Texas to require bonds for inactive wells

The Texas Railroad Commission passed a measure June 6 addressing abandoned oil and gas wells. Chairman Michael L. Williams proposed the plan, which calls for producers to provide financial assurance, such as a bond or letter of credit, for wells that remain inactive for two or more years and for certain low-producing wells that are transferred between operators. The plan also calls for yearly fluid level testing to indicate whether an inactive well is environmentally sound.


The Texas Railroad Commission passed a measure June 6 addressing abandoned oil and gas wells. Chairman Michael L. Williams proposed the plan, which calls for producers to provide financial assurance, such as a bond or letter of credit, for wells that remain inactive for two or more years and for certain low-producing wells that are transferred between operators. The plan also calls for yearly fluid level testing to indicate whether an inactive well is environmentally sound.

The measure is expected to be approved and take effect within 60-90 days. The proposal originally was expected to take effect in September 2002, but Texas Railroad Commissioner Tony Garza attached an amendment that made it effective once final adoption has occurred.

The measure will require financial assurance for wells entering their third year of inactivity. It also requires financial assurance when low-producing wells are transferred between operators. Williams believes this may be a red flag that a well may be ready to be plugged.

Key points of the plan are:

� It requires a bond or letter of credit when an inactive or minimally producing well is transferred between companies. A well producing less than 10 bbl/month of oil for three consecutive months or less than 100 Mcf/month of gas for the same period is considered "minimally producing." (Currently, transferred wells are approved automatically.)

� It requires annual fluid level tests on all inactive wells or a mechanical test every 5 years.

� It requires wells already under two or more 1-year extensions to be bonded immediately.

More in Home