Office of Conservation

Engineering Administrative>> Permits Section>>

Financial Security

Operators who are subject to the Financial Security Requirements must secure wells by pledging a Certificate of Deposit, securing a Performance Bond or obtaining a Letter of Credit.  There are specific forms for each type of Financial Security accepted.  Amounts required are discussed in the Financial Security Rules.


Financial Security Rules

(Title 43: NATURAL RESOURCES, Part XIX. Office of Conservation, Subpart 1. Statewide Order No. 29-B §104. Financial Security)
*Rules address financial security requirement, accepted forms, coverage minimums, and exemption criteria.


Accepted Forms

Downloadable PDF templates can be accessed here and below. Incomplete and/or incorrect financial security documents will be returned to sender for corrections.  The following forms are currently accepted:

Pledge of Certificate of Deposit

  • Form:(FS-CDMW)
  • Ensure that the issuing bank has signed and dated under the heading "Receipt" on page 3 of 3.
  • Witnesses must print their name next to their signature.
  • Include a copy of receipt of deposit from your bank. (Info shown on receipt should include: Operator Name, CD No., and CD amount.)

Performance Bond

  • Form:(FS-PBMW)
  • A performance bond shall be secured by a Surety or Insurance Company currently on the United States Department of the Treasury Financial Management Service List of approved bonding companies.

Letter of Credit

  • Form:(FS-LCMW)
  • Ensure that the bank provides two individual authorized signatures.

Exhibit "A" Forms

  • Blanket-10 Wells Form
  • Blanket-25 Wells Form
  • By Footage-Form
  • Max Financial Security - Blanket - All Wells
  • The Exhibit "A" is the attachment to each Financial Security document which lists the wells associated with that coverage. The Max Financial Security - Blanket - All Wells form is for operators that have the maximum financial security tier. Instead of a list of wells on the Exhibit "A," this form references all wells in the operator's name. File theMax Financial Security - Blanket - All Wells form with new financial security instruments. Modify the grey location text for the matter at hand- ie, either land location ($500,000), land and inland water location ($2,500,000), or delete the grey land description if the financial security instrument covers land, inland water, and offshore locations ($5,000,000).
  • Amendment Form
  • Max Financial Security - Blanket - All Wells - Amend
  • To add or delete wells to the existing Exhibit "A", use the Exhibit "A" Amendment Form. For large well lists (adding/deleting more than 10 wells), use the Exhibit "A" Amendment Form Attachment sheet for extra spaces to list wells.  Make sure you use the appropriate attachment (ADDED or DELETED). File the Max Financial Security - Blanket - All Wells - Amend for existing financial security instruments when the max-tier financial security is in place. Modify the grey location text for the matter at hand- ie, either land location ($500,000), land and inland water location ($2,500,000), or delete the grey land description if the financial security instrument covers land, inland water, and offshore locations ($5,000,000).

Frequently Asked Questions

What are the Financial Security amounts?

FOOTAGE
Depth Land Locations Water - Coastal Water - Offshore
≤ 3,000 ft. $2/ft. $8/ft. $12/ft.
3,001 - 10,000 ft. $5/ft. $8/ft. $12/ft.
≥ 10,001 ft. $4/ft. $8/ft. $12/ft.

 

BLANKET ← Prior to August 12, 2016 ("grandfathered;" see below)
Number of wells   Land Locations Water - Coastal Water - Offshore
< 10 $25,000 $250,000 $500,000
11-99 $125,000 $1,250,000 $2,500,000
> 100 $250,000 $2,500,000 $5,000,000

 

BLANKET ← After August 12, 2016
Number of wells Land Locations Water - Coastal Water - Offshore
< 10 $50,000 $250,000 $500,00
11-99 $250,000 $1,250,000 $2,500,000
> 100 $500,000 $2,500,000 $5,000,000

 

I have Financial Security in place. Will I have to increase my aggregate amount to comply with the end of the Emergency Rule (ie, after August 12, 2016)?
Not necessarily. Wells covered under Financial Security prior to August 12, 2016 will be "grandfathered in." However, the Commissioner has the authority to request additional Financial Security to match the amounts listed above if the operator is determined to be noncompliant.

Additionally, wells permitted or acquired after August 12, 2016 will have to comply with the new Financial Security amounts and will not be added to existing mechanisms if the total amount of the Financial Security does not match the new amounts. In such a scenario, operators can: (1) increase the current blanket instrument, (2) secure a new blanket financial security instrument for un-grandfathered wells newly permitted or transferred, (3) provide financial security on a per foot basis.

The only financial security exemption is for orphan wells acquired after August 1, 2016 (per  §104.I.1. Financial Security). Operators may acquire orphan wells without providing financial security. This exemption does not apply to landowners (ie, non-operators) acquiring orphan wells.

I am required to provide Financial Security for Inactive Wells (as defined in LAC 43:XIX.101). What can you tell me about those?
If Inactive Wells already have Financial Security, we will not require additional Financial Security to meet the new Financial Security amounts. Financial Security provided for wells only to comply with the Inactive Well rules can be released once the well is determined to no longer be inactive (ie, either P&A'd or brought back on production). Financial Security is not required for inactive wells that are on an approved Schedule of Abandonment/Return to Production plan (SOA). Contact your District Office to determine the requirements for establishing an SOA.

If I operate wells at both land and water locations, can I combine all locations under a single blanket financial security?
Yes.  However, the blanket security amount shall at minimum meet the funding level for the higher cost location (i.e. water locations).  Additionally, the total number of wells secured under a blanket coverage (≤10, 11-99, ≥100) remains unchanged, regardless of the fact that land locations may cost less to restore than water locations.

How long do I need to keep Financial Security in place?
New operators must post Financial Security prior to permitting their first well. Existing operators must provide Financial Security for newly permitted wells within 30 days of completing drilling operations. Financial Security must be provided for all wells included in an operator change prior to approval of the operator change. Wells that are secured with Financial Security will remain secured until the wells are either transferred to a new operator or the wells have been P&A'd and the sites have been restored.

How do I amend my Exhibit "A" to add/delete wells?
Please use the Exhibit "A" Amendment Form.  Make sure proper signatures, and witness signatures are present before submitting for review.  To delete a well, ensure that all necessary paperwork has been submitted to this Office to reflect the current disposition of the well and/or to verify that it has been plugged and the site has been restored.

How do I request the release of Financial Security when I plug and/or transfer Operatorship of my wells?
Write a letter referencing the Operator and Financial Security Number (Bond #, CD #,..) and request that the security be released by this Office.  Prior to any release request, ensure that all necessary paperwork has been submitted to this Office to reflect the current disposition of all wells covered by the security and to verify the status of plugged wells.

My well is located within the coastal zone but it is situated on land and accessible by road, how would these wells be classified?
Within the defined coastal zone area, any well drilled at a land location that remains accessible by road can be insured as a land well.  If a particular wellsite location is disputed, a final determination will be made by this Office based on a review of Coastal Use Permit documentation, and/or field inspection.

My well is going to be located on the water, how do I know if it is located "offshore" or within the "coastal zone"?
The definition of the coastal zone boundary is provided in LSA R.S. 49:214.24.  An offshore location is any water location in a field designated as offshore by the Commissioner of Conservation.  LDNR provides several on-line services via the "SONRIS" system including interactive GIS maps.  Both the state coastal zone boundary and state offshore boundary can be viewed.

If I operate a dual/triple completion well and I wish to obtain blanket financial security, is each completion (i.e. well serial number) counted as a distinct well under the blanket? 
No.  Multiple completion wells will count as a single wellbore under the blanket.  However, list all serial numbers in the Exhibit 'A' and clearly indicate any multiple completions.

The state-accepted format for a letter of credit includes language referencing the Uniform Customs and Practice for Documentary Credits by the International Chamber of Commerce Brochure No. 600 (2007 revision).  Will the Office of Conservation accept any other UCP brochure revisions?
We will accept letters of credit with either the UCP 600 (2007 revision) or the UCP 500 (1993 revision) reference; no others shall be accepted.

Where do I submit Financial Security documents?
Financial Security documents are maintained in the Baton Rouge Office and can be sent to:

Louisiana Office of Conservation
617 North Third Street
Baton Rouge Louisiana 70802
Attn: Financial Security, 9th Floor
OR
Louisiana Office of Conservation
P.O. Box 94275
Baton Rouge Louisiana 70804-9275
Attn: Financial Security, 9th Floor

If you have any questions concerning Financial Security, contact 225-342-5540.