Summary:

 Senate Bill 519 (SB 519) proposes amendments to the Oil and Gas Conservation Tax Act and the Oil and Gas Reclamation Fund. It increases the portion of tax revenue distributed to the Oil and Gas Reclamation Fund and revises the permitted uses of the fund. The bill establishes a minimum annual funding threshold and eliminates previous allocations for energy education programs. SB 519 takes effect on July 1, 2025. 

Legislation Overview:

 Senate Bill 519 (SB 519) modifies the Oil and Gas Conservation Tax Act by increasing the portion of tax receipts allocated to the Oil and Gas Reclamation Fund. The bill removes the prior distribution structure and replaces it with a provision directing all net receipts from the tax imposed under the act to the fund. This change ensures a more substantial and consistent revenue stream dedicated to oil and gas site reclamation.

SB 519 also revises the administration and allowable uses of the Oil and Gas Reclamation Fund, managed by the Oil Conservation Division of the Energy, Minerals and Natural Resources Department. Under the bill, the greater of $40,000,000 or five percent of the average year-end market values of the fund for the preceding three years will be dedicated to abandoned well site assessment, plugging, restoration, and remediation. The bill removes an existing provision that permitted up to $150,000 annually to support energy education programs.

Additionally, the bill affirms the Oil Conservation Division’s authority to reclaim and properly plug abandoned wells and remediate well sites using fund resources. It allows the division to seek indemnification from operators for costs incurred. Contractors working under division contracts to plug wells and restore sites will continue to be permitted to sell removed equipment and materials, deducting proceeds from remediation costs. The bill also retains reporting requirements for fund usage. SB 519 takes effect on July 1, 2025.

Implications

SB 519 significantly increases the financial resources available for oil and gas site reclamation by allocating all tax revenue from the Oil and Gas Conservation Tax Act to the Oil and Gas Reclamation Fund. This change ensures that the fund receives a more predictable and substantial revenue stream, which could expedite efforts to address abandoned wells and contaminated sites. The bill establishes a guaranteed minimum annual allocation of $40,000,000 or five percent of the fund’s recent average market value, providing long-term financial stability for reclamation efforts.

The removal of funding for energy education programs signals a shift in priorities, ensuring that available funds are directed solely toward site reclamation and remediation. The increase in available funding could lead to expanded hiring within the Oil Conservation Division and increased contracting opportunities for remediation work. Additionally, the bill strengthens the division’s authority to seek reimbursement from operators responsible for abandoned sites, potentially offsetting state expenditures.
 

Current Law:

 Under current law, a portion of the tax revenue from the Oil and Gas Conservation Tax Act is distributed to the Oil and Gas Reclamation Fund based on a tiered percentage system. The fund is used to support well site reclamation and plugging efforts, with up to $150,000 annually permitted for energy education programs. The Oil Conservation Division is responsible for administering the fund and overseeing reclamation activities. The division has the authority to contract for well plugging and remediation efforts and may recover costs from operators when possible.

Current law does not guarantee a fixed annual funding level for reclamation efforts, making available resources subject to fluctuations in tax revenue. The existing framework includes limitations on fund expenditures, which SB 519 modifies by prioritizing well site restoration and eliminating allocations for energy education programs.