055-3 Wyo. Code R. §§ 3-4 - Bonding Requirements (Forms 8, 8A, 8E and 8F)
(a) General.
(i) The purpose of a surety bond or other
guaranty posted as security pursuant to the Commission's Rules is to insure
that the principal or person posting same complies with the Wyoming
Conservation Act, the Commission's Rules, and the orders of the Commission, the
State Oil and Gas Supervisor, or his Authorized Agent, including, but not
limited to, proper plugging of wells and seismic holes and reclamation of the
area affected by same.
(ii) The
Commission shall require from the Owner/Operator a good and sufficient bond
running to the state of Wyoming to assure that each well and associated
equipment shall be operated and maintained in such a manner as not to cause
waste or damage the environment and upon permanent abandonment, each well shall
be plugged in accordance with the Rules and Regulations of the
Commission.
(iii) Site reclamation,
including removal of equipment, shall be initiated within one (1) year of
permanent abandonment of a well or last use of a pit, and shall be completed in
as timely a manner as climatic conditions allow. For just cause, the Supervisor
may grant an administrative variance providing for additional time.
(iv) Reclamation, including removal of
equipment, shall be completed in accordance with the landowner's reasonable
requests, and/or resemble the original vegetation and contour of adjoining
lands. Where practical, topsoil shall be stockpiled during construction for use
in reclamation. All disturbed areas on state lands will be recontoured and
reseeded as required by the Office of State Lands and Investments. Appendix F
includes information on reseeding.
(v) TRANSFER OF WELLS. The Supervisor shall
be advised by the Owner/Operator of all transfers of wells at least thirty (30)
days before the closing date of the transfer and the Supervisor retains the
right for an additional thirty (30) days to evaluate pending transfer of
well(s). Notice of transfer of wells must be accompanied by a list of all wells
to be transferred that includes the well name, API number, legal description
and well status. The purpose of the notice is to provide the Supervisor with an
opportunity to evaluate the status and number of wells that may be involved in
the transfer and determine the need for additional bonding by the new
Owner/Operator. No later than thirty (30) days after notification, the
Supervisor will notify the parties of his preliminary determination of
additional bonding. The previous Owner/Operator's bond shall not be released
until the new Owner/Operator provides bonding, including the additional bonding
if requested. The Supervisor shall have the discretion to hold the prior bond
for a period of six (6) months after the new bond has been posted to evaluate
the performance and viability of the new operator. The Supervisor shall also
provide thirty (30) days notice of the transfer of any well(s) to the county
where the well(s) is located.
(vi)
OTHER REQUIREMENTS. Nothing in this rule shall be construed to prevent the
Supervisor, upon notice and for good cause, from requiring bonds in special
cases in amounts greater than set out in this rule.
(b) Types of Bonds.
(i) WELL/BLANKET BONDS. The Commission shall
require from the Owner/Operator a good and sufficient bond running to the state
of Wyoming, except where a bond in satisfactory form has been filed by the
Owner/Operator in accordance with state, federal or Tribal lease requirements.
The minimum amount of bond or bonds required to be furnished shall be as
follows:
(A) An individual well bond shall be
set at ten dollars ($10.00) per foot of the well bore, and adjusted every three
(3) years based on the Wyoming consumer price index or actual plugging
costs.
(B) In the alternative, a
blanket bond in the amount of one hundred thousand dollars ($100,000.00)
covering all wells, regardless of depth or length.
(C) This section reserved.
(ii) IDLE WELL BONDING.
(A) In the event an Owner/Operator has a
blanket bond covering wells on fee or patented lands, the Commission will
normally not ask for additional coverage if the wells are producing,
monitoring, injecting, or disposing. Wells which are not producing, injecting,
or disposing in an economic manner are deemed to be idle. The Supervisor may
require an increased bond amount up to ten dollars ($10.00) per foot for each
idle well taking into account the existing level of bond in place. As wells are
removed from idle status, up to ten dollars ($10.00) per foot bonding
requirements will be reduced accordingly.
(B) The bonding level of $10 per foot will be
adjusted every three (3) years based on the actual Commission orphan well
plugging cost or by the percentage change in the Wyoming consumer price index.
An Owner/Operator may request the Supervisor to set a different bonding level
based on an evaluation of the specific well conditions and circumstances. The
Owner/Operator shall submit a written cost estimate to provide plugging,
abandonment and site remediation prepared by a Wyoming contractor with
expertise in well plugging, abandonment and site remediation. At his
discretion, the Supervisor may accept or reject the cost estimate when
determining whether to adjust the bonding level.
(C) The idle well bond amount will be
reviewed annually or upon request of the Owner/Operator. The Supervisor may
accept a detailed plan of operation in lieu of additional bonding, which
includes a time schedule to permanently plug and abandon idle wells or take
such action as may be necessary to remove the well(s) from idle status. As part
of the plan of operation, Owner/Operators shall commit to plug or return to
active status a minimum of ten percent (10%) of the idle wells each calendar
year. This plan and time schedule is subject to approval by the Supervisor, and
shall not exceed one (1) year from the date of filing. Approved plans filed by
an Owner/Operator are binding on purchasers in the event of a sale unless the
Supervisor accepts an alternate plan.
(iii) COMMERCIAL CLASS II DISPOSAL WELL
BONDS. The Owner/Operator of a commercial Class II disposal well shall post an
individual well bond for each commercial Class II disposal well owned or
operated. The commercial disposal well individual well bond amount shall be set
at the same amount as the individual well bond in (b)(i)(A) in this section. An
Owner/Operator may request the Supervisor to set a different bonding level
based on an evaluation of the specific well conditions and circumstances. The
Owner/Operator shall submit a written cost estimate to provide plugging,
abandonment, and site remediation prepared by a Wyoming contractor with
experience in well plugging, abandonment, and site remediation. At the
Supervisor's discretion, the Supervisor may accept or reject the cost estimate
when determining whether to adjust the bonding level.
(iv) PIT BONDS. The Commission may require
from the Owner/Operator a good and sufficient bond running to the state of
Wyoming conditioned for or securing the performance that pits constructed to
receive water or other wastes produced in association with hydrocarbons, or
noncommercial, centralized pits located within a lease, unit, or communitized
area used for field operations shall be operated and maintained in such a
manner as to not damage the environment or to not cause undue harm to health
and safety of employees and people residing in close proximity to the pit and
that upon permanent abandonment of the project or last use of the pit, the pit
shall be closed and the adjacent areas reclaimed in accordance with the Rules
and Regulations of the Commission.
(A)
Separate bonding amounts for these pits, if required by the Commission, shall
be set by the Supervisor following evaluation of site-specific conditions and
circumstances. The Owner/Operator shall, within a reasonable time after a
request by the Supervisor or his duly Authorized Agents, provide a written cost
estimate prepared by a Wyoming registered professional engineer with expertise
in surface pit remediation for closure of the pit and remediation of the
surface and access areas closely adjacent to the pit. The surface landowner
shall receive a copy of said cost estimate from the Owner/Operator prior to
construction.
(B) Because the
construction of pits for the retention of water produced solely in association
with the recovery of coalbed methane gas may be of benefit to the landowner,
the Supervisor, in his sole discretion, may waive the bonding for such pits
otherwise provided for by this subsection and allow such pits to remain open
after the cessation of production operations if a notarized statement of
acceptance signed by the landowner sufficient to meet the satisfaction of the
Supervisor and including, at a minimum, the following items, accompanies the
Form 14, Construction of Pits, when it is provided to the Commission:
(I) The surveyed location including latitude
and longitude;
(II) The exact size
and depth of the pit; and
(III) A
statement accepting all future responsibility for the structure and its
contents.
(C) Prior to
the waiving of bonding for pit closure and prior to acceptance by the surface
landowner, the Owner/Operator shall provide the surface landowner a current
written cost estimate for pit closure prepared by a Wyoming registered
professional engineer with expertise in surface pit remediation.
(v) SPLIT ESTATE BONDS.
(A) In the event that an Owner/Operator is
required to post a bond or other surety with the Commission as required by Wyo.
Stat. Ann. §
30-5-402, said surety bond shall comply with
the formatting requirements of the Commission. An Owner/Operator may post a
cashier's check, certificate of deposit or letter of credit that complies with
the requirements of this chapter.
(B) After attempted good faith negotiations
with the surface owner, the Owner/Operator may submit a bond or other guaranty
to cover all oil and gas operations on the surface owner's land as identified
by an oil and gas operator in the written notice required under Wyo. Stat. Ann.
§
30-5-402(e). The amount of
the bond shall be determined by the Supervisor. The minimum amount of bond
shall be ten thousand dollars ($10,000.00) per well site. The Supervisor may
require a separate blanket or surety bond to cover activities, such as but not
limited to access roads, pipelines, and production facilities.
(C) Split estate bonds for the purpose of
conducting seismic operations shall be set in an amount of not less than five
thousand dollars ($5,000.00) for the first one thousand (1,000) acres or
portion thereof, and not less than one thousand dollars ($1,000.00) for each
additional one thousand (1,000) acres or portion thereof, for each surface
owner over whose property access is sought. The Commission may pool parcels of
land of different surface owners where no single parcel exceeds forty (40)
acres.
(D) In determining the
amount of bond to be posted, whether a single well site bond or blanket bond,
the Supervisor shall consider the proposed plan of work and operations
submitted by the Owner/Operator in its notice to the surface owner and may
consider any other factors which would materially impact the bond amount needed
to secure payment of damages including, but not limited to, the following:
(I) Loss of production and income;
(II) Loss of land value; and,
(III) Loss of value of improvements caused by
oil and gas operations.
(E) Within seven (7) days of receipt of a per
well site surety bond or other guaranty, or blanket bond or other guaranty, the
Commission shall give written notice to the surface owner, by certified mail,
return receipt requested. This notice shall be sent to the address provided to
the Commission by the Owner/Operator and shall contain the following
information:
(I) A description of the amount
and type of bond or guaranty received;
(II) A copy of the statement (Form 1A) filed
by the Owner/Operator with its Application for Permit to Drill (APD) or seismic
permit pursuant to WYO. STAT. ANN. §
30-5-403(a); and
(III) A statement that the surface owner has
thirty (30) days from receipt of this notice to file an objection with the
Commission.
(F) If the
surface owner files a written objection to the bond or guaranty amount within
thirty (30) days of receipt of the notice, the matter shall be set before the
Commission at its next regularly scheduled meeting. Each interested party will
have an opportunity, subject to the applicable procedural Rules of the
Commission, to present evidence in support of or in opposition to the bond
amount. The Commission, in determining the accepted amount and type of surety
bond or other guaranty shall consider all relevant evidence, including the
following:
(I) The surety bond or guaranty
objected to;
(II) Any supporting
evidence submitted by the oil and gas Owner/Operator; and,
(III) The surface owner's objections and
supporting documents.
(G)
The Commission shall notify the parties of its decision in writing. The
required surety shall be submitted within thirty (30) days of the Commission's
final order.
(c) Types of Guarantees.
(i) SURETY BONDS. The Commission shall
require from the Owner/Operator a good and sufficient bond issued by a Surety
Company on the Commission's most current form. Bond forms include individual
well Owner's Surety Bonds, Owner's Blanket Bonds, Owner's Blanket Bonds for
Idle Well Bond, Owner's Surety Bonds for Pit Bond, Split Estate Bonds, Seismic
Operator's Blanket Bonds, Seismic Surety Bonds, and Seismic Hole Plugger's
Bond.
(ii) CASHIERS CHECK. A
deposit of a cashier's check in lieu of a surety bond may be accepted subject
to the following conditions:
(A) The check
shall be drawn for an amount equal to or greater than the amount required by
Section 4 of this chapter and Chapter 4, Section 6(h) for a surety
bond;
(B) The check shall be
payable to the order of "Wyoming Oil and Gas Conservation
Commission";
(C) The date on which
the check is issued shall be within ten (10) days before the date on which the
deposit is received by the Commission;
(D) The Owner/Operator shall execute a valid,
binding, first-priority pledge agreement as to the proceeds of the collected
cashier's check, which agreement shall be on the current form approved by the
Commission from time to time;
(E)
The cashier's check and the original of the fully-executed pledge agreement
shall be delivered to the Commission at the same time;
(F) By submitting a deposit under this
subsection, the Operator authorizes and directs the Commission to deposit and
collect the same upon receipt.
(G)
Replacement. The Owner/Operator may deliver at any time to the Commission an
acceptable surety bond or other guaranty to replace a Cashier's Check retained
by the Commission under this section. Upon its receipt and acceptance of such
replacement, the Commission will deliver to the Principal funds in an amount
equal to the original deposit.
(H)
No Interest on Deposits. Interest shall not accrue, nor be payable by the
Commission, on any cashier's check received by the Commission under this
section.
(iii)
CERTIFICATE OF DEPOSIT.
(A) The deposit of a
Certificate of Deposit (CD) in lieu of a surety bond shall satisfy the
following conditions:
(I) The CD shall be
drawn for an amount equal to or greater than the amount required by Section 4
of this chapter and Chapter 4, Section 6(h) of the Commission's Rules, for a
surety bond;
(II) The CD shall be
issued by an FDIC-insured bank with its main office or any branch located in
Wyoming or on any other bank that is deemed acceptable to the
Supervisor
(III) The CD shall be
payable in current funds or such other manner as the Commission may determine
at a bank located within the state of Wyoming;
(IV) The CD shall be on the current form of
certificate of deposit approved by the Commission from time to time;
(V) The CD shall be issued for an initial
term of not less than one (1) year and automatically renewable from year to
year;
(VI) The Owner/Operator shall
execute a valid, binding, first-priority pledge agreement as to the certificate
of deposit, which agreement shall be on the current form approved by the
Commission from time to time;
(VII)
The originals of both the CD and the fully-executed pledge agreement shall be
delivered to the Commission at the same time.
(VIII) The issue date of the CD and pledge
agreement shall be within ten (10) days before the date deposit is received by
the Commission.
(B) No
Interest on Deposits. Interest shall not accrue, nor be payable by the
Commission, on any deposit received by the Commission under this section.
Interest that is payable under a CD shall be paid by the bank directly to the
Owner/Operator.
(C) Replacement.
The Owner/Operator may deliver at any time to the Commission an acceptable
surety bond or other guaranty to replace a CD retained by the Commission under
this section. Upon its receipt and acceptance of such replacement, the
Commission will deliver to the bank the original CD suitably endorsed for
release.
(iv) LETTER OF
CREDIT.
(A) The deposit with the Commission of
a letter of credit (LOC) in lieu of a surety bond may be accepted subject to
the following conditions:
(I) The LOC shall
have a face amount equal to or greater than the amount required by Section 4 of
this chapter and Chapter 4, Section 6(h) for a surety bond;
(II) The LOC shall be issued by an
FDIC-insured bank with its main office or any branch located in Wyoming or on
any other bank that is deemed acceptable to the Supervisor;
(III) The LOC shall be payable in current
funds or such other manner as the Commission may determine at sight at the
counters of an FDIC-insured bank located within the state of Wyoming;
(IV) The LOC shall be on the current form of
letter of credit approved by the Commission from time to time;
(V) The LOC shall be issued with an initial
expiration date of not less than one (1) year from the date of its issuance and
automatically extended from year to year, not to exceed four (4)
years;
(VI) The LOC shall be
received by the Commission within ten (10) days of its issue date.
(B) Expiration of LOC without
Replacement. If a LOC is accepted and retained by the Commission under this
section, and if the Owner/Operator has not deposited any acceptable replacement
surety bond or other guaranty within thirty (30) days before the LOC's final
expiration date, then the Owner/Operator will be deemed to have authorized and
directed the Commission to draw the entire face amount of the LOC and, upon
receipt of the proceeds, retain the same as a deposit of the proceeds of a
collected cashier's check under this chapter;
(C) No Interest. Interest shall not accrue,
nor be payable by the Commission, on any LOC received by the Commission under
this section.
(D) Replacement. The
Owner/Operator may deliver at any time to the Commission an acceptable surety
bond or other guaranty to replace a LOC retained by the Commission under this
section. Upon its receipt and acceptance of such replacement, the Commission
will deliver to the Bank the original LOC.
(d) Disposition of Guarantees.
(i) The bond or other guarantees required by
these rules shall remain in full force and effect until:
(A) The permanent plugging and abandonment of
the well or wells has been approved by the Supervisor;
(B) The well has been properly converted to a
water well in a manner approved by the Supervisor, in conjunction with the
State Engineer;
(C) The successor
Owner/Operator or purchaser of the well or wells and/or the site(s) has
provided a bond or other surety in an amount and form acceptable to the
Commission; or
(D) The bond has
been forfeited or otherwise been released by the Commission.
(ii) Return of surety bond or
other guarantee.
(A) If the
Commission determines the principal on the bond a letter of credit, or cashier
check or certificate of deposit delivered pursuant to this chapter has complied
with the Oil and Gas Conservation Act, the Rules of the Commission, and the
orders of the Commission, the State Oil and Gas Supervisor, or their agents
including, but not limited to, production facility removal, pit closure, proper
plugging of wells and seismic holes and reclamation of the surrounding affected
area, with respect to all operations secured thereby, then the Commission shall
release the obligation of the bond or other guarantee.
(B) The Commission shall deliver to the
surety company a copy of the bond endorsed for release, and/or the original LOC
or CD to the bank. The Commission shall deliver to the depositor of a cashier's
check funds in an amount equal to the original deposit.
(iii) Forfeiture. The Oil and Gas Supervisor
may forfeit the surety bond or other guarantee if the principal or person
posting a surety bond or other guarantee fails to comply with the Oil and Gas
Conservation Act, the Commission's Rules, or any orders of the Commission,
(A) Forfeiture shall be determined by the
Commission after notice and hearing in accordance with these Rules and the Oil
and Gas Conservation Act. Notice of the hearing shall be served on the
principal and notice shall be sent by certified mail, return receipt requested,
and addressed to their last known address listed with the Wyoming Secretary of
State by mailing a copy of the notice of hearing and a copy of a complaint or
other notice, stating the grounds for forfeiture or non-return to them.
(B) If the principal has a defense
to, or otherwise wishes to contest the complaint of the Commission staff, he
shall file a written statement or answer setting forth same with the Commission
at least three (3) working days prior to the Commission hearing. Any defense or
reason for contesting the complaint is waived if he fails to do so. The
Commission may treat the failure to file such a defense or reason to contest
the complaint or the failure to appear at the hearing on same as a default by
the party. The proceeds of a surety bond or other guaranty become the property
of the Commission and shall not be returned to the person posting
same.
(e) Split
Estate Bonds and Other Guarantees.
(i) Any
Owner/Operator may request that its bond or other guaranty posted with the
Commission pursuant to Wyo. Stat. Ann. §
30-5-402(c) to secure the
payment of damages to a surface owner be released upon the submission of a
written request and a certified statement of the following:
(A) That compensation for damages has
occurred;
(B) An agreement for
release has been reached by all parties;
(C) Final resolution of the judicial appeal
process for any action for damages has occurred and all damages have been
paid;
(D) That the surface owner
has failed to give written notice required under Wyo. Stat. Ann. §
30-5-406(a); or,
(E) Has failed to bring an action for damages
within the required time period.
(ii) Upon receipt of a request for release,
the Commission shall notify the surface owner in writing, by certified mail, of
the request. The Commission shall include a copy of the release request and
supporting statement to the surface owner. The surface owner shall have fifteen
(15) days from receipt of said notice to dispute the release request. If no
dispute is received by the Commission, or it is satisfied that the oil and gas
Owner/Operator has complied with the above requirements, the bond may be
released. If the original request contains a verified statement from the
surface owner that he is in accord with the request to release, the Commission
may dispense with the waiting period and proceed to release the bond or other
guaranty forthwith. The Supervisor may release any bond or other surety for
just cause.
Notes
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