TRC studies bonding proposal for bay and offshore wells

The Texas Railroad Commission Tuesday voted to publish for public comment a proposed rule that would increase the level of required bonding for bay and offshore oil and gas well operators. Bonding has been the preferred method by which oil and gas operators assure the TRC that wells will be properly plugged when abandoned.

March 5, 2002

2 min read

By the OGJ Online Staff
HOUSTON, Mar. 5 -- The Texas Railroad Commission Tuesday voted to publish for public comment a proposed rule that would increase the level of required bonding for bay and offshore oil and gas well operators.

A formal 60-day comment period will follow publication of the bonding proposal. Bonding has been the preferred method by which oil and gas operators assure TRC that wells will be properly plugged when abandoned.

The proposed amendment would ensure sufficient financial security is in place to fund any necessary plugging or cleanup operations.

If passed and applied to existing bay and offshore wells, it would require 146 operators to post a total of $115 million in additional financial security. Currently, of these 146 operators, more than 65% post financial security of $50,000 or less. The amount of required bonding would depend upon the number and type of wells.

It costs the state an average $4,500 to plug an abandoned well on land. But that cost escalates to $60,000/well in shallow bay waters and $250,000 for an offshore well (OGJ Online, Jan. 15, 2002).

"Bay and offshore wells—if left unplugged—pose an especially serious threat to Texas beaches and coastal waters," TRC Commissioner Tony Garza said. "These wells are also among the most costly to plug, placing a potentially huge burden on the state's oil field cleanup fund."

Voluntary cleanup proposal
On a related environmental subject, the commission late last month voted to publish an oil field cleanup proposal known as the voluntary cleanup program. It is modeled after other state and federal programs involving the remediation of "brownfield" sites.

The program would encourage operators or land owners to return contaminated sites to safe and productive use. It also would reduce some of the burden on the state's oil field cleanup fund, Garza has said.

If adopted, the program would offer an innocent operator, owner or developed a release from future regulatory liability. The proposed rule is aimed at selected sites where the current lender, owner, developer, or operator did not contribute to soil or water pollution.