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Montana Oil and Gas Well Surety Bond

The Montana Board of Oil and Gas Conservation (the Board) regulates oil and gas production including drilling, re-entering, well operations, deepening, plugging and restoration. The Board issues operator permits, conducts inspections of new wells, plugging of wells and site restoration, collects and tracks inactive and active well data and maintains well field maps, and provides a financial responsibility element in the event an operator fails to perform the duties to meet the state requirements.

Obligee and Bond Conditions

The obligee is the entity that requires the bond. The Montana Board of Oil and Gas Conservation requires a form of financial responsibility before the drilling of wells, deepening, operation, or re-entering and plugging 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 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 will be forfeited when a valid claim has been made.

The Board allows for several options to meet the financial responsibility requirement which includes a surety bond, a letter of credit, or a certificate of deposit. The option of a letter of credit requires that the letter is to be issued by a qualified FDIC-insured commercial bank. The option of a certificate of deposit must be held by a Montana bank. And the option of a surety bond must be issued by a company licensed to do business in Montana, in which SuretyGroup.com meets this criteria.

The surety bond must be in place from the time the permit is issued up to the plugging of the well and does not have the option to be cancelled. 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 replacement bond is required to fulfill the financial responsibility conditions. Failure to maintain or replace the bond or financial responsibility will result in a claim by the Board.

The surety bond also ensures the well will be properly plugged and surface restoration completed. The plugged well must pass through an inspection process and the land restored as near as practical to its original condition. The Board will release the financial responsibility after the plugged well passes inspection, which in the case of a surety bond, the renewal premium will no longer be required.

Surety Bond Requirements

A surety bond is required and the bond amount is based on the depth and number of wells. Applicants can choose either an individual or single well surety bond or a blanket surety bond for multiple wells, a limited bond to cover wells with limitations, UIC bond to cover salt water disposal or enhanced recovery injection wells or a replacement bond.

An Individual or Single Well Surety Bond

Well depth 2,000 feet or less requires a $1,500 surety bond
Well depth more than 2,500 feet but less than 3,501 feet requires a $5,000 surety bond
Well depth more than 3,501 feet requires a $10,000 surety bond

The Board has the option to increase surety bond amounts for an individual well from:
$1,500 to $3,000;
$5,000 to $10,000;
$10,000 to $20,000

A Blanket or Multiple Well Surety Bond

Requires a $50,000 surety bond
Or the blanket bond may be increased from $50,000 to $100,000 at the discretion of the Board
The process to increase the bond amount will involve the surety issuing a rider for each bond increase
The Board may limit the number of wells covered under a blanket bond

Permit Requirements

Complete the permit application to drill, deepen, or re-enter for oil or gas or other and pay the permit fee.
The permit application will need to include the type of permit applying for, location of the well, operator and lease information, and type of casing to be used.
Supplemental information:
Provide a certified plat.
Provide an 8 ½ x 11” photocopy of a topographic map of the well location.
Attach a sketch of the well site that has dimensions and position of the well site, location of pits, location of additional topsoil reserves, and centerstake and cut at the corners.
Describe the plan for disposal of pit fluids and solids after the well is drilled.
Note any additional permits that may be required for this well site.

How Much Will This Bond Cost?

The premium that you pay for a Montana Oil and Gas Well Surety Bond is dependent on credit and depth and the number of wells. Our rates start at $100 for bond amounts $10,000 and under with good credit. Bond amounts over $10,000 start at 1% of the bond amount with good credit. Contact our Surety Bond Specialists for a free quote.

Did You Know?

Domestic gas wells must have a certificate of deposit or real property bond on file. A $5,000 certificate of deposit is required for a single well or a $10,000 certificate of deposit is required for more than one well. If the option of real property bond is chosen, the bond must be in amount two times the amount of the certificate of deposit and be submitted with a real property appraisal and a history of the title.