The Mississippi Oil and Gas Board (the Board) regulates oil and gas production in the state. The Board issues operator permits, collects and tracks inactive and active well data and maintains well field maps; conducts inspections for new wells, plugging and abandoning of wells; and provides a financial responsibility 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 Mississippi Oil and Gas Board requires a form of financial responsibility before new drilling of wells, operation, plugging and abandoning of an existing well. The bond ensures the cost of plugging wells. Failure to comply or perform proper plugging of wells may result in a claim filed against the bond by the Board. In the instance of a surety bond, if the Board 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 responsibility are forfeited when a valid claim has been made.
The Office allows for several options to meet the financial security requirement which includes a performance surety bond, an irrevocable letter of credit or participation in the trust. The option of irrevocable letter of credit requires a letter from a federally insured financial commercial bank. The option to pay into the trust, The Emergency Plugging Fund, requires a cash payment of an annual fee equal to 5% of the amount of financial responsibility that otherwise would be required. The option of a performance bond requires a surety agency licensed in Mississippi, in which the SuretyGroup meets this criteria will complete the bond form.
The performance surety bond or another form of financial responsibility must be in place from the time of the issuance of the permit up to the plugging of the well. The bond or other form of financial responsibility can be cancelled with a 120 day notice of cancellation. However, if the bond is cancelled, a replacement form of financial responsibility must be submitted to the Board within 90 days of the notice of cancellation. The premium will renew on the surety bond on an annual basis for the life of the well. If the well transfers to new ownership, a transfer of permit is required to fulfill the financial responsibility conditions. The Board must be notified in writing of the transfer within 10 days of the change.
The performance surety bond 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 Office will release the financial security after the plugged well passes inspection, which in the case of a performance bond, renewal premium will no longer be required.
A performance surety bond is required and the bond amount is based on the depth and number of wells and whether the well is on land or offshore waters. The surety bond may be for individual wells or a blanket bond for multiple wells.
|Depth in Feet||Bond Amount Required|
|Zero to 10,000 ft||$20,000|
|10,001 to 16,000 ft||$30,000|
|16,001 or more ft||$60,000|
A Blanket Bond for multiple wells requires a $100,000 surety bond.
Submerged Offshore Lands
|Number of Wells||Bond Amount|
|Blanket Bond Multiple Wells||$200,000|
The Board may request additional financial responsibility if the bond minimum is deemed insufficient as authorized in Section 53-1-17 of the Mississippi Code.
The premium that you pay for a Mississippi Oil and Gas Well Performance Surety Bond is dependent on credit and depth, location of wells and the number of wells.
Every well requires a sign at the entrance to the well location that has reasonably large and clear lettering that specifies wording: Danger, no trespassing, authorized personnel only, and have the operator record, API number, field name, well number, emergency phone number, well longitude and latitude, and section, township and range. Other signage requirements may be found in Statewide Rule 6.
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