HomeMy WebLinkAboutOrdinance 1553404-29-03P03:48 RCVD
ORDINANCE NUMBER ~ ~~ ~~
AN ORDINANCE AMENDING THE CODE OF ORDINANCES OF THE
CITY OF FORT WORTH, BY AMENDING DIVISION V. "INSURANCE,
BOND AND INDEMNITY", SECTION 15-41 "BOND, LETTERS OF
CREDIT, INDEMNITY, INSURANCE" OF ARTICLE II CHAPTER 15,
"GAS", ENTITLED, "GAS DRILLING AND PRODUCTION," TO
ALLOW FOR BLANKET BONDS/LETTERS OF CREDIT AND TO ADD
REQUIREMENTS FOR LETTERS OF CREDIT; PROVIDING THAT
THIS ORDINANCE SHALL BE CUMULATIVE OF ALL ORDINANCES;
PROVIDING A SAVINGS CLAUSE; PROVIDING A SEVERABILITY
CLAUSE; PROVIDING A PENALTY CLAUSE; PROVIDING FOR
PUBLICATION; AND NAMING AN EFFECTIVE DATE.
WHEREAS, the current gas drilling ordinance requires the operator to post a bond or
letter of credit in the amount of $50,000 for each well prior to the issuance of a permit;
WHEREAS, as the number of wells being drilled in the city increase, operators and
owners of gas drilling companies have reported that it is becoming cost prohibitive to maintain
bonds or letters of credit on each well due to current market conditions as the result of September
11, 2001 and other economic factors;
WHEREAS, the administration of the bonds and letters of credit by city staff will
become more difficult as the number of permitted wells in the city increase;
WHEREAS, allowing blanket bonds for multiple wells during drilling and production
phases will enable operators to continue operations while providing the necessary security
instrument to protect the citizens of Fort Wflrth;
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE
CITY OF FORT WORTH, TEXAS:
SECTION 1.
The Code of Ordinances of Fort Worth, Texas is hereby amended in part, by amending
Subsections B.l.b and B.l.c, "Bond, Irrevocable Letter of Credit," Section 15-41 "Bond Letter of
Credit, Indemnity, Insurance" of Division V. "Insurance, Bond .and. Indemnity" to read as
follows:
DIVISION V. INSUI~:ANCE, BOND AND INDEMNITY
SEC. 15-41. BOND, LETTERS OF CREDIT, INDEMNITY, INSURANCE.
B. Bond, Irrevocable Letter of Credat
1) Prior to the issuance of a Gas Well Permit the Operator shall provide the Gas
Inspector with a security instrument in the form of a bond or an irrevocable letter
of credit as follows:
a. Bond. A bond shall be executed by a reliable bonding or insurance
institution authorized to do business in Texas, acceptable to the City. The
bond shall become effective on or before the date the Gas Well Permit is
issued and shall remain in force and effect for at least a period of six (6)
months after the expiration of the Gas Well Permit term or until the well is
plugged and abandoned and the site is restored, whichever occurs first.
The Operator shall be listed as principal and the instrument shall run to the
City, as obligee, and shall be conditioned that the Operator will comply
with the terms and regulations of this Ordinance and the City. The
original bond shall be submitted to the Gas Inspector with a copy of the
same provided to the City Secretary.
b. Letter of Credit. A letter of credit shall be issued by a reliable bank
authorized to do business in Texas and shall become effective on or before
the date the Gas Well Permit is issued. The letter of credit shall remain in
force and effect for at least a period of six (6) months after the expiration
of the Gas Well Permit term. If the Letter of Credit is for a time period
less than the life of the well as required by this Ordinance, the Operator
must renew the Letter of Credit or replace the Letter of Credit with a bond
in the amount required by this Ordinance, on or before 45 days prior to the
expiration date of the Letter of Credit. If the Operator fails to deliver to
the City of Fort Worth either the renewal Letter of Credit or replacement
bond in the appropriate amount on or before 45 days prior to the
expiration date of the Letter of Credit, the City of Fort Worth may draw
the entire face amount of the attached Letter of Credit to be held by the
City of Fort Worth as security for Operator's performance of its
obligations under this Ordinance.
The City shall be authorized to draw upon such letter of credit to recover
any fines or penalties assessed under this ordinance. Evidence of the
execution of a letter of credit shall be submitted to the Gas Inspector by
submitting an original signed letter of credit from the banking institution,
with a copy of the same provided to the City Secretary.
c. The principal amount of any security instrument shall be Fifty Thousand
Dollars ($50,000) for any single well. If, after completion of a well, the
Applicant/Operator, who initially posted a fifty thousand dollars ($50,000)
bond or letter of credit, has complied with all of the provisions of this
Ordinance and whose well in the producing stage and all drilling
operations have ceased, may submit a request to the Gas Inspector to
reduce the existing security instrument to ten thousand dollars ($10,000)
for the remainder of the time the well produces without reworking. During
reworking operations, the amount of the bond or letter of credit shall be
maintained at fifty thousand dollars ($50,000).
An operator drilling or reworking between one and five wells at any given
time may elect to provide a blanket bond or letter of credit in the principal
minimum amount of One Hundred Fifty Thousand Dollars ($150,000). If
the operator drills or reworks more than five wells at a time, the blanket
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bond or letter of credit shall be increased in increments of $50,000 per
each additional well. Once the wells are in the producing stage and all
drilling operations have ceased, the Operator may elect to provide a
blanket bond or letter of credit for the remainder of the time the well
produces, without reworking, as follows:
Number of Producing_Wells Blanket Bond/Letter of Credit
Amount Required
Up to 75 wells $100,000
75 to 150 wells $150,000
More than 150 wells $200,000
If at any time after no less than a fifteen (15) day written notice to the
Operator and a public hearing, the City Council shall deem any Operator's
bond or letter of credit to be insufficient, it may require the Operator to
increase the amount of the bond or letter of credit up to a maximum. of two
hundred and fifty thousand dollars ($250,000) per well.
SECTION 2.
That this ordinance shall be cumulative of all other ordinances of the City of Fort Worth
and shall not repeal any of the provisions of such ordinances, except in those instances where
provisions of such ordinances are in direct conflict with the provisions of this ordinance.
SECTION 3.
That all rights or remedies of the City of Fort Worth, Texas, are expressly saved as to any
and all violations of the City Code, or any amendments thereto that have accrued at the time of
the effective date of this ordinance; and as to such accrued violations, and all pending litigation,
both civil or criminal, same shall not be affected by this ordinance but may be prosecuted until
final disposition by the courts.
SECTION 4.
That it is hereby declared to be the intention of the City Council that the sections,
paragraphs, sentences, clauses and phrases of this ordinance are severable, and if any phrase,
clause, sentence, paragraph or section of this ordinance shall be declared void, ineffective or
unconstitutional by the valid judgment or decree of any court of competent jurisdiction, such
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voidness, ineffectiveness or unconstitutionality shall not affect any of the remaining phrases,
clauses, sentences, paragraphs or sections of this ordinance, since the same would have been
enacted by the City Council without the incorporation herein of any such void, ineffective or
uncoristitutional phrase, clause, sentence, paragraph or section.
SECTION 5.
That any person, firm or corporation who violates, disobeys, omits, neglects or refuses to
comply with or who resists the enforcement of any of the provisions of this ordinance shall be
fined not more than Two Thousand Dollars ($2000.00) for each offense. Each day that a
violation exists shall constitute a separate offense.
SECTION 6.
That the City Secretary of the City of Fort Worth, Texas is hereby directed to publish this
ordinance for two (2) days in the official newspaper of the City of Fort Worth, Texas, as
authorized by V.T.C.A. Local Government Code Subsection 52.013.
SECTION 7.
This ordinance shall take effect upon passage and publication as required by law.
APPROVED AS TO FORM AND LEGALITY:
Davi ,City Attorne
Assist t ty Attorney
Adopted: ~" Z~ `-' ~ ~
Effective: ~ _ ~J - ~ 3
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City of Fort Worth, Texas
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DATE REFERENCE NUMBER LOG NAME PAGE
4/29/03 G-13959 12GAS 1 of 2
SUBJECT ADOPTION OF AN ORDINANCE AMENDING CITY CODE SECTION 15-41 OF
ARTICLE II, "GAS .DRILLING AND PRODUCTION" OF CHAPTER 1.5, "GAS" TO
ALLOW BLANKET. BONDS FOR MULTIPLE DRILLING AND PRODUCING WELLS
AND TO ADD ADDITIONAL REQUIREMENTS FOR LETTERS OF CREDIT
RECOMMENDATION:
It is recommended that that City Code Section 15-41 of Chapter 15, "Gas", Article 11, "Gas Drilling and
Production" be amended to allow blanket bonds for multiple drilling and producing wells and to add
additional requirements for letters of credit.
DISCUSSION:
Ordinance No. 14880, ,regulating the drilling and production of gas wells within the City limits, was
adopted by,the City Council on December 11, 2001 (M&C G-13450). Prior to the issuance of a gas well
permit, Section 15-41 requires the operator to post a bond or letter of credit in the amount of $50,000
for each well. Once the well is producing, the bond may be reduced to $10,000 at the request of the
.operator. During any reworking operations, the amount of the bond must be increased to $50,000. If an
operator is drilling multiple wells, each well must maintain a bond of $50,000 during the drilling phase.
The drilling companies have informed City staff that it is becoming cost prohibitive to maintain multiple
bonds or letters of credit due to the current market conditions. Further, administering the bonds and letters
of credit by City staff will become more difficult as the number of permitted wells in the City .increase.
It is recommended that Section 15-41, "Bond, Letters of Credit, Indemnity, Insurance" of Division V,
"Insurance, Bond, and Indemnity" be revised to allow a blanket bond, in the minimum amount of
$150,000 for up to five wells. Once the well is producing, the operator may elect. to provide a blanket
bond as follows:
Number of Producing Wells Blanket Bond Amount
Up to 75 $100,000
75 to 150 $150,000
More than 150..... $200,000
Additionally, the current ordinance requires letters of credit to remain in force. and effect for the life of
.the well. The lending institutions for the gas drilling. companies generally do not issue letters of credit
for an open-ended period of time. As a result, the operator must renew the letter of credit at the
expiration of the time period set by the bank. In order to ensure that the operator renews the letter of
credit and the City has recourse if he fails to do so, language will be added to Subsection B.1.b, "Letters
of Credit" of Section 15-41 to require the operator to renew the letter of credit or replace the letter of
credit with a bond in the amount required by the ordinance on or before 45 days prior to the expiration
..date. If the operator fails to deliver to the City either the renewal letter of credit or replacement bond in
the appropriate amount on or before 45 days prior to the expiration date of the letter of credit, the City
may draw the. entire face amount of the letter- of credit to be held by the City as security for the
operator's performance of its obligations.
DATE
4/29/03 REFERENCE NUMBER
G-13959 LOG NAME
~ 12GAS PAGE
2 of 2
suB.lECT ADOPTION OF AN ORDINANCE AMENDING CITY CODE SECTION 15-41 OF
ARTICLE II, "GAS DRILLING AND PRODUCTION" OF CHAPTER 15, "GAS" TO
ALLOW BLANKET BONDS. FOR MULTIPLE DRILLING AND, PRODUCING WELLS
AND TO ADD ADDITIONAL REQUIREMENTS FOR LEl-fERS OF CREDIT
The Risk Management Division agrees with the proposed changes to the ordinance.
FISCAL INFORMATION/CERTIFICATION:
The Finance Director certifies that this action will have no material effect on City funds.
BG:k
Submitted for City Manager's FUND ACCOUNT CENTER AMOUNT CITY SECRETARY
Office by: (to)
Bridgette Garrett (Acting) 6183
Originating Department Head:
David Yett 7623 (from) APPROVED 04/29/03 BY
ORD.# 15534 AS AMENDED
Additional Information Contact:
Sarah Fullenwider 7619