Session of 2000
SENATE Substitute for
HOUSE BILL No. 2782
By Committee on Utilities
3-22
12 AN ACT
concerning oil and gas; relating to certain abandoned wells;
13 amending K.S.A. 1999
Supp. 55-155, 55-161, 55-179, 55-192 and 55-
14 193 and repealing the
existing sections.
15
16 Be it enacted by the Legislature of the
State of Kansas:
17 Section
1. K.S.A. 1999 Supp. 55-155 is hereby amended to read as
18 follows: 55-155. (a) Operators and
contractors shall be licensed by the
19 commission pursuant to this section.
20 (b) Every
operator and contractor shall file an application or a re-
21 newal application with the commission.
Application and renewal appli-
22 cation forms shall be prescribed, prepared
and furnished by the
23 commission.
24 (c) No
application or renewal application shall be approved until the
25 applicant has:
26 (1) Provided
sufficient information, as required by the commission,
27 for purposes of identification;
28 (2) submitted
evidence that all current and prior years' taxes for prop-
29 erty associated with the drilling or
servicing of wells have been paid;
30 (3) demonstrated
to the commission's satisfaction that the applicant
31 complies with all requirements of chapter
55 of the Kansas Statutes An-
32 notated, all rules and regulations adopted
thereunder and all commission
33 orders and enforcement agreements, if the
applicant is registered with
34 the federal securities and exchange
commission;
35 (4) demonstrated
to the commission's satisfaction that the following
36 comply with all requirements of chapter 55
of the Kansas Statutes An-
37 notated, all rules and regulations adopted
thereunder and all commission
38 orders and enforcement agreements, if the
applicant is not registered with
39 the federal securities and exchange
commission: (A) The applicant; (B)
40 any officer, director, partner or member of
the applicant; (C) any stock-
41 holder owning in the aggregate more than 5%
of the stock of the appli-
42 cant; and (D) any spouse, parent, brother,
sister, child, parent-in-law,
43 brother-in-law or sister-in-law of the
foregoing;
2
1 (5) paid an
annual license fee of $100, except that an applicant for a
2 license who is operating one gas well
used strictly for the purpose of
3 heating a residential dwelling shall
pay an annual license fee of $25;
4
(6) complied with subsection (d); and
5 (7) paid an
annual license fee of $25 for each rig operated by the
6 applicant. The commission shall issue
an identification tag for each such
7 rig which shall be displayed on such
rig at all times.
8 (d) In
order to assure financial responsibility, each operator shall
9 demonstrate annually compliance with
one of the following provisions:
10 (1) The operator
pays a nonrefundable fee of $50 per year and has
11 obtained an individual performance bond or
letter of credit, in an amount
12 equal to $.75 times the total aggregate
depth of all wells (including active,
13 inactive, injection or disposal) of the
operator.
14 (2) The operator
pays a nonrefundable fee of $50 per year and has
15 obtained a blanket performance bond or
letter of credit in an amount
16 equal to the following, according to the
number of wells (including active,
17 inactive, injection or disposal) of the
operator:
18 (A) Wells less
than 2,000 feet in depth: 1 through 5 wells, $5,000; 6
19 through 25 wells, $10,000; and over 25
wells, $20,000.
20 (B) Wells 2,000
or more feet in depth: 1 through 5 wells, $10,000; 6
21 through 25 wells, $20,000; and over 25
wells, $30,000.
22 (3) The operator:
(A) Has an acceptable record of compliance, as
23 demonstrated during the preceding 36
months, with commission rules
24 and regulations regarding safety and
pollution or with commission orders
25 issued pursuant to such rules and
regulations; (B) has no outstanding
26 undisputed orders issued by the commission
or unpaid fines, penalties or
27 costs assessed by the commission and has no
officer or director that has
28 been or is associated substantially with
another operator that has any such
29 outstanding orders or unpaid fines,
penalties or costs; and (C) pays a
30 nonrefundable fee of $50 per year.
31 (4) The operator
pays a nonrefundable fee equal to 3% of the amount
32 of the bond or letter of credit that would
be required by subsection (d)(1)
33 or by subsection (d)(2) or a
nonrefundable fee of $50 per year, whichever
34 is more.
35 (5) The
operator pays a nonrefundable fee of $50 per year and the
36 state has a first lien on tangible personal
property associated with oil and
37 gas production of the operator that has a
salvage value equal to not less
38 than the amount of the bond or letter of
credit that would be required
39 by subsection (d)(1) or by subsection
(d)(2).
40 (6) The operator
pays a nonrefundable fee of $50 per year and has
41 provided other financial assurance approved
by the commission.
42 (e) Upon the
approval of the application or renewal application, the
43 commission shall issue to such applicant a
license which shall be in full
3
1 force and effect until one year from
the date of issuance or until surren-
2 dered, suspended or revoked as
provided in K.S.A. 55-162, and amend-
3 ments thereto. No new license shall
be issued to any applicant who has
4 had a license revoked until the
expiration of one year from the date of
5 such revocation.
6 (f) If an
operator transfers responsibility for the operation of a well,
7 gas gathering system or underground
natural gas storage facility to an-
8 other person, the transfer shall be
reported to the commission in accord-
9 ance with rules and regulations of
the commission.
10 (g) The
commission shall remit all moneys received from fees as-
11 sessed pursuant to subsection (c)(7) of
this section to the state treasurer
12 at least monthly. Upon receipt of each such
remittance, the state treasurer
13 shall deposit the entire amount thereof in
the state treasury. Twenty per-
14 cent of each such deposit shall be credited
to the state general fund and
15 the balance shall be credited to the
conservation fee fund created by
16 K.S.A. 55-143, and amendments thereto.
17 (h) The
commission shall deposit all moneys received pursuant to
18 subsections (d)(3) and (d)(4) into
the conservation fee subsection (d) into
19 the abandoned oil and gas well
fund.
20 Sec.
2. K.S.A. 1999 Supp. 55-161 is hereby amended to read as
fol-
21 lows: 55-161. The commission shall
investigate abandoned wells, and,
22 based on actual or potential pollution
problems, may select abandoned
23 wells to be drilled out by the commission
in order to test the integrity of
24 the plugs. The cost of such testing shall
be paid from the conservation
25 fee fund or the abandoned
oil and gas well fund, as appropriate.
26 Sec.
3. K.S.A. 1999 Supp. 55-179 is hereby amended to read as
fol-
27 lows: 55-179. (a) Upon receipt of any
complaint filed pursuant to K.S.A.
28 55-178 and amendments thereto, the
commission shall make an investi-
29 gation for the purpose of determining
whether such abandoned well is
30 polluting or is likely to pollute any
usable water strata or supply or causing
31 the loss of usable water, or the commission
may initiate such investigation
32 on its own motion. If the commission
determines:
33 (1) That such
abandoned well is causing or likely to cause such pol-
34 lution or loss; and
35 (2)
(A) that no person is legally responsible for the proper care
and
36 control of such well; or (B) that the
person legally responsible for the
37 care and control of such well is dead, is
no longer in existence, is insolvent
38 or cannot be found, then, after completing
its investigation, and as funds
39 are available, the commission shall plug,
replug or repair such well, or
40 cause it to be plugged, replugged or
repaired, in such a manner as to
41 prevent any further pollution or danger of
pollution of any usable water
42 strata or supply or loss of usable water,
and shall remediate pollution from
43 the well, whenever practicable and
reasonable. The cost of the investi-
4
1 gation; the plugging, replugging or
repair; and the remediation shall be
2 paid by the commission from
the conservation fee fund or the abandoned
3 oil and gas well fund, as
appropriate.
4 (b) For the
purposes of this section, a person who is legally respon-
5 sible for the proper care and control
of an abandoned well shall include,
6 but is not limited to, one or more of
the following: Any operator of a
7 waterflood or other pressure
maintenance program deemed to be causing
8 pollution or loss of usable water;
the current or last operator of the lease
9 upon which such well is located,
irrespective of whether such operator
10 plugged or abandoned such well; the
original operator who plugged or
11 abandoned such well; and any person who
without authorization tampers
12 with or removes surface equipment or
downhole equipment from an
13 abandoned well.
14 (c) Whenever the
commission determines that a well has been aban-
15 doned and is causing or is likely to cause
pollution of any usable water
16 strata or supply or loss of usable water,
and whenever the commission
17 has reason to believe that a particular
person is legally responsible for the
18 proper care and control of such well, the
commission shall cause such
19 person to come before it at a hearing held
in accordance with the pro-
20 visions of the Kansas administrative
procedure act to show cause why the
21 requisite care and control has not been
exercised with respect to such
22 well. After such hearing, if the commission
finds that the person is legally
23 responsible for the proper care and control
of such well and that such
24 well is abandoned, in fact, and is causing
or is likely to cause pollution of
25 any usable water strata or supply or loss
of usable water, the commission
26 may make any order or orders prescribed in
K.S.A. 55-162, and amend-
27 ments thereto. Proceedings for
reconsideration and judicial review of any
28 of the commission's orders may be held
pursuant to K.S.A. 55-606, and
29 amendments thereto.
30 (d) For the
purpose of this section, any well which has been aban-
31 doned, in fact, and has not been plugged
pursuant to the rules and reg-
32 ulations in effect at the time of plugging
such well shall be and is hereby
33 deemed likely to cause pollution of any
usable water strata or supply.
34 (e) For the
purpose of this section, the person legally responsible for
35 the proper care and control of an abandoned
well shall not include the
36 landowner or surface owner unless the
landowner or surface owner has
37 operated or produced the well, has
deliberately altered or tampered with
38 such well thereby causing the pollution or
has assumed by written con-
39 tract such responsibility.
40 Sec.
4. K.S.A. 1999 Supp. 55-192 is hereby amended to read as
fol-
41 lows: 55-192. (a) There is hereby
established in the state treasury the
42 abandoned oil and gas well fund.
43 (b) Moneys in the
abandoned oil and gas well fund shall be used only
5
1 for the purpose of paying the costs
of: (1) Investigation and remediation
2 of contamination sites; (2)
investigation of abandoned wells, and their well
3 sites, drilling of which
began before July 1, 1996; and; (3) plugging,
re-
4 plugging or repairing abandoned
wells, and; (4) remediation of the well
5 sites, drilling of which
began before July 1, 1996, in accordance with a
6 prioritization schedule adopted by
the commission and based on the de-
7 gree of threat to public health or
the environment. No moneys credited
8 to the fund shall be used to
pay administrative expenses of the commission
9 or to pay compensation or
other expenses of employing personnel to carry
10 out the duties of the
commission; (5) expenses of the commission in
ad-
11 ministering the fund and carrying out
the activities described in subsec-
12 tions (b)(1) through (b)(4), including,
but not limited to, expenses of iden-
13 tifying and locating persons legally
responsible for abandoned wells and
14 expenses of locating abandoned wells;
and (6) compensation and other
15 expenses of employing personnel to carry
out such activities.
16 (c) On or before
the 10th day of each month, the director of accounts
17 and reports shall transfer from the state
general fund to the abandoned
18 oil and gas well fund interest earnings
based on: (1) The average daily
19 balance of moneys in the abandoned oil and
gas well fund for the pre-
20 ceding month; and (2) the net earnings rate
for the pooled money in-
21 vestment portfolio for the preceding
month.
22 (d) All
expenditures from the abandoned oil and gas well fund shall
23 be made in accordance with appropriations
acts upon warrants of the
24 director of accounts and reports issued
pursuant to vouchers approved
25 by the chairperson of the state corporation
commission or a person des-
26 ignated by the chairperson.
27 (e) The
abandoned oil and gas well fund shall not be designated as
a
28 no limit fund, and all expenditures from
the fund shall be subject to spe-
29 cific amounts appropriated by the
legislature. Moneys appropriated from
30 the fund for purposes described in
subsections (b)(5) and (b)(6) shall each
31 be appropriated as a separate line item
and shall not be merged with
32 other items of appropriation.
33 Sec.
5. K.S.A. 1999 Supp. 55-193 is hereby amended to read as
fol-
34 lows: 55-193. Except as provided by
subsection (b), on July 15, 1996, and
35 on the 15th day of each calendar quarter
thereafter before July 1, 2002,
36 the director of accounts and reports shall
transfer $100,000 from the state
37 general fund, $100,000 from the state water
plan fund established by
38 K.S.A. 82a-951, and amendments
thereto, and $100,000 from the con-
39 servation fee fund established by K.S.A.
55-143, and amendments
40 thereto, to the abandoned oil and
gas well fund established by K.S.A.
41 1999 Supp. 55-192, and amendments
thereto.
42 New Sec.
6. (a) On the effective date of this act, the chairperson
of
43 the state corporation commission shall
certify to the director of accounts
6
1 and reports the amount of moneys in
the conservation fee fund which is
2 equal to: (1) All amounts credited to
such fund pursuant to subsections
3 (d)(3) and (d)(4) of K.S.A. 55-155,
and amendments thereto; plus (2) any
4 amounts recovered and credited to
such fund pursuant to subsection (d)
5 of K.S.A. 55-180, and amendments
thereto, with respect to abandoned
6 wells, sites of wells or pollution
from wells, drilling of which began on or
7 after July 1, 1996; minus (3) any
amounts expended from such fund pur-
8 suant to K.S.A. 55-161, and
amendments thereto, or subsection (a)(2) of
9 K.S.A. 55-179, and amendments
thereto, with respect to wells, sites of
10 wells or pollution from wells, 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 abandoned oil and gas well fund.
14 (b) All
liabilities of the conservation fee fund pursuant to K.S.A. 55-
15 161, and amendments thereto, or subsection
(a)(2) of K.S.A. 55-179, and
16 amendments thereto, with respect to wells,
sites of wells or pollution from
17 wells, drilling of which began on or after
July 1, 1996, are hereby trans-
18 ferred to and imposed on the abandoned oil
and gas well fund.
19 Sec. 7. K.S.A. 1999 Supp.
55-155, 55-161, 55-179, 55-192 and 55-
20 193 are hereby repealed.
21 Sec. 8. This act shall
take effect and be in force from and after its
22 publication in the statute book.