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Alaska Oil and Gas Single or Blanket Well Surety Bonds

Alaska oil and gas operators that drill, produce, and maintain oil, gas, and geothermal wells must obtain a Permit to Drill from the Alaska Oil and Gas Conservation Commission (AOGCC). The Commission manages certain oil and gas operations in the state, whether it is federally owned, state owned, or privately owned. The permit covers operators of exploratory, stratigraphic test, development wells, injection, and other service wells related to oil, gas and geothermal activities. A part of the permit process includes obtaining a single well or blanket surety bond.

Obligee and Bond Conditions

The "obligee" is the entity that requires the bond or other form of security. In Alaska, the obligee for drillers of oil, gas and geothermal resources is the Alaska Oil and Gas Conservation Commission.

The surety bond ensures that the operator adheres to the regulations set by the AOGCC. They must comply with all the provisions and laws of the State of Alaska, and follow appropriate practices to maintain well control, protect groundwater, avoid waste of oil, gas or geothermal resources, and promote efficient reservoir development.

Failure to comply with the laws and regulations can result in a claim filed against the surety bond. If a claim is filed, the owner and/or operator is responsible for repayment of the claimed about if it is paid out by the surety.

A surety bond remains active until all wells are plugged and abandoned according to state regulations, and all sites are restored.

Surety Bond Requirements

Operators must provide a form of security and can choose between a surety bond (form 10-402A) or a personal bond (form 10-402B). If an operator chooses to use a personal bond they can provide the state with a Certificate of Deposit along with the Personal Bond Form (10-402B), CD documentation or receipt, and Assignment of CD Form.

If the operator chooses to use a surety bond, then the surety bond agency must be licensed in Alaska. SuretyGroup.com is licensed to write all surety bonds in Alaska. The surety bond has two options, the single well bond or a blanket well bond that is used when there are multiple wells to be covered.

Single Well Surety Bonds have a minimum penal sum of $100,000 (except as otherwise allowed by the Commission under 20 AA 25.025(b)).
Blanket Bonds have a minimum penal sum of $200,000.
Surety bonds must remain in effect from the start of well drilling up until it has been plugged and the land restored or if ownership of the well changes, a new bond is required to replace the bond that is currently in effect. The surety bond is considered non-cancelable and the renewal premium is required on an annual basis.

Permit Requirements

The application form for a Permit to Drill is available on the AOGCC's website. Operators need to provide two copies of the form and all supporting information.

Information to be submitted in the application includes:

Name of the proposed well, its purpose, location, and proposed depth. Information on the property lease designation and plat.
Description of equipment used.
Information on drilling, casing and cementing, and drilling fluid.
Obtain either a single or blanket well surety bond

After an application has been received, it will be reviewed by a geologist, a reservoir engineer, and a drilling engineer to make sure the information on the application is accurate and conforms to all regulations.

How Much Will This Bond Cost?

The premium that you pay for an Alaska Oil and Gas Well Bond is dependent on credit and the bond amount required. Our rates start at 1% of the bond amount with good credit. If the bond amount exceeds $50,000, business financial statements may be required for underwriting. Contact our Surety Bond Specialists for a free quote.

Did You Know?

Powers of Attorney are required for every company representative that signs the forms. They must prove that each person signing has the legal authority to bind the corporation to lease and bond agreements.