Nebraska Oil and Gas Well Surety Bond

The Nebraska Oil and Gas Conservation Commission (the Commission) regulates oil and gas production including drilling, producing, well operations, re-entering, plugging and land restoration. The Commission issues operator permits, conducts inspections of new wells, plugging of wells and reviews land restoration; collects and tracks active and inactive 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 Nebraska Oil and Gas Conservation Commission requires a form of financial responsibility before drilling of new wells, deepening, operation, or re-entering and plugging of an existing well. The bond ensures compliance of state laws and state regulations. 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 responsibility will be forfeited when a valid claim has been made.

The Commission allows for several options to meet the financial responsibility requirement which includes a surety bond, a cashier’s check or a certificate of deposit. The option of a certificate of deposit must be held by a Nebraska bank and be authorized to withdrawal funds if necessary. The option of a surety bond must be issued by a company licensed to do business in Nebraska, 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 is sold to another company or person, 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 Commission.

The surety bond also ensures the well will be properly plugged and the land restored in a manner acceptable by the Commission. The plugged well must pass through an inspection process and the land restored as near as practical to its original condition. The Commission 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 number of wells. Applicants can choose either a one-well bond for individual wells or a blanket bond for multiple wells.

Single or individual wells require a one-well surety bond of $10,000 for each well.

Multiple wells require a $100,000 blanket surety bond.

Permit Requirements

1. Complete the permit application to drill, deepen, produce and operate oil or gas wells and pay the permit fee. Injection wells are not required to pay the permit fee.
2. The permit application will need to include the type of work and well applying for, location of the well, operator and lease information, type of casing and cementing to be used.
3. Provide a plat that provides longitude and latitude, scale of drawing ratio, a north arrow, description of any monuments, or other markers, provide the corners of the boundaries, basis of elevation, basis of bearings, ungraded ground elevation of the well site, township, range, and section where the well will be located.
4. Provide the appropriate surety bond.

How Much Will This Bond Cost?

The premium that you pay for a Nebraska 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?

Prior to the drilling of any well, a copy of the approved permit must be posted in a visible location on the drilling rig. Also, the operator must notify the Commission at least 24 hours in advance of the start of drilling.

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