Gas, Petroleum Products, Volatile Oils

HOUSE BILL 2535
By Lamberth

SENATE BILL 2231
By Johnson
SB2231
012421
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AN ACT to amend Tennessee Code Annotated, Title 59;
Title 60 and Title 68, relative to the production of
oil and gas.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 60-1-101(7), is amended by deleting
the subdivision and substituting:
(7) "Operator" means any person who is supervising or responsible for drilling,
operating, producing, repairing, abandoning, or plugging of wells under this part;
SECTION 2. Tennessee Code Annotated, Section 60-1-101(9), is amended by deleting
the subdivision and substituting:
(9) "Person" means any natural person, public or private entity, or any
subdivision or agent thereof, including a corporation, association, partnership, receiver,
trustee, guardian, executor, administrator, fiduciary, agent, or representative of any kind;
SECTION 3. Tennessee Code Annotated, Section 60-1-101(10), is amended by
deleting "crude petroleum".
SECTION 4. Tennessee Code Annotated, Section 60-1-101(11), is amended by
deleting the subdivision and substituting:
(11) "Producer" means the owner or operator of a well or wells capable of
producing oil or gas, or both, in paying quantities;
SECTION 5. Tennessee Code Annotated, Section 60-1-101, is amended by adding the
following as a new subdivision:

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( ) "Well" means a borehole drilled or proposed to be drilled for the purpose of
producing natural gas or oil, or both, or a borehole through which natural gas or oil, or
both, is being produced.
SECTION 6. Tennessee Code Annotated, Section 60-1-103(a)(1), is amended by
deleting the subdivision and substituting:
(1) A person shall not conduct any surface disturbances incidental to or in
preparation for drilling until a permit application has been submitted to the supervisor.
The supervisor shall not issue a permit until the conditions established by this subsection
(a) have been met.
SECTION 7. Tennessee Code Annotated, Section 60-1-103(a)(3), is amended by
deleting "blue-line streams within one-half mile (0.5 mi.) of the well site or access roads" and
substituting "streams within one-fourth mile (1/4 mi.) of the well site".
SECTION 8. Tennessee Code Annotated, Section 60-1-103(a)(5), is amended by
deleting the subdivision and substituting:
(5) A person shall not drill or operate a well without a permit issued by the
supervisor.
SECTION 9. Tennessee Code Annotated, Section 60-1-103(d), is amended by deleting
the subsection and substituting:
(d) Upon approval, the operator's plan must be a condition of the operator's
permit. Failure to comply with the plan is grounds for one (1) or more of the following:
(1) Suspension of operations;
(2) Permit revocation;
(3) Forfeiture of bonds;
(4) Assessment of civil penalties as provided by this chapter; and
(5) Imposition of any other penalties permitted by this chapter.

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SECTION 10. Tennessee Code Annotated, Section 60-1-104(a), is amended by
deleting "crude petroleum" wherever it appears and substituting instead "oil".
SECTION 11. Tennessee Code Annotated, Section 60-1-104(b), is amended by
deleting "oil and gas".
SECTION 12. Tennessee Code Annotated, Section 60-1-105, is amended by deleting
the section in its entirety.
SECTION 13. Tennessee Code Annotated, Section 60-1-202(a)(3), is amended by
adding "to contract with any person to perform plugging or reclamation work;" immediately
preceding "and to take such action as may be necessary to enforce this chapter;".
SECTION 14. Tennessee Code Annotated, Section 60-1-202(a)(4), is amended by
deleting the subdivision and substituting:
(4) To promulgate rules, in accordance with the Uniform Administrative
Procedures Act, compiled in title 4, chapter 5, to effectuate this chapter, including but not
limited to the following:
(A) To require the drilling, casing, and plugging of wells in a manner that
prevents the escaping of oil and gas out of one (1) stratum to another; to prevent
intrusion of water to oil and gas strata; to prevent pollution of fresh water by oil,
gas, or salt water; to protect potentially mineable coal and other minerals; and to
require a bond for the plugging of each well;
(B) To require notification to the supervisor, upon such forms as the
supervisor shall prescribe, of the intention to drill any well for oil or gas;
(C) To require the filing of logs, including electrical logs and drilling
records, cores and drill cutting samples, and all other downhole surveys and
information, within sixty (60) days following the cessation of drilling operations of
the well;

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(D) To prevent wells from being drilled, operated, and produced in such
manner as to cause injury to neighboring leases or property;
(E) To prevent the drowning by water of any oil and gas stratum in
paying quantities and to prevent the premature and irregular encroachment of
water which would affect the total ultimate recovery of oil and gas;
(F) To require the operation of wells with efficient gas-oil ratios and to fix
such ratios;
(G) To prevent "blow outs," "caving," and "seepage" in the same sense
that conditions indicated by such terms are generally understood in the oil and
gas business;
(H) To prevent fires;
(I) To identify ownership of oil and gas wells, producing leases,
refineries, tanks, plants, structures, and all storage and transportation equipment
and facilities;
(J) To regulate the "shooting" and chemical treatment of wells in the
same sense that conditions indicated by such terms are generally understood in
the oil and gas business;
(K) To regulate secondary recovery methods;
(L) To regulate the spacing of wells;
(M) To provide for the forced integration of separately owned tracts and
other property ownership interests into drilling and production units;
(N) To provide that the board may, in the absence of a voluntary
agreement and at least sixty (60) days after providing notice to owners, force a
volumetric or surface poolwide unit; provided, that the pool producers having

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rights to more than fifty percent (50%) of the pool acreage request such
unitization of the pool;
(O) To provide that the board may, in the absence of an acceptable plan
of unitization by the producers, shut in the pool to prevent waste and to protect
correlative rights until an acceptable plan is presented by the producers;
(P) To require that any person conducting oil or gas operations, or
causing surface disturbances preparatory to or incidental to such operations,
conduct such operations in a manner which will prevent or mitigate adverse
environmental impacts, such as soil erosion and water pollution, and perform
reclamation of all areas disturbed by the operations, including access roads, as
prescribed by part 7 of this chapter; and
(Q) To require that any operator conducting oil and gas operations, or
causing surface disturbances preparatory to or incidental to such operations, for
wells permitted and drilled after July 1, 1987, post a bond or bonds to secure
compliance with the requirements of this chapter and the rules promulgated
under this chapter, both for plugging of the wells and reclamation of the surface.
A prospective operator shall post the bond with the supervisor at the time the
prospective operator's permit application is submitted. The bond takes effect
when the initial surface disturbances begin. As an alternative to the performance
bond required in this subdivision (a)(4)(Q), a person may submit:
(i) A certificate of deposit issued by any federally-insured financial
institution to be placed in a separate departmental account that must not
revert to the general fund;
(ii) An irrevocable letter of credit issued by any federally-insured
bank or savings and loan association; or

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(iii) Other cash or securities in an amount mutually agreed to by
the supervisor and the operator, to be placed in a separate departmental
account that must not revert to the general fund.
SECTION 15. Tennessee Code Annotated, Section 60-1-203, is amended by deleting
the section in its entirety.
SECTION 16. Tennessee Code Annotated, Section 60-1-204, is amended by deleting
the section in its entirety.
SECTION 17. Tennessee Code Annotated, Section 60-1-207, is amended by deleting
the section in its entirety.
SECTION 18. Tennessee Code Annotated, Section 60-1-208, is amended by deleting
the section in its entirety.
SECTION 19. Tennessee Code Annotated, Section 60-1-209, is amended by deleting
the section in its entirety and substituting:
60-1-209.
(a)
(1) No later than the filing of the application with the supervisor for a
permit to drill and prior to initiating site preparation, the applicant shall give notice
by certified mail, return receipt requested, of the applicant's intent to drill to the
property owner or owners of the surface of the land to be drilled or to be affected
by the surface disturbances listed in subdivision (a)(3).
(2) The property owners to be notified under this section are each
property owner of record in the property tax assessor's office in the county where
the property is located.
(3) The notice must include: the proposed location of the well site; the
proposed location of all new ingress and egress; the location of all diversions,

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drilling pits, dikes, and related structures and facilities; the location of proposed
storage tanks; and all other surface disturbances.
(4) The notice must state that each property owner of record and the
applicant have fifteen (15) business days from the date of mailing to discuss the
location of surface disturbances in connection with the drilling operation. The
notice must also state that if each property owner and the applicant are unable to
resolve differences regarding the location of surface disturbances, either or both
may bring an action for settlement in a court of proper jurisdiction.
(b) Notwithstanding any other requirements for a permit to drill, such a permit
may only be issued if:
(1) The applicant submits to the supervisor statements of no objection
signed by each property owner entitled to notice under subsection (a); or
(2) Upon the submittal of a court order approving the location to the
supervisor.
SECTION 20. Tennessee Code Annotated, Section 60-1-401, is amended by deleting
the section in its entirety and substituting:
60-1-401.
(a) If, upon an inspection or investigation, the supervisor determines that a
person is in violation of this chapter, rules promulgated pursuant to this chapter, an order
adopted by the board, or terms or conditions of a permit, the supervisor shall with
reasonable promptness, and in no event no later than six (6) months following the
inspection or investigation, issue by certified mail a written notice that states the nature
and, if applicable, the location of the violation, including a reference to the statute, rules,
order, or permit terms or conditions alleged to have been violated. In addition, the notice
must fix a reasonable time for abatement of the violation. The supervisor may suspend

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or lengthen the abatement period upon a showing of a good faith effort to comply with
the abatement requirements and that failure to comply with the abatement requirements
is due to factors beyond the person's reasonable control. If applicable, the notice may
state that the supervisor has reason to believe that a violation, or the failure to abate
such violation, should result in the assessment of a civil penalty.
(b)
(1) The supervisor may assess civil penalties up to ten thousand dollars
($10,000) for each day a violation occurs against a person who violates this
chapter, rules promulgated pursuant to this chapter, an order adopted by the
board, or the terms or conditions of a permit.
(2) A civil penalty must be assessed in the following manner:
(A) An order and assessment must be issued by certified mail,
return receipt requested, personal service, or any other means authorized
by the Tennessee Rules of Civil Procedure stating the amount of the
penalty to be assessed and the reason therefor;
(B) An order and assessment issued pursuant to subdivision
(b)(2)(A) must inform the person of the right to appeal to the board within
thirty (30) days of service by filing a written notice of appeal with the
supervisor and the board setting forth the grounds and reasons for the
objections and requesting a hearing in the matter involved before the
board;
(C) A hearing brought before the board must be conducted as a
contested case in accordance with the Uniform Administrative Procedures
Act, compiled in title 4, chapter 5; and

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(D) If a petition for review of an order and assessment is not filed
within thirty (30) days after the date of service, the person is deemed to
consent to the order and assessment, and the order and assessment is
final.
(3) In assessing a civil penalty, the supervisor shall consider the
following:
(A) The appropriateness of the penalty with respect to the size of
the business of the person assessed;
(B) The gravity of the violation;
(C) The good faith of the person;
(D) The person's history of previous violations;
(E) The economic benefit gained by the person; and
(F) Damages to this state, including waste resulting from the
violation, as well as expenses incurred in investigating and enforcing this
section and the costs involved in rectifying any damage.
(4)
(A) If a person appeals an order and assessment of a penalty
pursuant to this subsection (b), the appeal must be conducted as a
contested case and heard before an administrative judge sitting alone
pursuant to §§ 4-5-301(a)(2) and 4-5-314(b), unless settled by the parties.
(B) The administrative judge to whom an appeal is assigned shall
convene the parties for a scheduling conference within thirty (30) days of
the date the appeal is filed.
(C) The administrative judge shall issue a scheduling order for the
contested case that results in a hearing being completed within one-

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hundred eighty (180) days of the scheduling conference, unless the
parties agree to a longer time or the administrative judge allows otherwise
for good cause shown, and an initial order being issued within ninety (90)
days of completion of the record of the hearing.
(D) The administrative judge's initial order, together with any
earlier orders issued by the administrative judge, becomes final unless a
party appeals pursuant to § 4-5-315 within fifteen (15) days after entry of
the initial order.
(E) The board is precluded from reviewing an initial order unless
appealed by a party. Upon appeal to the board by a party the board shall
afford each party an opportunity to present briefs, review the record, and
allow each party an opportunity to present oral argument. If appealed to
the board, the review of the administrative judge's initial order is limited to
the record, but must be reviewed de novo with no presumption of
correctness. In such appeals, the board shall render a final order, in
accordance with § 4-5-315, affirming, modifying, remanding, or vacating
the order and assessment. A final order rendered pursuant to this
subdivision (b)(4)(E) is effective upon its entry unless a later effective
date is stated in the final order. A petition to stay the effective date of a
final order may be filed under § 4-5-316. A petition for reconsideration of
a final order may be filed pursuant to § 4-5-317. Judicial review of a final
order may be sought by filing a petition for review in accordance with § 4-
5-322.
(F) An order of an administrative judge that becomes final in the
absence of an appeal is deemed to be a decision of the board in that

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case for purposes of the standard of review by a court; provided,
however, that in other matters before the board, it may be considered but
is not binding on the board.
(c)
(1) The supervisor, through a notice of forfeiture, may order the forfeiture
of the bond to the department for any person who violates this chapter, rules
promulgated pursuant to this chapter, an order adopted by the board, or the
terms or conditions of a permit.
(2) A bond forfeiture must be issued in the following manner:
(A) The supervisor shall with reasonable promptness, and no
later than six (6) months following the inspection or investigation, issue to
the person by certified mail a notice of noncompliance that states the
nature, and if applicable, the location of the violation, including a
reference to the alleged violation;
(B) A notice of noncompliance must fix a reasonable time for
abatement of the violation. The supervisor may suspend or lengthen the
abatement period upon a showing of a good faith effort to comply with the
abatement requirements and that failure to comply with the abatement
requirements is due to factors beyond the person's reasonable control. If
the supervisor has reason to believe that the violation, or the failure to
abate the violation, may result in bond forfeiture, the notice may so state;
(C) If, within the period of abatement established in the notice of
noncompliance, no agreement has been reached with the supervisor
regarding the alleged failure to comply, and the supervisor determines
that the person has not complied with the requirements set forth by the

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notice of noncompliance, then the supervisor shall issue a notice of
forfeiture to the person by certified mail, return receipt requested,
personal service, or any other means authorized by the Tennessee Rules
of Civil Procedure stating that the bond is ordered forfeited to the
department;
(D) A notice of forfeiture issued pursuant to this subsection (c)
must inform the person of their right to appeal to the board within a period
of thirty (30) days of service by filing a written notice of appeal with the
supervisor and the board setting forth the grounds and reasons for the
objections and asking for a hearing in the matter involved before the
board.
(E) Any hearing brought before the board must be conducted as a
contested case in accordance with the Uniform Administrative Procedures
Act, compiled in title 4, chapter 5; and
(F) If a petition for review of the notice of forfeiture is not filed
within thirty (30) days after the date the notice of forfeiture is served, then
the bond must be ordered forfeited to the department.
(3)
(A) If a person appeals a notice of forfeiture pursuant to this
subsection (c), the appeal must be conducted as a contested case and
heard before an administrative judge sitting alone pursuant to §§ 4-5-
301(a)(2) and 4-5-314(b), unless settled by the parties.
(B) The administrative judge to whom an appeal is assigned shall
convene the parties for a scheduling conference within thirty (30) days of
the date the appeal is filed.

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(C) The administrative judge shall issue a scheduling order for the
contested case that results in a hearing being completed within one-
hundred eighty (180) days of the scheduling conference, unless the
parties agree to a longer time or the administrative judge allows otherwise
for good cause shown, and an initial order being issued within ninety (90)
days of completion of the record of the hearing.
(D) The administrative judge's initial order, together with any
earlier orders issued by the administrative judge, becomes final unless a
party appeals pursuant to § 4-5-315 within fifteen (15) days after entry of
the initial order.
(E) The board shall not review an initial order unless appealed by
a party. Upon appeal to the board by a party, the board shall afford each
party an opportunity to present briefs, review the record, and allow each
party an opportunity to present oral argument. If appealed to the board,
the review of the administrative judge's initial order is limited to the record,
but must be reviewed de novo with no presumption of correctness. In
such appeals, the board shall render a final order, in accordance with § 4-
5-314, affirming, modifying, remanding, or vacating the notice of
forfeiture. A final order rendered pursuant to this subdivision (c)(3)(E) is
effective upon its entry unless a later effective date is stated in the final
order. A petition to stay the effective date of a final order may be filed
under § 4-5-316. A petition for reconsideration of a final order may be
filed pursuant to § 4-5-317. Judicial review of a final order may be sought
by filing a petition for review in accordance with § 4-5-322.

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(F) An order of an administrative judge that becomes final in the
absence of an appeal is deemed to be a decision of the board in that
case for purposes of the standard of review by a court; provided,
however, that in other matters before the board, it may be considered but
is not binding on the board.
(4)
(A) Reclamation bonds must be performance bonds, conditioned
on the reclamation of the well site and access roads pursuant to part 7 of
this chapter.
(B) Any portion of a reclamation bond not expended for the
purposes described in subdivision (c)(4)(A) shall be refunded to the
operator or the operator's surety if the conditions of the bond are fully
satisfied.
(C) If the conditions of a reclamation bond are not fully satisfied,
because the bond is a blanket bond or otherwise, the unexpended
proceeds must be held or applied in a manner to secure the performance
of the remaining obligations secured by the bond. If the bond is a blanket
bond and the unexpended portion is less than is required for the
remaining wells covered by the bond, a supplementary bond must be
required.
SECTION 21. Tennessee Code Annotated, Section 60-1-404(a), is amended by
deleting the subsection and substituting:
(a) All sums received in payment of penalties and bond forfeitures pursuant to
this part must be placed in the state treasury in a separate account to be designated as
the Tennessee oil and gas reclamation fund.

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SECTION 22. Tennessee Code Annotated, Section 60-1-404, is amended by deleting
"default and" from subsections (b) and (c).
SECTION 23. Tennessee Code Annotated, Section 60-1-701, is amended by deleting
the section and substituting:
At the well site, the operator shall take measures to prevent or minimize soil
erosion and pollution of surface waters during the life of the operation, including work
preparatory to or incidental to such operations. Such measures may include sediment
ponds, berms, diversion ditches, hay bales, and other measures designed to prevent
erosion and discharge of pollutants from the well site.
SECTION 24. Tennessee Code Annotated, Section 60-1-702, is amended by deleting
the section and substituting:
Access roads must be constructed and maintained in accordance with all
applicable local, state, and federal laws, rules, and regulations, including, but not limited
to, the requirements of title 69, chapter 3, part 1, and applicable rules promulgated by
the board.
SECTION 25. Tennessee Code Annotated, Section 60-1-703(6), is amended by
deleting the subdivision and substituting:
(6) Access roads are subject to all of the above reclamation requirements unless
the landowner establishes by sworn affidavit that a road will continue to be used for
purposes other than well access. The access road must be maintained in a usable
condition by the surface owner and must comply with all applicable local, state, and
federal laws and regulations, including, but not limited to, the requirements of title 69,
chapter 3, part 1, and applicable rules promulgated by the board. An access road may
continue to be used by the operator to gain access to the well site in order to determine
the adequacy of the vegetation cover or to perform additional revegetation;

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SECTION 26. Tennessee Code Annotated, Section 60-1-703(7), is amended by
deleting the subdivision and substituting:
(7) Revegetation success must not be determined until after two (2) successfully
completed growing seasons have occurred, or at a lesser time as determined by the
supervisor; and
SECTION 27. Tennessee Code Annotated, Section 60-1-704(a), is amended by
deleting the subsection and substituting:
(a) Upon satisfactory completion of regrading and revegetation of all disturbed
areas except active work areas and access roads needed for oil or gas production, the
supervisor may release one-third (1/3) of the reclamation bond upon written request by
the operator or as determined by the supervisor. After plugging, and upon final
reclamation and satisfactory survival of the vegetation as determined by the supervisor,
the supervisor may release the remainder of the reclamation bond upon written request
of the operator or as determined by the supervisor.
SECTION 28. Tennessee Code Annotated, Section 60-1-705, is amended by deleting
the section.
SECTION 29. Tennessee Code Annotated, Section 68-203-103(b)(6), is amended by
deleting the subdivision and substituting:
(6) The fees under the Mineral Test Hole Regulatory Act, compiled in title 59, as
a new chapter pursuant to Section 30, must be set by the supervisor in accordance with
redesignated § 59-9-105.
SECTION 30. Tennessee Code Annotated, Title 60, Chapter 1, Part 5, is amended by
deleting "part" wherever it appears and substituting "chapter" in §§ 60-1-501; 60-1-502; 60-1-
503; 60-1-504(a), (b)(1), (b)(3), (b)(4), (b)(5), and (b)(9); 60-1-505(a) and (c); 60-1-506; 60-1-
507; 60-1-508(1), (3), and (5); 60-1-509; 60-1-510(a) and (c); and 60-1-511.

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SECTION 31. The Tennessee Code Commission is directed to transfer the Mineral Test
Hole Regulatory Act, compiled in Title 60, Chapter 1, Part 5, from that part to Title 59 as a new
chapter 9.
SECTION 32. This act takes effect upon becoming a law, the public welfare requiring it.