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South Dakota Oil and Gas Well Plugging and Performance Bond

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The South Dakota Mineral and Mining Program Board (Board) is responsible for the issuing of permits and compliance of state laws and regulations of oil and gas well drilling, operation, exploration, and plugging. The Board tracks and maps well locations, production and other well data; addresses water, environment and human health concerns related to wells; ensures that the permitting of the drilling of wells to meet regulatory standards; and provides a mechanism for non-compliance of operator duties through a form of security in which a performance surety bond meets this criteria.

Obligee and Surety Bond Conditions

The "obligee" is the entity that requires the bond or other form of security. The South Dakota Department of Environment and Natural Resources, Minerals & Mining Program Board requires that a performance surety bond be obtained for wells drilled or permitted after July 1, 2013. The bond ensures compliance of state laws and rules. Failure to comply with these terms may result in the shutting down and sealing of property and a claim filed against the performance surety bond by the Board. If a claim is filed against the bond, you, 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.

The bond must be in place at all times and does not have the option to be canceled. The premium will renew on the surety 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 Board.

The bond also ensures the plugging and surface restoration of the well. When the well is plugged, the land restored, and passes inspection, the obligee will release the bond and the premium will no longer be due.

Instead of a performance bond, another form or combination of financial security may be accepted by the Board. This can include escrow accounts, letters of credit, trusts, guarantees, or cash deposit’s equal to the required bond amount. The board may also take into consideration as a form of financial security the company net worth when determining the security amount required.

Performance Bond Requirements

A performance surety bond is required based on the number of wells and the depth of the wells for any well drilled, sold, transferred, or permitted after July 1, 2013. An individual bond is required for each well. A blanket bond is required to cover multiple wells.

Individual Bonds:

  • A $10,000 performance bond is required for each well with a depth of less than 5,500 feet.
  • A $50,000 performance bond is required for each well with a depth of more than 5,500 feet.

  • Blanket Bonds:

  • A $30,000 performance bond is required for multiple wells with a depth of less than 5,500 feet.
  • A $100,000 performance bond is required for multiple wells with a depth of more than 5,500 feet.

  • The Board may increase the bond amount based on the law at its discretion at any time.

    Permit Requirements

    1. Complete the application and pay the permit fee for each well.
    2. Provide details for well type, proposed depth, size of casing and cement to be used, well spacing and location.
    3. Obtain either an individual bond or blanket bond based on the number of wells.

    How Much Will This Bond Cost?

    The premium that you pay for a South Dakota Oil and Gas Well Performance Surety Bond is dependent on credit, the depth of the well and number of wells. Bond amounts over $50,000 may require business financial statements for underwriting purposes.

    Did You Know?

    Plugging of wells requires surface restoration within one year and may include reclamation such as grading, clean up of drilling wastes, replacing topsoil, seeding, controlling weeds, etc. to return the land as it was before the drilling occurred.

    Related Links

    South Dakota Oil & Gas Rules and Regulations
    South Dakota Oil and Gas Permit Forms

    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, buy from us. 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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