Un‘covering’ blanket bonds: Assessing the adoption of blanket bonds across the states

Abstract

States have different rules governing blanket bonds, a tool that is intended to cover the financial obligations of well closure. Ideally, the blanket bond amount is sufficient to cover the costs of site closure, especially costs associated with safely closing abandoned wells. They are also designed to mitigate the financial risks that wells pose to taxpayers. Yet, blanket bond amounts that are too high can discourage investment, especially at marginally producing wells, and reduce the economic benefits that result from oil and gas development. Despite a growing body of research examining state oil and gas policies, the politics of blanket bonds have received little scholarly attention. To address this gap, we utilize a time-series dataset of U.S. states to shed light on the factors that shape blanket bond amounts before and during the unconventional production boom. We find that political culture, number of wells, emissions from abandoned wells, and GDP from the oil and gas industry contribute to changes in minimum blanket bond amounts.