As Amended by House Committee
Session of 2000
HOUSE BILL No. 2782
By Committee on Environment
2-1
11 AN ACT
concerning oil and gas; relating to disposition of certain
fees;
12 amending K.S.A. 1999
Supp. 55-155, 55-161, 55-179 and 55-180 and
13 repealing the existing
sections.
14
15 Be it enacted by the Legislature of the
State of Kansas:
16 New Section
1. (a) There is hereby established in the state treasury
17 the well plugging assurance fund.
18 (b) Moneys in the
well plugging assurance fund shall be used only
19 for the purpose of paying the costs of: (1)
Investigation of abandoned
20 wells, and their well sites, drilling of
which began on or after July 1, 1996;
21 and (2) plugging, replugging or repairing
abandoned wells, and remedi-
22 ation of the well sites, drilling of which
began on or after July 1, 1996, in
23 accordance with a prioritization schedule
adopted by the state corpo-
24 ration commission and based on the
degree of threat to public health or
25 the environment. No moneys credited to the
fund shall be used to pay
26 administrative expenses of the commission
or to pay compensation or
27 other expenses of employing personnel to
carry out the duties of the
28 commission.
29 (c) On or before
the 10th day of each month, the director of accounts
30 and reports shall transfer from the state
general fund to the well plugging
31 assurance fund interest earnings based on:
(1) The average daily balance
32 of moneys in the well plugging assurance
fund for the preceding month;
33 and (2) the net earnings rate for the
pooled money investment portfolio
34 for the preceding month.
35 (d) All
expenditures from the well plugging assurance fund shall be
36 made in accordance with appropriation acts
upon warrants of the director
37 of accounts and reports issued pursuant to
vouchers approved by the
38 chairperson of the state corporation
commission or a person designated
39 by the chairperson.
40 New Sec.
2. (a) On the effective date of this act, the chairperson
of
41 the state corporation commission shall
certify to the director of accounts
42 and reports the amount of moneys in the
conservation fee fund which is
43 equal to: (1) All amounts credited to such
fund pursuant to subsections
2
1 (d)(3) and (d)(4) of K.S.A. 55-155,
and amendments thereto; plus (2) any
2 amounts recovered and credited to
such fund pursuant to subsection (d)
3 of K.S.A. 55-180, and amendments
thereto, for plugging, replugging or
4 repairing an abandoned well, drilling
of which began on or after July 1,
5 1996; minus (3) any amounts expended
from such fund pursuant to K.S.A.
6 55-161, and amendments thereto, or
subsection (a)(2) of K.S.A. 55-179,
7 and amendments thereto, for the
purpose of: (A) Investigation of aban-
8 doned wells, and their well sites,
drilling of which began on or after July
9 1, 1996; and (B) plugging, replugging
or repairing abandoned wells, and
10 remediation of the well sites, drilling of
which began on or after July 1,
11 1996. Upon receipt of such certification,
the director of accounts and
12 reports shall transfer the amount certified
from the conservation fee fund
13 to the well plugging assurance fund.
14 (b) All
liabilities of the conservation fee fund which are attributable
15 to the following are hereby transferred to
and imposed on the well plug-
16 ging assurance fund: (1) Investigation of
abandoned wells, and their well
17 sites, drilling of which began on or after
July 1, 1996; and (2) plugging,
18 replugging or repairing abandoned wells,
and remediation of the well
19 sites, drilling of which began on or after
July 1, 1996.
20 New Sec.
3. Whenever there are insufficient moneys in the well
21 plugging assurance fund or the abandoned
oil and gas well fund to pay
22 the liabilities of such fund, such
liabilities shall be and are hereby imposed
23 on the conservation fee fund, provided
such liabilities were incurred
24 in accordance with the prioritization
schedules established pur-
25 suant to subsection (b)(2) of section 1,
and amendments thereto,
26 and subsection (b)(2) of K.S.A. 1999
Supp. 55-192, and amend-
27 ments thereto.
28 Sec.
4. K.S.A. 1999 Supp. 55-155 is hereby amended to read as
fol-
29 lows: 55-155. (a) Operators and contractors
shall be licensed by the com-
30 mission pursuant to this section.
31 (b) Every
operator and contractor shall file an application or a re-
32 newal application with the commission.
Application and renewal appli-
33 cation forms shall be prescribed, prepared
and furnished by the
34 commission.
35 (c) No
application or renewal application shall be approved until the
36 applicant has:
37 (1) Provided
sufficient information, as required by the commission,
38 for purposes of identification;
39 (2) submitted
evidence that all current and prior years' taxes for prop-
40 erty associated with the drilling or
servicing of wells have been paid;
41 (3) demonstrated
to the commission's satisfaction that the applicant
42 complies with all requirements of chapter
55 of the Kansas Statutes An-
43 notated, all rules and regulations adopted
thereunder and all commission
3
1 orders and enforcement agreements, if
the applicant is registered with
2 the federal securities and exchange
commission;
3
(4) demonstrated to the commission's satisfaction that the
following
4 comply with all requirements of
chapter 55 of the Kansas Statutes An-
5 notated, all rules and regulations
adopted thereunder and all commission
6 orders and enforcement agreements, if
the applicant is not registered with
7 the federal securities and exchange
commission: (A) The applicant; (B)
8 any officer, director, partner or
member of the applicant; (C) any stock-
9 holder owning in the aggregate more
than 5% of the stock of the appli-
10 cant; and (D) any spouse, parent, brother,
sister, child, parent-in-law,
11 brother-in-law or sister-in-law of the
foregoing;
12 (5) paid an
annual license fee of $100, except that an applicant for a
13 license who is operating one gas well used
strictly for the purpose of
14 heating a residential dwelling shall pay an
annual license fee of $25;
15 (6) complied with
subsection (d); and
16 (7) paid an
annual license fee of $25 for each rig operated by the
17 applicant. The commission shall issue an
identification tag for each such
18 rig which shall be displayed on such rig at
all times.
19 (d) In order to
assure financial responsibility, each operator shall
20 demonstrate annually compliance with one of
the following provisions:
21 (1) The operator
has obtained an individual performance bond or
22 letter of credit, in an amount equal to
$.75 times the total aggregate depth
23 of all wells (including active, inactive,
injection or disposal) of the
24 operator.
25 (2) The operator
has obtained a blanket performance bond or letter
26 of credit in an amount equal to the
following, according to the number
27 of wells (including active, inactive,
injection or disposal) of the operator:
28 (A) Wells less
than 2,000 feet in depth: 1 through 5 wells, $5,000; 6
29 through 25 wells, $10,000; and over 25
wells, $20,000.
30 (B) Wells 2,000
or more feet in depth: 1 through 5 wells, $10,000; 6
31 through 25 wells, $20,000; and over 25
wells, $30,000.
32 (3) The operator:
(A) Has an acceptable record of compliance, as
33 demonstrated during the preceding 36
months, with commission rules
34 and regulations regarding safety and
pollution or with commission orders
35 issued pursuant to such rules and
regulations; (B) has no outstanding
36 undisputed orders issued by the commission
or unpaid fines, penalties or
37 costs assessed by the commission and has no
officer or director that has
38 been or is associated substantially with
another operator that has any such
39 outstanding orders or unpaid fines,
penalties or costs; and (C) pays a
40 nonrefundable fee of $50 per year.
41 (4) The operator
pays a nonrefundable fee equal to 3% of the amount
42 of the bond or letter of credit that would
be required by subsection (d)(1)
43 or by subsection (d)(2).
4
1 (5) The
state has a first lien on tangible personal property associated
2 with oil and gas production of the
operator that has a salvage value equal
3 to not less than the amount of the
bond or letter of credit that would be
4 required by subsection (d)(1) or by
subsection (d)(2).
5 (6) The
operator has provided other financial assurance approved by
6 the commission.
7 (e) Upon
the approval of the application or renewal application, the
8 commission shall issue to such
applicant a license which shall be in full
9 force and effect until one year from
the date of issuance or until surren-
10 dered, suspended or revoked as provided in
K.S.A. 55-162, and amend-
11 ments thereto. No new license shall be
issued to any applicant who has
12 had a license revoked until the expiration
of one year from the date of
13 such revocation.
14 (f) If an
operator transfers responsibility for the operation of a well,
15 gas gathering system or underground natural
gas storage facility to an-
16 other person, the transfer shall be
reported to the commission in accord-
17 ance with rules and regulations of the
commission.
18 (g) The
commission shall remit all moneys received from fees as-
19 sessed pursuant to subsection (c)(7) of
this section to the state treasurer
20 at least monthly. Upon receipt of each such
remittance, the state treasurer
21 shall deposit the entire amount thereof in
the state treasury. Twenty per-
22 cent of each such deposit shall be credited
to the state general fund and
23 the balance shall be credited to the
conservation fee fund created by
24 K.S.A. 55-143, and amendments thereto.
25 (h) The
commission shall deposit all moneys received pursuant to
26 subsections (d)(3) and (d)(4) into the
conservation fee well plugging as-
27 surance fund.
28 Sec.
5. K.S.A. 1999 Supp. 55-161 is hereby amended to read as
fol-
29 lows: 55-161. The commission shall
investigate abandoned wells, and,
30 based on actual or potential pollution
problems, may select abandoned
31 wells to be drilled out by the commission
in order to test the integrity of
32 the plugs. The cost of such testing shall
be paid from the conservation
33 fee well plugging
assurance fund or the abandoned oil and gas well fund,
34 as appropriate.
35 Sec.
6. K.S.A. 1999 Supp. 55-179 is hereby amended to read as
fol-
36 lows: 55-179. (a) Upon receipt of any
complaint filed pursuant to K.S.A.
37 55-178 and amendments thereto, the
commission shall make an investi-
38 gation for the purpose of determining
whether such abandoned well is
39 polluting or is likely to pollute any
usable water strata or supply or causing
40 the loss of usable water, or the commission
may initiate such investigation
41 on its own motion. If the commission
determines:
42 (1) That such
abandoned well is causing or likely to cause such pol-
43 lution or loss; and
5
1 (2)
(A) that no person is legally responsible for the proper care
and
2 control of such well; or (B) that the
person legally responsible for the
3 care and control of such well is
dead, is no longer in existence, is insolvent
4 or cannot be found, then, after
completing its investigation, and as funds
5 are available, the commission shall
plug, replug or repair such well, or
6 cause it to be plugged, replugged or
repaired, in such a manner as to
7 prevent any further pollution or
danger of pollution of any usable water
8 strata or supply or loss of usable
water, and shall remediate pollution from
9 the well, whenever practicable and
reasonable. The cost of the investi-
10 gation; the plugging, replugging or repair;
and the remediation shall be
11 paid by the commission from the
conservation fee well plugging
assurance
12 fund or the abandoned oil and gas well
fund, as appropriate.
13 (b) For the
purposes of this section, a person who is legally respon-
14 sible for the proper care and control of an
abandoned well shall include,
15 but is not limited to, one or more of the
following: Any operator of a
16 waterflood or other pressure maintenance
program deemed to be causing
17 pollution or loss of usable water; the
current or last operator of the lease
18 upon which such well is located,
irrespective of whether such operator
19 plugged or abandoned such well; the
original operator who plugged or
20 abandoned such well; and any person who
without authorization tampers
21 with or removes surface equipment or
downhole equipment from an
22 abandoned well.
23 (c) Whenever the
commission determines that a well has been aban-
24 doned and is causing or is likely to cause
pollution of any usable water
25 strata or supply or loss of usable water,
and whenever the commission
26 has reason to believe that a particular
person is legally responsible for the
27 proper care and control of such well, the
commission shall cause such
28 person to come before it at a hearing held
in accordance with the pro-
29 visions of the Kansas administrative
procedure act to show cause why the
30 requisite care and control has not been
exercised with respect to such
31 well. After such hearing, if the commission
finds that the person is legally
32 responsible for the proper care and control
of such well and that such
33 well is abandoned, in fact, and is causing
or is likely to cause pollution of
34 any usable water strata or supply or loss
of usable water, the commission
35 may make any order or orders prescribed in
K.S.A. 55-162, and amend-
36 ments thereto. Proceedings for
reconsideration and judicial review of any
37 of the commission's orders may be held
pursuant to K.S.A. 55-606, and
38 amendments thereto.
39 (d) For the
purpose of this section, any well which has been aban-
40 doned, in fact, and has not been plugged
pursuant to the rules and reg-
41 ulations in effect at the time of plugging
such well shall be and is hereby
42 deemed likely to cause pollution of any
usable water strata or supply.
43 (e) For the
purpose of this section, the person legally responsible for
6
1 the proper care and control of an
abandoned well shall not include the
2 landowner or surface owner unless the
landowner or surface owner has
3 operated or produced the well, has
deliberately altered or tampered with
4 such well thereby causing the
pollution or has assumed by written con-
5 tract such responsibility.
6 Sec.
7. K.S.A. 1999 Supp. 55-180 is hereby amended to read as
fol-
7 lows: 55-180. (a) The fact that any
person has initiated or supported a
8 proceeding before the commission, or
has remedied or attempted to rem-
9 edy the condition of any well under
the authority of this act, shall not be
10 construed as an admission of liability or
received in evidence against such
11 person in any action or proceeding wherein
responsibility for or damages
12 from surface or subsurface pollution, or
injury to any usable water or oil-
13 bearing or gas-bearing formation, is or may
become an issue; nor shall
14 such fact be construed as releasing or
discharging any action, cause of
15 action or claim against such person
existing in favor of any third person
16 for damages to property resulting from
surface or subsurface pollution,
17 or injury to any usable water or
oil-bearing or gas-bearing formation.
18 (b) The
commission, on its own motion, may initiate an investigation
19 into any pollution problem related to oil
and gas activity. In taking such
20 action the commission may require or
perform the testing, sampling,
21 monitoring or disposal of any source of
groundwater pollution related to
22 oil and gas activities.
23 (c) The
commission or any other person authorized by the commis-
24 sion who has no obligation to plug, replug
or repair any abandoned well,
25 but who does so in accordance with the
provisions of this act, shall have
26 a cause of action for the reasonable cost
and expense incurred in plugging,
27 replugging or repairing the well against
any person who is legally respon-
28 sible for the proper care and control of
such well pursuant to the provi-
29 sions of K.S.A. 55-179, and
amendments thereto, and the commission or
30 other person shall have a lien upon the
interest of such obligated person
31 in and to the oil and gas rights in the
land and equipment located thereon.
32 (d) Any moneys
recovered by the commission in an action pursuant
33 to subsection (c) shall be remitted to the
state treasurer. The state trea-
34 surer shall deposit the entire amount of
the remittance in the state treas-
35 ury and credit it to the
conservation fee conservation fee fund
well
36 plugging assurance fund or the
abandoned oil and gas well fund, as ap-
37 propriate based on the fund from which the
costs incurred by the com-
38 mission were paid. If such costs were
paid from the conservation fee fund,
39 any moneys recovered shall be credited
to the well plugging assurance
40 fund.
41 Sec. 8. K.S.A. 1999 Supp.
55-155, 55-161, 55-179 and 55-180 are
42 hereby repealed.
43 Sec. 9. This act shall
take effect and be in force from and after its
7
1 publication in the statute book.