Financial Assurance & Bonding

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Operators whose goal is to produce our vital natural resources are held accountable for the financial, environmental, and social responsibilities that come with operating in the great state of North Dakota. This includes proper planning, operations, emergency response, maintenance, and retirement of assets.

All operators must have the required financial assurance and bonding in place. They must follow rules and regulations for proper spill prevention, monitoring, and remediation in addition to proper plugging of wells and the responsible reclamation of land.

Frequently Asked Questions

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Frequently Asked Questions
Financial Assurance and Bonding Requirements in North Dakota

Oil and Gas operators in North Dakota are required to have bonding in place for each well pursuant to state law (Found in our Rules & Regulations). Bonding is a form of financial surety that a business will purchase which indicates that they are planning on standing behind their obligations. Should the business not meet those obligations, the party requiring the bond may seek a claim against any amount of the bond. For example, North Dakota requires that a bond shall be in the amount of $50,000 when applicable to one well only. Should the operator of that well fail to properly keep the well in compliance, the state – after proper hearing – may confiscate all or a portion of that bond to bring the well to compliance.  

Bankruptcy

In the event a North Dakota operator files for bankruptcy, this does not grant approval or consent to bypass rules and regulations and/or walk away from proper decommissioning and cleanup of their North Dakota assets.

The North Dakota Oil and Gas Division does not control or prevent bankruptcy. Our focus is to protect the public and the environment. We work to ensure that funds in the estate are used for proper site abandonment, remediation, and reclamation.

When assets are sold, a transfer application must be submitted to us for approval. Our final decision ensures that the purchaser is an eligible licensee and that the application meets all requirements.

When there is no legally responsible party to look after an asset, the Oil and Gas Division may designate it as an orphan. An orphan well may be confiscated by the state and the responsibility for proper plugging and reclamation is then financed through the Abandoned Well Plugging and Restoration Fund (AWPSRF).

Abandoned Well Plugging Site Restoration Fund (AWPSRF)

Established 1983, AWPSRF pays for plugging and reclamation costs where no responsible party can be determined. Originally funded by fees paid to the Oil and Gas Division and confiscated bonds; the funding sources were amended in 2013 to include a portion of the gross production tax and collected civil penalties. The amount of funds available in AWPSRF fluctuates depending on amount of fees, penalties and taxes collected minus any costs for any work required in the field; however, the total amount allowed in the fund is capped at $100 million dollars. AWPSRF can cover plugging and reclamation of both General Plugging and Reclamation as well as Legacy Reclamation

General AWPSRF Program:

The general program covers the cost of plugging and reclaiming sites from 1983 to present where a company has defaulted on their responsibilities and the state seized the bond, equipment, and salable oil; or no responsible party can be found. The North Dakota Industrial Commission will seek reimbursement for all reasonable expenses incurred in plugging or reclaiming any well site through action instituted by the Attorney General.

General Program Reclamation Examples:

  • Re-plugging an improperly plugged well
  • Illegal dumping
  • Reclamation of orphaned or confiscated well sites
Legacy AWPSRF Program:

The legacy program allows for AWPSRF to cover reclamation of eligible pre-1983 oil field issues. The State Legislature expanded the scope of the AWPSRF in 2015 and expanded funding in 2017 to include the legacy program. The expanded scope allocated an additional $5.5 million dollars per biennium dedicated to legacy (pre-1983) oil field issues where no continuing reclamation responsibility is covered under state law.

Legacy Program Examples:

  • Reclaiming old reserve pits.
  • Properly abandoning old flowlines.
  • Plugging seismic “shot holes” from the 1970s.
  • Funding for studies to better reclaim land damaged by the use of brine ponds in the 1950s through the 1980s.

Click here for more information on Reclamation and Reclamation Studies