schedule of fees in an amount not

to exceed fifty dollars ($50) per well, in addition to the fees imposed by

paragraph (a) of this subsection, upon each application to drill, deepen, or

reopen a well for any purpose relating to the production, repressuring, or

storage of oil or gas, and for each water supply well, observation well, and

geological or structure test hole. The fees or schedule of fees to be established

by administrative regulation shall not exceed an amount sufficient to recover

the costs incurred by the department in administering the Underground

Injection Control Program less any other state or federal funds which are made

available for this purpose.

(c) All money paid to the State Treasurer for fees required by paragraph (b) of

this subsection shall be for the sole use of the department in the administration

of the Underground Injection Control Program under Section 1425 of the Safe

Drinking Water Act (Pub. L. 93-523 as amended).

(3) Applications for each deep well shall be assessed a fee according to the following

schedules:

(a) For a vertical deep well:

1. With a total vertical depth of seven thousand (7,000) feet or less, the fee

shall be five hundred dollars ($500); and

2. With a total vertical depth greater than seven thousand (7,000) feet, the

fee shall be six hundred dollars ($600); and

(b) For a horizontal deep well:

1. With a total measured well depth of ten thousand (10,000) feet or less,

the fee shall be five thousand dollars ($5,000);

2. With a total measured well depth greater than ten thousand (10,000)

feet, the fee shall be six thousand dollars ($6,000); and

3. Five hundred dollars ($500) for each additional lateral.

(4) For a horizontal deep well, each additional deep horizontal well located on the same

well pad shall be assessed the following fee:

(a) Three thousand dollars ($3,000) for a total measured well depth up to ten

thousand (10,000) feet; and

(b) Four thousand dollars ($4,000) for a total measured well depth greater than

ten thousand (10,000) feet.

(5) All money paid to the State Treasurer for licenses and fees required by KRS

353.500 to 353.720 shall be for the sole use of the department and shall be in

addition to any moneys appropriated by the General Assembly for the use of the

department.

(6) Each application shall be accompanied by a plat, which shows the location and

elevation of each well, prepared according to the administrative regulations

promulgated under KRS 353.500 to 353.720. The plat shall be certified as accurate

and correct by a professional land surveyor licensed in accordance with the

provisions of KRS Chapter 322.

(7) When any person submits to the department an application for a permit to drill a

shallow well, or to reopen, deepen, or temporarily abandon any well which is not

covered by surety bond, the department shall, except as provided in this section,

require from the shallow well operator the posting of a bond. For any well permit

issued after June 27, 2019, the department shall require two dollars ($2) of bond

amount for every foot of true vertical well depth. For applications for well transfers

filed after June 27, 2019, pursuant to subsection (23) of this section, bonding shall

be two dollars ($2) for every foot of true vertical well depth and shall be posted by

the transferee operator. Failure to post the required bond shall result in an order

issued by the department:

(a) Requiring the proper plugging and abandonment of the shallow well or wells;

or

(b) Refusing to transfer the requested shallow well or wells.

(8) Plugging and reclamation bonds for vertical deep wells shall be twenty-five

thousand dollars ($25,000). However, the commission may establish a higher

bonding amount for vertical deep wells if the anticipated plugging and reclamation

costs exceed the minimum bonding amounts established in this section.

(9) The minimum amount of plugging and reclamation bond for a horizontal deep well

shall be forty thousand dollars ($40,000). However, the commission may establish a

bond amount greater than forty thousand dollars ($40,000) if the anticipated

plugging and reclamation costs exceed the minimum bond.

(10) (a) All bonds required to be posted prior to June 27, 2019, under this section for

plugging shallow wells shall:

1. Be made in favor of the department;

2. Be conditioned that the wells, upon abandonment, shall be plugged in

accordance with the administrative regulations of the department and

that all records required by the department be filed as specified; and

3. Remain in effect until the plugging of the well is approved by the

department, or the bond is released or forfeited by the department.

(b) All bonds required to be posted after June 27, 2019, under this section for

plugging shallow wells shall:

1. Be made in favor of the department;

2. Be conditioned on the wells, upon abandonment, being plugged and the

disturbed areas reclaimed in accordance with applicable statutes and the

administrative regulations promulgated thereunder, and on all records

required by the department being filed as specified; and

3. Remain in effect until the plugging of the well and the reclamation of

the disturbed area is approved by the department, or the bond is released

or forfeited by the department.

(c) All bonds required to be posted under this section for plugging deep wells

shall:

1. Be made in favor of the department;

2. Be conditioned that the wells, upon abandonment, shall be plugged and

the disturbed area reclaimed in accordance with the statutes and the

administrative regulations of the department and that all records required

by the department be filed as specified; and

3. Remain in effect until the plugging of the well and the reclamation of

the disturbed area is approved by the department or the bond is released

by the department.

(11) An operator may petition the department to amend the drilling depth and bond

amount applicable to a particular well and shall not proceed to drill to a depth

greater than that authorized by the department until the operator is so authorized,

except pursuant to administrative regulations promulgated by the department.

(12) (a) Any shallow well blanket bond filed by an operator prior to June 27, 2019,

shall remain in effect until the plugging or transfer of all the wells secured by

the blanket bond, or the blanket bond is released or forfeited by the

department. In the event that a number of the wells are plugged, transferred, or

both, that result in the operator being eligible for a blanket bond in a lower

amount, the department shall release the bond to a lower amount based upon

the tiered structure in existence at the time the bond was issued. After June 27,

2019, in the event that an operator with a shallow well blanket bond that was

filed prior to June 27, 2019, drills or acquires additional wells and has

remaining capacity on the blanket bond after June 27, 2019, the operator may

secure such wells with the existing blanket bond up to the limits of the bond.

However, the number of wells that are eligible to be covered by a blanket

bond filed prior to June 27, 2019, that were in a tier with more than five

hundred (500) wells shall be limited to one thousand (1,000) wells.

(b) After June 27, 2019, any shallow well operator, in lieu of an individual bond,

may file with the department a blanket bond according to the following tiered

structure:

1. One (1) to twenty-five (25) wells require a twenty thousand dollar

($20,000) bond;

2. Twenty-six (26) to one hundred (100) wells require an additional thirty

thousand dollar ($30,000) bond;

3. One hundred one (101) to five hundred (500) wells require an additional

one hundred fifty thousand dollar ($150,000) bond; and

4. Five hundred one (501) to one thousand (1,000) wells require an

additional one hundred thousand dollar ($100,000) bond.

(c) After June 27, 2019, well operators who have more wells than can be

accommodated by the blanket bonding structure established in paragraph (b)

of this subsection or as in effect pursuant to paragraph (a) of this subsection

may, in lieu of individual bonds, incrementally increase the amount of their

blanket bonds filed with the department according to the tiers established in

paragraph (b) of this subsection. Nothing contained in this subsection shall

require a well operator with a blanket bond in existence prior to June 27,

2019, to increase the amount of its blanket bond as to the wells covered by the

existing blanket bond.

(13) If the operator is a corporate subsidiary, the operator further shall provide a

corporate guarantee in which the guarantor shall be the parent corporation of the

operator of the wells covered under the bond. The corporate guarantee shall

provide:

(a) That if the operator fails to perform with the proper plugging and

abandonment of any well covered by the blanket bond, the guarantor shall do

so or provide for alternate financial assurance; and

(b) The corporate guarantee shall remain in force unless the guarantor sends

notice of the cancellation by certified mail to the operator and to the

department. Cancellation shall not occur, however, during the one hundred

twenty (120) day period beginning on the first day that both the operator and

the department have received notice of cancellation, as evidenced by the

certified mail return receipts.

(14) An operator shall not be eligible to file a new blanket bond or add additional wells

to an existing blanket bond if the operator has:

(a) Any outstanding, unabated violations of KRS Chapter 353 or the regulations

adopted pursuant thereto which have not been appealed;

(b) A forfeiture of a bond, whether an individual bond or portion of a blanket

bond, on any permit where the operator has not entered into an agreed order

with the department for the plugging and proper abandonment of the well or

wells on the forfeited permit or permits; or

(c) A permit or permits, upon which a bond or portion of a bond has been

forfeited and the proceeds from the forfeiture have been spent by the

department to plug or reclaim the permitted well or wells, unless the operator

has made restitution to the department for all costs associated with the

forfeiture, plugging, and proper abandonment.

(15) Any deep well operator, in lieu of an individual bond, may file with the department

a blanket bond according to the following:

(a) One (1) to ten (10) vertical deep wells require a two hundred thousand dollar

($200,000) bond; and

(b) One (1) to ten (10) horizontal deep wells require a three hundred twenty

thousand dollar ($320,000) bond.

(16) A deposit in cash or a bank-issued irrevocable letter of credit may serve in lieu of

either of the individual well or blanket bonds.

(17) Individuals acquiring a single well for domestic use may post a combination bond

which shall consist of a cash bond in the amount of one thousand dollars ($1,000)

plus a lien on the property to cover future plugging costs. Only one (1) combination

bond may be posted by each individual.

(18) A certificate of deposit, the principal of which is pledged in lieu of a bond and

whose interest is payable to the party making the pledge, may serve for an

individual well bond. A certificate of deposit, the principal of which is pledged in

lieu of a bond and whose interest is payable to the party making the pledge, may

serve for a blanket bond, provided that the first five thousand dollars ($5,000) of the

blanket bond is posted with the department in cash.

(19) The bond or bonds referred to in this section shall be executed by the well operator

as principal and, if a surety bond, by a corporate surety authorized to do business in

the Commonwealth.

(20) A deposit in cash shall serve in lieu of either of the above bonds; all cash bonds

accepted by the department shall be deposited into an interest-bearing account, with

the interest thereon payable to the special agency account known as the oil and gas

well plugging fund, created in subsection (27) of this section, to be used in

accordance with the purposes described therein. All cash bonds being held by the

department on July 13, 1990, shall likewise be deposited in the interest-bearing

account, with the proceeds to be used for the purposes established for the oil and

gas well plugging fund.

(21) The bond amounts prescribed by subsection (7) of this section shall be applicable

only to permits issued after June 27, 2019. All bonds posted for permits issued prior

to June 27, 2019, shall remain in full force and effect for the duration of the permits

secured by the bonds.

(22) The blanket bond amounts prescribed by subsection (12) of this section shall be

effective after June 27, 2019. Any operator having filed a blanket bond with the

department prior to June 27, 2019, in the event that the capacity of the bond is

reached, may at its discretion increase the level of the blanket bond incrementally

by increasing the blanket bond by the amount of the individual bond prescribed by

subsection (12) of this section on any wells drilled subsequent to June 27, 2019,

until the blanket bond has reached the level necessary to conform to the tiers

prescribed by subsection (12) of this section.

(23) (a) Prior to commencing use or operation of a well or wells operated in the name

of a different operator, a well operator seeking to become a successor operator

shall file an application to transfer the well or wells executed by both the

current operator and the applicant, pay a fee of fifty dollars ($50) per well to

the department, and post the appropriate bond.

(b) 1. Upon receipt of a request for a well records report made by an operator

seeking to become a successor operator and approved by the current

operator, the department shall print a well records report of the wells

requested and provide the report to both the current operator and the

operator seeking to become a successor operator.

2. If the report indicates the existence of outstanding violations or of

missing records required to be filed pursuant to this chapter, on any

application to transfer a well or wells filed within thirty (30) days of the

date of the well report, the successor operator may decline to accept

transfer of any wells with outstanding violations or with missing

records, or may agree to accept responsibility for abatement of the

violations or the filing of the missing records.

3. Based upon the successor operator's response to the well record report

and subject to bonding requirements and the provisions of KRS 353.572,

the department shall approve the transfer of the requested well or wells

or any portion thereof not declined by the successor operator.

4. The department may not hold a successor operator responsible or liable

for missing records not disclosed on the well record report provided by

the department prior to transfer, or for missing records that were not

filed or completed by a previous operator and for which information

necessary to complete the records is not reasonably available.

(c) Subject to KRS 353.572, upon receipt of written approval of the requested

transfer, the successor operator shall assume the obligations of this chapter as

to the particular well or wells and relieve the current operator of responsibility

under this chapter with respect to the well or wells transferred. It shall be the

responsibility of the current operator to ensure that the successor operator has

complied with the requirements of this subsection before relinquishing

operations to the successor operator and before relief of responsibility under

this chapter is granted to the current operator. The current operator shall

remain responsible, and its bond shall not be released, on any well or wells

with an outstanding violation or missing records for which a successor

operator declined to accept a transfer.

(24) If the requirements of this section with respect to any provision of KRS 353.500 to

353.720 or 353.735 to 353.747, or any administrative regulation or order

promulgated or issued thereunder, have not been complied with within the time

limits set by the department, by administrative regulation, or by this chapter, the

department shall cause a notice of noncompliance to be served upon the operator by

certified mail, addressed to the permanent address shown on the application for a

permit.

(a) The notice shall specify in what respects the operator has failed to comply

with this chapter or the administrative regulations of the department.

(b) If, within forty-five (45) days after mailing of the notice of noncompliance, no

agreement has been reached with the department regarding the alleged failure

to comply, and the director determines that the operator has not complied with

the requirements set forth by the department, the bond shall be ordered

forfeited to the department. The forfeiture order shall become effective thirty

(30) days after the department gives the operator notice of the order, unless a

petition has been filed pursuant to KRS 353.700, in which case the forfeiture

order shall only become effective upon a final determination of the secretary

affirming the forfeiture order following the conclusion of the petition process.

(25) (a) In addition to a notice of noncompliance issued pursuant to subsection (24) of

this section, the cabinet may issue a well closure order to any person or

operator where:

1. An oil and gas well is in violation of KRS 353.500 to 353.720 or

353.735 to 353.747, or any administrative regulation or order

promulgated or issued thereunder, and the violation is causing or could

be reasonably expected to cause an imminent threat to human health,

safety, or the environment; or

2. The operation of an oil and gas well by any person without first posting

bond.

(b) The well closure order shall be affixed by a red tag marker to the wellhead

with a letter of violation and a copy of the well closure order mailed to the

address of record for the responsible person or operator, if an address is on file

with the division. The letter of violation and well closure order shall notify the

person or operator to immediately:

1. Cease operation of the well; and

2. Abate the violation of KRS 353.500 to 353.720 or 353.735 to 353.747,

or any administrative regulation or order promulgated or issued

thereunder.

(c) Any person operating a well under the circumstances described in paragraph

(a)2. of this subsection may be ordered to properly plug and abandon the well,

but such order does not relieve any prior obligation owed by the current

operator of record pursuant to KRS 353.180. The well closure order may be

appealed pursuant to KRS 353.700 within thirty (30) days of issuance.

(26) A bond forfeited pursuant to the provisions of this chapter may be collected by an

attorney for the department or by the Attorney General, after notice from the

director.

(27) All sums received through the forfeiture of bonds shall be placed in the State

Treasury and credited to a special agency account to be designated as the oil and gas

well plugging fund, which shall be an interest-bearing account with the interest

thereon payable to the fund. This fund shall be available to the department and shall

be expended for the plugging of any abandoned wells coming within the authority

of the department pursuant to this chapter. The plugging of any well pursuant to this

subsection shall not be construed to relieve the operator or any other person from

civil or criminal liability which would exist except for the plugging. Any

unencumbered and any unexpended balance of this fund remaining at the end of any

fiscal year shall not lapse but shall be carried forward for the purpose of the fund

until expended or until appropriated by subsequent legislative action.

(28) (a) Any permitted stratigraphic test well:

1. Is subject to all requirements under this section and KRS 353.5901,

353.550, 353.610, and 353.660(1) and (4) as if the stratigraphic test well

were defined as a "well" in KRS 353.510(14); and

2. Shall be plugged within one hundred eighty (180) days of completion of

drilling the well.

(b) A stratigraphic test well shall be permitted as an oil and gas production well

prior to:

1. Producing oil or gas; or

2. Deviating from true vertical.

(c) Any stratigraphic test well converted to an oil or gas production well under

paragraph (b) of this subsection shall be subject to the requirements of KRS

353.660(1) to (3).

(29) For the purpose of this chapter, "water supply well" shall not include:

(a) Any well for a potable water supply for domestic use or for livestock; or

(b) Any water well used primarily for cooling purposes in an industrial process.

(30) Any order or final determination of the department under this section shall be

subject to review in accordance with KRS 353.700 and any administrative

regulations promulgated thereunder.