Bonds Needed to Sell Oil & Gas

by Eric Feigenbaum

Operating a gasoline or service station comes with many risks - from potential leaks in underground tanks to fires and explosions that can result from spillovers at the pump. That's why state regulators require gas stations to carry liability protection. Although many states require liability coverage in the form of insurance, some allow surety or financial responsibility bonds.


Storing gasoline and petroleum can create an environmental hazard. Earthquakes, shifts in soil and corrosion of underground tanks can lead petroleum products to seep into soil and waterways. The Environmental Protection Agency and state environmental protection and insurance departments have regulations on the specifications and maintenance of gas station properties and equipment. When measures fail, or owners are negligent, clean up and repair costs are costly. That's why government agencies require financial responsibility.

Surety Bonds

States like Ohio and Florida allow surety bonds as a guarantee of financial responsibility for gas stations. Station owners must purchase bonds in legally prescribed amounts from state authorized surety bond issuers. They must then place the bonds on file with state environmental protection agencies or departments of insurance. Although bonds can satisfy state requirements for the operation of gas stations, they do not meet federal EPA requirements for financial responsibility during construction of new underground tanks and stations.

Insurance States

Not every state allows oil and gasoline sellers to use surety bonds for financial guarantees. Michigan, Missouri and Wisconsin, among others, require sellers to carry insurance policies from state licensed and recognized companies. Station owners must regularly show proof of liability insurance meeting minimum requirements during periodic state and county inspections.

Surety Bond Advantages

Sellers who choose surety bonds usually prefer them because, unlike insurance policies, they do not require regular premiums or payments. A one-time deposit of money -- albeit larger than a typical insurance premium -- continues to provide financial responsibility so long as the bond is not cashed in or used. In the long run, a surety bond can save a cautious station operator significantly compared to insurance premiums.

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