A. General requirements. The operator shall be required to:
1. Comply with the terms and conditions of this article and the oil and gas well permit issued hereunder.
2. Promptly clear drill and operation sites of all litter, trash, waste and other substances used, allowed, or occurring in the operations, and after abandonment or completion grade, level and restore such property to the same surface conditions as nearly as possible as existed before operations.
3. Indemnify and hold harmless the City, its officers, agents, and employees from and against any and all claims, losses, damages, causes of action, suits and liability of every kind, including all expenses of litigation, court costs, and attorney's fees, for injury to or death of any person or for damage to any property arising out of or in connection with the work done by operator under an oil and gas well permit:
a. Where such injuries, death or damages are caused by operator's sole negligence or the joint negligence of operator and any other person or entity; and
b. Regardless of whether such injuries, death or damages are caused in whole or in part by the negligence of operator.
4. Promptly pay all fines, penalties and other assessments imposed due to breach of any terms of the oil and gas well permit.
5. Promptly restore to its former condition any public property damaged by the oil and gas operation.
B. Bond, irrevocable letter of credit.
1. Prior to the issuance of an oil and gas well permit the operator shall
provide the Oil and Gas Inspector with a security instrument in the form of a bond or an irrevocable letter of credit in accordance with this subsection (B). Evidence of the execution of a letter of credit shall be submitted to the Oil and Gas Inspector by submitting an original signed letter of credit from the banking institution, with a copy of the same provided to the City Clerk.
a. During drilling. An operator drilling between one (1) and five (5) wells in the City at any time shall provide a blanket bond or letter of credit that meets the requirements of this subsection (B) in the principal minimum amount of one hundred fifty thousand dollars ($150,000.00). Such blanket bond or letter of credit shall be increased by fifty thousand dollars ($50,000.00) for the sixth (6th) and each additional well being drilled in the City.
b. During production. An operator with wells that are producing and for which all drilling operations have ceased shall provide a blanket bond or letter of credit that meets the requirements of this subsection (B) in the principal minimum amounts as follows:
(1) Up to seventy-five (75) wells: One hundred thousand dollars ($100,000.00);
(2) Between seventy-six (76) and one hundred fifty (150) wells: One hundred fifty thousand dollars ($150,000.00); and
(3) More than one hundred fifty (150) wells: Two hundred fifty thousand dollars ($250,000.00).
2. The City shall be authorized to draw upon such bond or letter of credit to (i) recover any fines or penalties assessed under this article or (ii) to pay the City for the cost of doing any work required to remedy any default by the operator under any provision of this article. If the City determines that a default has occurred in the performance of any requirement or condition imposed by this article, 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 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 over to the City one hundred twenty-five percent (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 thirty (30) 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 article.
The City shall be authorized to draw against the bond or letter of credit provided hereunder to recover such amount due from the operator. Upon receipt of such monies, the City shall proceed by such mode as deemed convenient and necessary 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 article. 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 irrevocable letter of credit or 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.
3. Requirements for bonds. A bond shall be executed by a reliable bonding or insurance institution authorized to do business in Oklahoma, acceptable to the City. The bond shall become effective on or before the date the oil and gas well permit is issued and shall remain in force and effect for at least a period of six (6) months after the expiration of the oil and 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 article and the City. The original bond shall be submitted to the Oil and Gas Inspector with a copy of the same provided to the City Clerk.
4. Requirements for letters of credit. A letter of credit shall be issued by a reliable bank authorized to do business in Oklahoma and shall become effective on or before the date the oil and gas well permit is issued. The letter of credit shall remain in force and effect for at least a period of six (6) months after the expiration of the oil and gas well permit term. If the letter of credit is for a time period less than the life of the well as required by this article, the operator must agree to either renew the letter of credit or replace the letter of credit with a bond in the amount required by this article, on or before sixty (60) days prior to the expiration date of the letter of credit. If the operator fails to deliver to the City either the renewal letter of credit or replacement bond in the appropriate amount on or before sixty (60) days prior to the expiration date of the letter of credit, the City may draw the entire face amount of the attached letter of credit to be held by the City of Purcell as security for operator's performance of its obligations under this article.
5. When the well or wells covered by said irrevocable letters of credit or bond have been properly abandoned in conformity with all regulations of this article, 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 irrevocable letter of credit or bond issued in compliance with these regulations shall be terminated and cancelled.
C. Insurance. In addition to the bond or letter of credit required pursuant to this article, the operator shall carry a policy or policies of insurance issued by an insurance company or companies authorized to do business in Oklahoma. In the event such insurance policy or policies are cancelled, the oil and gas well permit shall be suspended on such date of cancellation and the operator's right to operate under such oil and gas well permit shall immediately cease until the operator files additional insurance as provided herein.
1. General requirements applicable to all policies.
a. The City, its officials, employees, agents and officers shall be endorsed as an "additional insured" to all policies except employers liability coverage under the operator's workers compensation policy.
b. All policies shall be written on an occurrence basis except for environmental pollution liability (seepage and pollution coverage) and excess or umbrella liability, which may be on a claims-made basis.
c. All policies shall be written by an insurer with an A-VIII or better rating by the most current version of the A.M. Best Key Rating Guide or with such other financially sound insurance carriers acceptable to the City.
d. Deductibles shall be listed on the certificate of insurance and shall be on a "per occurrence" basis unless otherwise stipulated herein.
e. Certificates of Insurance shall be delivered to the City of Purcell, planning and development, 230 W. Main, Purcell, Oklahoma 73080, evidencing all the required coverage, including endorsements, prior to the issuance of an oil and gas well permit.
f. All policies shall be endorsed with a waiver of subrogation providing rights of recovery in favor of the City.
g. Any failure on part of the City to request required insurance documentation shall not constitute a waiver of the insurance requirement specified herein.
h. Each policy shall be endorsed to provide the City a minimum thirty (30) day notice of cancellation, non-renewal, and/or material change in policy terms or coverage. A ten (10) day notice shall be acceptable in the event of nonpayment of premium.
i. During the term of the oil and gas well permit, the operator shall report, in a timely manner, to the Oil and Gas Inspector any known loss occurrence which could give rise to a liability claim or lawsuit or which could result in a property loss.
j. Upon request, certified copies of all insurance policies shall be furnished to the City.
2. Standard commercial general liability policy. This coverage must include premises, operations, blowout or explosion, products, completed operations, sudden and accidental pollution, blanket contractual liability, underground resources and equipment hazard damage, broad form property damage, independent contractors' protective liability and personal injury. This coverage shall be a minimum combined single limit of one million dollars ($1,000,000) per occurrence for bodily injury and property damage.
3. Excess or umbrella liability. Five million dollars ($5,000,000.00) excess when necessary.
4. Environmental pollution liability coverage.
a. Operator shall purchase and maintain in force for the duration of the oil and gas well permit, insurance for environmental pollution liability applicable to bodily injury, property damage, including loss of use of damaged property or of property that has not been physically injured or destroyed; cleanup costs; and defense, including costs and expenses incurred in the investigation, defense or settlement of claims; all in connection with any loss arising from the insured site. Coverage shall be maintained in an amount of at least five million dollars ($5,000,000.00) per loss.
b. Coverage shall apply to sudden and accidental, as well as gradual pollution conditions resulting from the escape or release of smoke, vapors, fumes, acids, alkalis, toxic chemicals, liquids or oil and gases, waste material or other irritants, contaminants or pollutants.
c. The operator shall maintain continuous coverage and shall purchase extended coverage period insurance when necessary. The extended coverage period insurance must provide that any retroactive date applicable to coverage under the policy precedes the effective date of the issuance of the permit by the City.
5. Control of well. The policy should cover the cost of controlling a well that is out of control, re-drilling or restoration expenses, seepage and pollution damage as first party recovery for the operator and related expenses, including, but not limited to, loss of equipment, experts and evacuation of residents.
a. Five million dollars ($5,000,000.00) per occurrence/combined single limit.
b. Five hundred thousand dollars ($500,000.00) sub-limit endorsement may be added for damage to property for which the operator has care, custody and control.
6. Workers' compensation and employers' liability insurance.
a. Workers' compensation benefits shall be Oklahoma statutory limits.
b. Employers' liability shall be a minimum of five hundred thousand dollars ($500,000.00) per accident.
c. Such coverage shall include a waiver of subrogation in favor of the City and provide coverage in accordance with applicable State and federal laws.
7. Automobile liability insurance.
a. Combined single limit of one million dollars ($1,000,000.00) per occurrence for bodily injury and property damage.
b. Coverage must include all owned, hired and not-owned automobiles.
8. Certificates of insurance.
a. The company must be admitted or approved to do business in the State of Oklahoma, unless the coverage is written by a surplus lines insurer.
b. The insurance set forth by the insurance company must be:
(1) Underwritten on forms that have been approved by the Oklahoma State Board of Insurance or ISO, or an equivalent policy form acceptable to the City, with the exception of environmental pollution liability and control of well coverage;
(2) Set forth all endorsements and insurance coverage according to requirements and instructions contained
herein; and
(3) Shall specifically set forth the notice of cancellation, termination, or change in coverage provisions to the City. All policies shall be endorsed to read "THIS POLICY WILL NOT BE CANCELLED OR NON-RENEWED WITHOUT THIRTY (30) DAYS ADVANCED WRITTEN NOTICE TO THE OWNER AND THE CITY EXCEPT WHEN THIS POLICY IS BEING CANCELLED FOR NONPAYMENT OF PREMIUM, IN WHICH CASE TEN (10) DAYS ADVANCE WRITTEN NOTICE IS REQUIRED."
c. Original endorsements affecting coverage required by this section shall be furnished with the certificates of insurance.
D. Indemnification and express negligence provisions.
1. Each oil and gas well permit issued by the Oil and Gas Inspector shall include the following language: operator does hereby expressly release and discharge all claims, demands, actions, judgments, and executions which it ever had, or now has or may have, or assigns may have, or claim to have, against the City of Purcell, and/or its departments, agents, officers, servants, successors, assigns, sponsors, volunteers, or employees, created by, or arising out of personal injuries, known or unknown, and injuries to property, real or personal, or in any way incidental to or in connection with the performance of the work performed by the operator under an oil and gas well permit. The operator shall fully defend, protect, indemnify, and hold harmless the City of Purcell, Oklahoma, its departments, agents, officers, servants, employees, successors, assigns, sponsors, or volunteers from and against each and every claim, demand, or cause of action and any and all liability, damages, obligations, judgments, losses, fines, penalties, costs, fees, and expenses incurred in defense of the City of Purcell, Oklahoma, its departments, agents, officers, servants, or employees, including, without limitation, personal injuries and death in connection therewith which may be made or asserted by operator, its agents, assigns, or any third parties on account of, arising out of, or in any way incidental to or in connection with the performance of the work performed by the operator under an oil and gas well permit. The Operator agrees to indemnify and hold harmless the City of Purcell, Oklahoma, its departments, its officers, agents, servants, employees, successors, assigns, sponsors, or volunteers from any liabilities or damages suffered as a result of claims, demands, costs, or judgments against the City, its departments, its officers, agents, servants, or employees, created by, or arising out of the acts or omissions of the City of Purcell occurring on the drill site or in the course and scope of inspecting and permitting the Oil and Gas Wells, including, but not limited to, claims and damages arising in whole or in part from the negligence of the City of Purcell occurring on the drill site or in the course and scope of inspecting and permitting the oil and gas wells. It is understood and agreed that the indemnity provided for in this section is an indemnity extended by the operator to indemnify and protect the City of Purcell, Oklahoma and/or its departments, agents, officers, servants, or employees from the consequences of the negligence of the City of Purcell, Oklahoma and/or its departments, agents, officers, servants, or employees, whether that negligence is the sole or contributing cause of the resultant injury, death, and/or damage.
E. Notice. The individual designated to receive notice shall be a resident of Oklahoma upon whom all orders and notices provided in this article may be served in person or by registered or certified mail. Every operator shall within ten (10) days notify the Oil and Gas Inspector in writing of any change in such agent or mailing address unless operations in the City are discontinued and abandonment is complete.
F. Acceptance and indemnity agreement. The operator who has a net worth of not less than fifty million dollars ($50,000,000.00), as shown in such owner's or operator's most recent audited financial statements, may substitute an acceptance and indemnity agreement in lieu of the bond or irrevocable letter of credit and insurance requirements set forth in this article, provided that such acceptance and indemnity agreement shall be in a form acceptable to, and approved by, the City Attorney and the City's director of risk management. The Oil and Gas Inspector may request an annual review of the operator's most recent audited financial statements to assure compliance with this section.
(Ord. No. 10-08, 7-6-2010)