The Kansas Corporation Commission, Conservation Division (the Commission) regulates oil and gas production in the state including exploration and production activities and intrastate gas storage. The Commission issues operator licenses, collects and tracks active and inactive well data and maintains a well mapping system; conducts inspections for new wells, plugging of wells and site remediation of well sites; and provides a financial assurance element in the event an operator fails to perform the duties to meet the state requirements.
The obligee is the entity that requires the bond. The Kansas Corporation Commission, Conservation Division requires a form of financial assurance before any drilling of new wells, deepening, repairing, re-drilling, or plugging and abandoning of an existing well. The bond ensures compliance of regulations and state laws. Failure to comply or perform by the state laws and regulations may result in a claim filed against the bond by the Commission. In the instance of a surety bond, if the Commission files a claim against the surety bond, the owner and/or operator (named as the principal on the bond form) will be responsible for repayment of the claimed amount if the claim is paid out by the surety. Other forms of financial assurance/responsibility are forfeited when a valid claim has been made.
The Commission allows for several options to meet the financial assurance/responsibility requirement which includes a performance surety bond, cash or irrevocable letter of credit.
The performance surety bond must be in place from the time of the issuance of the license up to the plugging of the well and does not have the option to be canceled. The premium will renew on the bond on an annual basis for the life of the well. If the well transfers to new ownership, a new bond is required to fulfill the financial assurance conditions. Failure to maintain or replace a bond will result in a claim by the Commission.
The performance surety bond also ensures the well will be properly plugged and surface remediation completed. The plugged well must pass through an inspection process, and the surface reclaimed to meet state standards. The Commission will release the financial assurance after the plugged well passes inspection, which in the case of a bond, renewal premium will no longer be required.
A performance surety bond is required and the bond amount is based on the depth and numer of wells.
If the performance bond amount is less than $45,000, provide an inventory list for each well including the depth of the well.
The performance bond will need to be filed with the Kansas Corporation Commission, Conservation Division
266 N. Main St., Ste 220
Wichita, KS 67202-1513
The premium that you pay for a Kansas Oil and Gas Well Performance Surety Bond is dependent on credit and depth and the number of wells.
License applications will need to be submitted through KOLAR the Kansas On-Line Automated Reporting system. Well inventory forms, changes to the operator license, change of ownership and other applicable forms can be made through this system.
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