Oklahoma Administrative Code › Title 165 - Corporation Commission › Chapter 10 - Oil And Gas Conservation › Subchapter 1 - Administration › Part 3 - SURETY › Section 165:10-1-10 - Operator's agreement; Category A and Category B surety

Current through Vol. 41, No. 20, July 1, 2024
(a) Any
				  person who drills or operates any well for the exploration, development or
				  production of oil or gas, or as an injection or disposal well, within this
				  State, shall furnish in writing, on forms approved by the Corporation
				  Commission, such person's agreement to drill, operate and plug wells in
				  compliance with the rules and regulations of the Commission and the laws of
				  this state, together with evidence of financial ability to comply with the
				  requirements for plugging, closure of surface impoundments, removal of trash
				  and equipment as established by the rules of the Commission and by law. Any
				  operator violating this Section may be fined up to $500.00. To establish
				  evidence of financial ability, the Commission shall require:
(1) Category A surety which shall include a
				  financial statement listing assets and liabilities and including a general
				  release that the information may be verified with banks and other financial
				  institutions. The statement shall prove a net worth of not less than $50,000.00
				  in U.S. dollars; or
(2) Category B
				  surety shall include an irrevocable commercial letter of credit, cash, a
				  cashier's check, a certificate of deposit, bank joint custody receipt, other
				  approved negotiable instrument, or a blanket surety bond. Except as provided in
				  (3) of this subsection, the amount of such Category B surety shall be in the
				  amount of $25,000.00 in U.S. dollars but may be set higher at the discretion of
				  the Director of the Conservation Division. The Commission is authorized to
				  establish Category B surety in an amount greater than $25,000.00 in U.S.
				  dollars based upon the past performance of the operator and its insiders and
				  affiliates regarding compliance with the laws of this state, and compliance
				  with any rules promulgated thereto including but not limited to the drilling,
				  operation and plugging of wells, closure of surface impoundments, or removal of
				  trash and equipment. Any such Category B surety shall constitute an
				  unconditional promise to pay and be in a form negotiable by the Commission.
(3) The Commission may grant
				  Category B surety in an amount less than $25,000.00 in U.S. dollars to an
				  operator whose statewide well plugging liability is less than $25,000.00 in
				  U.S. dollars. Said Category B surety shall be in an amount that is sufficient
				  to cover the total estimated cost of properly plugging and abandoning each and
				  every well, the operations for which, an operator is responsible. Statewide
				  well plugging liability shall be documented by an affidavit filed on Form 1006D
				  and shall be properly executed by a duly licensed casing pulling and well
				  plugging company and shall be approved by the Conservation Division. Said
				  affidavit shall state, among other things, an estimated cost of plugging,
				  closure, and removal operations for each well in accordance with
				  165:10-11-3
				  through
				  165:10-11-8
				  inclusively and shall be accompanied by a Form 1000 (Intent to Drill) if the
				  estimate involves a proposed well or by a Form 1002A (Completion Report) if the
				  estimate involves a well that is a producing, injection, or disposal well. The
				  estimated cost shall not include any salvage value as to recoverable casing,
				  tubing, or well head equipment. The total statewide well plugging liability of
				  an operator utilizing this Category B surety shall be kept current and shall be
				  increased as additional wells are added to the responsibility of the operator
				  and may be decreased as included wells are plugged and abandoned, but in no
				  event shall exceed $25,000.00 in U.S. dollars unless otherwise ordered by the
				  Commission.