Utah Modernizes Antiquated Oil And Gas Bonding Rules – Saving Taxpayers Hundreds of Millions of Dollars in Future Plugging Liability

Salt Lake City, UT – Today, after more than five years of work, Utah’s Board of Oil, Gas and Mining finalized updates to its antiquated oil and gas bonding regulations. This process started after a 2019 performance audit found that “bond amounts and bond structures for oil and gas wells were last updated 16 years ago [2003], which is concerning given ongoing industry technological advances. Insufficient bond amounts and bond structures pose a financial risk to the state. Existing bond amounts and bond structures are inadequate.”

When an oil or gas well reaches the end of its life, companies are required to plug it. But if an operator goes bankrupt or walks away, the financial responsibility falls to the state and taxpayers. Before today, bonding rates were only a fraction of plugging costs, incentivizing operators to walk away and passing costs onto taxpayers.

The state has proposed a data-driven and risk-based reform that takes into account how many wells in a fleet are at risk of being orphaned and ensures that operators set aside an appropriate amount of funds to ensure their wells get plugged.

This commonsense rule will reduce future costs to taxpayers while ensuring Utah’s oil and gas industry can continue to grow.

What The New Rule Does

• Replaces Utah's decades-old bonding system with a risk-based approach. Instead of requiring the same bonding structure for all operators, the proposal ties financial assurance requirements to a company's production levels and the number of wells that may be at risk of becoming orphaned.
• Requires operators with larger near-term cleanup liabilities to provide more financial assurance. Companies with higher concentrations of low-producing or "at-risk" wells would be required to post higher bond amounts, while lower-risk operators could continue to pay lower rates.
• Limits the use of blanket bonds for operators with high orphan-well risk. The proposal establishes that a blanket bond is a privilege, not a right, and creates blanket bond eligibility requirements that ensure high-risk companies aren’t able to game the system. 

The end result of these changes is that taxpayers are better protected from future financial liabilities. Additionally, Utah is now eligible for tens of millions of dollars of additional federal funding for orphan well plugging and decommissioning through the Infrastructure Investment and Jobs Act.

Below are quotes from key organizations that have been closely involved in this process:

“With increasing frequency, Utahns have been left to foot the bill for cleaning up after oil and gas companies that fail to comply with the law, and the state’s taxpayers face hundreds of millions of dollars in decommissioning risks from low- and non-producing wells over time,” said Adam Peltz, Senior Director and Lead Counsel at Environmental Defense Fund. “Today, Utah finalized reforms to right-size antiquated financial assurance rates that were universally recognized as inadequate. Importantly, these changes enshrine the principle that blanket bonds are a privilege, not a right. We commend the state for its strong leadership on this critical issue.”

“We are grateful for the work of the Division staff, board members, and other contributors to update the bond rule for operators of oil and gas wells within the state of Utah, following similar progress in other western states,” said Soren Simonsen, nonprofit board member of the Mormon Environmental Stewardship Alliance. “We see two important benefits for updating this rule — first, protecting our land, air and water from the harmful impacts of leaking, abandoned wells, and second, limiting the exposure or risk of Utah taxpayers from the potential liabilities of plugging these wells and related environmental remediation. Principles of self-reliance and stewardship of resources, both of which are strong Utah values, apply to industries and businesses as they do with individuals, especially where the economic benefit is primarily received by the industries that operate these wells. This action is an important step forward. It will benefit the people of Utah and the ecological systems that sustain all life.”

“This rulemaking demonstrates what is possible when industry, environmental advocates, regulators, and other stakeholders come to the same table in good faith,” said Ashley Miller, Executive Director of Breathe Utah. “The result is a dramatically stronger, more modern bonding framework that better protects Utah taxpayers while providing greater certainty for responsible operators. We applaud the Division for leading a collaborative process that produced a far better outcome than anyone could have achieved alone.”

“Utah’s outdoor access generates nearly $10 billion in direct revenue, but its true value lies in the quality of life that drives statewide business investment,” said Ashley Korenblat, Managing Director for Public Land Solutions Beyond. “National Parks and ski areas, Bureau of Land Management (BLM) lands provide essential recreation assets vital to this economic engine. To sustain this, Utah must address the threat of orphaned oil and gas wells on public lands; updating bonding policies is a critical step in securing the state’s ongoing economic prosperity.”