THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY M. WHITE, YAW, SCARNATI, PILEGGI, YUDICHAK, ORIE, D. WHITE, PIPPY, EARLL, WAUGH, KASUNIC, BROWNE AND ERICKSON, MARCH 8, 2011

REFERRED TO ENVIRONMENTAL RESOURCES AND ENERGY, MARCH 8, 2011  

AN ACT

Amending the act of December 19, 1984 (P.L.1140, No.223),

entitled "An act relating to the development of oil and gas

and coal; imposing duties and powers on the Department of

Environmental Resources; imposing notification requirements

to protect landowners; and providing for definitions, for

various requirements to regulate the drilling and operation

of oil and gas wells, for gas storage reservoirs, for various

reporting requirements, including certain requirements

concerning the operation of coal mines, for well permits, for

well registration, for distance requirements, for well casing

requirements, for safety device requirements, for storage

reservoir obligations, for well bonding requirements, for a

Well Plugging Restricted Revenue Account to enforce oil and

gas well plugging requirements, for the creation of an Oil

and Gas Technical Advisory Board, for oil and gas well

inspections, for enforcement and for penalties," further

providing for bonding.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 215(a) of the act of December 19, 1984

(P.L.1140, No.223), known as the Oil and Gas Act, amended July

2, 1992 (P.L.365, No.78), is amended to read:

Section 215.  Bonding.

(a)  (1)  Except as provided in subsection (d) hereof, upon

filing an application for a well permit and before continuing

to operate any oil or gas well, the owner or operator thereof

shall file with the department a bond for the well and the

well site on a form to be prescribed and furnished by the

department. Any such bond filed with an application for a

well permit shall be payable to the Commonwealth and

conditioned that the operator shall faithfully perform all of

the drilling, water supply replacement, restoration and

plugging requirements of this act. Any such bond filed with

the department for a well in existence on the effective date

of this act shall be payable to the Commonwealth and

conditioned that the operator shall faithfully perform all of

the water supply replacement, restoration and plugging

requirements of this act. The amount of the bond required

shall be in the [amount of $2,500 per well for at least two

years following the effective date of this act, after which

time the bond amount] following amounts and may be adjusted

by the Environmental Quality Board every two years to reflect

the projected costs to the Commonwealth of performing well

plugging[.]:

(i)  For wells with a total well bore length less

than 6,000 feet:

(A)  For operating up to 50 wells, $4,000 per

well, provided the operator may not be required to

provide a bond under this section exceeding $35,000.

(B)  For operating 51 to 150 wells, $35,000 plus

$4,000 per well for each well in excess of 50 wells,

provided the operator may not be required to provide

a bond under this section exceeding $60,000.

(C)  For operating 151 to 250 wells, $60,000 plus

$4,000 per well for each well in excess of 150 wells,

provided the operator may not be required to provide

a bond under this section exceeding $100,000.

(D)  For operating more than 250 wells, $100,000

plus $4,000 per well for each well in excess of 250 

wells, provided the operator may not be required to

provide a bond under this section exceeding $250,000.

(ii)  For wells with a total well bore length greater

than 6,000 feet:

(A)  For operating up to 25 wells, $10,000 per

well, provided the operator may not be required to 

provide a bond under this section exceeding $60,000.

(B)  For operating 26 to 50 wells, $60,000 plus

$10,000 per well for each well in excess of 25 wells,

provided the operator may not be required to provide

a bond under this section exceeding $120,000.

(C)  For operating 51 to 150 wells, $120,000 plus

$10,000 per well for each well in excess of 50 wells,

provided the operator may not be required to provide

a bond under this section exceeding $180,000.

(D)  For operating more than 150 wells, $180,000

plus $10,000 per well for each well in excess of 150

wells, provided the operator may not be required to

provide a bond under this section exceeding $250,000.

(2)  In lieu of individual bonds for each well, an owner

or operator may file a blanket bond, for the appropriate

amount as indicated in paragraph (1), on a form prepared by

the department, covering all of its wells in Pennsylvania as

enumerated on the bond form. [A blanket bond shall be in the

amount of $25,000 for at least two years following the

effective date of this act, after which time the bond amount

may be adjusted by the Environmental Quality Board every two

years to reflect the projected costs to the Commonwealth of

performing well plugging.]

(3)  Liability under such bond shall continue until the

well has been properly plugged in accordance with this act

and for a period of one year after filing of the certificate

of plugging with the department. Each bond shall be executed

by the operator and a corporate surety licensed to do

business in the Commonwealth and approved by the secretary.

The operator may elect to deposit cash, certificates of

deposit or automatically renewable irrevocable letters of

credit from financial institutions chartered or authorized to

do business in Pennsylvania and regulated and examined by the

Commonwealth or a Federal agency which may be terminated at

the end of a term only upon the financial institution giving

90 days prior written notice to the permittee and the

department or negotiable bonds of the United States

Government or the Commonwealth, the Pennsylvania Turnpike

Commission, the General State Authority, the State Public

School Building Authority or any municipality within the

Commonwealth, or United States Treasury Bonds issued at a

discount without a regular schedule of interest payments to

maturity, otherwise known as Zero Coupon Bonds, having a

maturity date of not more than ten years after the date of

purchase and at such maturity date having a value of not less

than $25,000, with the department in lieu of a corporate

surety. The cash deposit, certificate of deposit, amount of

such irrevocable letter of credit or market value of such

securities shall be equal at least to the sum of the bond.

The secretary shall, upon receipt of any such deposit of

cash, letters of credit or negotiable bonds, immediately

place the same with the State Treasurer, whose duty it shall

be to receive and hold the same in the name of the

Commonwealth, in trust, for the purpose for which such

deposit is made. The State Treasurer shall at all times be

responsible for the custody and safekeeping of such deposits.

The operator making deposit shall be entitled from time to

time to demand and receive from the State Treasurer, on the

written order of the secretary, the whole or any portion of

any collateral so deposited, upon depositing with him, in

lieu thereof, other collateral of the classes herein

specified having a market value at least equal to the sum of

the bond, and also to demand, receive and recover the

interest and income from said negotiable bonds as the same

becomes due and payable. Where negotiable bonds, deposited as

aforesaid, mature or are called, the State Treasurer, at the

request of the owner thereof, shall convert such negotiable

bonds into such other negotiable bonds of the classes herein

specified as may be designated by the owner. Where notice of

intent to terminate a letter of credit is given, the

department shall give the operator 30 days' written notice to

replace the letter of credit with other acceptable bond

guarantees as provided herein and, if the owner or operator

fails to replace the letter of credit within the 30-day

notification period, the department shall draw upon and

convert such letter of credit into cash and hold it as a

collateral bond guarantee.

* * *

Section 2.  This act shall take effect in 60 days.