California's Division of Oil, Gas and Geothermal Resources oversees the drilling, operation, maintenance, plugging and abandonment of oil, gas, and geothermal wells. Oil and gas operators in California must file individual or blanket bonds with the Department. The bonds protect the State of California from financial loss, protect the environment, prevent pollution, and ensure public safety.
A bond covers drilling, redrilling, deepening, or other operations permanently altering the casing in oil, gas, geothermal or service wells. The bond can be forfeited if an operator fails to plug and abandon a well, failure to clean up a spill or screen a sump associated with a well.
The bond must be obtained with a surety agency that is licensed in California. SuretyGroup.com is licensed to write all surety bonds in California, including all oil and gas bonds.
The "obligee" is the entity that requires the bond or other form of security. California's Division of Oil, Gas and Geothermal Resources is the obligee for California oil and gas well drillers.
Instead of a surety bond, another form of security may be accepted by the Division. Acceptable forms of security include a certified or cashier's check, certificates of deposit, or savings passbook account number.
If the business is a partnership, then all the names of the partners must be on the bond, stating that they are a partnership, and with the name of the firm listed. If the principal is a corporation, then a seal from the corporation must be affixed on the bond. A seal of the surety must also be affixed.
The name of the principal and the well designation must coincide exactly on both the bond form and on any notice of intention to drill, redrill, deepen, abandon, reabandon, or permanently alter the casing on a well.
Some well operations that require a surety bond include:
There are two types of bonds: Individual well surety bonds and blanket surety bonds.
Operators with $200,000 or $400,000 blanket indemnity or cash bond must pay either idle-well fees, maintain an escrow account, or file idle-well bonds at $5000 each.
Operators with $200,000 blanket indemnity bond with over the 50-well limit must file a rider to increase the bond to $400,000 or $2,000,000.
Operators with $200,000 blanket cash bond and well amount exceeds 50 must complete a new bond form for $400,000 and file an additional $200,000 security deposit, or file a $2,000,000 blanket bond.Offshore wells covered by a blanket surety bond = $1,000,000
Life-of-Well or Life-of-Production Facility Bond: For operators with a history of noncompliance. The surety bond amount will vary according to the costs of removing a well or a production facility associated with a well.
Before drilling, operators must:
The premium that you pay for a California Oil and Gas Well surety bond is dependent on credit and the number of wells. For bond amounts over $50,000, personal and corporate business financial statements may be required.
A surety bond rider would be needed if there is a name change of the principal, a designation change on the well, or to increase the monetary liability of a bond or previous rider.
Check out our FAQ page or What’s a Surety Bond? page. Should you need or choose to buy a surety bond, buy from us. SuretyGroup.com has been underwriting surety bonds throughout the U.S. for more than 35 years. When you work with us, you enjoy the unique benefit of dealing with a team of highly experienced surety agents with in-house underwriting authority. This allows you to receive competitive, low rates, quick approvals, and immediate bond delivery. In most cases, your bond will be delivered within 24 hours after you apply for it.
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