Brief (1)
HB 2200 would establish the Well Plugging Assurance Fund, create new legislation regulating the underground storage of hydrocarbon including natural gas and liquid petroleum gas, and establish certain authority for the State Corporation Commission to regulate the storage of natural gas in depleted oil and gas formations.
Well Plugging Assurance Fund
Besides establishing the Well Plugging Assurance Fund, the bill would provide that moneys in the fund would be used only for the purpose of paying the costs of investigations of abandoned oil and gas wells, and their sites, the drilling of which began on or after July 1, 1996, and the plugging, replugging, or repairing abandoned wells, and remediation of sites, drilling of which began on or after July 1, 1996.
In addition, the bill would redirect moneys in the Conservation Fee Fund to the newly created Well Plugging Assurance Fund which were credited to the Conservation Fee Fund under provisions of law to assure financial responsibility for oil and gas wells drilled on or after July 1, 1996. Moneys in the fund would be credited interest earnings rather than being deposited in the State General Fund.
The bill also would provide that, whenever there are insufficient moneys in the Well Plugging Assurance Fund or the Abandoned Oil and Gas Well Fund to pay the liabilities of either fund, the liabilities would be imposed upon the Conservation Fee Fund, provided the liabilities were incurred in accordance with the prioritization schedules established pursuant to law.
In addition, the bill would clarify that any moneys recovered by the State Corporation Commission for plugging, replugging, or repair of any abandoned oil or gas well from a responsible party would be credited to the fund from which the costs incurred by the Commission were paid.
Regulation of Underground Storage of
Hydrocarbons and Liquid Petroleum
Gas by Kansas Department of
Health and Environment
In addition to other provisions of the bill, HB 2200 would have as its purpose the protection of the health, safety and property of the people of the state, and the soil and water of the state from pollution. In this regard, the bill would require the Secretary of the Kansas Department of Health and Environment (KDHE) to adopt separate and specific rules and regulations establishing requirements, procedures, and standards for the following:
The bill would require that the rules and regulations include such things as site selection criteria; design and development criteria; operation criteria; casing requirements; monitoring and measurement requirements; safety requirements, including public notification; closure and abandonment requirements, including financial requirements as outlined in the bill; and long-term monitoring. The Secretary of KDHE could enter into contract for services from consultants and other experts for the purpose of assisting in the drafting of rules and regulations.
In addition, the bill would authorize the Secretary of KDHE to establish rules and regulations establishing fees for permitting, monitoring, and inspecting of salt solution mining operators; the underground storage of liquid petroleum gas and hydrocarbons; the storage of natural gas in bedded salt; and the underground storage of hydrocarbon in aquifers. All fees collected would be deposited in the newly created fund described below.
Further, the bill would establish the Subsurface Hydrocarbon Storage Fund to administer the underground storage of hydrocarbons, natural gas, and liquid petroleum gas, including, but not limited to, all activities relating to permitting, testing procedures, investigations, review and witnessing of workover or repair procedures, contracting for need services to supplement KDHE's staff expertise, consultation concerning needed remedial action, and administrative costs of the program. Interest that the fund moneys generate would be deposited into the fund.
Any company or operator receiving a permit for this type of storage would have to demonstrate annually that the permit holder has financial ability to cover the cost of closure as required by KDHE. This demonstration would have to be to the satisfaction of KDHE.
The bill also would prohibit for a period of two years beginning July 1, 2001, or until appropriate rules and regulations are adopted, the injection of natural gas into underground storage in bedded salt. Cushion gas may be injected and natural gas currently stored may be extracted. All existing storage of natural gas in bedded salt must comply with KDHE rules and regulations prior to the commencement of injection of working natural gas.
In addition, the bill would permit the Secretary of KDHE or the Secretary's duly authorized representatives to enter property or facilities in order to perform investigations or administrative functions relating to surface and subsurface water pollution, soil pollution, and public health or safety. KDHE personnel could observe, monitor, collect samples, and examine records and facilities to determine compliance or noncompliance with state laws and rules and regulations. The representatives of the Secretary would have the right of ingress and egress upon any land to clean-up pollution resulting from the underground storage of hydrocarbons, natural gas, and liquid petroleum gas. The Secretary of KDHE or the Secretary's authorized representative would establish any requirements they deem necessary relating to the inspection, monitoring, investigation, recording, and reporting by any holder of a permit under the provisions of the bill or under KSA 65-171d.
The bill would authorize the Secretary of KDHE or the Director of the Division of the Environment, if designated by the Secretary, to impose a penalty of not to exceed $10,000 for violations of the provisions of the bill outlined above. Each day would constitute a separate violation and is to constitute an economic deterrent. The bill would provide for an opportunity for a hearing and the hearing would be conducted in accordance with the provisions of the Kansas Administrative Procedure Act. Any action of the Secretary would be subject to review in accordance with the Act for Judicial Review and Civil Enforcement of Agency Actions.
The bill also would amend KSA 65-171d by deleting authority under this section of law to protect the soil and waters of the state from pollution resulting from underground storage reservoirs of hydrocarbons and liquid petroleum gas and by deleting authority for KDHE to permit, monitor, and inspect.
State Corporation Commission Regulation of
Underground Storage of Natural Gas
The bill also would establish specific authority for the State Corporation Commission (KCC) to regulate the underground storage of natural gas in depleted oil or gas formations. Language would be added to explicitly state that the KCC does not have jurisdiction over the refining, treating, or storing of oil or gas after transporting of the oil or gas, except for the storing of natural gas in depleted oil or gas formations.
In addition, the bill would require that the KCC adopt rules and regulations governing the underground storage of natural gas in depleted oil and gas formations. These rules and regulations would include the permitting, monitoring, and inspecting of underground natural gas storage wells, swell systems, and operations including the closure and abandonment of these facilities. The rules and regulations may include fees. The provisions of KSA 55-162 would apply to violations of the rules and regulations established by the KCC under this bill. Finally, the bill would create the Natural Gas Underground Storage Fee Fund where fee moneys imposed by the KCC under the provisions of the bill would be deposited.
Background
This bill was introduced at the request of a spokesperson from the State Corporation Commission.
At the hearing on the bill, a spokesperson from the State Corporation Commission indicated that the 1996 Legislature passed legislation requiring financial assurance from oil and gas operators for abandoned wells which were drilled on or after July 1, 1996. The conferee indicated that the moneys generated by these assurance fees were credited to the Conservation Fee Fund instead of a separate fund. He noted that the Commission believes that the moneys raised through financial assurance fees should be set aside to pay for potential future plugging liabilities of abandoned wells which were drilled on or after July 1, 1996.
The Senate Committee on Utilities amended the provisions relating to the underground storage of hydrocarbons, including natural gas and liquid petroleum gas, into the bill.
The Senate Committee of the Whole amended the bill to clarify that the Secretary of KDHE could adopt rules and regulations establishing fees for the permitting, monitoring, and inspecting of underground storage of hydrocarbons in aquifers.
The fiscal note on the original bill indicates that there would be a decrease of revenues to the State General Fund of $25,080.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi