What is a California Oil and Gas Well Bond?
In order to drill or alter oil and gas wells in the State of California, operators are required to post a surety bond as a guarantee that they will adhere to the regulations set for the industry.
Who Needs a California Oil and Gas Well Bond?
Any operator who wishes to drill, deepen, or otherwise alter wells in the state of California is regulated by the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources. To begin a project, the operator must obtain proper permitting, which requires a $25,000 bond for each well less than 10,000 feet or a $40,000 bond for each well that is more than 10,000 feet deep. Operators should verify the required bond amount with the state prior to bonding.
Why Do I Need a California Oil and Gas Well Bond?
For permitted projects, oil and gas well bonds ensure that the operators will fully comply with the laws defined in Division 3 of the Public Resources Code and all rules and regulations of the State Oil and Gas Supervisor or district deputies.
Among other provisions, the principals pledge to:
- Keep accurate logs of the drilling
- Avoid causing harmful substances to penetrate underground or surface water
- Prevent unnecessary damage to the environment
If the principal fails to act in compliance with the industry regulations, any harmed parties can make a claim against the oil and gas well bond. The principal will be responsible for reimbursing the surety for any damages or legal fees paid out.
How Much Does a California Oil and Gas Well Bond Cost?
Depending on the depth of the well being worked on, the California Department of Conservation’s Division of Oil, Gas, and Geothermal Resources requires surety bonds of either $25,000 or $40,000 for each well in the project. California oil and gas well bonds are subject to underwriting, and therefore the cost of the bond will vary based on the credit rating of the applicant. The bond remains in full force as long as the principal remains in compliance with the terms of the surety bond agreement.
Get Started Today!
In order to begin a project drilling or altering a well, you must first purchase an oil and gas well bond. Don’t delay your application.