R649-13-3. Blanket Well Performance Bonds

(1) Blanket Well Performance Bonds An operator who, on or after July 7, 2026, engages in the drilling, completion, re-entry, deepening of a well, or who acquires an existing well, and who meets the qualifications set forth in Subsection (1)(a), may file with the division a blanket well performance bond to cover operations of its State Wells in lieu of an individual well depth performance bond for each well as required by Section R649-13-2. (a) Qualifications Required for Blanket Well Performance Bonding (i) To qualify for a blanket well performance bond, an operator must meet: (1) a production requirement, and (2) a threshold at risk well ratio requirement. (ii) An operator qualifies for blanket well performance bonding in accordance with the tier 1 base blanket bond schedule if: (A) The operator's total well count production is equal to or greater than 1,000 BOE per day average for the previously reportable 12 months; and (B) The operator's at risk well ratio is equal to or less than 20%. (iii) An operator qualifies for blanket well performance bonding in accordance with the tier 2 base blanket bond schedule if: (A) The operator's total well count production is equal to or greater than 500 BOE per day average for the previously reportable 12 months; and (B) The operator's at risk well ratio is equal to or less than 22%. (iv) An operator qualifies for blanket well performance bonding in accordance with the tier 3 base blanket bond schedule if: (A) The operator's total well count production is equal to or greater than 200 BOE per day average for the previously reportable 12 months; and (B) The operator's at risk well ratio is equal to or less than 25%. (v) An operator who does not qualify for blanket well performance bonding must provide individual well depth performance bonds for each well as outlined in Section R649-13-2. (b) Determination of Blanket Well Performance Bond Amount (i) An operator who qualifies for blanket well performance bonding shall post a bond with the division that equals the total sum of the operator's combined base blanket bond amount and at risk well supplemental amount within the appropriate tier. (A) Base Blanket Bond Amount Calculation. (I) An operator's base blanket bond amount is determined in accordance with the base blanket bond table for the appropriate tier outlined in Section R649-13-4. (II) An operator's base blanket bond amount shall be the amount which corresponds to the operator's total state well count. (B) At Risk Well Supplement Amount Calculation. (I) For each tier, the allowable number of at risk wells exempt from inclusion in the at risk well supplemental amount calculation is as follows: (A) Tier 1: 20% of state wells; (B) Tier 2: 13% of state wells; and (C) Tier 3: 8% of state wells. (II) An operator's at risk well supplement amount shall be determined for the number of non-exempt at risk wells, which are the at risk wells exceeding the number of exempt at risk wells described in Subsection (1)(b)(i)(B)(I), and is in accordance with the at risk well supplement table for the appropriate tier outlined in Section R649-13-4. (III) The depth to be used for this calculation shall be the average TVD. (IV) An operator's at risk well supplement amount shall be calculated by: (1) determining the total number of non-exempt at risk wells, rounded down to the nearest multiple of ten; (2) determine the average TVD; (3) identifying the corresponding bond amount for the average TVD for the appropriate tier; and (4) multiplying the multiple of ten from Subsection (1)(b)(i)(B)(IV)(1) by the corresponding bond amount. (2) Adjustment of Blanket Well Performance Bond Amount. (a) An operator's blanket well performance bond amount shall be set in accordance with the base blanket bond schedules found in Section R649-13-4, which shall be adjusted not to exceed five years as referenced in Subsection R649-13-1(3). (b) An operator's at risk well supplement will be recalculated under Subsection (1)(b)(i)(B)(IV)(1) when an operator's at risk wells increase to the next multiple of ten. (c) An operator may request a recalculation of its at risk well supplement when an operator's at risk wells decrease by a multiple of ten. (d) An operator's blanket well performance bond amount shall be recalculated if the division determines the operator's blanket well performance bonding qualifications have changed since the last calculation. (e) The division shall provide written notification to an operator of the need to increase the amount of its blanket well performance bond to conform with updated bonding schedules or an increase in state at risk wells. (f) Within 120 days of such notification by the division, the operator shall post a bond with the division in compliance with Rule R649-13 or appeal the decision to the Board of Oil, Gas, and Mining.