Section 601.215 - Bonding(a)(1) Except as provided in subsection (d) hereof, upon filing an application for a well permit and before continuing to operate any oil or gas well, the owner or operator thereof shall file with the department a bond for the well and the well site on a form to be prescribed and furnished by the department. Any such bond filed with an application for a well permit shall be payable to the Commonwealth and conditioned that the operator shall faithfully perform all of the drilling, water supply replacement, restoration and plugging requirements of this act. Any such bond filed with the department for a well in existence on the effective date of this act shall be payable to the Commonwealth and conditioned that the operator shall faithfully perform all of the water supply replacement, restoration and plugging requirements of this act. The amount of the bond required shall be in the amount of $2,500 per well for at least two years following the effective date of this act, after which time the bond amount may be adjusted by the Environmental Quality Board every two years to reflect the projected costs to the Commonwealth of performing well plugging.(2) In lieu of individual bonds for each well, an owner or operator may file a blanket bond, on a form prepared by the department, covering all of its wells in Pennsylvania as enumerated on the bond form. A blanket bond shall be in the amount of $25,000 for at least two years following the effective date of this act, after which time the bond amount may be adjusted by the Environmental Quality Board every two years to reflect the projected costs to the Commonwealth of performing well plugging.(3) Liability under such bond shall continue until the well has been properly plugged in accordance with this act and for a period of one year after filing of the certificate of plugging with the department. Each bond shall be executed by the operator and a corporate surety licensed to do business in the Commonwealth and approved by the secretary. The operator may elect to deposit cash, certificates of deposit or automatically renewable irrevocable letters of credit from financial institutions chartered or authorized to do business in Pennsylvania and regulated and examined by the Commonwealth or a Federal agency which may be terminated at the end of a term only upon the financial institution giving 90 days prior written notice to the permittee and the department or negotiable bonds of the United States Government or the Commonwealth, the Pennsylvania Turnpike Commission, the General State Authority, the State Public School Building Authority or any municipality within the Commonwealth, or United States Treasury Bonds issued at a discount without a regular schedule of interest payments to maturity, otherwise known as Zero Coupon Bonds, having a maturity date of not more than ten years after the date of purchase and at such maturity date having a value of not less than $25,000, with the department in lieu of a corporate surety. The cash deposit, certificate of deposit, amount of such irrevocable letter of credit or market value of such securities shall be equal at least to the sum of the bond. The secretary shall, upon receipt of any such deposit of cash, letters of credit or negotiable bonds, immediately place the same with the State Treasurer, whose duty it shall be to receive and hold the same in the name of the Commonwealth, in trust, for the purpose for which such deposit is made. The State Treasurer shall at all times be responsible for the custody and safekeeping of such deposits. The operator making deposit shall be entitled from time to time to demand and receive from the State Treasurer, on the written order of the secretary, the whole or any portion of any collateral so deposited, upon depositing with him, in lieu thereof, other collateral of the classes herein specified having a market value at least equal to the sum of the bond, and also to demand, receive and recover the interest and income from said negotiable bonds as the same becomes due and payable. Where negotiable bonds, deposited as aforesaid, mature or are called, the State Treasurer, at the request of the owner thereof, shall convert such negotiable bonds into such other negotiable bonds of the classes herein specified as may be designated by the owner. Where notice of intent to terminate a letter of credit is given, the department shall give the operator 30 days' written notice to replace the letter of credit with other acceptable bond guarantees as provided herein and, if the owner or operator fails to replace the letter of credit within the 30-day notification period, the department shall draw upon and convert such letter of credit into cash and hold it as a collateral bond guarantee.(b) No bond shall be fully released until all requirements of this act identified in subsection (a) or section 213 are fully met. Upon release of all of the bonds and collateral as herein provided, the State Treasurer shall immediately return to the owner the amount of cash or securities specified therein.(c) If the well owner or operator fails or refuses to comply with the applicable requirements of this act identified in subsection (a), the regulations promulgated hereunder or the conditions of the permit relating thereto, the department may declare the bond forfeited and shall certify the same to the Attorney General, who shall proceed to enforce and collect the full amount of the bond and, where the owner or operator has deposited cash or securities as collateral in lieu of a corporate surety, the department shall declare said collateral forfeited and shall direct the State Treasurer to pay the full amount of said funds into the Well Plugging Restricted Revenue Account or to proceed to sell said security to the extent forfeited and pay the proceeds thereof into the Well Plugging Restricted Revenue Account. Should any corporate surety or financial institution fail to promptly pay, in full, a forfeited bond, it shall be disqualified from writing any further bonds under the act or any other environmental act administered by the department. Any person aggrieved by reason of forfeiting the bond or converting collateral, as herein provided, shall have a right to appeal to the Environmental Hearing Board in the manner provided by law. Upon forfeiture of a blanket bond for a violation occurring at one or more well sites, the person whose bond is forfeited shall submit a replacement bond to cover all other wells of which he is owner or operator within ten days of said forfeiture. Failure to submit said replacement bond constitutes a violation of this section as to each of the wells owned or operated by said person.(d)(1) Any operator of not more than 200 wells who cannot obtain a bond for a well drilled prior to April 18, 1985, as required under subsection (a), due to an inability to demonstrate sufficient financial resources may, in lieu of the bond: (i) Submit to the department a fee in the amount of $50 per well, or a blanket fee of $500 for ten to 20 wells, or a blanket fee of $1,000 for more than 20 wells, which shall be a nonrefundable fee paid each year that the operator has not filed a bond with the department. All fees collected in lieu of a bond under this subsection shall be used for the purposes authorized by this act. The Environmental Quality Board shall have the power, by regulation, to increase the amount of the fees established under this subsection.(ii)(A) Make phased deposits of collateral to fully collateralize the bond. Such payment shall be based on the number of wells the operator owns or operates. The operator shall make an initial deposit and shall, thereafter, make annual deposits in accordance with the schedule in clause (B). Interest accumulated by the collateral shall become a part of the bond until such time as the collateral plus accumulated interest equals the amount of the required bond. The collateral shall be deposited, in trust, with the State Treasurer as provided in this subsection, or with a bank selected by the department which shall act as trustee for the benefit of the Commonwealth to guarantee the operator's compliance with the drilling, water supply replacement, restoration and plugging requirements of this act. The operator shall be required to pay all costs of the trust.(B) An operator of up to ten existing wells who does not intend to operate additional wells shall deposit $250 per well and shall, thereafter, annually deposit $50 per well until the obligations of this section are fully met. An operator of 11 to 25 wells or an operator of up to ten wells who applies for one or more permits for additional wells shall deposit $2,000 and shall, thereafter, annually deposit $1,150 plus $150 for each additional well to be permitted that year until the obligations of this section are fully met. An operator of 26 to 50 wells shall deposit $3,000 and shall, thereafter, annually deposit $1,300 plus $400 for each additional well to be permitted that year until the obligations of this section are fully met. An operator of 51 to 100 wells shall deposit $4,000 and shall, thereafter, annually deposit $1,500 plus $400 for each additional well to be permitted that year until the obligations of this section are fully met. Operators of 101 to 200 wells shall deposit $8,000 and shall, thereafter, annually deposit $1,600 plus $1,000 for each additional well to be permitted that year until the obligations of this section are fully met. Operators of more than 200 wells shall fully bond their wells immediately. The department shall reduce the amount of phased collateral payments or the period of time over which phased collateral payments shall be made on behalf of owners or operators who, prior to the effective date of this amendatory act, have paid a fee in lieu of bond pursuant to subparagraph (i), and who, within one year of the effective date of this amendatory act, choose to enter the phased collateral program pursuant to this subparagraph rather than to continue to make payments in lieu of bond. Payments made in lieu of bond prior to the effective date of this amendatory act shall not be credited in any other manner, nor shall the department be required to refund such fees at any time. The Environmental Quality Board shall have the power, by regulation, to change the annual deposits established under this clause if it is found to be necessary to accommodate a change in the amount of the bond required under this section.(2) An operator may continue to pay a fee in lieu of bond or make phased deposits of collateral to fully collateralize the bond so long as the operator does not miss any payments for wells as provided under this subsection and so long as the operator remains in compliance with the provisions of this act and regulations and permits issued thereunder. If an operator has missed any payments for wells as provided under this subsection, the operator shall:(i) immediately submit the appropriate bond amount in full; or(ii) cease all operations and plug the wells in accordance with section 210.(d.1)(1) An individual who cannot obtain a bond to drill new wells due to an inability to demonstrate financial resources may meet the collateral bond requirements of subsection (a) by making phased deposits of collateral to fully collateralize the bond. Such individuals shall be limited to drilling ten new wells per calendar year. The individual shall, for each well to be drilled, deposit $500 and shall, thereafter, annually deposit 10% of the remaining bond amount for a period of ten years. Interest accumulated by the collateral shall become a part of the bond until such time as the collateral, plus accumulated interest, equals the amount of the required bond. The collateral shall be deposited, in trust, with the State Treasurer as provided in subsection (a) or with a bank selected by the department which shall act as trustee for the benefit of the Commonwealth, to guarantee the individual's compliance with the drilling, water supply replacement, restoration and plugging requirements of this act. The individual shall be required to pay all costs of the trust.(2) Individuals may continue to use phased collateral to obtain permits so long as they have not missed any payments for wells drilled under this provision and so long as they remain in compliance with this act and regulations and permits issued thereunder. If an individual has missed any payments for wells under this subsection, the operator shall: (i) immediately submit the appropriate bond amount in full; or(ii) cease all operations and plug the wells in accordance with section 210. For the purposes of this subsection an "individual" is defined as an applicant who is a natural person doing business under his own name.
(e) All remedies for violation of this act, the regulations adopted hereunder or the conditions of permits are expressly preserved. Nothing in this section shall be construed as an exclusive penalty or remedy for such violations of law. No action taken pursuant to this section shall waive or impair any other remedy or penalty provided in law.(f) Owners or operators who have failed to meet the requirements of this section prior to the effective date of this amendatory act shall not be required to make payments pursuant to this section on a retroactive basis as a condition of obtaining a permit under this act nor shall such failure be deemed a violation of this act.1984, Dec. 19, P.L. 1140, No. 223, § 215, effective in 120 days. Amended 1986, Oct. 9, P.L. 1431, No. 135, § 1, effective in 30 days; 1992, July 2, P.L. 365, No. 78, § 5, effective in 30 days.