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Virginia Gas and Oil Well Permit Surety Bonds

The Commonwealth of Virginia, Department of Mines, Minerals and Energy, Division of Gas and Oil (the Division) is responsible for the issuing of permits and operator compliance of state rules and regulations for oil and gas well drilling, operations, plugging and abandonment. The Division conducts well location mapping, investigates and inspects wells, ensures well operations meet the states regulatory standards, reviews reports and forms, compiles and tracks well data. and provides a process in the event the operator fails to perform the duties set forth in the rules and regulations or fails to maintain a bond during the life of the well.

Obligee and Bond Conditions

The obligee is the entity that requires the bond. The Commonwealth of Virginia, Department of Mines, Minerals, and Energy, Division of Gas and Oil, requires a surety bond for the plugging of each well and maintaining and restoring of well sites. The bond ensures faithful performance and compliance of state regulations and rules. Failure to comply or perform the regulations and rules 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.

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: an operator’s surety bond or an operator’s cash bond. The operator’s cash bond option requires the bond amount to be paid through a certificate of deposit made payable to Virginia or a cash deposit. The operator’s surety bond option must be issued by an insurance company authorized and licensed to do business in Virginia, in which SuretyGroup.com meets this requirement.

A surety bond must be in place from the time of the initial permit up to plugging and abandonment of the well and can be only cancelled by the Division. The premium will renew on the bond on an annual basis for the life of the well until the operator has plugged and abandoned the well. Failure to maintain a surety bond can result in the operator being forced to stop well operations and a claim may be placed against the bond.

If the well changes operators, a new bond and well permit is required to replace the existing permit and bond. The Division must review the new owner’s eligibility before approving the change. Failure to acquire a replacement bond will result in a claim, otherwise known as forfeiture, by the Division.

A surety bond is a guarantee that the operator will plug and restore the land around the well site. The well site must pass through an inspection process to ensure that the well was properly plugged and the surface restored to meet state standards. Upon approval of the plugging and restoration, the bond will be released by the Division and the premium for the surety bond will no longer be required.

Surety Bond Requirements

A surety bond is required based on the number of wells. The single well surety bond covers individual wells. A blanket surety bond covers multiple wells.

Single Well Surety Bond:

$10,000 for each well

In addition to the well bond amount, a fee of $2,000 per acre (one-tenth of an acre up to five acres) of disturbed land will be assessed, calculated to the nearest tenth of an acre.

Blanket Surety Bond:

$25,000 up to 15 wells

$50,000 16 wells to 30 wells

$75,000 31 wells to 50 wells

$100,000 51 or more wells

In addition to the well bond amount, a fee of $2,000 per acre (one-tenth of an acre up to five acres) of disturbed land will be assessed, calculated to the nearest tenth of an acre.

Operators that secure a blanket bond will also need to contribute $50 per permit annually to the Gas and Oil Plugging and Restoration Fund. The fund is used to supplement bond proceeds in the cost of plugging and restoration if an operator fails to perform the state required plugging and restoration duties.

Permit Requirements

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.
Applicants will need to notify parties that may directly be affected by the well site.
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.
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.
Provide an erosion and sediment control plan.

How Much Will This Bond Cost?

The premium that you pay for a Virginia Gas and Oil Well Permit Surety Bond is dependent on credit and the number of and depth of wells. 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. Contact our Surety Bond Specialists for a free quote.

Did You Know?

Operators drilling horizontal wells have special requirements to follow. These requirements may be found in the Southwest Virginia Horizontal-1 (SWVH-1) Drilling Pool Field Rules.