Monday, January 5, 2009

Legislature may see bill to protect public and environment from drilling-site waste

Something to consider supporting by contacting legislators and governor during the upcoming session.
Don't be shy about pointing weaknesses and strengths of the bill. Amendments will occur. Your comment can make a difference:

AN ACT TO AMEND ARKANSAS CODE § 8-4-203 TO REQUIRE FINANCIAL ASSURANCE FOR THE CLOSURE OR RESTORATION OF PERMITTED SITES IN THE STATE OF ARKANSAS THAT LAND APPLY OR STORE FLUIDS GENERATED OR UTILIZED DURING EXPLORATION OR PRODUCTION PHASES OF OIL OR GAS OPERATIONS; AND FOR OTHER PURPOSES.

AN ACT TO REQUIRE FINANCIAL ASSURANCE FOR LANDFARMS.

SECTION 1. Arkansas Code § 8-4-203 is amended to add a new subsection to read as follows:

8-4-203. Permits generally.

(c)(1)(A)(i) All facilities that land apply or store fluids generated or utilized during exploration or production phases of oil or gas operations shall be closed in a manner that ensures protection of human health and the environment.
(ii) As used in this subsection “land application or storage of fluids generated or utilized during exploration or production phases of oil or gas operations” means land-farming through the controlled and repeated application of drilling fluids to a soil surface or the practice of receiving and storing said fluids from offsite for waste management.
(iii) Surface facilities associated with Class II injection wells are specifically excluded from the requirements of this section.
(iv) Land applications at the drilling or exploration site that are authorized pursuant to any general permit issued by the Department are specifically excluded from the requirements of this section.
(B) Within sixty days after the effective date of this Act, each existing, permitted facility regulated under this section shall submit to the department the following:
(i) A plan to close the permitted facility and make any site restoration deemed necessary by the Department;
(ii) A detailed cost estimate to close and
restore the permitted facility that meets the requirements of this subsection and is approved by the Department; and
(iii) A financial mechanism that demonstrates, to the department’s satisfaction, the permittee’s financial ability to ensure adequate closure and any necessary restoration of the permitted facility in accordance with the requirements of this subsection.
(C) After the effective date of this Act, the department shall not issue, modify, or renew a permit for facilities regulated under this subsection without the permit applicant first demonstrating to the department’s satisfaction, the applicant’s financial ability to ensure adequate closure and any necessary restoration of the permitted facility in accordance with the requirements of this subsection.
(D) The amount of any financial assurance
required under this subsection shall be in an amount that is equal to or greater than the detailed cost estimate prepared by an independent professional consultant for a third party to close the permitted facility in accordance with closure plans approved by the department.
(i) For new permits, the applicant shall submit to the department, for approval, a detailed cost estimate to close and restore the facility based on the proposed operation and capacity of the facility from the date the permit is issued through the following October 1;
(ii) For renewal or modification applications, the permittee shall submit to the department, for approval, a detailed cost estimate to close and restore the permitted facility based on closure plans approved by the department; and
(iii) On or before August 15 of each year, all permittees shall submit to the Department for approval, a detailed cost estimate to close and restore the permitted facility in accordance with closure plans approved by the department.
(E) The financial assurance mechanism shall be renewable on October 1 of each year during the duration of the permit.
(F) Documentation that the required financial assurance mechanism has been renewed must be received by the department by September 15 of each year for the duration of the permit or the department shall initiate procedures to take possession of the funds guaranteed by the mechanism and suspend or revoke the permit under which the facility is operated. Any permit suspension shall remain in effect until a financial assurance mechanism is provided to the department in accordance with this subsection.
(G) The permittee is responsible for ensuring that documentation of annual renewal is received by the department by its due date.
(2) The permittee or applicant’s financial ability to adequately close or restore the land application or storage facility shall be demonstrated:
(A) By obtaining insurance that specifically covers closure and restoration costs;
(B) By obtaining a letter of credit;
(C) By obtaining a bond or other surety instrument;
(D) By creating a trust fund or an escrow account;
(E) Through the use of a combination of any of the above; or
(F) By any other financial instrument acceptable to the director.
(4) Any financial instrument required by this subsection shall:
(i) Be posted to the benefit of the department;
(ii) Provide that it cannot be cancelled without sixty days prior, written notice addressed to the department’s Legal Division Chief as evidenced by a signed, certified mail, return receipt; and
(iii) Be reviewed by the Department upon receipt of the cancellation notice, to determine whether to initiate procedures to revoke or suspend the facility’s permit and whether to initiate procedures to take possession of the funds guaranteed by the financial assurance mechanism.
(4) Before the department may release any financial assurance mechanism, it must receive a certification by a professional engineer that the permitted facility has been closed and restored in accordance with closure plans approved by the department.
(5) It is explicitly understood that the department shall not be responsible for the operation, closure, or restoration of any facility permitted under this subsection.
SECTION 2. EMERGENCY CLAUSE. It is found and determined by the General Assembly of the State of Arkansas that establishing financial assurance requirements for the closure of commercial facilities that land apply or store fluids generated or utilized during exploration or production phases of oil or gas operations is necessary to protect human health and the environment and that a delay in the effective date of this Act may result in harm to human health or the environment. Therefore, an emergency is declared to exist and this Act being necessary for the immediate preservation of the public peace, health, and safety shall be in full force and effect from and after the date of its passage or approval. If the bill is neither approved nor vetoed by the Governor, it shall become effective on the expiration of the period of time during which the Governor may veto the bill. If the bill is vetoed by the Governor and the veto is overridden, it shall become effective on the date the last house overrides the veto.

1 comment:

supernikita said...

When the legislature asks for letters of credit I get nervous, since the requirements for payments under an LC vary widely depending on the documents presented.
In order to avoid discussions later, the requirements for payment to the beneficiary should be clearly spelled out.

In case you have any questions regarding letters of credit, please visit the Letter of Credit Forum which hosts extensive information. Of course you can ask questions in the forum which is frequented by many bankers who will help find a solution that reflects the interests of all parties.

The worst in law is ambiguity. The law might be wrong, as long as it is clear one can live with it. Ambiguity only causes problems.
CLARIFY.