§ 17-518. Compliance by operator with rules - Evidence of financial ability - Neglect, failure or refusal to plug and abandon or replug well, etc. - Forfeiture or payment - Transfer of title.

A.  Any person who drills or operates any well or unit for the exploration, development or production of oil or brine, or as an injection or disposal well, within this state, shall furnish in writing, on forms approved by the Corporation Commission, his or her agreement to drill, operate and plug wells in compliance with the rules 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.

B.  To establish evidence of financial ability, the Commission shall require an irrevocable commercial letter of credit, cash, a cashier's check, a Certificate of Deposit, Bank Joint Custody Receipt, other negotiable instrument or a blanket surety bond.  The amount of such letter of credit, cash, cashier's check, certificate, bond, receipt or other negotiable instrument shall be in the amount of Twenty-five Thousand Dollars ($25,000.00) per well.  If an operator operates more than four wells subject to this requirement, the operator may file appropriate evidence of financial ability in a blanket amount of One Hundred Thousand Dollars ($100,000.00).  Any instrument shall constitute an unconditional promise to pay and be in a form negotiable by the Commission.

C.  The agreement provided for in subsection A of this section shall provide that if the Commission determines that the person furnishing the agreement has neglected, failed or refused to plug and abandon, or cause to be plugged and abandoned, or replug any well or has neglected, failed or refused to close any surface impoundment or removed or cause to be removed trash and equipment in compliance with the rules of the Commission, then the person shall forfeit from his or her bond, letter of credit or negotiable instrument or shall pay to this state, through the Commission, for deposit in the State Treasury, a sum equal to the cost of plugging the well, closure of any surface impoundment or removal of trash and equipment.  The Commission may cause the remedial work to be done, issuing a warrant in payment of the cost thereof drawn against the monies accruing in the State Treasury from the forfeiture or payment.  Any monies accruing in the State Treasury by reason of a determination that there has been a noncompliance with the provisions of the agreement or the rules of the Commission, in excess of the cost of remedial action ordered by the Commission, shall be credited to the Oil and Gas Revolving Fund.  The Commission shall also recover any costs arising from litigation to enforce this provision.  Provided, before a person is required to forfeit or pay any monies to the state pursuant to this section, the Commission shall notify the person at his or her last-known address of the determination of neglect, failure or refusal to plug or replug any well, or close any surface impoundment or remove trash and equipment and such person shall have ten (10) days from the date of notification within which to commence remedial operations.  Failure to commence remedial operations shall result in forfeiture or payment as provided in this subsection.

D.  If title to property or a well is transferred, the transferee shall furnish the evidence of financial ability to plug the well and close surface impoundments required by the provisions of this section, prior to the transfer.

Added by Laws 1990, c. 255, § 19, eff. Sept. 1, 1990.  Amended by Laws 1997, c. 275, § 4, eff. July 1, 1997.