North Dakota wants to use $33.1 million in federal coronavirus aid to plug “orphaned” oil wells, many of which have been abandoned by companies financially disrupted amid low energy prices and sparse demand brought on by the pandemic.
State and industry officials said the idea is both a jobs program for energy workers and an attempt to curb a growing problem in western North Dakota’s oil patch.
The North Dakota Emergency Commission, headed by Republican Gov. Doug Burgum, approved the funding Tuesday. The commission in total approved $524 million, or 42% of the $1.25 billion given to the state as part of the federal stimulus package approved in March.
Burgum said the money approved by the commission is to support economic recovery.
The state’s Budget Section, which handles the Legislature’s business between sessions, is scheduled Friday to consider the program, along with a package of proposals from several state agencies.
State Mineral Resources Director Lynn Helms said 549 wells have been identified as abandoned in North Dakota’s oil-producing region, including about 10% that companies have walked away from in recent weeks.
Before the pandemic devastated the U.S. oil industry, daily oil production in North Dakota was at a near-record 1.45 million barrels daily in February, the latest figures available.
Helms said thousands of wells have been idled in recent weeks, amounting to about 550,000 barrels of lost oil production daily, or more than third of the state’s production from a few months ago.
Companies are required to post a $100,000 bond for a producing oil well but the cost of plugging and reclaiming a site averages about $150,000, Helms said.
The problem, Helms said, is that the oil companies don’t have the money needed to plug and reclaim the sites, and bonding companies are not willing sell more bonds to cover the costs.
Plugging an orphaned well consists largely of filling it with cement and sealing it. Helms said it takes a crew of about 15 about five days to plug a well.
The program is only aimed at plugging wells at present, but Helms said his agency likely will request a similar amount of funding to reclaim the sites, which takes a crew of 12 about three days for each site.
In all, the programs would employ about 550 oil field workers, Helms said. The entire cost would be offset with $10 million from the state’s abandoned well fund and $6 million in existing reclamation bonds, he said. Offsetting this cost with $10 million from the abandoned well fund and $6 million in existing reclamation bonds.
Bids for work could occur in July, he said.
“It’s primarily to support a skilled workforce for the next six months ... and keep them here,” Helms said.
Ron Ness, president of the North Dakota Petroleum Council, said a ready workforce is important once prices rebound and things begin returning to normal in the oil patch.
“This is the first step in getting this going again,” said Ness, whose groups represents more than 500 energy-related companies working in the state. “This also takes care of a long-term issue that could be a liability in the future.”
Although no formal proposal has been submitted, the governor and other state officials also have discussed using some of the federal coronavirus aid to restart the mores than 6,000 oil wells that have been idled but not abandoned in recent weeks due to low prices. State and industry officials said it could $50,000 to $400,000 to bring a well back online and production.
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