Prior to the issuance of a gas well permit the operator shall provide the town with a security instrument in the form of a bond that is effective for the life of the well as follows:
(A) A bond shall be executed by a reliable bonding or insurance institution authorized to do business in Texas and acceptable to the town. 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 last. The operator shall be listed as principal and the instrument shall run to the town, as obligee, and shall be conditioned that the operator will comply and perform in accordance with the terms and regulations of this chapter and other applicable town ordinances. The original bond shall be submitted to the Inspector with a copy of the same provided to the Town Secretary.
(B) Principal amount. The principal amount of the bond or letter of credit shall be $50,000 for any single well. If, after completion of a well, the applicant/operator, who initially posted a $50,000 bond, has complied with all of the provisions of this chapter and whose well is in the producing stage and all drilling operations have ceased, such operator may submit a request to the Inspector to reduce the existing bond to $10,000 for the remainder of the time the well produces without reworking. During reworking operations, the amount of the bond or letter of credit shall be maintained at $50,000. 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 or letter of credit to be insufficient, it may require the operator to increase the amount of the bond or letter of credit up to a maximum of $250,000 per well.
(C) Default; notice. In addition to all remedies and the suspension or revocation of a permit as set out in § 154.025 of this chapter, whenever the Inspector finds that a default has occurred in the performance of any requirement or condition imposed by this chapter, a written notice shall be given to the operator unless immediate compliance is needed due to a serious health or safety condition. Such notice shall specify the work to be done and the estimated period of time deemed by the Inspector to be reasonably necessary for the completion of any 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 over to the town 125% of the estimated cost of doing the work as determined by the Inspector once a failure to cure has occurred. In no event, however, shall the cure period be less than ten days unless 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 chapter. The town shall be authorized to make claim against any bond to recover such amount due from the operator. In the event that the well has not been properly abandoned under the regulations of the Railroad 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 chapter.
(D) Termination. When the well or wells covered by the bond have been properly abandoned in conformity with all regulations of this chapter, and in conformity with all regulations of the Railroad Commission and notice to that effect has been received by the town, or upon receipt of a satisfactory substitute, the irrevocable letter of credit or bond issued in compliance with these regulations shall be terminated and cancelled.
(Ord. 326, passed 7-14-2011)