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Oil and Gas Wells Permit Surety Bond Requirements

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In most states, oil and gas well operators that are involved in exploring, drilling and plugging of wells are required to secure a surety bond to guarantee the compliance of statutes and regulations set forth by each state for the issuance of a license or permit. An oil and gas well surety bond ensures that proper permitting has been obtained and conditions will be met in the exploring, drilling and plugging process. This also includes faithful performance of duties and responsibilities and protects the environment, State and citizens from harm.

Even with new technology, not all states need a form of financial security since the land and terrain is not likely to produce oil or gas. These states are mostly found on the eastern seaboard such as Delaware, New Hampshire, Vermont, Maine and Massachusetts. States such as Vermont have chosen not participate in exploration and drilling even though there may be a potential for gas and oil offshore.

Surety Bonds to Meet Financial Security Requirements:

Each state requiring a form of financial security will often accept a surety bond instead of a cash deposit, letter of credit or other form of security. The bond may be in the form of a single or individual well bond or a blanket bond that covers multiple well sites. Some states have a limit to the number of wells under a blanket bond, while others have no limit. Bond terminology may include wording such as: performance, indemnity, surety, conformance, domestic, inactive, deepened, converted, surface, plugging, drilling, abandoned, leased, re-opened, onshore, offshore, irrigated, non-irrigated, seismic, crude oil, natural gas, financial security instrument, and may reference the depth of a well and name or number of the well.

The bond amount may be determined by the depth of a well, type of well, the number of wells owned or leased and other well method information. Most states require a bond at all times and are considered non-cancellable until the well is plugged and the land restored. When a well is plugged and meets the states closure conditions, the state (the obligee) will no longer require a bond and will release it back to the surety that issued it. Bond amounts required by a state range anywhere from $1,000 and up to over a million dollars depending on the location of the wells (offshore wells generally require higher bond amounts) and the number of wells.

Operators may transfer a well to a new owner and a new bond will be required at that time to meet the state requirements. Failure to maintain a bond or pay for the annual continuation can result in a claim by the obligee (the state requiring the bond) and the operator will be required to repay the claimed amount. Operators can opt to replace a bond and in certain instances to find a better rate than was originally quoted if their personal credit has improved since the original bond was issued. A new bond may cost less and can be purchased to replace the existing bond. Sureties (the insurance company underwriting the bond) may also require financial records of the business during the purchasing of a new bond and may request financial reports annually or periodically thereafter.

Permit or License Requirements:

Each state has its own procedures for issuing a license or permit. The process generally includes providing details of the well location(s): including a plat(s) with land details, well construction and type of well casing and cementing, lease information (for leased land), drilling and operation information, and geologic information. The process may also include a site inspection, completion of the application, and payment of the permit or license fee.

Applying for an Oil and Gas Well Bond in Your State?

The first step in applying for a surety bond is understanding the licensing or permit requirements of the state in which your well(s) will be located. The list below provides basic information for each state’s bond name and the state agency requiring the bond.

Bond By StateObligeeApply Now
Alabama Single Well or Alabama Blanket BondOil and Gas Board of AlabamaApply Now
Alaska Surety BondAlaska Oil and Gas Conservation CommissionApply Now
Arizona Performance Bond (Form No. 2)Arizona Oil & Gas Conservation CommissionApply Now
California Individual or Blanket Oil and Gas Well Indemnity BondCalifornia Department of Conservation, Division of Oil, Gas and Geothermal ResourcesApply Now
Colorado Performance Bond (Form 3)Colorado Oil and Gas Conservation CommitteeApply Now
Florida Single Well Bond or Multiple Well Performance BondFlorida Department of Environmental ProtectionApply Now
Georgia Performance BondGeorgia Environmental Protection DivisionApply Now
Idaho Oil & Gas Conservation Commission BondIdaho Oil & Gas Conservation CommissionApply Now
Illinois Financial Security Instrument Surety BondIllinois Office of Oil and Gas Resource ManagementApply Now
Indiana Oil and Gas Surety Bond or Blanket Surety Bond (Form No. B1)Indiana Department of Natural Resources Division of Oil and GasApply Now
Iowa Blanket or Well BondIowa Department of Natural ResourcesApply Now
Kansas Performance Bond (Form OPL-1)Kansas Corporation Commission Oil & Gas Conservation DivisionApply Now
Kentucky Surety Bond Covering Wells to be Drilled, Deepened, Re-Opened or Temporarily AbandonedKentucky Department for Natural Resources Division of Oil and GasApply Now
Louisiana Well or Multiple Wells Performance BondLouisiana Department of Natural Resources Office of ConservationApply Now
Maryland Gas and Oil Drilling and Operating Surety Bond and Blanket Surety BondMaryland Department of the Environment, Minerals, Oil and Gas DivisionApply Now
Michigan Bond for Conformance (Form EQP 7200-3)Michigan Department of Environmental QualityApply Now
Mississippi Bond Covers the Plugging of Class II or Oil and Gas WellsMississippi State Oil and Gas BoardApply Now
Missouri Oil and Gas Well BondMissouri Department of Natural Resources Oil and Gas CouncilApply Now
Montana Surety Bond (Form No. 3)Montana Board of Oil and Gas ConservationApply Now
Nebraska Oil and Gas Operators Bond (Form 3A)Nebraska Oil and Gas Conservation CommissionApply Now
Nevada Oil and Gas Drilling BondNevada Commission on Mineral Resources, Division of MineralsApply Now
New Mexico One Well or Blanket Plugging Bond (Form O & G B)New Mexico State Lance OfficeApply Now
New York Well Plugging and Surface Restoration BondNew York Department of Environmental Conservation, Division of Mineral ResourcesApply Now
North Carolina Surety Bond (Form 8)North Carolina Department of Environment and Natural Resources, Division of Energy, Mineral, and Land Resources, Energy Section-Oil and Gas ProgramApply Now
North Dakota Single Well < 2,000’ in Depth or > 2,000’ in Depth or Blanket BondIndustrial Commission of North Dakota, Oil and Gas DivisionApply Now
Ohio Surety Bond (Form 2) Ohio Department of Natural Resources Division of Oil and Gas Resources ManagementApply Now
Oklahoma Surety Bond (Form 1006)Ohio Corporation Commission, Oil and Gas Conservation DivisionApply Now
Oregon Performance Bond to ConductOregon Department of Geology and Mineral IndustriesApply Now
Pennsylvania Surety Bond for Oil and Gas WellsPennsylvania Department of Environmental ProtectionApply Now
South Carolina Drilling Permit Performance BondSouth Carolina Board of Environmental CertificationApply Now
South Dakota Plugging and Performance BondSouth Dakota Department of Environment and Natural Resources, Minerals and Mining ProgramApply Now
Tennessee Comprehensive Bond Identification (Form CN-0120) Tennessee Department of Environment and Conservation, Oil and Gas ProgramApply Now
Texas Individual or Blanket Performance Bond (Form P-5PB)Railroad Commission of Texas, Oil & Gas DivisionApply Now
Utah Surety Bond (Form 4A)Utah Department of Natural Resources, Division of Oil, Gas and MiningApply Now
Virginia Operator’s Surety BondVirginia Department of Mines Minerals and EnergyApply Now
Washington Oil & Gas Blanket Drilling and Production BondWashington Department of Natural Resources, Division of Geology and Earth ResourcesApply Now
West Virginia Single or Blanket Bond for Oil and Gas Wells West Virginia Department of Environmental Protection, Office of Oil and GasApply Now
Wyoming Owner’s Surety Bond or Blanket Bond (Form 8)Wyoming Oil and Gas Conservation CommissionApply Now
Bureau of Land Management: Oil and Gas or Geothermal Resources Lease Bond, Oil and Gas or Geothermal Exploration BondDepartment of the Interior Office of Natural ResourcesApply Now

How Much Will an Oil and Gas Well Bond Cost?

The premium that you pay for an oil and gas well bond will vary based on the bond amount required by the state, your personal credit. We offer low rates for those with good credit. Contact our Surety Bond Specialists for a free quote. For bond amounts over $50,000 business financial statements may be required.

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Read our blog, The Oil and Gas Industry is Bigger In Texas
Read our blog, Changes for California Oil and Gas Well Drillers

More Surety Bond Questions?

Check out our FAQ page or What’s a Surety Bond? page. Should you need or choose to buy a surety bond, SuretyGroup.com has been underwriting surety bonds throughout the U.S. for more than 35 years. When you work with us, you enjoy the unique benefit of dealing with a team of highly experienced surety agents with in-house underwriting authority. This allows you to receive competitive, low rates, quick approvals, and immediate bond delivery. In most cases, your bond will be delivered within 24 hours after you apply for it.


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