Committee advances bill to create voluntary oil-and-gas bonding pool to help small operators meet new federal bonds

At a meeting of the Minerals, Business & Economic Development Committee, members advanced Senate File 20, a measure that would authorize the Oil and Gas Conservation Commission (OGCC) to establish a voluntary financial-assurance pool or to contract with a private bonding provider to help operators meet federal and state bonding requirements.

The bill was described by Tom Kropatch, state oil and gas supervisor at the OGCC, as a response to a recent Bureau of Land Management rule that raised minimum bond levels. "The BLM did modify a rule this summer ... it changed a lease bond ... from $10,000 to $150,000 minimum bond. And it changed the statewide bond ... from $25,000 to $500,000 minimum bond," Kropatch told the committee, adding that the changes would make it difficult for many small operators to obtain or afford bonds for federal lands.

Why it matters: Committee witnesses and industry representatives said the new federal bonding levels — and tougher conditions in the commercial surety market — risk forcing many small Wyoming operators out of business or into abandonment, increasing orphan-well risk and shifting plugging and reclamation liabilities to the state. Proponents said a pooled, voluntary approach would spread risk, lower costs, and preserve production from small operators that together supply a significant share of state output.

What the bill would do: The bill creates a voluntary program that the OGCC would implement by rule. It provides two paths: (1) contract with a certified third-party surety or insurance-like entity to operate a bonding pool that would issue bonds acceptable to federal agencies, or (2) if a third-party arrangement is impractical, have the OGCC operate its own financial-assurance pool. The pool would stand as financial assurance for plugging and abandonment, reclamation and other liabilities normally secured by bonds.

Funding and mechanics: Kropatch and other witnesses described an initial funding plan that relies on existing, unexpended commission funds and a possible future assessment on participating operators. The OGCC has approximately $45,000,000 in unexpended or unobligated conservation-related funds that testimony identified as the likely seed funding. The bill also authorizes an assessment on participating operators measured on the fair market value of oil and gas produced in Wyoming; that assessment is set at 0 mills through June 30, 2030 and could be set by rule up to 0.5 mills starting July 1, 2030.

Kropatch told the committee the legislation would require OGCC rulemaking to implement the program and make participation voluntary. He said the commission anticipates contracting with a third-party provider as the primary option because that approach could use an OGCC-backed pool as a backstop while leveraging private-market administration.

Industry testimony: Pete Obermueller, president of the Petroleum Association of Wyoming, and Tom Van Cleef, a small operator who participated in the bill's working group, urged passage. Van Cleef described the scale of the impact on small operators, saying federal bond math had pushed potential per-well bond figures far above operators' expected plugging costs. "The feds have taken ... the oil and gas commission uses about $10 a foot for plugging and abandoning ... They want me to put up a half a $1,000,000 worth of bond," Van Cleef said, arguing the pool would allow smaller operators to continue operating without posting crippling collateral.

Other provisions and safeguards: The bill includes reporting requirements to the committee and to Joint Appropriations if funds from the conservation tax are expended as a backstop. It also allows transfer of financial assurance when a well or lease changes ownership and requires participating operators to remain in good standing. The measure authorizes OGCC to enter into agreements with federal agencies to perform work (for example, plugging) without requiring forfeiture of an issued bond, if that approach is acceptable to the federal agency.

Committee action and next steps: The committee approved a standing-committee amendment inserted on the floor to make explicit that the pool may be seeded with "any unexpended and unobligated funds available in the account established under Wyoming Statute 35-1-116(b)." The motion to advance the bill was moved by Senator Cooper and seconded by Senator Jones; a roll-call vote recorded ayes from Senators Cooper, Jones, Nethercott, Rothfuss and Chairman Anderson (5 ayes). The bill will proceed with rulemaking language to be finalized; Kropatch and staff were asked to provide precise statutory citations and draft amendment language to clarify the seed-funding authority. Witnesses said OGCC would need to begin rulemaking promptly because new federal bond requirements are effectively being applied to bond replacements and new or modified bonds ahead of the June 30, 2026 compliance date.

Quotes are from testimony and committee discussion during the hearing. "The bonding market for those companies is pretty difficult ... you might as well post a cash bond," Kropatch said, describing why the pool is needed. Obermueller noted the bill could remain valuable even if ongoing litigation over the federal rule succeeds: "If that were to be successful, what we're doing here is still important and makes sense because it provides a different avenue for doing bonds ... and it helps deal, as supervisor Kropatch mentioned, state bonds."

The committee asked OGCC to prepare clarifying language for a standing-committee amendment and signaled urgency given the federal timeline; OGCC estimated rulemaking could be complete toward the end of 2025 to allow third-party contracting before the federal replacement deadline.