(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) All Owners/Operators are required to post additional bond amounts to comply with this subsection (b)(i) within one (1) year of the effective date of this rule.
- (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) 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.
- (iv) 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.