The Ohio Division of Oil and Gas Resources Management (Division) is responsible for the issuing of permits and operator compliance of state laws and regulations for oil and gas well drilling, operation, exploration, and plugging. The Division maintains maps of well locations and tracks other data relevant to each well; performs inspections of new well sites and plugging and restoration of well sites; ensures wells are drilled and operated meeting the state's regulatory standards; and provides a mechanism for non-compliance of operator duties through a form of security in which a surety bond meets this obligation.
The obligee is the entity that requires the bond or other form of security. The Ohio Department of Natural Resources (DNR), Division of Oil and Gas Resources Management requires a surety bond prior to the drilling of any new wells, deepening of wells, and the plugging of wells. The bond ensures compliance of state laws and regulations. Failure to comply with state laws and regulations may result in a claim filed against the surety bond by the Division. If a claim is filed against the bond, the owner and/or operator (named as the principal on the bond form) are responsible for repayment of the claimed amount if it is paid out by the surety.
The bond must be in place at all times 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 bond is replaced or ownership has changed, a new bond must be filed with the state. Failure to maintain a bond will result in a claim by the Division.
The bond also ensures the plugging and surface restoration of the well. When the well is plugged and the land is restored and passes inspection, the obligee will release the bond, and the premium for the bond is no longer required.
Instead of a surety bond, another type of security may be accepted by the Division. Acceptable forms of security include cash, a certificate of deposit or an irrevocable letter of credit equal to the required bond amount.
A surety bond is required based on the number of wells for any well sold, transferred, drilled or permitted. An individual bond is required for a single well. A blanket bond is required for two or more wells.
The premium that you pay for an Ohio Oil and Gas Well Surety bond is dependent on credit and the number of wells.
An annual statement of production is required for each well. The reporting period ends December 31st of each year.
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