HB 2259 - Surface Equipment Cleanup/Removal

General Requirements

Depending on how long a well has been inactive, certain actions must be completed and certified to the Commission. An individual with actual personal knowledge of the physical condition of the inactive well must execute and submit to the Commission a Form W-3C, Certification Of Surface Equipment Removal For An Inactive Well. The certification must state the following:

1. For wells inactive for 12 months or longer:
   • that the operator has physically terminated electric service to the well’s production site (or that the site does not have electric service)
2. For wells inactive at least 5 years but less than 10 years:
   • that the operator has emptied or purged of production fluids all piping, tanks, vessels and equipment associated with the well;
   • that the operator owns the land where the well is located.
3. For wells inactive 10 years or longer (See also “Phase-In Information” below):
   • that the operator has removed all surface equipment;
   • that the operator owns the land where the well is located; or
   • that the well is associated with a Commission-approved Enhanced Oil Recovery (EOR) project and the equipment remaining on the lease is associated with that project.

The items to be certified are cumulative. For example, if the well has been inactive for 7 years, the operator must certify compliance with both #1 and #2 above.

An operator need only provide the certification as outlined above once. However, if a well is transferred to a subsequent operator, then certifications based on ownership of the land or upon EOR project approval will be nullified and the acquiring operator will be required to certify compliance in their own name. Also, if the well is returned to active operation and later becomes inactive again, the operator must recertify the well as the certifications become applicable for the new period of inactivity.

Phase-In Information

The rules provide for a five-year phase-in period for wells that have reached 10 years of inactivity prior to September 1, 2010 (i.e., those with shut-in dates of September 2000 and earlier). The phase-in period ONLY applies to surface equipment removal. There is no phase-in for the requirement to disconnect electricity for 12-month inactive wells, or to remove surface equipment for wells becoming 10 years inactive on or after September 1, 2010. However, the wells eligible for phase-in need not have the fluids purged from lines and vessels, provided that the removal action during the phase-in period also addresses any production fluids.

At least 20 percent of wells eligible for phase-in must be compliant with the surface equipment removal requirements at the first Form P-5 renewal date on or after september 1, 2011. At least 40 percent of the wells eligible for phase-in must be compliant at the Form P-5, Organization Report, renewal date on or after September 1, 2012, and so on until the Form P-5 renewal date on or after September 1, 2015. At this point, all 10-year inactive wells must be compliant. Note that there is no penalty for early completion; any wells completed beyond the 20% required for the first year will count toward the 40 percent requirement in the second year.

Wells that are acquired from another operator following the September 1, 2010 effective date of HB 2259 are NOT eligible for handling under the Phase-in process. Those acquired wells must be addressed as outlined in the “Well transfers and Surface Equipment Cleanup/Removal” section below.

Temporary Extensions

You may be eligible for a temporary (one year) extension to the surface equipment removal requirements if your inability to comply is solely due to safety concerns or required maintenance of the well site. If this is the case, you must include with Form W-3C a written affirmation of the facts regarding the safety concerns or maintenance. If the Commission declines to approve your extension request administratively, you may request a hearing. (Your Organization Report renewal will not be delayed during the hearing process; however, if your request is ultimately denied, your Organization Report may be revoked.)


Well Transfers and Surface Equipment Cleanup/Removal

Transfer of a well that is part of your inventory of wells eligible for the Phase-In period will not count towards your compliance requirement. (Effectively, however, such a transfer will reduce the number of wells you are required to bring into compliance during the fifth and final year of the phase-in process.)

Additionally, the well will no longer be eligible for the phase-in treatment and the acquiring operator will be required to comply with the surface equipment removal requirement within 6 months of Commission approval of the transfer. Further, until the well has been brought into compliance, the Commission will not approve a transfer of the well to a third operator.