(A) Prior to the issuance of a gas well permit the operator shall provide the city with a security instrument in the form of a bond as follows:
(1) A bond shall be executed by a reliable bonding or insurance institution authorized to do business in Texas, acceptable to the city. The bond shall become effective on or before the date the gas well permit is issued and shall remain in force and effect for at least a period of six months after the expiration of the gas well permit term or until the well is plugged and abandoned and the site is restored, whichever occurs first. The operator shall be listed as principal and the instrument shall run to the city, as obligee, and shall be conditioned that the operator will comply with the terms and regulations of this division (A) and the gas well permit, and further conditioned that the operator will repair any damages to the city roads, streets, or utilities, as determined by the Director of Public Works of the city, caused by the use of heavy vehicles and equipment for any activity associated with the preparation, drilling, fracing, production, and operation of gas wells.
(2) The principal amount of any security instrument shall be $50,000 for any single well. During reworking operations, the amount of the bond shall be maintained at $50,000.
(3) An operator drilling or reworking between one and five wells at any given time, may elect to provide a blanket bond, in the principal minimum amount of $150,000. If the operator drills or reworks more than five wells at a time, the blanket bond shall be increased in increments of $50,000 per each additional well. Once the wells are in the producing stage and all drilling operations have ceased, the operator may elect to submit a request to the City Manager for approval to reduce the existing bond and provide a blanket bond for the remainder of the time the well produces, without reworking, as follows:
Number of Producing Wells | Blanket Bond Amount Required |
Up to 75 wells | $200,000 |
75 to 150 wells | $250,000 |
More than 150 wells | $300,000 |
If at any time after no less than a 15 day written notice to the operator and a public hearing, the City Council shall deem any operator's bond to be insufficient, it may require the operator to increase the amount of the bond up to a maximum of $350,000 per well.
(4) Whenever the city finds that a default has occurred in the performance of any requirement or condition imposed by this division (A) or the gas well permit, a written notice shall be given to the operator. Such notice shall specify the work to be done, the estimated cost and the period of time deemed by the city to be reasonably necessary for the completion of such work. After receipt of such notice, the operator shall, within the time therein specified, either cause or require the work to be performed, or failing to do so, shall pay to the city 125% of the estimated cost of doing the work as set forth in the notice. In no event, however, shall the cure period be less than 30 days unless in the sole opinion of the Director of Public Works the failure presents a risk of imminent destruction of property or injury to persons or unless the failure involves the operator's failure to provide periodic reports as required by this division (A). The city shall be authorized to draw against any bond to recover such amount due from the operator. Upon receipt of such monies, the city shall proceed by such mode as deemed convenient to cause the required work to be performed and completed, but no liability shall be incurred other than for the expenditure of said sum in hand. In the event that the well has not been properly abandoned under the regulations of the Commission, such additional money may be demanded from the operator as is necessary to properly plug and abandon the well and restore the drill site in conformity with the regulations of this division (A).
(5) In the event the operator does not cause the work to be performed and fails or refuses to pay over to the city the estimated cost of the work to be done as set forth in the notice, or the issuer of the security instrument refuses to honor any draft by the city against the applicable bond, the city may proceed to obtain compliance and abate the default by way of civil action against the operator, or by criminal action against the operator, or by both such methods.
(6) When the well or wells covered by said bond have been properly abandoned in conformity with all regulations of this division (A), and in conformity with all regulations of the Commission and notice to that effect has been received by the city, or upon receipt of a satisfactory substitute, the bond issued in compliance with these regulations shall be terminated and cancelled.
(B) In addition to the bond required above, the operator shall carry a policy or policies of standard comprehensive public liability insurance, including contractual liability coverage, for accidental death, bodily injury and property damage, naming both the operator and city as insureds, with an insurance company authorized to do business in the state and appearing on the list of authorized insurance companies prepared by the State Board of Insurance. Such policy or policies in the aggregate shall provide for the following minimum coverages:
(1) Accidental death or bodily injury, $5,000,000 one person and $5,000,000 total for one accident;
(2) Property damage, $1,000,000 total for one accident.
(C) The operator shall file with the City Secretary a certificate of insurance, showing compliance with the above, prior to receiving a copy or copies of the permit or commencing any operations on the drill site. The insurance shall not be canceled without written notice to the City Secretary at least ten days prior to the effective date of such cancellation. In the event such insurance is canceled, the permit granted in connection with such policy or policies shall be suspended and ineffective until the operator files additional insurance as provided herein.
('68 Code, § 19½-5) (Ord. 10-1987-55, passed 10-20-87; Am. Ord. 01-2007-07, passed 1-23-07; Am. Ord. 06-2011-32, passed 6-28-11; Am. Ord. 08-2011-42, passed 8-9-11) Penalty, see § 118.99