How oil and gas well bonding works
What a plugging bond is, the difference between single-well and blanket bonds, why bonds often fall short, and where to see each state's amounts.
A plugging bond is money, or a surety guarantee, that an operator posts with the state so that a well can be plugged if the operator walks away.
Single-well and blanket bonds
A single-well bond covers one well. A blanket bond covers all of an operator's wells in the state for a fixed amount. Many states set the amount in law and vary it by depth or number of wells.
Why bonds fall short
Bond amounts were generally set long ago and often sit well below the cost of plugging. Where the published median cost per well is higher than the single-well bond, an abandoned well leaves the public with the difference. Where a blanket bond covers hundreds of wells, the gap is larger.
See the numbers
Bond amounts by state sets each state's rule beside the published cost to plug a well. Bond check tests a bond against a list of wells.
For sureties and lenders
Use cost figures as a reference for exposure, not a quote: see for sureties and lenders and asset retirement obligations.