New Bond Regulations for Oil and Gas Wells in Georgia
In July 2019, the Georgia Department of Natural Resources introduced new regulations for oil and gas well operators in the state.
The new rules concern the Georgia oil and gas wells bond requirements that applicants for permits need to provide. The Department increased the bond amounts, and also changed some of the conditions for satisfying the bond criteria.
The most important changes that concerns operators of oil and gas well operators in Georgia are described in the sections below.
The new regulations
In order to work on oil and gas wells in Georgia, operators need to obtain a permit from the state Department of Natural Resources. The authority has to assess the suitability of the applicants and then issue the permit, if all requirements are satisfied.
One of the main criteria that you have to fulfill to get a permit is to post a surety bond. It serves as a protection mechanism for the state that you will operate the oil and gas well drilling in accordance with state regulations. If you fail to comply with applicable rules, the state can seek financial reimbursement via a claim against your bond.
Previously, the Department required operators to post a bond between $10,000 and $40,000. The exact amount depended on the depth of the wells. The new rules change the amount range to $20,000 to $80,000, with the exact amount still set on the basis of the depth of the drilling. The maximum blanket bond that an applicant can provide for operating multiple wells is also increased – from $50,000 to $100,000.
Additionally, the Director of the Department can demand a higher bond amount for additional testing after the drilling rig has been removed. Previously, the maximum amount was $10,000. Now this has been increased to $25,000.
The revised regulations introduce two additional options for applicants. A permit applicant can demand to post a lower bond amount if they can demonstrate that it would be appropriate to cover their activities. The new rules also allow permit holders to provide a letter of credit instead of a surety bond in order to satisfy the security requirements of the Department.
Meeting the state oil and gas wells bond requirement
All permit applicants have to provide the required bond amounts in order to drill oil and gas wells in Georgia. The bond functions as an additional layer of guarantee for the state that you will conduct your activities as a drilling operator in accordance with the law.
In order to get bonded, you have to cover a small percentage of the bond amount set by the Department for your permit. This is called the premium, and it depends on the strength of your personal and business finances. If they are in good shape, you can expect rates between 1% and 5% of the required bond amount. Thus, if you have to post a $20,000 surety bond, your premium can be as low as $200 to $1,000.
Do you need further information about Georgia oil and gas wells bonds? Don’t hesitate to contact us at 877.514.5146.