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Bonds for permits to drill oil and gas wells in Michigan - information and forms
OIL AND GAS WELL BONDS (updated 1-14-2009)
Financial assurance requirements under Part 615, Supervisor of Wells, of the Natural Resources and Environmental Protection Act, 1994 PA 45,1 as amended (NREPA); MCL 324.61501 to 324.61527 may be satisfied through any of the following instruments.
Download all forms needed for oil and gas application, drilling, and operations.
1. Cash Bond - Cash submitted as a well bond must be a certified check or money order in the appropriate amount (see Highlights) made payable to "State of Michigan". A personal or company check is not acceptable. The check should be accompanied by a letter stating its purpose (on behalf of what company and for what well or wells). If the cash bond is for a single well, write the name and number of the well on the check or money order.
2. Certificate of Deposit (CD) - A CD may be obtained through a local bank and submitted as a bond. The CD shall be made out in the sole name of "State of Michigan , Supervisor of Wells, Department of Environmental Quality" in the appropriate amount. A Certificate of Deposit must have a maturity of not less than 1 year and must be non-negotiable and pay interest on maturity only (i.e. no more than one interest check per year). The Certificate of Deposit must be automatically renewable. The State's Federal ID Number (38-6000134) shall be used on all certificates. The company name must not appear on the CD. In order to comply with the USA Patriot Act, authorized delegates of the Supervisor of Wells can sign and return signature cards if delivered to them. However, Department employees cannot furnish their Social Security number.
Also required with a CD bond is a signed "Acceptance of Certificate of Deposit as Conformance Bond". The form contains additional instructions to the bank and requires certification by both the issuing bank and the well permittee. There is an Acceptance form for a single well CD, EQP 7200-15 and an Acceptance form for blanket coverage EQP 7200-16. Please include the permitee's Federal ID Number and the mailing address of the issuing bank on the Acceptance form.
3. Letter of Credit - A letter of credit can be obtained from a local bank. Released letters of credit are returned to the issuing bank. The required language of a single well letter of credit and a blanket coverage letter of credit may be viewed by opening the hyperlink. EQP 7298 single well or EQP 7299 blanket coverage Please do not alter the language of these letters in any way.
4. Surety Bond - The bond form EQP 7200-3 for your surety to use is linked. The form should be printed with a front side (Bond for Conformance) and a back side (Excerpts from General Rules governing oil and gas operations effective
5. Statement of Financial Responsibility - This method of financial assurance requires the listing and certification of certain financial records of a company. Details of the necessary documents can be found in Rule 324.210. The Statement of Financial Responsibility form, EQP 7200-17 linked.
Please submit well bonds to:
Michigan Department of Environmental Quality
Highlights of the rules are outlined below. For further information regarding types of bonding, levels of bonding, or questions relating to the release of a bond, contact Joe Pettit at 517.335.6766
Highlights of the requirements for Oil and Gas Well Bonds i.e. for wells permitted under Part 615, Supervisor of Wells, of the Natural Resources and Environmental Protection Act, 1994 PA 451, as amended. The full text of the rules covering oil and gas well bonds (Sections R324.210 - R324.216) may be viewed in the Part 615, Administrative Rules of the Oil and Gas Regulations .
- Both single well and blanket bonds are available
Amount of Bond- -The amount of a bond varies depending on the depth of the well(s) to be covered.
Bond Discounts--Rule 212(b)
Blanket Bond--Rules 212, 214
Maximum Blanket Bond--Rule 212(d)
Compliance agreements may require additional bonds
Bond Cancellation--Rule 213
Bond Release--Rule 215
Statement of Financial Responsibility--Rule 210
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