KRS 349.120: Well operators to execute bonds or blanket bonds in favor of department --

Establishment of coalbed methane well plugging fund -- Operators' civil and

criminal liability.

(1) When any person submits to the department an application for a permit to dri ll a

coalbed methane well, or to reopen, deepen, or temporarily abandon any coalbed

methane well which is not covered by a surety bond, the department shall, except as

provided in this section, require from the well operator a bond in the sum of five

thousand dollars ($5,000). The bonds shall be made in favor of the Department for

Natural Resources, conditioned that the wells upon abandonment shall be plugged

in accordance with the administrative regulations and that all records required by

the department b e filed as specified. All bonds shall remain in effect until the

plugging of the well is approved by the department, or the bond is released by the

department. Any well operator in lieu of the bond may file with the department a

blanket bond in a sum of on e hundred thousand dollars ($100,000), covering all

coalbed methane wells drilled or to be drilled in the Commonwealth by the

principal in the bond, and the acceptance and approval by the department of the

blanket bond shall be in full compliance with the above provision requiring an

individual well bond. The department may establish a bond in a sum greater than

five thousand dollars ($5,000) for an individual well or blanket bond in sum greater

than one hundred thousand dollars ($100,000) if the department determines that the

particular circumstances of the drilling of the well or wells warrant an increase in

the bond amount. A deposit in cash or a bank -issued irrevocable letter of credit may

serve in lieu of either of the individual well or blanket bonds. A certificate of

deposit, the principal of which is pledged in lieu of a bond and whose interest is

payable to the party making the pledge, may also be accepted by the department. If

an operator is required to post individual well bonds exceeding a total o f five

thousand dollars ($5,000) or elects to post a blanket bond, the certificate of deposit

shall be accepted by the department in lieu of that portion of the amount of the

bonds exceeding five thousand dollars ($5,000). The bond or bonds referred to in

this section shall be executed by the well operator as principal and, if a surety bond,

by a corporate surety authorized to do business in the Commonwealth. A deposit in

cash shall serve in lieu of either of the above bonds; all cash bonds accepted by the

department shall be deposited into an interest -bearing account, with the interest

thereon payable to the special agency account known as the coalbed methane well

plugging fund, created in subsection (3) of this section, to be used in accordance

with the purposes described therein.

(2) A successor to the well operator shall post bond, pay a twenty -five dollar ($25) fee

per well to the department, and notify the department in writing in advance of

commencing use or operations of a well or wells. The successor shall assume the

obligations of this chapter as to a particular well or wells and relieve the original

permittee of responsibility under this chapter with respect to the well or wells. It

shall be the responsibility of the selling operator to require the successor operator to

post bond before use or operation is commenced by the successor and relief of

responsibility under this chapter is granted to the original permittee.

(3) All sums received through the forfeiture of bonds shall be placed in the State

Treasury and credited to a special agency account to be designated as the coalbed

methane well plugging fund, which shall be in an interest -bearing account with the

interest thereon payable to the fund. This fund shall be available to the department

and shall be expended for the plugging of any abandoned coalbed methane wells

coming within the authority of the department pursuant to this chapter. The

plugging of any coalbed methane wells pursuant to this subsection shall not be

construed to relieve the opera tor or any other person from civil or criminal liability

which would exist except for the plugging. Any unencumbered and any unexpended

balance of this fund remaining at the end of any fiscal year shall not lapse but shall

be carried forward for the purpos e of the fund until expended or until appropriated

by subsequent legislative action.