An Act concerning oil and gas; concerning the prevention of pollution and protection of water quality; providing for payment of costs of remediation of certain contamination sites and costs of plugging, replugging and repairing certain abandoned wells and re- mediation of pollution from such wells; amending K.S.A. 27-118, 55-161, 55-179 and 55-180 and K.S.A. 1995 Supp. 55-155 and repealing the existing sections; also repealing K.S.A. 1995 Supp. 74-632 and K.S.A. 55-179, as amended by section 2 of 1996 Senate Bill No. 685.

Be it enacted by the Legislature of the State of Kansas:

New Section 1. As used in this act:

(a) ``Abandoned well'' means any well that the commission has au- thority to plug, replug or repair under K.S.A. 55-179 and amendments thereto.

(b) ``Commission'' means the state corporation commission.

(c) ``Contamination site'' means any of: (1) The 17 sites of pollution from oil and gas activities, identified as of March 1, 1996, over which jurisdiction was transferred from the department of health and environ- ment to the commission by chapter 204 of the 1995 Session Laws of Kansas; or (2) the 92 sites of pollution from oil and gas activities identified by the commission as of March 1, 1996.

(d) ``Abandoned well site'' means the location of an abandoned well and any pollution from such well.

New Sec. 2. (a) There is hereby established in the state treasury the abandoned oil and gas well fund.

(b) Moneys in the abandoned oil and gas well fund shall be used only for the purpose of paying the costs of: (1) Investigation and remediation of contamination sites; (2) investigation of abandoned wells, and their well sites, drilling of which began before July 1, 1996; and (3) plugging, re- plugging or repairing abandoned wells, and remediation of the well sites, drilling of which began before July 1, 1996, in accordance with a priori- tization schedule adopted by the commission and based on the degree of threat to public health or the environment. No moneys credited to the fund shall be used to pay administrative expenses of the commission or to pay compensation or other expenses of employing personnel to carry out the duties of the commission.

(c) On the 10th day of each month, the director of accounts and reports shall transfer from the state general fund to the abandoned oil and gas well fund the amount of money certified by the pooled money investment board in accordance with this subsection. Prior to the 10th day of each month, the pooled money investment board shall certify to the director of accounts and reports the amount of money equal to the proportionate amount of all the interest credited to the state general fund for the preceding period of time specified under this subsection, pursuant to K.S.A. 75-4210a and amendments thereto, that is attributable to mon- eys in the abandoned oil and gas well fund. Such amount of money shall be determined by the pooled money investment board based on: (1) The average daily balance of moneys in the abandoned oil and gas well fund during the period of time specified under this subsection as certified to the board by the director of accounts and reports; and (2) the average interest rate on repurchase agreements of less than 30 days' duration entered into by the pooled money investment board for that period of time. On or before the fifth day of the month for the preceding month, the director of accounts and reports shall certify to the pooled money investment board the average daily balance of moneys in the abandoned oil and gas well fund for the period of time specified under this subsec- tion.

(d) All expenditures from the abandoned oil and gas well fund shall be made in accordance with appropriations acts upon warrants of the director of accounts and reports issued pursuant to vouchers approved by the chairperson of the state corporation commission or a person des- ignated by the chairperson.

New Sec. 3. Except as provided by subsection (b), on July 15, 1996, and on the 15th day of each calendar quarter thereafter before July 1, 2002, the director of accounts and reports shall transfer $100,000 from the state general fund, $100,000 from the state water plan fund estab- lished by K.S.A. 82a-951 and amendments thereto and $100,000 from the conservation fee fund established by K.S.A. 55-143 and amendments thereto to the abandoned oil and gas well fund established by section 2.

Sec. 4. K.S.A. 27-118 is hereby amended to read as follows: 27-118. All moneys received by the state of Kansas from the United States under the mineral leasing act as the state's share to be used for the construction and maintenance of public roads or for the support of public schools or other public educational institutions as provided by section 35, chapter 85 of the Acts of Congress of 1920 (41 Stat. 450; 30 U. S. C. 191) and any amendments thereto shall be deposited in the state treasury by the state treasurer, and fifty percent (50%) 50% of all such moneys shall be credited to the state general fund, and the remaining fifty percent (50%) 50% shall be credited to the state highway fund abandoned oil and gas well fund established by section 2.

Sec. 5. K.S.A. 1995 Supp. 55-155 is hereby amended to read as fol- lows: 55-155. (a) Operators and contractors shall be licensed by the com- mission pursuant to this section.

(b) Every operator and contractor shall file an application or a re- newal application with the commission. Application and renewal appli- cation forms shall be prescribed, prepared and furnished by the commis- sion.

(c) No application or renewal application shall be approved until the applicant has:

(1) Provided sufficient information, as required by the commission, for purposes of identification;

(2) submitted evidence that all current and prior years' taxes for prop- erty associated with the drilling or servicing of wells have been paid;

(3) demonstrated to the commission's satisfaction that the applicant complies with all requirements of chapter 55 of the Kansas Statutes An- notated, all rules and regulations adopted thereunder and all commission orders and enforcement agreements, if the applicant is registered with the federal securities and exchange commission;

(4) demonstrated to the commission's satisfaction that the following comply with all requirements of chapter 55 of the Kansas Statutes An- notated, all rules and regulations adopted thereunder and all commission orders and enforcement agreements, if the applicant is not registered with the federal securities and exchange commission: (A) The applicant; (B) any officer, director, partner or member of the applicant; (C) any stock- holder owning in the aggregate more than 5% of the stock of the appli- cant; and (D) any spouse, parent, brother, sister, child, parent-in-law, brother-in-law or sister-in-law of the foregoing;

(5) paid an annual license fee of $100, except that an applicant for a license who is operating one gas well used strictly for the purpose of heating a residential dwelling shall pay an annual license fee of $25;

(6) on and after January 1, 1998, complied with subsection (d); and

(6) (7) paid an annual license fee of $25 for each rig operated by the applicant. The commission shall issue an identification tag for each such rig which shall be displayed on such rig at all times.

(d) On and after January 1, 1998, in order to assure financial re- sponsibility, each operator shall demonstrate annually compliance with one of the following provisions:

(1) The operator has obtained an individual performance bond or letter of credit, in an amount equal to $.75 times the total aggregate depth of all wells (including active, inactive, injection or disposal) of the oper- ator.

(2) The operator has obtained a blanket performance bond or letter of credit in an amount equal to the following, according to the number of wells (including active, inactive, injection or disposal) of the operator:

(A) Wells less than 2,000 feet in depth: 1 through 5 wells, $5,000; 6 through 25 wells, $10,000; and over 25 wells, $20,000.

(B) Wells 2,000 or more feet in depth: 1 through 5 wells, $10,000; 6 through 25 wells, $20,000; and over 25 wells, $30,000.

(3) The operator: (A) Has an acceptable record of compliance, as dem- onstrated during the preceding 36 months, with commission rules and regulations regarding safety and pollution or with commission orders is- sued pursuant to such rules and regulations; (B) has no outstanding un- disputed orders issued by the commission or unpaid fines, penalties or costs assessed by the commission and has no officer or director that has been or is associated substantially with another operator that has any such outstanding orders or unpaid fines, penalties or costs; and (C) pays a nonrefundable fee of $50 per year.

(4) The operator pays a nonrefundable fee equal to 3% of the amount of the bond or letter of credit that would be required by subsection (d)(1) or by subsection (d)(2).

(5) The state has a first lien on tangible personal property associated with oil and gas production of the operator that has a salvage value equal to not less than the amount of the bond or letter of credit that would be required by subsection (d)(1) or by subsection (d)(2).

(6) The operator has provided other financial assurance approved by the commission.

(d) (e) Upon the approval of the application or renewal application, the commission shall issue to such applicant a license which shall be in full force and effect until one year from the date of issuance or until surrendered, suspended or revoked as provided in K.S.A. 55-162, and amendments thereto. No new license shall be issued to any applicant who has had a license revoked until the expiration of one year from the date of such revocation.

(e) (f) The commission shall remit all moneys received from fees as- sessed pursuant to subsection (c)(7) of this section to the state treasurer at least monthly. Upon receipt of each such remittance, the state treasurer shall deposit the entire amount thereof in the state treasury. Twenty per- cent of each such deposit shall be credited to the state general fund and the balance shall be credited to the conservation fee fund created by K.S.A. 55-143, and amendments thereto.

(g) The commission shall deposit all moneys received pursuant to sub- sections (c)(3) and (c)(4) into the conservation fee fund.

Sec. 6. K.S.A. 55-161 is hereby amended to read as follows: 55-161. The commission shall investigate abandoned wells, and, based on actual or potential pollution problems, may select abandoned wells to be drilled out by the commission in order to test the integrity of the plugs. The cost of such testing shall be paid from the conservation fee fund or the aban- doned oil and gas well fund, as appropriate.

Sec. 7. K.S.A. 55-179 is hereby amended to read as follows: 55-179. (a) Upon receipt of any complaint filed pursuant to K.S.A. 55-178 and amendments thereto, the commission shall make an investigation for the purpose of determining whether such abandoned well is polluting or is likely to pollute any usable water strata or supply or causing the loss of usable water, or the commission may initiate such investigation on its own motion. If the commission determines:

(1) That such abandoned well is causing or likely to cause such pol- lution or loss; and

(2) (A) that no person is legally responsible for the proper care and control of such well; or (B) that such person so the person legally respon- sible for the care and control of such well is dead or, is no longer in existence or, is insolvent or cannot be found, then, within 60 days after completing its investigation, and as funds are available, the commission shall plug, replug or repair such well, or cause it to be plugged, replugged or repaired, in such a manner as to prevent any further pollution or danger of pollution of any usable water strata or supply or loss of usable water, and shall remediate pollution from the well, whenever practicable and reasonable. The cost of such plugging the investigation; the plugging, replugging or repair; and the remediation shall be paid by the commission from the conservation fee fund or the abandoned oil and gas well fund, as appropriate.

(b) For the purposes of this section, a person who is legally respon- sible for the proper care and control of an abandoned well shall include, but is not limited to, one or more of the following: Any operator of a waterflood or other pressure maintenance program deemed to be causing pollution or loss of usable water; the current or last operator of the lease upon which such well is located, irrespective of whether such operator plugged or abandoned such well; and the original operator who plugged or abandoned such well; and any person who without authorization tam- pers with or removes surface equipment or downhole equipment from an abandoned well.

(c) Whenever the commission determines that a well has been aban- doned and is causing or is likely to cause pollution of any usable water strata or supply or loss of usable water, and whenever the commission has reason to believe that a particular person is legally responsible for the proper care and control of such well, the commission shall cause such person to come before it at a hearing held in accordance with the pro- visions of the Kansas administrative procedure act to show cause why the requisite care and control has not been exercised with respect to such well. After such hearing, if the commission finds that such the person is legally responsible for the proper care and control of such well and that such well is abandoned, in fact, and is causing or is likely to cause pollution of any usable water strata or supply or loss of usable water, the commis- sion may make any order or orders prescribed in K.S.A. 55-162, and amendments thereto. Proceedings for reconsideration and judicial review of any of the commission's orders may be held pursuant to K.S.A. 55-606, and amendments thereto.

(d) For the purpose of this section, any well which has been aban- doned, in fact, and has not been plugged pursuant to the rules and reg- ulations in effect at the time of plugging such well shall be and is hereby deemed likely to cause pollution of any usable water strata or supply.

(e) For the purpose of this section, the person legally responsible for the proper care and control of an abandoned well shall not include the landowner or surface owner unless the landowner or surface owner has operated or produced the well, has deliberately altered or tampered with such well thereby causing the pollution or has assumed by written con- tract such responsibility.

Sec. 8. K.S.A. 55-180 is hereby amended to read as follows: 55-180. (a) The fact that any person has initiated or supported a proceeding before the commission, or has remedied or attempted to remedy the condition of any well under the authority of this act, shall not be construed as an admission of liability or received in evidence against such person in any action or proceeding wherein responsibility for or damages from surface or subsurface pollution, or injury to any usable water or oil-bearing or gas-bearing formation, is or may become an issue; nor shall such fact be construed as releasing or discharging any action, cause of action or claim against such person existing in favor of any third person for damages to property resulting from surface or subsurface pollution, or injury to any usable water or oil-bearing or gas-bearing formation.

(b) The commission, on its own motion, may initiate an investigation into any pollution problem related to oil and gas activity. In taking such action the commission may require or perform the testing, sampling, monitoring or disposal of any source of groundwater pollution related to oil and gas activities.

(c) The commission or any other person authorized by the commis- sion who has no obligation to plug, replug or repair any abandoned well, but who does so in accordance with the provisions of this act, shall have a cause of action for the reasonable cost and expense incurred in plugging, replugging or repairing the well against any person who is legally respon- sible for the proper care and control of such well pursuant to the provi- sions of section 32, and such K.S.A. 55-179 and amendments thereto and the commission or other person shall have a lien upon the interest of such obligated person in and to the oil and gas rights in the land and equipment located thereon.

(d) Any moneys recovered by the commission in an action pursuant to subsection (c) shall be remitted to the state treasurer. The state treas- urer shall deposit the entire amount of the remittance in the state treasury and credit it to the conservation fee fund or the abandoned oil and gas well fund, as appropriate based on the fund from which the costs incurred by the commission were paid.

New Sec. 9. (a) The commission shall prepare an annual report con- taining the following information regarding each contamination site:

(1) A description and evaluation of the site, including surface and subsurface contamination;

(2) the immediacy of the threat to public health or the environment from pollution from the site, including any contamination of drinking water or groundwater;

(3) the level of surface and subsurface remediation recommended;

(4) any unusual problems associated with investigation or remediation of pollution from the site;

(5) an estimate of the cost to achieve the recommended level of re- mediation or, if no estimate is possible, an estimate of the cost to conduct an investigation sufficient to determine the cost of remediation;

(6) any funds available to pay the costs of remediation;

(7) with regard to remediation of pollution from the site performed during the preceding fiscal year: (A) The nature of such remediation; (B) the total amount expended for such remediation; and (C) the amount expended for administrative expenses of the commission and compen- sation and other expenses of employing personnel to carry out the duties of the commission; and

(8) total expenditures in preceding fiscal years for remediation at the site.

(b) The commission shall prepare an annual report containing the following information regarding abandoned wells and their well sites:

(1) Documentation of the number of unplugged abandoned wells in the state; and

(2) a multiyear plan for dealing with unplugged abandoned wells that categorizes wells according to the risk posed to public health and the environment, sets forth a schedule for plugging wells posing the most serious risks and addresses funding of the plan.

(c) The commission shall submit the reports provided for by this sec- tion to the governor and the chairperson and ranking minority member of the committees on energy and natural resources of the senate and the house of representatives, on or before the first day of the regular legis- lative session each year.

New Sec. 10. The state corporation commission shall create and maintain a data base of all oil or gas wells in existence in this state. The data base shall include the location of each well and name, address and other information relevant to the identity of the operator of the well.

Sec. 11. K.S.A. 28-118, 55-161, 55-179 and 55-180 and K.S.A. 1995 Supp. 55-155 and 74-632 and K.S.A. 55-179, as amended by section 2 of 1996 Senate Bill No. 685 are hereby repealed.

Sec./007006/This act shall take effect and be in force from and after its publication in the statute book.

Approved May 17, 1996.