Oil and Gas Surety Bonds Overview
Oil and gas surety bonds are usually required from oil and gas well operators, as a prerequisite to obtaining permission to explore or drill in a particular area. The surety bond ensures strict compliance with state and federal regulations on operating an oil and gas well, disposing of waste, closing the operation, and more.
Like other types of surety bonds, oil and gas surety bonds are a three party agreement between a principal (the oil and gas well operator), an obligee (the state) and a surety (the bonding company). The bonding company is the entity that underwrites the bond, essentially backing the agreement legally and financially. If the principal violates the agreement in any way, a claim can be made against them. The surety must reimburse the claimant for all losses, after which it will seek reimbursement from the principal. Ultimately, you’ll be required to indemnify the surety for any claims against your bond.
Keep reading for more information on oil and gas surety bonds. If you need any assistance, simply call us at (866)-450-3412.
Oil and Gas Surety Bond Cost
The cost of your surety bond will be determined only after the bond underwriter does a thorough evaluation of your credit report and financial status. You will have to a pay a premium, which is a certain percentage of the total bond of the surety bond you need to post. If the surety determines that you are lower-risk applicant, you’ll likely pay no more than 5% of the bond amount. Bad credit applicants may see higher premiums.
The total bond amount refers to the maximum compensation you could be mandated to pay, if you are found to be in violation and there is a claim against you. Each state determines the total bond amount they will require. For example, Montana requires oil and gas surety bonds in amounts between $1,500 and $50,000, depending on the depth and number of wells.
If you wish to learn more about how the cost of surety bonds is calculated, visit our bond cost guide.
Getting an Oil and Gas Surety Bond with Bad Credit
Spots in your credit report, a low credit score, or no credit history are all red flags to surety underwriters, which is why your premium will be higher. Normally, bad credit applicants pay between 4% and 15% of the total value of the bond.
You can usually mitigate the influence of your credit score by providing other information which would signal trustworthiness to the bonding company. These can be submitting proof of liquid assets, personal and business financial statements, or a strong resume demonstrating industry experience. Although bad credit applicants pay higher premiums, they can lower their bond costs over time if they improve their credit profile.
Our Bad Credit Program can help you obtain your bond at the lowest price.
How to Get an Oil and Gas Well Permit
In addition to providing the surety bond, oil and gas well operators are required to satisfy a number of other requirements.
These may vary significantly from state to state, so there’s no one-size-fits-all set of instructions for getting your permit. It’s important to be well-acquainted with your state’s requirements before you apply, so as to avoid the rejection of your application. Knowing all the requirements well will also help you reduce the likelihood of triggering a bond claim.
Get Your Oil and Gas Surety Bond Today!
Applying for your surety bond is now easier than ever, using our our simple 1-page online application. You will get a free bond quote and instructions from one of our agents on how to complete the rest of the application process.
Do not hesitate to call us at (866)-450-3412 if you need any help from us. We are looking forward to your call!