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(A) A security instrument that covers each well must be delivered to the city before the issuance of the oil or gas well permit for the well. The instrument must provide that it cannot be cancelled without at least 30 days prior written notice to the city and, if the instrument is a performance bond, that the bond cannot be cancelled without at least 10 days prior written notice for non-payment of premium. The instrument shall secure the obligations of the operator related to the well to:
(1) Repair damage as determined by a professional engineer by comparing the pre-drilling and the post-drilling road condition evaluation studies excluding ordinary wear and tear, if any, to public streets, including but not limited to bridges, caused by the operator or by the operator's employees, agents, contractors, subcontractors or representatives in the performance of any activity authorized by or contemplated by the oil or gas well permit;
(2) Comply with the insurance and security provisions set forth in this chapter; and
(3) Pay fines and penalties imposed upon the operator by the city for any breach of the oil or gas well permit.
(B) The security instrument may be in the form of an irrevocable letter of credit or payment bond issued by a bank or surety approved by the city. The instrument shall run to the city for the benefit of the city, shall become effective on or before the date the oil or gas well permit is issued, and shall remain in effect until the well is abandoned and the site restored. The security instrument must be provided by a surety company with an A.M. Best A+ rating that is licensed to conduct business in the State of Texas and shall be payable to the city. Such surety company shall maintain an A.M. Best A+ rating for the policy period.
(C) A certificate of deposit may be substituted for the letter of credit or payment bond. The certificate shall be issued by a bank in Ellis County, Texas, shall be approved by the city, shall be payable to the order of the city to secure the obligations of the operator described above, and shall be pledged to the bank with evidence of delivery provided to the city. Interest on the certificate shall be payable to the operator.
(D) The amount of the security shall be a minimum of $50,000 for any single well. Any operator who initially posted a $50,000 bond, and whose well in the producing stage and all drilling operations have ceased, may submit an application to the city to reduce the existing $50,000 bond.
(E) The security will terminate when the oil or gas well permit is transferred, with respect to the operator-transferor and if the operator-transferee provides replacement security that complies with this section, when the well is abandoned and the site restored, and when the city consents in writing to such termination.
(F) An appeal of the determination of the amount of security required under this chapter may be made to the Planning and Zoning Commission for recommendation to the City Council for final determination of the amount of security.
(Ord. 618, passed 3-20-2006)