BLM rule change threatens small oil and gas operators | Local News

He could either pay $10,000 for a bond on an oil lease, which would cover one oil well, or $25,000 for a statewide “blanket bond” that would be good for seven oil wells. He decided to go with the latter because it seemed like the better deal, especially since he was thinking about having several wells.

“It’s like having a poker hand, you look at that hand and think, ‘Is it worth it? Should I jeopardize my future and old age to own these wells?’” Kissack said. “At the time, yeah, we thought it was a good idea.”

Now, a rule change from the federal government that will take effect in less than a month threatens to push Kissack and other small oil and gas operators out of the industry.

In 2019, the Government Accountability Office recommended the Bureau of Land Management address the risks from insufficient bonding, which were determined too low to cover the costs of reclaiming orphaned wells.

The BLM has put forth a rule change to increase the bond amounts that will take effect June 22. These bonds are guarantees that are meant to cover the cost of reclamation, and to prevent people from just abandoning their wells whenever they feel like it.

The BLM published the proposed rule change in July 2023 and opened it up for a 60-day comment period, where it received more than 215,000 comments, but out of those, there were about 1,200 unique comments.

The minimum lease bond amount will go from $10,000 to $150,000, and the minimum statewide bond amount will increase from $25,000 to $500,000. The former has stayed the same since 1960, while the latter has been unchanged since 1951.

The BLM wrote that the increase will account for both inflation and the cost of “potential liabilities on the ground,” because the current bond amounts “do not adequately protect the fiscal interests of the American public.”

Kissack, who owns six wells, said it’s difficult enough being at the mercy of the market.

“When you’re in the oil industry you’ve got that gambling mentality,” he said. “You’re always thinking next year’s going to be better, next month’s going to be better.”

What frustrates him is when the federal government changes the rules on the industry.