MISSISSIPPI LEGISLATURE
2023 Regular Session
To: Energy; Finance
By: Senator(s) Harkins
AN ACT TO CREATE THE ORPHANED WELL PARTNERSHIP PROGRAM; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. (1) The Legislature finds that:
(a) Uncapped, orphaned oil and natural gas wells require cleanup or would otherwise continue to emit methane and other gasses;
(b) The federal government is allocating at least Twenty Five Million Dollars ($25,000,000.00) to the State of Mississippi, with additional grant money available to states that address the management and containment of orphaned wells;
(c) In Mississippi, significant new funding would be needed to contain existing orphaned wells in a timely manner; and
(d) Digital asset mining operations can use orphaned oil and natural gas wells to secure the digital asset network in a profitable manner while generating economic activity and helping mitigate the environmental challenge of orphaned wells.
(2) Therefore, the Legislature creates in this chapter the Orphaned Well Partnership Program.
SECTION 2. (1) As used in this chapter, the following words have the following meanings:
(a) "Digital asset mining" means using electricity to power a computer for the purpose of securing the digital asset network.
(b) "Board" means the Mississippi State Oil and Gas Board.
(c) "Orphaned well" means an oil or natural gas well on public or private lands which has not been properly plugged according to the requirements of the statutes where the leasehold owner or wellbore operator cannot be located, and there is no other party that can be forced to plug the well.
(d) "Program" means the Orphaned Well Partnership Program created in this article.
SECTION 3. (1) As administrator of the program, the board shall partner with digital asset miners to have them assume responsibility for plugging, remediating or reclaiming orphaned wells in return for temporary control of the energy from the well as specified by a process created by the board.
(2) The Orphaned Well Partnership Program Fund is created for the purpose of funding the board and providing up-front capital to digital asset miners for the Orphaned Well Partnership Program. The money for this fund shall be deposited from portions of the Infrastructure Investment and Jobs Act as well as the Inflation Reduction Act and a percentage of the funding that currently goes to cleaning up orphaned oil wells from any other state programs.
(3) The board shall be responsible for documenting to the best of its ability all orphaned wells in the state.
(4) The board shall make accessible the reporting information required by the Infrastructure Investment and Jobs Act and other relevant information on a publicly accessible website that contains information on orphaned wells in the state, as well as the following information, if it is reasonably possible to provide such information:
(a) How much methane or any other natural gas can reasonably be expected to be produced from the orphaned well;
(b) The location of the well;
(c) How long the well has been abandoned;
(d) An estimate of how much money it will take to plug, remediate or reclaim each orphaned well to environmental standards;
(e) Whether the well is on state or private land;
(f) Information on the last known operator;
(g) Any information regarding the integrity of the well and/or the casing of the well; and
(h) Any other information the board deems relevant for the program.
Once this information has been collected and put up on a publicly accessible website, the board will solicit bids also available on the same website from digital asset miners to take temporary ownership of the orphaned well and take legal responsibility for plugging, remediating or reclaiming orphaned wells.
The board shall solicit bids at least once a year for this program but may hold more bidding periods at their discretion.
The board shall require digital asset miners to submit all the following information to the board to be eligible to submit bids:
1. Legal documents showing the structure of the digital asset mining company and a demonstrated ability to mine digital assets successfully;
2. A reasonable estimate of when the digital asset mining company would begin mining on the site and a reasonable estimate of how long the digital asset mining company would mine digital assets at the orphaned well site;
3. A reasonable estimate of funds needed in upfront investment from the Orphaned Well Partnership Program Fund to more quickly deploy mining equipment;
4. A reasonable estimate of how many digital assets would be mined at the orphaned well over the life of the agreement;
5. A reasonable estimate of the breakeven price for digital asset mining in order to be profitable at the orphaned well;
6. Proof of financial responsibility for the digital asset mining company's ability to ensure cleanup of the site of the orphaned well, regardless of the success of the mining operation at this location;
7. An estimate of the monies the company will deposit back to the Orphaned Well Partnership Program fund over the life of its agreement in the form of digital assets; and
8. Any other information the board deems relevant.
The information in this bid is to be private to the board. The board may provide summary statistics regarding information received in the bids.
After a bidding period defined by the board, the board will select the bidding winners, taking into account the following criteria:
1. The ability of the digital asset mining company to successfully and safely mine on the orphaned well;
2. The time frame over which the company will mine on the well; and
3. The initial cost and return on investment for the Orphaned Well Partnership Program.
Once the bid is won, and if the mineral rights are still held by a third-party, the miner who assumes control over the well shall enter into private negotiations to determine the royalty on a per-thousand-cubic-feet basis.
The board will announce the winning bidders on a publicly accessible website along with a shortened version of the proposals submitted, removing all sensitive business information of the digital asset mining company.
Before the winning bidder may begin mining on an orphaned well, the bidder must use a third-party organization to report to the board the amount of natural gas emissions currently being emitted from the well.
The winning bidders may begin mining on the orphaned well as per their bid with the board only after posting a bond to the state to ensure that the site will be plugged, remediated or reclaimed to environmental standards.
Before beginning the process of mining on a previously orphaned well won through the bidding process, the winning bidder shall have sixty (60) days from being informed they are the winning bidder to perform due diligence on the well. This shall include the ability to perform the following:
1. Run logs for mechanical integrity;
2. Run logs for surface integrity; and
3. Determine the amount of natural gas and or oil the well can produce.
This data must be reported to the board no longer than sixty (60) days after the due diligence period.
After sixty (60) days, the winning bidder must report their decision of whether they intend to mine at the well and assume all liability of plugging, remediating or reclaiming an orphaned well. If they do not report their decision to the board, they shall be fully responsible for plugging, remediating or reclaiming an orphaned well.
If after sixty (60) days the winning bidder chooses not to mine on the orphaned well, they must do the following:
1. Report their decision to the board;
2. Report the reasoning to the board; and
3. Report any and all logs to the board.
Before the due diligence period ends, a winning bidder may apply to the board for an additional sixty (60) days to perform necessary due diligence.
After the winning bidder assumes control over the orphaned well, the bidder is fully responsible for plugging, remediating or reclaiming the orphaned well.
If applicable, the board will remove the wells secured by digital asset miners through the bidding process from any required plugging schedule.
The cost of plugging, remediating or reclaiming an orphaned well shall be capped at three times the initial estimate by the board unless it is demonstrated that the winning bidder caused any additional costs to the site.
Any additional costs shall be paid for by the Orphaned Well Partnership Program Fund.
In order to qualify for a cap cost on plugging, remediating or reclaiming the orphaned well, the digital asset miner must use a third-party to provide all the following to the board:
1. All information about the well integrity;
2. Record all data on natural gas emissions;
3. Record any potential groundwater contamination; and
4. Show that digital asset mining on the well did not significantly cause the cost of plugging, remediating or reclaiming the well to increase.
Any digital asset miners participating in the Orphaned Well Partnership Program shall not incur any liabilities other than the duty to plug, remediate or reclaim an orphaned well they have taken control of through this program to environmental standards.
The digital asset mining company may pay any monies owed to the Orphaned Well Partnership Program Fund in the form of digital assets. The legislature may determine whether the fund will hold the digital assets or immediately transfer them into American dollars or a stable coin or some combination thereof.
Any digital asset miner paying into this fund shall have those payments exempt from state income and capital gain tax for their digital asset paid into this fund or any other digital asset generated through this project.
Any digital asset miner in this program shall provide a yearly update to the board documenting their ability to plug, remediate or reclaim the well as outlined in their bid.
After the agreed upon period of time set forth in the bid, the digital asset miner shall plug, remediate or reclaim the well using an approved company by the board.
Nothing in this section shall prohibit a digital asset miner from creating an agreement with a third-party to facilitate the transfer of oil from an orphaned well to market.
At the end of the agreed upon mining period, the digital asset miner may take full legal ownership of the well, but doing so does not remove the responsibility of the digital asset miner to plug, remediate or reclaim the orphaned well. A digital asset miner must make the state aware of such plans twelve (12) months before the orphaned well is slated to be plugged, remediated or reclaimed.