Bureau of Land Management Gas, Oil & Geothermal Lease Surety Bonds

The United States Department of the Interior, Bureau of Land Management, otherwise known as the BLM, is responsible for bringing together local, state and tribal governments to protect federal lands in the process of acquiring of natural resources. The BLM determines how, when and where the use of federal lands will be leased including accepting applications for permits to drill. The BLM follows the Federal Land Policy Management Act (FLPMA) to guide the agency in determining the conditions for permitting.

The BLM is also responsible for inspection and enforcement of Federal and Indian leases to ensure all laws are observed and followed. Inspections can include, production and drilling inspections, abandonment inspections, workover inspections, environmental inspections, records verification and undesirable or theft inspections.

Obligee and Bond Conditions:

The obligee is the entity that requires the bond. The Bureau of Land Management requires a surety bond for leasing of federal lands for the purpose of drilling of oil, gas and geothermal wells. The bond ensures faithful performance and compliance of federal regulations and rules. Failure to comply or perform the regulations and rules may result in a claim filed against the bond by the BLM. In the instance of a surety bond, if the BLM files a claim against the surety bond, the 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.

A surety bond is a form of financial security to meet the permit requirement. There are two options of financial security to meet the requirement: a surety bond or a personal bond. The personal bond option requires the bond amount to be paid through a certificate of deposit made payable to the Department of Interior, or a cash deposit by certified check, or cashier’s check. The surety bond option must be issued by an insurance company approved by the Department of Treasury, in which SuretyGroup.com is appointed with surety companies meeting this requirement.

A surety bond must be in place from the time of the initial lease up until the release of the lease and can be only cancelled by the BLM. The premium will renew on the bond on an annual basis for the life of the lease. Failure to maintain a surety bond can result in a claim against the bond.

Surety Bond Requirements:

A surety bond is required based on the type of leases a well operator has: Nationwide, Statewide, Individual or National Petroleum Reserve. A nationwide bond includes coverage of multiple exploration operations throughout the nation including the National Petroleum Reserve in Alaska. The statewide bond covers multiple explorations in a single state. The individual bond is for a single lease operation. And the National Petroleum Reserve In Alaska bond covers either a single lease or multiple leases for exploration operations.

Individual Surety Bond:

• $10,000 or more for each well depending on the state the well is located in

State, Nationwide or National Petroleum Reserve Surety Bond:

• A minimum $25,000 for all leases in one state

Permit Requirements:

1. Complete the Application For New Permit, Permit Modification, or Transfer of Permit Rights including applicants information, location of well, type of operation, type of application, bond information, and have the application notarized.
2. Applicants will need to notify parties that may directly be affected by the well site.
3. Applicants must also notify the local government nearest in proximity of the proposed well site and publish in a local newspaper the intent to drill a well.
4. Provide an operation plan that describes the pre-site condition, type of construction including access roads, land disturbance, and blasting activities. Also include the equipment and facilities that may be used, design and operation of any pits, drilling plan, and disposal of drill cuttings, produced waters, etc.
5. Provide an erosion and sediment control plan.

How Much Will This Bond Cost?

The premium that you pay for a Bureau of Land Management Gas, Oil and Geothermal Lease Surety Bond is dependent on credit and the required bond amount. 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 will require personal and/or business financial statements. Contact our Surety Bond Specialists for a free quote.

Did You Know?

According to the BLM, in 2016 there were approximately 12,771,829 producing acres and 23,926 producing leases on Federal lands.

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