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New York (NY) Oil and Gas Well Drill, Plug & Surface Restoration Permit Surety Bond

The New York (NY) Department of Environmental Conservation, Division of Mineral Resources (the Division) is responsible for the issuing of permits and operator compliance of state laws and regulations for oil and gas well operations and solution mining, plugging, deepening, converting, drilling and surface restoration. The Division conducts permitting, plugging and inspection of surface restoration of well sites, reviews reports and forms, ensures environmental safety during the production of wells, compiles and tracks well data and well location mapping, investigates and inspects wells, ensures well operations meet the states regulatory standards, and provides a process in the event an operator fails to perform the duties to meet the financial security requirement.

Obligee and Bond Conditions:

The obligee is the entity that requires a surety bond or other form of financial security. The New York Department of Environmental Conservation, Division of Mineral Resources requires a plugging and surface restoration bond prior to the drilling of any new wells, deepening of wells, and converting and the plugging of wells. The bond ensures compliance of regulations and state laws. Failure to comply or perform the regulations and state laws may result in a claim filed on the financial security by the Division. In the instance of a surety bond, if the Division 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.

The plugging and surface restoration bond is a form of financial security to meet the permit requirement. There are several options for the surety bond: cash, escrow account, a certificate of deposit, irrevocable letter of credit made to the state, a statement of financial responsibility, or a surety bond.

A plugging and surface restoration surety bond must be in place from the time of the initial permit up to completion of the well, and does have the option to be canceled by the surety. However, if the bond is cancelled, either another surety bond or other form of financial security must be provided in its place. 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 or other form of financial security is required to fulfill the permit conditions. The Division must approve transfer of ownership prior to any operations. Failure to maintain a bond will result in a claim by the Division.

The conformance bond also ensures the plugging and surface restoration of the well. The well must pass through an inspection process for proper plugging and the surface restored to meet state standards. Upon the release, the premium for the bond is no longer required.

Surety Bond Requirements:

A well plugging and surface restoration surety bond is required based on the number of wells and depth of wells. The single well surety bond covers individual wells. A blanket surety bond covers multiple wells.

Single Well Surety Bonds:

1-9 wells $2,500 for each well up to 2,500 feet in depth

1-7 wells $5,000 for each well 2,500 to 6,000 feet in depth

Blanket Well Surety Bond:

Category 1 Wells

10-25 wells up to 2,500 feet in depth $25,000

26-31 wells up to 2,500 feet in depth $2,500 for each well

32-50 wells up to 2,500 feet in depth $40,000

51-62 wells up to 2,500 feet in depth $2,500 for each well

63-100 wells up to 2,500 feet in depth $70,000

101-112 wells up to 2,500 feet in depth $2,500 for each well

Over 112 wells up to 2,500 feet in depth $100,000

Category 2 Wells

8-25 wells 2,500 to 6,000 feet in depth $40,000

25-28 wells 2,500 to 6,000 feet in depth $5,000 for each well

29-50 wells 2,500 to 6,000 feet in depth $60,000

51-57 wells 2,500 to 6,000 feet in depth $5,000 for each well

58-100 wells 2,500 to 6,000 feet in depth $100,000

101-109 wells 2,500 to 6,000 feet in depth $5,000 for each well

Over 109 wells 2,500 to 6,000 feet in depth $150,000

The bond amount for wells over 6,000 feet in depth will need to be calculated by the Division.

The plugging and surface restoration surety bond will need to be submitted to the New York Department of Environmental Conservation:
Division of Mineral Resources
625 Broadway 3rd Floor
Albany, New York 12233-6500

Permit Requirements:

Complete the permit application and pay the application fee. The check for the application fee will need to be made out to the State of New York.
Complete the Well Permittee Organizational Report unless one is already on file.
The following documents are required when submitting the application:

How Much Will This Bond Cost?

The premium that you pay for a New York Oil and Gas Well Surety Bond is dependent on credit and the number of and depth 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. Bond amounts over $50,000 may require personal and business financial statements. Contact our Surety Bond Specialists for a free quote.

Did You Know?

New York has approximately 14,000 active well and continues to add new drilling each year. Oil and gas drilling provides close to a half a billion dollars a year towards the state’s economy annually.