(A) Amount:
The surety bond provided for in section
1509.07 of the Revised Code
shall be executed by a surety company authorized to do business in the state of
Ohio and shall be in the following amount:
For an individual bond covering a single well, five thousand
dollars; for a blanket bond covering all such wells operated by the principal,
fifteen thousand dollars;
(B) Delinquent restoration.
If the oil or gas well owner, permittee, or his agent fails to
complete the initial restoration as required under division (A) of section
1509.072 of the Revised Code,
the chief, prior to issuing a bond forfeiture order for such failure, shall
issue to such person a written notice of violation. The notice of violation
shall:
(1) Set forth with reasonable
specificity:
(a) The nature of the failure;
(b) The remedial action required;
(c) A reasonable time for
completion of the restoration; and
(d) A description of the area to be restored.
(2) State that if the
notice is not compiled with within the time allowed in the notice and any
extensions given for good cause, the chief will forfeit the total amount of the
performance bond.
(C)
Forfeiture criteria and amount.
The chief shall forfeit the total amount of the performance
bond when he or she finds that the oil or gas well owner or permittee has:
(1) Failed to comply with a notice of
violation issued under paragraph (B) of this rule;
(2) Failed to comply with the final
restoration requirements of division (B) of section
1509.072 of the Revised Code;
(3) Failed to comply with the
plugging requirements of section
1509.12 of the Revised Code, the
permit provisions of section
1509.13 of the Revised Code or
rules adopted thereunder.
(D) Forfeiture procedures.
When performance bond is to be forfeited, the chief shall issue
an order to the owner or permittee, which order shall be referred to in this
rule as the bond forfeiture order. The bond forfeiture order shall:
(1) Set forth the violation giving rise to
the order;
(2) Declare that the
entire amount of the bond is forfeited;
(3) If the performance bond filed with the
division is supported by or in the form of cash or negotiable certificates of
deposit, declare the cash or certificates property of the state;
(4) If the performance bond filed with the
division is in the form of a surety bond, the chief shall also issue a bond
forfeiture order to the surety involved and, in addition to the requirements of
paragraphs (C)(1) and (C)(2) of this rule, the order shall also inform the
surety of its rights and the extent of its obligations and liability.
(E) Options for the
surety.
(1) Within thirty days after it
receives a bond forfeiture order, each surety shall notify the chief that it
will:
(a) Not correct the violation or
violations resulting in the issuance of the bond forfeiture order and shall
make payment for the full amount of the bond; or,
(b) Correct the violation or violations and
shall submit to the chief a plan, including a time frame for performance for
accomplishing the required work; or,
(c) Pay to the treasurer of the state that
amount of money which it would cost the state of Ohio as determined by the
chief to complete the required work.
(2) The rights of the surety to correct the
violation or violations resulting in the issuance of the bond forfeiture order
shall be terminated if the surety fails to:
(a) Notify the chief within thirty days after
receipt of the bond forfeiture order that it will or will not correct the
violation;
(b) Submit a timetable
at the same time it notifies the chief that it will perform the required work;
or,
(c) Commence, continue, or
complete the required work in a manner and in accordance with its timetable and
the provisions of Chapter 1509. of the Revised Code.
(3) When the chief determines that the rights
of a surety shall be terminated, the chief shall issue an order terminating the
rights of the surety and demanding payment from the surety for the entire
amount of performance bond filed with the chief by the surety.
(F) Financial statements:
Sworn financial statements may be accepted in lieu of a surety
bond, certificate of deposit, or cash bond only for owners classified as exempt
domestic well owners or for non-domestic well owners for whom the chief has
accepted a sworn financial statement prior to January 1, 1993 and who are not
in material and substantial violation of Chapter 1509. of the Revised Code.
Additionally, the chief may accept new financial statements for exempt domestic
well owners and non-domestic well owners if an irrevocable letter of credit on
a form provided by the division for the bond amount is provided from an
approved financial institution along with the financial statement required in
(F)(1)(d) or (F)(2)(c) or by providing a copy of a financial statement
submitted to the financial institution issuing the letter of credit. The chief
will not accept new financial statements to release surety bonds, certificates
of deposit or cash bonds previously filed with the division.
(1) Exempt domestic well owners:
(a) New exempt domestic well owners filing a
financial statement will be limited to one well under the financial statement.
New exempt doemstic well owners requesting the ownership of more than one well
and existing exempt domestic well onwers requesting to receive additional wells
must file a certificate of deposit, surety bond or cash bond in the amount
required for the total number of wells to be owned.
(b) Exempt domestic well owners shall
demonstrate financial responsibility at least once every two years under a
schedule established by the division.
(c) To demonstrate financial responsibility,
exempt domestic well owners must show sufficient assets and income to operate,
maintain, and abandon the well.
(d) Exempt domestic well owners shall submit
the following information to the division:
(i) Personal financial statement on a form
provided by the division;
(ii)
Statement of estimated well operating, maintenance, and abandonment expenses
and source of funds to use in paying for these costs;
(iii) Other information required by the
chief.
(iv) The exempt domestic
well owner must attest to the material accuracy of the information provided.
The forms shall prescribe penalties for submission of a false statement.
(2)
Non-domestic well owners:
(a) Each owner with
a previously approved financial statement shall demonstrate financial
responsibility annually under a schedule established by the division.
(b) To demonstrate financial
responsibility, and receive approval of the financial statement, each owner
shall show the following:
(i) The owner must
have a sufficient capital structure to show a net financial worth in Ohio of
twice the required bonding amount;
(ii) The owner must not be found to be in
material or substantial violation of section
1509.01, ET SEQ., of the Ohio
Revised Code or section
1501:9-1-01,
ET SEQ., of the Ohio Administrative Code during the preceding year;
(iii) The owner must be in compliance with
sections 1509.10 and
1509.11 of the Revised Code.
(c) In order to verify
the accuracy of the financial statement each owner shall submit the following
information when requested by the chief of the Division of Mineral Resources
Management:
(i) Income statement;
(ii) Balance sheet;
(iii) Copy of corporate franchise tax filing
for previous year (if applicable);
(iv) List of fixed assets and their current
market or book value;
(v) Copy of
independent appraisal or copy of the county auditor's assessed value of all
real estate listed if the book value exceeds twenty-thousand dollars;
(vi) Proof of payment of oil and
gas severance tax for previous year;
(vii) List of all producing wells including
type of equipment and percentage of equipment owned;
(viii) Other information required by the
chief; other information approved by the chief may be accepted in lieu of the
above listed items.
(ix) Annual
reports (reviews or audits) prepared in the normal course of business for an
owner by a certified public accountant in accordance with generally accepted
accounting principles will be accepted in lieu of the information required in
(F)(2)(c)(i) through (v) if the signature page of the division's financial
statement form is submitted with the annual report and signed by the owner or
authorized representative.
(d) Information preparation and standards:
(i) Financial statements submitted under
(F)(2)(c) pursuant to this rule shall be compilations and prepared according to
generally accepted accounting principles;
(ii) All financial statements must be sworn
as to the material accuracy by the owner or authorized representative of the
owner and a certified public accountant must certify that each financial
statement was prepared in accordance with generally accepted accounting
principals. Forms shall prescribe penalty for submission of a false statement;
(iii) If the owner is a
corporation, only assets and liabilities of the corporation may be included on
the financial statements.
(e) Evaluation:
(i) The division may use accepted financial
industry tools to evaluate financial information;
(ii) The division may review inspection and
enforcement data to determine if the owner has acted in an environmentally
responsible manner.
(f)
Penalties:
(i) Failure of an owner to
demonstrate financial responsibility as required under (F)(1)(b) through (d),
(F)(2)(a) and (F)(2)(b) and/or failure to supply all the information listed
under (F)(2)(c) of this rule will result in an order by the chief requiring a
surety bond, certificate of deposit, or cash bond in the amount of bond
required. If the order is not complied with, the owner will receive an order by
the chief requiring the plugging of all wells of the owner.
Notes
Ohio Admin. Code 1501:9-1-03
Five Year Review (FYR) Dates:
10/13/2020 and
10/13/2025
Promulgated
Under: 119.03
Statutory
Authority: 1190.03
Rule Amplifies:
1509.03,
1509.07
Prior
Effective Dates: 11/01/1967, 09/01/1980, 11/01/1984, 07/16/1993,
04/15/2004
Eff 11-1-67;
9-1-80; 11-1-84; 7-16-93; 4-15-04
Rule promulgated under: RC
119.03
Rule
authorized by: RC 1509.03
Rule
amplifies: RC 1509.07
RC
119.032 review dates: 9/16/03,
1/27/04, 4/15/09
