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.
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.
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.
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.
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.
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