Regular Session 2017-2018 House Bill 0943 P.N. 1099

PRINTER'S NO. 1099

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

943

Session of

2017

INTRODUCED BY MURT, DEAN, DONATUCCI, FREEMAN, MADDEN AND

MULLERY, MARCH 23, 2017

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY,

MARCH 23, 2017

AN ACT

Amending Title 58 (Oil and Gas) of the Pennsylvania Consolidated

Statutes, in general requirements relating to development,

providing for liability bonding.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Title 58 of the Pennsylvania Consolidated

Statutes is amended by adding a section to read:

§ 3225.1. Liability bonding.

(a) General rule.--

(1) Except as provided in subsection (d), upon filing an

application for a well permit and before continuing to

operate an unconventional well, the owner or operator of the

unconventional well shall file with the department a bond

covering any remediation liabilities at the unconventional

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

by the department. A bond filed with an application for a

well permit shall be payable to the Commonwealth and

conditioned upon the proper remediation of any release of any

regulated substance, restoration and plugging requirements of

this chapter. The amount of the bond required shall be

$2,000,000 and may be adjusted by the Environmental Quality

Board every two years to reflect the projected costs to the

Commonwealth of remediation activities.

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

or operator may file a blanket bond in an amount equal to 20%

of the sum total for all individual bonds that would

otherwise be required of the operator.

(3) Liability under the bond shall continue until any

release has been properly remediated and the well has been

properly plugged in accordance with this chapter and for a

period of two years 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 this Commonwealth and approved by the secretary. In lieu

of a corporate surety, the operator may deposit with the

department:

(i) cash;

(ii) certificates of deposit or automatically

renewable irrevocable letters of credit, from financial

institutions chartered or authorized to do business in

this Commonwealth and regulated and examined by a Federal

agency or the Commonwealth, which may be terminated at

the end of a term only upon 90 days' prior written notice

by the financial institution to the permittee and the

department;

(iii) negotiable bonds of the Federal Government or

the Commonwealth, the Pennsylvania Turnpike Commission,

the State Public School Building Authority or any

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municipality within this Commonwealth; or

(iv) 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 10 years after the date

of purchase and at the maturity date having a value of

not less than the applicable amount under paragraph (1).

The cash deposit, certificate of deposit, amount of the

irrevocable letter of credit or market value of the

securities shall be equal at least to the sum of the

bond.

(4) The secretary shall, upon receipt of a deposit of

cash, letters of credit or negotiable bonds, immediately

place the same with the State Treasurer, who shall receive

and hold the same in the name of the Commonwealth, in trust,

for the purpose for which the deposit is made.

(5) The State Treasurer shall be custodian of and shall

safely keep the deposits. The operator making the deposit may

from time to time demand and receive from the State

Treasurer, on the written order of the secretary, the whole

or any portion of collateral deposited, by depositing with

the State Treasurer, in lieu of the collateral, other

collateral of classes specified in this section that have a

market value at least equal to the sum of the bond and may

also demand, receive and recover the interest and income from

the negotiable bonds as they become due and payable.

(6) If negotiable bonds on deposit under this subsection

mature or are called, the State Treasurer, at the request of

the owner of the bonds, shall convert them into other

negotiable bonds, of classes specified in this section,

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designated by the owner of the bonds.

(7) If 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 in this section. If

the owner or operator fails to timely replace the letter of

credit, the department shall draw upon and convert the letter

of credit into cash and hold it as a collateral bond

guarantee.

(b) Discharge.--No bond shall be fully discharged until the

requirements of subsection (a) and section 3223 (relating to

notification and effect of well transfer) have been fully met.

Upon release of bonds and collateral under this section, the

State Treasurer shall immediately return to the owner the

specified amount of cash or securities.

(1) If an unconventional well owner or operator fails or

refuses to comply with subsection (a), regulations

promulgated under this chapter or conditions of a permit

relating to this chapter, the department may declare the bond

forfeited and shall certify the forfeiture to the Attorney

General. The Attorney General shall proceed to enforce and

collect the full amount of the bond and, if the

unconventional well owner or operator has deposited cash or

securities as collateral in lieu of a corporate surety, the

department shall declare the collateral forfeited and direct

the State Treasurer to pay the full amount of the funds into

the Well Plugging Restricted Revenue Account or to sell the

security to the extent forfeited and pay the proceeds into

the Well Plugging Restricted Revenue Account.

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(2) If a corporate surety or financial institution fails

to pay a forfeited bond promptly and in full, the corporate

surety or financial institution shall be disqualified from

writing further bonds under this chapter or any other

environmental law administered by the department.

(3) A person aggrieved by reason of forfeiting the bond

or converting collateral, as provided in this section, shall

have a right to appeal to the Environmental Hearing Board in

the manner provided by law.

(4) Upon forfeiture of a blanket bond for a violation

occurring at one or more unconventional well sites, the

person whose bond is forfeited shall, within 10 days of the

forfeiture, submit a replacement bond to cover all other

unconventional wells of which the person is an owner or

operator.

(5) Failure to submit the replacement bond constitutes a

violation of this section as to each of the wells owned or

operated by the person.

(d) Alternatives to certain bonds.--

(1) An operator of not more than 200 unconventional

wells that cannot obtain a bond for an unconventional well

spud prior to the effective date of this section, as required

under subsection (a), due to inability to demonstrate

sufficient financial resources may, in lieu of the bond:

(i) Submit to the department a fee in the amount of

$10,000 per unconventional well, a blanket fee of $50,000

for 10 to 20 wells or a blanket fee of $1,000,000 for

more than 20 wells, which shall be a nonrefundable fee to

be paid in any year that the operator has not filed a

bond with the department. All fees collected in lieu of a

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bond under this subsection shall be used for the purposes

authorized by this chapter. The Environmental Quality

Board may by regulation increase the amount of the fees

established under this subparagraph.

(ii) Make phased deposits of collateral to fully

collateralize the bond, subject to the following:

(A) Payment shall be based on the number of

unconventional wells owned or operated. The operator

shall make an initial deposit and make annual

deposits in accordance with the schedule in clause

(B).

(B) Interest accumulated by the collateral shall

become a part of the bond until the collateral plus

accumulated interest equals the amount of the

required bond.

with the State Treasurer as provided in this

subsection or with a bank selected by the department

which shall act as trustee for the benefit of the

Commonwealth to guarantee the operator's compliance

with the remediation of any release and the

restoration and plugging requirements of this

chapter.

(D) The operator shall pay all costs of the

trust.

(2) An operator of an unconventional well spud prior to

the effective date of this section that does not intend to

operate an additional unconventional well shall deposit

$10,000 per well and shall, thereafter, annually deposit

$5,000 per well until the obligations of this section are

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fully met.

(3) An operator may continue to pay a fee in lieu of the

bond or make phased deposits of collateral to fully

collateralize the bond provided the operator does not miss a

payment under this subsection and remains in compliance with

this chapter. If an operator misses a payment under this

subsection, the operator shall:

(i) immediately submit the appropriate bond amount

in full; or

(ii) cease all operations and plug all wells.

(e) Reservation of remedies.--

(1) All remedies for violations of this chapter,

regulations adopted under this chapter and conditions of

permits are expressly preserved.

(2) Nothing in this section shall be construed as an

exclusive penalty or remedy for violations of law.

(3) No action taken under this section shall waive or

impair any other remedy or penalty provided in law.

(f) Definitions.--As used in this section, the following

words and phrases shall have the meanings given to them in this

subsection unless the context clearly indicates otherwise:

"Regulated substance." The term shall include hazardous

substances and contaminants regulated under the act of October

18, 1988 (P.L.756, No.108), known as the Hazardous Sites Cleanup

Act, and substances covered by the act of June 22, 1937

(P.L.1987, No.394), known as The Clean Streams Law, the act of

January 8, 1960 (1959 P.L.2119, No.787), known as the Air

Pollution Control Act, the act of July 7, 1980 (P.L.380, No.97),

known as the Solid Waste Management Act, the act of July 13,

1988 (P.L.525, No.93), referred to as the Infectious and

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Chemotherapeutic Waste Law, and the act of July 6, 1989

(P.L.169, No.32), known as the Storage Tank and Spill Prevention

Act.

"Release." Spilling, leaking, pumping, pouring, emitting,

emptying, discharging, injecting, escaping, leaching, dumping or

disposing of a regulated substance into the environment in a

manner not authorized by the department. The term includes the

abandonment or discarding of barrels, containers, vessels and

other receptacles containing a regulated substance.

"Remediation." To clean up, mitigate, correct, abate,

minimize, eliminate, control or prevent a release of a regulated

substance into the environment in order to protect the present

or future public health, safety, welfare or the environment,

including preliminary action to study or assess the release.

"Well site." An area occupied by all equipment or facilities

necessary for or incidental to drilling, production or plugging

of an unconventional well.

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

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