In Texas, a person who operates or maintains oil or gas wells needs to have an Individual Performance Bond to guarantee the correct plugging and cleanup of the wells under their authority. A Blanket Performance Bond may be utilized to cover many well operations. The Texas Railroad Commission (RRC) set this requirement to protect the environment, natural resources, and health of Texas and its people.
When you choose Jet, you can purchase your bond directly from the surety provider thus avoiding the run-around communications of an agent or broker.
Rates are based on a few factors: the amount needed for the bond, personal credit check, project details, business financial and personal financial statements.
Let’s elaborate on how the required bond limit is set by the RRC for the Individual Performance Bond and the Blanket Performance Bond. The Individual Bond is calculated by taking the combined depth of all the wells you oversee and multiplying it by $2 per foot. If you have multiple Commission-regulated operations, you can use the Blanket Performance Bond, as long as the bond is in the appropriate amount:
Additionally, if you have any bay or offshore wells, supplemental bond coverage will be needed. For each bay well, an additional $60,000 will be added to the bond coverage mentioned above, while each offshore well will add $100,000 to the bond limit. A well operator may be approved for a reduction in the additional bonding if the conditions of Title 16, Rule 3.78 of the Texas Administrative Code are met.
This bond is used to guarantee the Oil and Gas Division of the Texas Railroad Commission (RRC) that wells will be properly closed up. Failing to plug up the well appropriately can cause danger to environmental or human health or lead to increased costs in bringing the well into compliance.
This bond must be held by any person, firm, partnership, etc. that holds a permit with the RRC for maintain oil wells, gas wells, or other operations, like:
Or, other operations listed in Title 16, Rule 3.1 of the Texas Administrative Code
When you click the button to apply at the top of the page, you will go through Jet’s application that is easy to fill out. A typical application needs general business information and uses a soft credit check, which will be taken care of during the application. Once you have submitted that, your application will be reviewed by a Jet team member. Texas Oil and Gas Bonds also require a look into financial history, so financial statements may be requested at this time.
Once your review is complete, Jet will send you an email with an approved quote. You can purchase the bond by clicking on the link in the email. A digital copy of your Oil and Gas Bond and a receipt will be emailed to you.
After the payment has been processed, Jet will go ahead and prepare the bond form. The original form will be mailed directly to you to turn in along with your P-5 Organization Report and any other filing requirements. The bond must be sent to the RRC at this address:
Railroad Commission of Texas
Attn: Oil and Gas Division
Permitting/Production, P-5 Financial Assurance Section
PO Box 12967
Austin, TX 78711-2967
Basically, the length of the Oil and Gas Bond is set to cover any missteps during the plugging and clean up of the well. Upon initial filing, the bond will begin the same day as the P-5 and will continue out to 150 days past the P-5’s expiration date. If you continue operations, you will need to renew your P-5 term and the bond term as needed.
When you no longer need to renew your P-5 and it expires, your Oil and Gas Bond will expire 150 days after the end of the P-5, unless the RRC releases the bond prior to that date.
An Oil and Gas Bond must be maintained along with the P-5 Organization Report, renewing as needed. When your term is getting close to its end, Jet will send you a renewal notice through mail and email. You can choose whichever way is easiest for you, but if time is of the essence, online renewals are quicker.
Your renewal notice will include a quote based on the information on hand, but if more wells have been added under your authority, you may have a change in your limit. A good time to address any changes is during the renewal process so let Jet know right away. If there is a change to your quote for the new term, Jet will send an email with a link to purchase the new quote immediately.
If paying for the bond on a monthly basis, you will also receive a notice near the anniversary of your bond’s effective date. If there are any changes to your bond, there may be a change in your monthly premium.
The way to avoid claims against the Oil and Gas Bond is to make sure that you comply with the obligations specified on the bond form after the end of their P-5 term. These obligations are:
If you don’t take care in plugging up your wells or cleaning up other oil and gas operations, the RRC will take action against the bond. Jet will have to pay for such clean up, for liquidated damages or for reimbursing the RRC for using State funds to bring the wells into compliance.
A well operator who is not able to complete these actions will have action taken against the bond by the RRC. The Commission will send a notice of noncompliance and Jet must pay the claim out within 60 days of the notice, unless a written demand for payment is sent out. At which point, Jet will have to fulfill payment within 30 days.
No, as long as the Oil and Gas Bond is in the correct limit to cover all wells or operations, one bond should be sufficient to cover all activities.