P5 Filings and Financial Security Requirements Jennifer Gilmore

P-5 Filings and Financial Security Requirements Jennifer Gilmore August 2017 Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Topics • P-5 Organization Report Forms (Revised September 2011) • Financial Security Requirements • P-5 Filing Fees and Surcharge • Auto P-4’s Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

P-5 Organization Report Who is required to file an organization report? • Oil & Gas & Pipeline Operators: • Natural Resources Code, Sec. 91. 142 • Oil & Gas Statewide Rules 1 & 78 • Master Meter & Distribution Systems (Safety Division): • Utilities Code, Sec. 121. 201 • Pipeline Safety Rule 51/Oil & Gas Rules 1 & 78 Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Supplemental Forms • Form P-5 O (Officer Listing) • Form P-5 A (Non-Employee Agent Listing) • Forms P-5 PB(1), P-5 PB(2), P-5 LC (Financial Security Documents) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 (Organization Report) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 (Organization Report) Continued Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 O (Officer Listing) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 A (Non-Employee Agent Listing) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 A (Non-Employee Agent Listing) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Financial Security Requirements Financial Security requirement options: • Option 1 – Individual • Option 2 - Blanket Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Oil & Gas Non-Well Operators • You are exempt from filing financial security if your only operations are: Master Meter / Gas Distribution Center Purchaser Directional Surveyor Salt Water Hauler Approved Well Plugger Approved Cementer for Well Plugging (Well plugging requires Approval by Field Ops) Service company for well stimulation activities • $25, 000 if you have any other activities Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Option 1 Individual Performance Bond (Form P-5 PB(1), Letter of Credit (Form P-5 LC), or a Cash Deposit are accepted under this option. • Only available to well operators who have no activity other than wells. • Amount determined by multiplying the aggregate depth of all wells (active, injection, producer, etc. ) at $2. 00 per foot. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Option 2 Blanket Performance Bond (Form P-5 PB(2), Letter of Credit (Form P-5 LC), or Cash Deposit • Available to all operators • Amount determined by the total number of wells (active, injection, producer, etc. ) 1 to 10 wells 11 to 99 wells 100 wells or more $25, 000 $50, 000 $250, 000 • For operators without wells who are required to file financial assurance, $25, 000 is your base requirement. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Bay and Offshore Wells • Statewide Rule § 3. 78 was amended September 1, 2004 require additional financial security for operators of Bay and Offshore wells. • Calculated by Base amount + Entry Level amount + Non-Producing Amount. • Presumed Plugging Cost for Bay Well $60, 000. 00 / Offshore Well $100, 000. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Bay and Offshore Wells Example: Operator A has 15 wells, of which 8 are bay wells. 4 of these wells are non-producing. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Drilling Permits • Effective December 19, 2005 Statewide Rule 78 was amended requiring financial security as a condition of the issuance of permit to drill, recomplete, or reenter a well. • Financial Security Requirement: Option 1 or Option 2 are available. • Permits cannot be issued to operators without financial security in place. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

P-5 LC (Letter of Credit Form) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

P-5 LC (Front Page) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

P-5 LC (Back Page) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Form P-5 PB(1) and Form P-5 PB(2) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Back Page of Forms P-5 PB(1) and P-5 PB(2) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Cash Deposits • Can be filed under either Financial Security Option 1 or Option 2. • Funds are to be submitted in the form of a Cashier’s Check. • Cash deposits are automatically renewed once the operator provides their P-5 renewal packet and filing fee – No renewal form required. • There is no fee to renew your cash deposit annually. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Filing Fees and Surcharges • Filing fee required for annual P-5 renewals and new P-5 filings. • Statewide Rule 78 amended to impose a surcharge of 150% to filing fees. • Notification to industry sent out February 2012. • Effective May 1, 2012. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Filing Fees and Surcharges (1 of 2) • Annual fee to accompany initial filing and annual renewals of P-5 Organization Report. • Required of all operators, regardless of and in addition to any financial assurance requirement. • Amount ranges from $225. 00 to $1, 350. 00, based upon the activities of the organization reflected on their P-5 record. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Filing Fees and Surcharges (2 of 2) • If you are a well operator and conduct other service activities, your filing fee will cap out at $1, 125. 00. • Once you have determined your filing fee, you would then add the 150% surcharge to calculate your total filing fee. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

P-5 Filing Fee Amount based on the following four components: Number of wells operated • 1 -25 wells $300. 00 • 26 -100 wells $500. 00 • 101 wells or more Natural Gas Pipelines/ Master Meter Operator $1, 000. 00 Pipelines other than Natural Gas (one or more) Facilities and/or Service Activities Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide) $225. 00 $625. 00 $500. 00

Facilities & Service Activities Oil & Gas Regulated activities other than pipelines or wells. $300. 00 if the activities include only: • • • Pollution Cleanup Contractor Directional Surveyor Approved Cementer for plugging wells and/or Moving/Storing Crude or Condensate Approved Cementer for Well Plugging Well Stimulation Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Facilities & Service Activities Oil & Gas Regulated activities other than pipelines or wells. $500. 00 if the operator has any other Commission-regulated facilities or service activities including (but not limited to): • • Commercial Facility (COMFAC) Gas Plant (GASPLT) Reclamation Plant (RECLPL) Refinery (REFINE) Saltwater Disposal P 18 authority (SWDP 18) Waste Hauler authority (WHAUL) Service Comp. for Well Stimulation/Hydraulic Fracturing Activities (WLSTIM) Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Surcharges on Railroad Commission Fees Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Auto P-4 Changes – Types of Auto P-4’s • Name change P-5 • Large acquisitions of property • Same operator change for Gatherer/Purchaser Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Auto P-4 Changes – Letter Requirements • Operator must submit a letter requesting the Auto P-4 process to transfer all property/activities • Letter must designate a contact person. • Letter can be signed by company authorized individual. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Auto P-4 Changes – Financial Security • If the operator is utilizing the same financial security on file for the existing company, all inactive well requirements, drilling permits, and specialty codes will need to be addressed. • If the operator is submitting in a new form of financial security to cover the new company, drilling permits and specialty codes that require financial security can be cleared up after the Auto P-4 process. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Helpful Links (1 of 2) Railroad Commission Website: http: //www. rrc. texas. gov Expanded Website Access (EWA) – P 5 Query (Data Updated Nightly): http: //webapps 2. rrc. texas. gov/EWA/organization. Query. Acti on. do Oil & Gas Fee Payments and Surcharges Information: http: //www. rrc. texas. gov/oil-gas/applications-andpermits/fees-surcharges/ Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Helpful Links (2 of 2) P-5 Renewal Status Query (Data Updated Nightly): http: //webapps 2. rrc. texas. gov/EWA/inactive. Well. Status. Q uery. Action. do HB 2259/HB 3134 Information (Inactive Well requirements): http: //www. rrc. texas. gov/oil-gas/complianceenforcement/hb 2259 hb 3134 -inactive-well-requirements/ Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)

Contact Information For any questions the P-5 Unit can be contacted by phone or email. P-5 Main Line (512) 463 -6772 P 5@rrc. texas. gov Jennifer Gilmore (512) 463 -6776 Jennifer. Gilmore@rrc. texas. gov Auto P-4 Questions? Contact Mysti Doshier (512) 463 -6743 Mysti. Doshier@rrc. texas. gov Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Slide)