CS/CS/CS/HB 1219

1
A bill to be entitled
2An act relating to the regulation of state lands and oil
3and gas resources; amending s. 253.52, F.S.; providing for
4the Board of Trustees of the Internal Improvement Trust
5Fund to accept and award bids for oil and gas leases on
6submerged lands underlying the territorial waters of the
7state; providing requirements and procedures for
8submitting, reviewing, and awarding such bids; providing
9for a nonrefundable bid submittal fee; providing for
10easements over sovereign submerged lands for the
11construction, installation, and maintenance of structures
12relating to the production of oil, gas, or other petroleum
13products; providing a fee for such easements; requiring
14certain notice; providing bidder eligibility criteria
15relating to location; providing location restrictions on
16the refining and retail sale of oil and gas extracted
17pursuant to such leases; amending s. 253.571, F.S.;
18providing requirements for proof of financial
19responsibility by a lessee prior to the commencement of
20drilling on submerged lands underlying the territorial
21waters of the state; providing a limitation; creating s.
22253.585, F.S.; providing for the distribution of
23royalties, cash considerations, annual rentals, or
24payments in lieu of royalties collected for oil and gas
25leases on submerged lands within the territorial waters of
26the state; providing for distribution of other state
27income from offshore oil and natural gas activities;
28providing limitations on activities in military range and
29activity zones; requiring each proposal to be presented
30with a specified study; providing for rulemaking; amending
31s. 253.61, F.S.; providing an exemption from land-leasing
32restrictions for leases on submerged lands within the
33territorial waters of the state; deleting a provision
34prohibiting leasing of specified lands; amending s.
35377.24, F.S.; providing an exemption from permit
36restrictions relating to drilling gas or oil wells for
37leases on submerged lands within the territorial waters of
38the state; deleting a provision prohibiting drilling in
39specified waters; amending s. 377.242, F.S.; deleting a
40provision prohibiting the construction of specified
41structures; providing exemptions from restrictions
42relating to the permitting or construction of structures
43intended for the drilling for or production of oil, gas,
44or other petroleum products; amending s. 377.2425, F.S.;
45revising applicability provisions relating to surety for
46geophysical exploration, drilling, and production;
47exempting applicants for drilling or operating permits for
48operations planned in coastal waters; providing an
49effective date.
50
51Be It Enacted by the Legislature of the State of Florida:
52
53     Section 1.  Section 253.52, Florida Statutes, is amended to
54read:
55     253.52  Placing oil and gas leases on market by board.--
56     (1)  Whenever in the opinion of the Board of Trustees of
57the Internal Improvement Trust Fund there shall be a demand for
58the purchase of oil and gas leases on any area, tract, or parcel
59of the land so owned, controlled, or managed, by any state
60board, department, or agency, then the board shall place such
61oil and gas lease or leases on the market in such blocks,
62tracts, or parcels as it may designate. The lease or leases
63shall only be made after notice by publication thereof has been
64made not less than once a week for 4 consecutive weeks in a
65newspaper of general circulation published in Leon County, and
66in a similar newspaper for a similar period of time published in
67the vicinity of the lands offered to be leased, the last
68publication in both newspapers to be not less than 5 days in
69advance of the sale date. Such notice shall be to the effect
70that a lease or leases will be offered for sale at such date and
71time as may be named in said notice and shall describe the land
72upon which such lease, or leases, will be offered. This notice
73may be combined with the notice required pursuant to s. 253.115.
74Before any lease of any block, tract, or parcel of land,
75submerged, or unsubmerged, within a radius of 3 miles of the
76boundaries of any incorporated city, or town, or within such
77radius of any bathing beach, or beaches, outside thereof, such
78board, department, or agency, shall through one or more of its
79members hold a public hearing, after notice thereof by
80publication once in a newspaper of general circulation published
81at least 1 week prior to said hearing in the vicinity of the
82land, or lands, offered to be leased, of the offer to lease the
83same, calling upon all interested persons to attend said hearing
84where they would be given the opportunity to be heard, all of
85which shall be considered by the board prior to the execution of
86any lease or leases to said land, and the board may withdraw
87said land, or any part thereof, from the market, and refuse to
88execute such lease or leases if after such hearing, or
89otherwise, it considers such execution contrary to the public
90welfare. Before advertising any land for lease the form of the
91lease or leases to be offered for sale, not inconsistent with
92law, or the provisions of this section, shall be prescribed by
93the board and a copy, or copies, thereof, shall be available to
94the general public at the office of the Board of Trustees of the
95Internal Improvement Trust Fund and the advertisements of such
96sale shall so state.
97     (2)(a)  Notwithstanding subsection (1), the Board of
98Trustees of the Internal Improvement Trust Fund shall accept a
99nomination on or before September 1 of each year from a bidder
100or bidders for the purchase, in such blocks, tracts, or parcels
101as the bidder may designate, of oil and gas leases on any area,
102tract, or parcel of submerged land underlying the territorial
103waters of the state, as defined in the Submerged Lands Act, 43
104U.S.C. ss. 1301-1315, so owned, controlled, or managed by any
105state board, department, or agency.
106     (b)  Within 14 days after receipt of a bid, the board shall
107give notice of same by publication in the Florida Administrative
108Weekly and in a newspaper of general circulation published in
109the vicinity of the proposed lease or leases. The publication
110may not include any reference to proprietary trade secrets or
111confidential or economic business information provided by the
112original bidder.
113     (c)  The notice requirements under paragraph (b) shall
114apply in lieu of the requirements under subsection (1) and s.
115253.115 for a nomination for the purchase of an oil and gas
116lease pursuant to this subsection.
117     (d)  Other interested parties shall have 90 days after the
118date of publication of the notice to submit a competing bid for
119the same blocks, tracts, or parcels as were designated in the
120original bid and published in the notice. The bid period shall
121close on the 90th day.
122     (e)  The board shall have no more than 30 days from the
123date the bid period closes to review all bids and determine
124whether or not each bid contains all of the information required
125under subsection (4). Any bid determined to not contain all of
126the information required under subsection (4) shall be returned
127to the bidder and may not be further considered.
128     (f)  Following a determination that a bid or bids contain
129all of the information required under subsection (4), the board
130shall select the highest and best of such bids within 30 days,
131provided that if, in the reasonable judgment of the board, the
132bids submitted do not represent the reasonable fair value of
133such lease or leases, the execution of same is reasonably
134determined to be contrary to the public welfare, or, if the
135responsibility of the bidder offering the highest amount has not
136reasonably been established to the board's satisfaction, the
137board may in its discretion reject the bids. All information
138included in all bids not selected by the board shall be returned
139to the bidder, including all checks or other financial
140assurances, except for the $1 million nonrefundable bid
141submittal fee.
142     (g)  The board shall have no more than 90 days to negotiate
143any outstanding matters, including, but not limited to, definite
144rental payments or payments that may be made in lieu of royalty,
145with the winning bidder and award the lease or leases.
146Affirmative action by the board to approve any such lease shall
147require the approval of the Governor and at least two other
148members of the board.
149     (3)  To the extent that any provision of the sealed bid
150requirements pursuant to s. 253.53 and the competitive bidding
151process pursuant to s. 253.54 may be in conflict with the
152nomination process provided under subsection (2), subsection (2)
153shall control the nomination for and the award of the purchase,
154in such blocks, tracts, or parcels as may be designated, of an
155oil and gas lease or leases on any area, tract, or parcel of
156submerged land underlying the territorial waters of the state.
157     (4)  All bids submitted to the board for lands identified
158under subsection (2) shall include the following:
159     (a)  A nonrefundable bid submittal fee of $1 million in
160addition to and separate from any cash consideration that may be
161provided as part of the bid;
162     (b)  Documentation stating that all equipment or structures
163above the surface of the water and related to the development
164and production of oil and gas within the territorial waters of
165the state shall be situated no closer than 3 miles from the
166coast as calculated from the line of mean high tide;
167     (c)  A statement and map identifying the blocks, tracts, or
168parcels, as designated for the oil and gas lease or leases, on
169submerged land underlying the territorial waters of the state;
170     (d)  A statement of a cash consideration; and
171     (e)  A statement of a royalty, never less than one-eighth
172in kind or in value; provided, however, that up-front payments
173in lieu of royalties may be proposed and, if proposed, may
174reduce the minimum one-eighth royalty.
175     (5)  All bids shall be accompanied by a separate cashier's
176check or certified check for the amount of the cash
177consideration and application fee and shall be payable to the
178state board, department, or agency which holds title to or
179controls the land sought to be leased.
180     (6)  For a bidder who obtains an oil and gas lease from a
181bid pursuant to subsection (2) and fails to be issued a permit,
182after a good faith effort to attain such a permit, for
183geophysical operations, drilling, or exploring and extracting
184through well holes or by other means pursuant to ss. 377.2408
185and 377.242 within 24 months after receiving the lease, the
186board shall refund the entire cash consideration with interest
187paid pursuant to s. 55.03(1), using the per annum rate for the
188year in which the bidder obtained the lease. The bidder may
189extend this time period upon receiving a written request showing
190good cause by the Department of Environmental Protection.
191     (7)  If the board awards an oil and gas lease or leases
192issued pursuant to subsection (2), the lessee shall be entitled
193to obtain an easement or easements over sovereign submerged
194lands for the construction, installation, and maintenance of any
195pipeline or associated infrastructure that is an appurtenance to
196the transportation of oil and gas from the leased submerged
197lands to shore-based facilities. The fee for this easement shall
198be based on a cost per linear foot basis and may not exceed $5
199per linear foot. Notwithstanding s. 253.115, within 14 days
200after receipt of an application for an easement or easements
201pursuant to this subsection, the board shall require the
202applicant for such easement or easements to give notice of the
203filing of such application or applications by publication, one
204time only, in a newspaper of general circulation published in
205the vicinity of the proposed lease or leases.
206     (8)  To be eligible to bid on any oil or gas leases offered
207within the territorial waters of the state, bidders must have
208corporate headquarters, including senior management personnel,
209physically located within the continental United States. Any oil
210or gas extracted pursuant to such leases must be refined and
211sold at the retail level within the continental United States.
212     Section 2.  Section 253.571, Florida Statutes, is amended
213to read:
214     253.571  Proof of financial responsibility required of
215lessee prior to commencement of drilling.--
216     (1)  The Board of Trustees of the Internal Improvement
217Trust Fund may require a surety or property bond, an irrevocable
218letter of credit, or other proof of financial responsibility
219from each lessee of public land or mineral interest prior to the
220time such lessee mines, drills, or extracts in any manner,
221petroleum, petroleum products, gas, sulphur, or any other
222mineral from such land. The surety bond or irrevocable letter of
223credit shall be from a surety company or bank authorized to do
224business in the state. The surety bond, irrevocable letter of
225credit, or other proof of financial responsibility shall serve
226as security and is to be forfeited to the board to pay for any
227damages caused by mining or drilling operations performed by the
228lessee. In the case of operations planned in the waters of the
229state or under other particular circumstances which, by their
230nature warrant greater security in view of possible damages, the
231board shall give special consideration to the extent of such
232possible damages and shall set the amount of an adequate and
233sufficient surety bond, irrevocable letter of credit, or other
234proof of financial responsibility accordingly. For the purposes
235of this section, damages shall include, but not be limited to,
236air, water, and ground pollution, destruction of wildlife or
237marine productivity and any other damage which impairs the
238health and general welfare of the citizens of the state. The
239board shall require a lessee to provide proof of financial
240responsibility only once, irrespective of the number of
241different leases the lessee may have.
242     (2)  A surety or property bond, an irrevocable letter of
243credit, or other proof of financial responsibility from each
244lessee of public land or mineral interest in submerged lands
245underlying the territorial waters of the state, as defined in
246the Submerged Lands Act, 43 U.S.C. ss. 1301-1315, shall not
247exceed the lesser amount of either:
248     (a)  Five hundred million dollars; or
249     (b)  A calculated cost estimate for potential damages
250related to, but not limited to, air, water, and ground
251pollution, destruction of wildlife or marine productivity, and
252any other damage that impairs the health and general welfare of
253the citizens of the state, as based on reasonably foreseeable
254accidents or occurrences associated with the particular oil and
255gas development or production activity within the immediate area
256of the oil and gas lease.
257     (3)  A surety or property bond, an irrevocable letter of
258credit, or other proof of financial responsibility issued under
259subsection (2) shall be the only proof of financial
260responsibility a lessee must provide in lieu of any other proof
261of financial responsibility that may be required by any agency
262for any permit or authorization that must be obtained in
263connection with the development and production of oil and gas,
264including, but not limited to, oil and gas transportation
265infrastructure, such as pipelines, appurtenant to the leased
266submerged lands.
267     Section 3.  Section 253.585, Florida Statues, is created to
268read:
269     253.585  Distribution of royalties, cash considerations,
270annual rentals, or payments in lieu of royalties collected for
271oil and gas leases on submerged lands within the territorial
272waters of the state.--
273     (1)  Royalties, cash considerations, annual rentals, or
274payments in lieu of royalties collected for oil and gas leases
275on submerged lands within the territorial waters of the state
276shall be appropriated for the following purposes:
277     (a)  To fund a bond initiative to provide up to $300
278million per year for the Florida Forever land acquisition
279program, including up to an additional $15 million for
280reasonable management costs for the administration of such
281lands, to the extent the Board of Trustees of the Internal
282Improvement Trust Fund determines such management costs are
283necessary.
284     (b)  To provide up to $20 million per year for local
285governments to support beach restoration and nourishment
286projects.
287     (c)  To provide up to $20 million per year to be
288distributed to coastal local governments within the county or
289counties within which the lease or leases are issued.
290     (2)  After the distributions under subsection (1), the next
291$150 million from state income from offshore oil and natural gas
292activities shall be equally distributed as follows:
293     (a)  Up to $25 million annually shall be appropriated to
294the Florida Energy and Climate Commission to be used for
295enhancements to the Solar Energy System Incentives Program.
296     (b)  Up to $25 million annually shall be appropriated to
297the Board of Governors of the State University System to fund
298research and development of technologies, systems, and processes
299to solve the nation's dependency on foreign fossil fuels and
300expand the use of alternative, biomass, and renewable
301alternative fuels through a peer-reviewed grant process.
302     (c)  Up to $25 million annually shall be appropriated to
303the Internal Improvement Trust Fund for enhanced funding of the
304management of public lands and state parks or the funding of
305beach nourishment, or both, as determined by the Board of
306Trustees of the Internal Improvement Trust Fund.
307     (d)  Up to $25 million annually shall be appropriated to
308fund environmental science programs in elementary and middle
309schools in preparation for 10th grade and higher science testing
310and for promoting science in high schools, to be spread
311equitably between each school district.
312     (e)  Up to $25 million annually shall be appropriated in
313equal amounts to establish hands-on oil and natural gas industry
314training academies in 25 counties using current state-of-the-art
315industry-provided materials, technological training, and
316instructors. Up to $15 million of the appropriation under this
317paragraph shall be used to fund high school oil and natural gas
318industry training academies. Up to $10 million of the
319appropriation under this paragraph shall be used to fund
320community college oil and natural gas industry training
321academies, spread as evenly as possible geographically across
322the state.
323     (f)  Up to $25 million annually shall be appropriated to
324veteran's programs to provide care and rehabilitation services
325and educational opportunities for veterans and their dependents
326who are residents of this state.
327     (g)  Notwithstanding the limitations on the maximum amount
328of tax credits available each year contained in s.
329220.193(3)(c), and consistent with the other provisions in s.
330220.193, up to $10 million shall be appropriated annually to
331fund the Florida Renewable Energy Production Credit through the
332year 2020 to encourage the development and expansion of
333facilities that produce renewable energy in this state.
334     (3)  Where federally recognized military range and activity
335zones exist, each submitted proposal shall allow temporary
336geological or drilling and equipment activities, or both, above
337and below the surface of the water in order to establish pump
338sites only, after which, no above-surface permanent placement of
339equipment other than safety marker buoys is allowed.
340     (4)  Each submitted proposal shall be presented with a
341study that draws from existing state-of-the-art technology to
342demonstrate that exploration for oil and gas is feasible in the
343intended permit area.
344     (5)  The Division of State Lands in the Department of
345Environmental Protection, as staff to the Board of Trustees of
346the Internal Improvement Trust Fund, shall adopt rules as
347necessary to administer this section.
348     Section 4.  Paragraphs (b), (c), and (d) of subsection (1)
349of section 253.61, Florida Statutes, are amended to read:
350     253.61  Lands not subject to lease.--
351     (1)  Regardless of anything to the contrary contained in
352this law in any previous section or part thereof, no board or
353agency mentioned therein or the state shall have the power or
354authority to sell, execute, or enter into any lease of the type
355covered by this law relating to any of the following lands,
356submerged or unsubmerged, except under the circumstances and
357conditions as hereinafter set out in this section, to wit:
358     (b)  No lease of the type covered by this law shall be
359granted, sold or executed covering any such lands in the tidal
360waters of the state, abutting on or immediately adjacent to the
361corporate limits of a municipality or within 3 miles of such
362corporate limits extending from the line of mean high tide into
363such waters, unless the governing authority of the municipality
364shall have first duly consented to the granting or sale of such
365lease by resolution. This paragraph does not apply to leases on
366submerged lands underlying the territorial waters of the state,
367as defined in the Submerged Lands Act, 43 U.S.C. ss. 1301-1315,
368where any structure or equipment above the surface of the water
369is more than 3 miles from such corporate limits.
370     (c)  No lease of the type covered by this law shall be
371granted, sold or executed covering such lands on any improved
372beach, located outside of an incorporated town or municipality,
373or covering such lands in the tidal waters of the state abutting
374on or immediately adjacent to any improved beach, or within 3
375miles of an improved beach extending from the line of mean high
376tide into such tidal waters, unless the county commissioners of
377the county in which such beach is located shall have first duly
378consented to the granting or sale of such lease by resolution.
379This paragraph does not apply to leases on submerged lands
380underlying the territorial waters of the state, as defined in
381the Submerged Lands Act, 43 U.S.C. ss. 1301-1315, where any
382structure or equipment above the surface of the water is more
383than 3 miles from such improved beach.
384     (d)  Without exception, after July 1, 1989, no lease of the
385type covered by this law shall be granted, sold, or executed
386south of 26° north latitude off Florida's west coast and south
387of 27° north latitude off Florida's east coast, within the
388boundaries of Florida's territorial seas as defined in 43 U.S.C.
3891301. After July 31, 1990, no oil or natural gas lease shall be
390granted, sold, or executed covering lands located north of
39126°00'00" north latitude off Florida's west coast to the western
392boundary of the state bordering Alabama as set forth in s. 1,
393Art. II of the State Constitution, or located north of 27°00'00"
394north latitude off Florida's east coast to the northern boundary
395of the state bordering Georgia as set forth in s. 1, Art. II of
396the State Constitution, within the boundaries of Florida's
397territorial seas as defined in 43 U.S.C. 1301.
398     Section 5.  Subsections (6), (7), and (9) of section
399377.24, Florida Statutes, are amended to read:
400     377.24  Notice of intention to drill well; permits;
401abandoned wells and dry holes.--
402     (6)  No permit to drill a gas or oil well shall be granted
403at a location in the tidal waters of the state, abutting or
404immediately adjacent to the corporate limits of a municipality
405or within 3 miles of such corporate limits extending from the
406line of mean high tide into such waters, unless the governing
407authority of the municipality shall have first duly approved the
408application for such permit by resolution. This subsection does
409not apply to leases on submerged lands underlying the
410territorial waters of the state, as defined in the Submerged
411Lands Act, 43 U.S.C. ss. 1301-1315, where any structure or
412equipment above the surface of the water is more than 3 miles
413from such corporate limits.
414     (7)  No permit to drill a gas or oil well shall be granted
415on any improved beach, located outside of an incorporated town
416or municipality, or at a location in the tidal waters of the
417state abutting or immediately adjacent to an improved beach, or
418within 3 miles of an improved beach extending from the line of
419mean high tide into such tidal waters, unless the county
420commissioners of the county in which such beach is located shall
421have first duly approved the application for such permit by
422resolution. This subsection does not apply to leases on
423submerged lands underlying the territorial waters of the state,
424as defined in the Submerged Lands Act, 43 U.S.C. ss. 1301-1315,
425where any structure or equipment above the surface of the water
426is more than 3 miles from such improved beach.
427     (9)  Without exception, after July 1, 1989, no permit to
428drill a well in search of oil or gas shall be granted south of
42926°00'00" north latitude off Florida's west coast and south of
43027°00'00" north latitude off Florida's east coast, within the
431boundaries of Florida's territorial seas as defined in 43 U.S.C.
4321301. After July 31, 1990, no permit to drill a well in search
433of oil or gas shall be granted north of 26°00'00" north latitude
434off Florida's west coast to the western boundary of the state
435bordering Alabama as set forth in s. 1, Art. II of the State
436Constitution, or located north of 27°00'00" north latitude off
437Florida's east coast to the northern boundary of the state
438bordering Georgia as set forth in s. 1, Art. II of the State
439Constitution, within the boundaries of Florida's territorial
440seas as defined in 43 U.S.C. 1301.
441     Section 6.  Section 377.242, Florida Statutes, is amended
442to read:
443     377.242  Permits for drilling or exploring and extracting
444through well holes or by other means.--The department is vested
445with the power and authority:
446     (1)(a)  To issue permits for the drilling for, exploring
447for, or production of oil, gas, or other petroleum products
448which are to be extracted from below the surface of the land,
449including submerged land, only through the well hole drilled for
450oil, gas, and other petroleum products.
451     1.  No structure intended for the drilling for, or
452production of, oil, gas, or other petroleum products may be
453permitted or constructed on any submerged land within any bay or
454estuary.
455     2.  No structure intended for the drilling for, or
456production of, oil, gas, or other petroleum products may be
457permitted or constructed within 1 mile seaward of the coastline
458of the state.
459     3.  No structure intended for the drilling for, or
460production of, oil, gas, or other petroleum products may be
461permitted or constructed within 1 mile of the seaward boundary
462of any state, local, or federal park or aquatic or wildlife
463preserve or on the surface of a freshwater lake, river, or
464stream.
465     4.  No structure intended for the drilling for, or
466production of, oil, gas, or other petroleum products may be
467permitted or constructed within 1 mile inland from the shoreline
468of the Gulf of Mexico, the Atlantic Ocean, or any bay or estuary
469or within 1 mile of any freshwater lake, river, or stream unless
470the department is satisfied that the natural resources of such
471bodies of water and shore areas of the state will be adequately
472protected in the event of accident or blowout.
473     5.  Without exception, after July 1, 1989, no structure
474intended for the drilling for, or production of, oil, gas, or
475other petroleum products may be permitted or constructed south
476of 26°00'00" north latitude off Florida's west coast and south
477of 27°00'00" north latitude off Florida's east coast, within the
478boundaries of Florida's territorial seas as defined in 43 U.S.C.
479s. 1301. After July 31, 1990, no structure intended for the
480drilling for, or production of, oil, gas, or other petroleum
481products may be permitted or constructed north of 26°00'00"
482north latitude off Florida's west coast to the western boundary
483of the state bordering Alabama as set forth in s. 1, Art. II of
484the State Constitution, or located north of 27°00'00" north
485latitude off Florida's east coast to the northern boundary of
486the state bordering Georgia as set forth in s. 1, Art. II of the
487State Constitution, within the boundaries of Florida's
488territorial seas as defined in 43 U.S.C. s. 1301.
489     (b)  Subparagraphs (a)1. and 4. do not apply to permitting
490or construction of structures intended for the drilling for, or
491production of, oil, gas, or other petroleum products pursuant to
492an oil, gas, or mineral lease of such lands by the state under
493which lease any valid drilling permits are in effect on the
494effective date of this act. In the event that such permits
495contain conditions or stipulations, such conditions and
496stipulations shall govern and supersede subparagraphs (a)1. and
4974.
498     (c)  The prohibitions of subparagraphs (a)1.-4. in this
499subsection do not include "infield gathering lines," or other
500pipelines for the purpose of transporting offshore production on
501shore, provided no other placement is reasonably available and
502all other required permits have been obtained.
503     (d)  Subparagraphs (a)1.-3. do not apply to the permitting
504or construction of offshore structures intended for the
505exploration or production of oil, gas, or other petroleum
506products where any structure or equipment above the surface of
507the water is more than 3 miles seaward from the line of mean
508high tide.
509     (2)  To issue permits to explore for and extract minerals
510which are subject to extraction from the land by means other
511than through a well hole.
512     (3)  To issue permits to construct wells for the injection
513and recovery of any natural gas for temporary storage in
514subsurface reservoirs.
515
516Each permit shall contain an agreement by the permitholder that
517the permitholder will not prevent inspection by division
518personnel at any time. The provisions of this section
519prohibiting permits for drilling or exploring for oil in coastal
520waters do not apply to any leases entered into before June 7,
5211991.
522     Section 7.  Subsection (1) of section 377.2425, Florida
523Statutes, is amended to read:
524     377.2425  Manner of providing security for geophysical
525exploration, drilling, and production.--
526     (1)  Prior to granting a permit to conduct geophysical
527operations; drilling of exploratory, injection, or production
528wells; producing oil and gas from a wellhead; or transporting
529oil and gas through a field-gathering system, the department
530shall require the applicant or operator to provide surety that
531these operations will be conducted in a safe and environmentally
532compatible manner.
533     (a)  The applicant for a drilling, production, or injection
534well permit or a geophysical permit may provide the following
535types of surety to the department for this purpose:
536     1.  A deposit of cash or other securities made payable to
537the Minerals Trust Fund. Such cash or securities so deposited
538shall be held at interest by the Chief Financial Officer to
539satisfy safety and environmental performance provisions of this
540chapter. The interest shall be credited to the Minerals Trust
541Fund. Such cash or other securities shall be released by the
542Chief Financial Officer upon request of the applicant and
543certification by the department that all safety and
544environmental performance provisions established by the
545department for permitted activities have been fulfilled.
546     2.  A bond of a surety company authorized to do business in
547the state in an amount as provided by rule.
548     3.  A surety in the form of an irrevocable letter of credit
549in an amount as provided by rule guaranteed by an acceptable
550financial institution.
551     (b)  An applicant for a drilling, production, or injection
552well permit, or a permittee who intends to continue
553participating in long-term production activities of such wells,
554has the option to provide surety to the department by paying an
555annual fee to the Minerals Trust Fund. For an applicant or
556permittee choosing this option the following shall apply:
557     1.  For the first year, or part of a year, of a drilling,
558production, or injection well permit, or change of operator, the
559fee is $4,000 per permitted well.
560     2.  For each subsequent year, or part of a year, the fee is
561$1,500 per permitted well.
562     3.  The maximum fee that an applicant or permittee may be
563required to pay into the trust fund is $30,000 per calendar
564year, regardless of the number of permits applied for or in
565effect.
566     4.  The fees set forth in subparagraphs 1., 2., and 3.
567shall be reviewed by the department on a biennial basis and
568adjusted for the cost of inflation. The department shall
569establish by rule a suitable index for implementing such fee
570revisions.
571     (c)  This subsection does not apply to an applicant for a
572drilling or operating permit for operations planned in coastal
573waters that by their nature warrant greater surety shall provide
574surety only in accordance with paragraph (a), or similar proof
575of financial responsibility other than as provided in paragraph
576(b). For all such applications, including applications pending
577at the effective date of this act and notwithstanding the
578provisions of paragraph (b), the Governor and Cabinet in their
579capacity as the Administration Commission, at the recommendation
580of the Department of Environmental Protection, shall set a
581reasonable amount of surety required under this subsection. The
582surety amount shall be based on the projected cleanup costs and
583natural resources damages resulting from a maximum oil spill and
584adverse hydrographic and atmospheric conditions that would tend
585to transport the oil into environmentally sensitive areas, as
586determined by the Department of Environmental Protection.
587     Section 8.  This act shall take effect July 1, 2009.


CODING: Words stricken are deletions; words underlined are additions.