(c) Financial assurance. The director shall
consider and approve the applicant's demonstration of financial responsibility
for all the phases of the geologic sequestration project, including the
post-injection storage facility care and closure phase and the plugging phase,
prior to issuance of a geologic storage injection well permit.
(1) Injection and monitoring wells. The owner
or operator must comply with the requirements of §
3.78 of this title for all
monitoring wells that penetrate the base of usable quality water and this
subsection for all injection wells.
(2) Geologic storage facility.
(A) The applicant must include in an
application for a geologic storage facility permit:
(i) a detailed written estimate, in current
dollars, of the cost necessary to perform corrective action on wells in the
area of review, plugging of injection wells, post-injection monitoring and
closure of the facility, and emergency and remedial response that shows all
assumptions and calculations used to develop the estimate;
(ii) a copy of the form of the bond or letter
of credit that will be filed with the Commission; and
(iii) information concerning the issuer of
the bond or letter of credit including the issuer's name and address and
evidence of authority to issue bonds or letters of credit in Texas.
(B) A geologic storage facility
shall not receive CO2 until a bond or letter of credit
in an amount approved by the director under this subsection and meeting the
requirements of this subsection as to form and issuer has been filed with and
approved by the director.
(C) The
determination of the amount of financial assurance for a geologic storage
facility is subject to the following requirements:
(i) The director must approve the dollar
amount of the financial assurance. The amount of financial assurance required
to be filed under this subsection must be equal to or greater than the maximum
amount necessary to perform corrective action, emergency response, and remedial
action, post-injection monitoring and site care, and closure of the geologic
storage facility, including plugging of wells, at any time during the permit
term in accordance with all applicable state laws, Commission rules and orders,
and the permit. The cost estimate must be performed for each phase separately
and must be based on the costs to the Commission of hiring a third party to
perform the required activities. A third party is a party who is not within the
corporate structure of the owner or operator;
(ii) A qualified professional engineer
licensed by the State of Texas, as required under Occupations Code, Chapter
1001, relating to Texas Engineering Practice Act, must prepare or supervise the
preparation of a written estimate of the highest likely amount necessary to
close the geologic storage facility. The owner or operator must submit to the
director the written estimate under seal of a qualified licensed professional
engineer, as required under Occupations Code, Chapter 1001, relating to Texas
Engineering Practice Act; and
(iii)
The Commission may use the proceeds of financial assurance filed under this
subsection to pay the costs of plugging any well or wells at the facility if
the financial assurance for plugging costs filed with the Commission is
insufficient to pay for the plugging of such well or wells.
(D) Bonds and letters of credit
filed in satisfaction of the financial assurance requirements for a geologic
storage facility must comply with the following standards as to issuer and
form.
(i) The issuer of any geologic storage
facility bond filed in satisfaction of the requirements of this subsection must
be a corporate surety authorized to do business in Texas. The form of bond
filed under this subsection must provide that the bond be renewed and continued
in effect until the conditions of the bond have been met or its release is
authorized by the director.
(ii)
Any letter of credit filed in satisfaction of the requirements of this
subsection must be issued by and drawn on a bank authorized under state or
federal law to operate in Texas. The letter of credit must be an irrevocable,
standby letter of credit subject to the requirements of Texas Business and
Commerce Code, §§
5.101 -
5.118. The
letter of credit must provide that it will be renewed and continued in effect
until the conditions of the letter of credit have been met or its release is
authorized by the director.
(iii)
The qualifying financial responsibility instruments must comprise protective
conditions of coverage. Protective conditions of coverage must include at a
minimum cancellation, renewal, and continuation provisions; specifications on
when the provider becomes liable following a notice of cancellation if there is
a failure to renew with a new qualifying financial instrument; and requirements
for the provider to meet a minimum rating, minimum capitalization, and ability
to pass the bond rating when applicable.
(I)
Cancellation. An owner or operator must provide that its financial instrument
may not cancel, terminate, or fail to renew except for failure to pay such
financial instrument. If there is a failure to pay the financial instrument,
the financial institution may elect to cancel, terminate, or fail to renew the
instrument by sending notice by certified mail to the owner or operator and the
director. The cancellation must not be final until at least 120 days after the
Commission receives the cancellation notice. The owner or operator must provide
an alternate financial responsibility demonstration within 60 days of notice of
cancellation, and if an alternate financial responsibility demonstration is not
acceptable or possible, any funds from the instrument being cancelled must be
released within 60 days of notification by the director.
(II) Renewal. If a financial instrument
expires, the owner or operator must renew the financial instrument for the
entire term of the geologic storage project. The instrument may be
automatically renewed as long as the operator has the option of renewal at the
face amount of the expiring instrument. The automatic renewal of the instrument
must, at a minimum, provide the holder with the option of renewal at the face
amount of the expiring financial instrument.
(III) Financial instrument to remain in
effect. Cancellation, termination, or failure to renew shall not occur and the
financial instrument shall remain in full force and effect if on or before the
date of expiration:
(-a-) the director deems
the facility abandoned;
(-b-) the
permit is terminated or revoked or a new permit is denied;
(-c-) closure is ordered by the director or a
United States district court or other court of competent
jurisdiction;
(-d-) the owner or
operator is named as debtor in a voluntary or involuntary proceeding under
Title 11 (Bankruptcy), U.S. Code; or
(-e-) the amount due is
paid.
(E) During the active life of the geologic
storage project, the owner or operator must adjust the cost estimate for
inflation within 60 days prior to the anniversary date of the establishment of
the financial instruments used to comply with paragraph (2)(C)(i) of this
subsection and provide this adjustment to the director. The owner or operator
must also provide to the director written updates of adjustments to the cost
estimate within 60 days of any amendments to the area of review and corrective
action plan, the injection well plugging plan, the post-injection storage
facility care and closure plan, and the emergency and remedial response
plan.
(F) The owner or operator of
a geologic storage facility must provide to the director, and the director must
approve, annual written updates of the cost estimate to increase or decrease
the cost estimate to account for any changes to the AOR and corrective action
plan, the emergency response and remedial action plan, the injection well
plugging plan, and the post-injection storage facility care and closure plan.
The Director must approve any decrease or increase to the initial cost
estimate. During the active life of the geologic storage project, the owner or
operator must revise the cost estimate no later than 60 days after the director
has approved the request to modify the AOR and corrective action plan, the
injection well plugging plan, the post-injection storage facility care and
closure plan, and the emergency and response plan, if a change in any of these
plans increases the cost. If a change to a plan decreases the cost, any
withdrawal of funds must be approved by the director. Any decrease to the value
of a financial assurance instrument must first be approved by the director. The
revised cost estimate must be adjusted for inflation as specified at paragraph
(2)(E) of this subsection. The owner or operator must provide to the director,
within 60 days of notification by the director, an adjustment of the cost
estimate if the director determines during the annual evaluation of the
qualifying financial responsibility instruments that the most recent
demonstration is no longer adequate to cover the cost of corrective action,
injection well plugging and post-injection storage facility care and closure,
and emergency and remedial response.
(G) Whenever the current cost estimate
increases to an amount greater than the face amount of a financial instrument
currently in use, the owner or operator, within 60 days after the increase,
must either cause the face amount to be increased to an amount at least equal
to the current cost estimate and submit evidence of such increase to the
director or obtain other financial responsibility instruments to cover the
increase. Whenever the current cost estimate decreases, the face amount of the
financial assurance instrument may be reduced to the amount of the current cost
estimate only after the operator has received written approval from the
director.
(H) The requirement to
maintain adequate financial responsibility is directly enforceable regardless
of whether the requirement is a condition of the permit.
(i) The owner or operator must maintain
financial responsibility until:
(I) the
director receives and approves the completed post-injection storage facility
care and closure plan; and
(II) the
director issues the certificate of closure.
(ii) The owner or operator may be released
from a financial instrument in the following circumstances:
(I) The owner or operator has completed the
phase of the geologic storage project for which the financial instrument was
required and has fulfilled all its financial obligations as determined by the
director, including obtaining financial responsibility for the next phase of
the geologic storage project, if required; or
(II) The owner or operator has submitted a
replacement financial instrument and received written approval from the
director accepting the new financial instrument and releasing the owner or
operator from the previous financial instrument.
(3) The director may
consider allowing the phasing in of financial assurance for only corrective
action based on project-specific factors.
(4) The director may approve a reduction in
the amount of financial assurance required for post-injection monitoring and/or
corrective action based on project-specific monitoring results.
(5) The owner or operator must maintain the
required financial responsibility regardless of the status of the director's
review of the financial responsibility demonstration.