Oil And Gas Operator Asks Legislature For Break On Bonding
The Legislature's Joint Minerals Committee will consider a proposal at its meeting this week to create a state-backed insurance pool that small oil and gas operators could tap into for their cleanup obligations.
Gillette-based M&K Oil is behind the proposal. In a memo, the company argues that current bonding requirements of $10 a foot for wells that aren’t currently producing oil or gas are too burdensome for small operators. The state requires bonding to ensure it isn’t left on the hook for cleanup if companies walk away.
Instead, M&K is proposing that small companies should be able to pay a fraction of their overall obligations into a pool. In the event a company were to walk away from its obligations, the state could draw from that pool to cover the costs. However, M&K acknowledges in the memo that funds from the pool would not necessarily be enough to cover those costs, leaving the state to pay the difference.
The company says the risk is worth it, though, because small operators play an important role in the state’s economy, and the insurance pool would make it easier for them to keep producing oil in the state. The committee meets on August 11.