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North Dakota Oil and Gas Well Surety Bonds

The North Dakota Industrial Commission, Department of Natural Resources, Oil and Gas Division (the Division) regulates drilling, explorations, and production of oil and gas wells, is responsible for the issuing of permits and operator compliance, well completion, drilling, and production. The Division collects and tracks active and inactive well data and maintains a well mapping system; conducts inspections for new wells, plugging of wells and reclamation of well sites; and provides a security element in the event an operator fails to perform the duties to meet the surety bond requirement. WE NO LONGER WRITE THESE BONDS BUT YOUR LOCAL INSURANCE AGENT MAY BE ABLE TO HELP YOU FIND A SURETY THAT STILL DOES.

Obligee and Bond Conditions

The obligee is the entity that requires the bond. The North Dakota Industrial Commission, Department of Natural Resources, Oil and Gas Division requires a form of security before any drilling of new well’s, plugging or deepening of an existing well. The bond ensures compliance of regulations and state laws. Failure to comply or perform the state laws and regulations may result in a claim filed against the bond 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. Cash bonds are forfeited when a valid claim has been made.

The Division allows for several options to meet the security requirement which includes a surety bond or a cash bond. An alternative form of security but it must first be approved by the Division.

The surety bond must be in place from the time of the initial permit 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 permit conditions. Failure to maintain or replace a bond will result in a claim by the Division.

The surety bond also ensures the well is properly plugged and the surface restored to its natural space. The plugged well must pass through an inspection process and the surface reclaimed to meet state standards. The Division will release the bond when the plugged well passes inspection and the premium for the bond will no longer be required.

Surety Bond Requirements

A surety bond is required based on the number of wells and or depth of the wells. Operators must choose between a single well bond for each well location or a blanket bond covering multiple wells.

Single Well Surety Bond:

$50,000 for a well less than 2000 feet in depth. (Form 3)

$50,000 for a well more than 2000 feet in depth. (Form 3A)

Blanket Surety Bond:

$100,000 a blanket bond for multiple wells. (Form 3c) The blanket bond can’t have more than 6 of the following: a well with a dry hole not plugged, a well that is plugged but the site not properly reclaimed, or a well that is not properly plugged nor properly reclaimed.

The Division may impose additional bond amounts if the operator is in non-compliance or if the Division has pending administrative action against the operator.

Permit Requirements

Complete the Application for Permit to Drill (for vertical or directional drilling) (Form 1) or the Application for Permit to Drill Horizontal Well (Form 1H) and pay the application fee.
The application requires the type of work, type of well, proposed well details including the location, casing, and operator information. The application must be e-filed unless there are extenuating circumstances. The ePermit authorization form will need to be completed and emailed to: apd@nd.gov. The Bismarck will then issue a user-ID and password to file the permit application online.
Provide a certified plat meeting specifications described in the permit instructions.
Provide a drilling prognosis.
Provide a general completion technique.
Submit the surety bond with the permit application.

How Much Will This Bond Cost?

The premium that you pay for a North Dakota Oil and Gas Well Surety Bond is dependent on credit and depth and the number of wells. For bond amounts over $50,000, personal and business financial statements may be required. Contact our Surety Bond Specialists for a referral to an agency that writes these bonds.

Did You Know?

The Division must consider location issues before approving a permit such as the distance to aquifers, coal, sand or gravel deposits, abandoned wells, military facilities, historic or recreation sites, future roadway projects, etc. and may attach stipulations if necessary.