If you are a coalbed methane gas well owner in Wyoming, there are new regulations in the state to consider. They are the new standard for staying in legal compliance.The Wyoming Oil and Gas Conservation Commission (WOGCC) has adopted changes to the coalbed methane gas well permit bond requirement and introduced a new surety bond requirement for seismic exploration activities.
The new legal framework aims to guarantee the proper handling of land after it has been used for mining. In this way, funds will be secured for plugging of wells and land reclamation, as the need arises. The increase is enacted to tackle issues with abandoned mined land across the state.
Let’s take a look at the most important legal changes for Wyoming coalbed methane gas well owners.
The legal requirements for well owners in Wyoming
Until now, the bond amount for wells less than 2,000 feet was set at $10,000. Well owners of wells deeper than 2,000 feet had to post a $20,000 permit bond. For multiple-well owners, there was a possibility to obtain a blanket bond of $75,000, covering all locations.
Additionally, if drilling occurred on private land, $2,000 bond for each well location was also required.
Seismic exploration operators were not required to get bonded to operate legally previously.
The new coalbed methane gas well permit bond
The most significant alterations made by the Commission concern the amount of the coalbed methane gas well permit bond. The new regulations stipulate that the bond amount is dependent on the depth of the wells. $10,000 bond coverage is needed per one thousand feet of a well. Thus, for a 2,000 feet well, the bond amount would be $20,000.
The blanket bond amount for multiple-well owners has been increased with $25,000 to a total of $100,000. Drilling on private land will require a bond of $10,000.
There are new regulations for seismic exploration operators as well. Those working on a surface owner’s property will need to obtain a $5,000 bond for using less than 1,000 acres, on top of securing the needed permissions from the owners of the land. Every other 1,000 acres will need bond coverage of additional $1,000.
Besides the bond requirement, there is a new regulation concerning well ownership transfer. The Commission has the right to hold the bond of the original owner for up to half a year during which it is assessing the performance of the new well operator.
All legal changes can be viewed in Chapter 3 Drilling Rules of the WOGCC.
The reasoning for the changes
The main rationale for introducing higher amounts for coalbed methane gas well permit bonds is to secure adequate funds for taking care of land that has been used for mining – plugging and reclaiming. The new legislation comes as an answer to the high number of wells that were abandoned in the last years in the Powder River Basin. Currently, there are $23.9 million at the Commission’s disposal in the form of bonds that serve as a security for reclamation obligations. With the new rules, this amount will rise to $43.5 million.
The purpose of surety bonds, in principle, is to guarantee that the bonded party will follow its contractual and legal obligations. If the state of Wyoming suffers any losses due to well owners’ actions breaching the rules in Chapter 3 of the Wyoming Rules and Regulations, the bond can provide compensation for the damages. In case the well owner reclaims the well, the bond is not used, but if they don’t, the state can use the bond to take care of the land.
Let’s not forget, also, that well owners do not need to provide the whole bond amount in cash when getting bonded. They have to cover only a fraction of the required bond amount, which is their bond premium. Thus, while the new bond requirements might seem high, they are not likely to prevent well owners from conducting business, while they will guarantee that the state has enough funds to reclaim mined land.
Over to you
What are your thoughts on the legal changes for coalbed methane gas wells in Wyoming? We’d love to hear your views in the comments below.
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