North Dakota regulators want greater authority to go after corporate leaders who flagrantly disregard spills and other environmental problems in the oil patch.
The proposal was among several significant bills related to energy and the environment heard during the first week of the legislative session. Lawmakers also are considering measures tied to storing natural gas underground and cleaning up contaminated property.
Senate Bill 2064 would allow the state to penalize corporate officers deemed responsible for oil- and gas-related violations.
Two serious environmental problems recently occurred in the oil fields, prompting the legislation after the state spent hundreds of thousands of dollars to clean up the sites, State Mineral Resources Director Lynn Helms told the Senate Energy and Natural Resources Committee during a hearing Thursday. The state tried to get the companies to act, but they shirked their responsibilities, he said.
In one instance, a significant spill occurred at a well and flowed onto farmland, and the company responsible refused to send help.
“When we finally got ahold of one of the corporate officers, his statement was, ‘We do not have a pumper for that location, we won’t have a pumper, and we do not plan to send anyone to address the issue,’” Helms said.
The state Oil and Gas Division spent $128,000 from a fund designated for abandoned well cleanup to address the site, and it raised the matter with investigators for prosecution. Jurisdictional issues arose because those responsible lived in other states, and they were not charged, Helms said.
Another spill occurred elsewhere in the oil fields and a leader of the company responsible committed additional violations to keep cleanup costs down, then abandoned the site, according to Helms. The state spent nearly $900,000 to clean it up. The price tag was so high in part because the property contained radioactive waste.
“In both cases, all of the assets of these corporations were removed out of state and are in the bank accounts of the corporate officers,” Helms said. “There are no assets to reimburse the state for the cleanup or for plugging and reclamation costs.”
Helms cautioned that while most oil and gas companies cooperate when issues arise, problematic situations such as the ones he described to lawmakers are likely to keep happening given the financial stress the industry is under amid the coronavirus pandemic.
The bill faces opposition from the oil and gas industry, as well as the larger business community, including the Greater North Dakota Chamber.
“The mission of the chamber is to create the best business climate right here in North Dakota,” lobbyist Matt Gardner said. “I think if this was passed, it would send a negative message.”
Helms offered an amendment to the bill to ensure that it targets only corporate leaders whose actions or inaction cause harm to the public.
Even with those provisions in place, the North Dakota Petroleum Council would oppose the bill, according to lobbyist Todd Kranda.
“Those internal standards or factors are arbitrary and capricious and, in the hands of a different administration years down the road, could certainly prove to be punitive against a company,” he said.
He added that the measure would “significantly and negatively” impact longstanding standards that offer protections under corporate entities. He also said it’s unfair to single out oil and gas through the legislation and not other industries.
Underground gas storage
State regulators are asking lawmakers to give the North Dakota Industrial Commission authority to permit the underground storage of natural gas, natural gas liquids and oil.
Storing natural gas liquids could be important for a future petrochemical facility if one were to be built in North Dakota. Natural gas liquids refer to components of raw gas such as ethane, propane and butane that can appear in liquid form under certain pressures and temperatures. Ethane, for example, is processed in petrochemical plants to manufacture plastics.
State leaders have tried for several years to lure the petrochemical industry to North Dakota to make use of abundant natural gas in the Bakken.
Helms told the Senate Energy and Natural Resources Committee on Friday that three types of facilities are feasible for storage: a depleted oil field, a saline aquifer and a salt cavern. The last method would involve drilling a narrow hole into a salt formation and injecting freshwater to dissolve out the salts.
“What we don’t have is the statute or the rules that lay out how that’s going to happen in North Dakota,” Helms said.
The University of North Dakota’s Energy & Environmental Research Center has studied various storage possibilities, and the legislation before lawmakers, Senate Bill 2065, is modeled after existing rules for carbon dioxide storage, he said. The Industrial Commission, a three-member panel chaired by Gov. Doug Burgum, would later be tasked with approving more detailed rules surrounding the permitting of such facilities.
The bill received support at Friday’s hearing from landowners and the oil and gas industry.
“We appreciate that the legislation ensures the owners of the pore space have a say in the development of their property and also recognizes the right to equitable compensation when their property is being used by others,” said Troy Coons, chairman of the Northwest Landowners Association.
Pore space refers to the cavities in rocks or soil where natural gas, liquids or oil would be stored.
The bill would help promote research into underground storage, reduce flaring and encourage oil companies to develop “stranded” oil fields where pipelines or processing facilities are lacking, said Brady Pelton, a lobbyist for the North Dakota Petroleum Council.
Cleaning up contamination
The head of the North Dakota Department of Environmental Quality made a pitch this week for cleaning up contaminated sites across the state to repurpose the property for future development.
Director Dave Glatt asked lawmakers to expand the scope of a fund designated for responding to environmental emergencies so it also would apply to sites with longstanding contamination.
Senate Bill 2070, heard before the Senate Energy and Natural Resources Committee on Thursday, aims to prompt companies to clean up contamination they create, provides money for the state to do the work when no responsible company can be identified, and offers liability relief to investors and developers that want to repurpose contaminated sites, Glatt said.
Numerous other states have similar programs for former industrial sites with contamination, which are known as “brownfields.” Glatt identified several examples of such sites across North Dakota, including hydrocarbon contamination in Napoleon, piles of glass at a warehouse in West Fargo and an abandoned dry cleaning facility in Williston.
The bill seeks to address one of the major barriers to repurposing the sites. Glatt said banks often are hesitant to invest in projects due to risks associated with the potential magnitude of the contamination.
The restoration fund would receive an initial influx of $5 million in earnings from the Legacy Fund, North Dakota’s oil tax savings account, and then be sustained through penalties levied against companies for environmental violations, as well as potential federal dollars, among other sources, Glatt said.
The bill received support from landowners, the North Dakota Petroleum Marketers Association and the North Dakota Petroleum Council, all of whom said they plan to work with the department to refine its language to address some concerns.
Coons, with the landowners association, indicated that his group is worried about the potential for landowners to be held liable by the state for brine spills and similar leaks if mineral development is taking place on their land, yet they own only the surface rights and did not have a say in whether their property was used.
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