As North Dakota creates a program to plug abandoned oilfield wells using federal coronavirus stimulus dollars, landowners and oil companies indicated at a hearing Wednesday that they support the concept but have specific concerns they want the state to address.
The North Dakota Oil and Gas Division has identified 368 potential wells to plug in the western and northern parts of the state. It plans to complete the task by spending $33 million in funding from the federal CARES Act, as authorized by the North Dakota Emergency Commission last month.
Numerous oil producers expressed concern Wednesday that if officials move to plug their wells, the state could seize their bonds, which it’s allowed to do under state law. Bonds are a form of financial assurance secured for wells, and the state requires them to ensure that at least some money is available to plug and clean up a well site if the company fails to complete those responsibilities when it stops operating a well.
Producers also said they did not want to subject themselves to any potential legal action by the attorney general’s office, as is possible under state law.
The trade group representing the state’s oil and gas industry said officials should rely solely on the pool of CARES Act money to plug the wells.
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“It appears to us that if you use those funds, then you do not need to seek reimbursement for the plugging of these wells from the operators,” said Ron Ness, president of the North Dakota Petroleum Council.
He added that the council believes any reimbursements made might need to be returned to the federal government under CARES Act rules.
Those issues aside, Ness said oilfield companies that could benefit from the work have expressed a lot of enthusiasm about the program.
Plugging a single well could employ several dozen workers, he said. Many oilfield companies have had to lay off workers or rely on federal stimulus dollars to stay afloat as activity in the oil patch took a dive when prices tanked this spring during the pandemic.
Ness said he hopes the state doesn’t just opt to plug wells but also takes steps to reclaim the well sites, which involves clean up work to restore the land to its original state.
“We think that is absolutely a critical step in this, and it essentially puts a whole other group of people to work,” he said.
A group that advocates on behalf of land and mineral owners said such a step is critical “so that the land can be returned to productive use.”
Troy Coons, chairman of the Northwest Landowners Association, said abandoned well sites have often been neglected.
“These locations often have had additional problems such as spills or leaks,” he said, adding that the sites can cost hundreds of thousands of dollars to clean up.
A landowner with several wells under consideration to be plugged on his family’s land said saltwater has leaked underground on the property. Saltwater is a byproduct of oil and gas production that can render land infertile when it leaks.
“We hope that the state takes it seriously and uses some of its funding to clean these old well sites up,” landowner Timothy Sundhagen said.
He said his family would like to farm the land, which is north of Tioga in Williams County.
The wells the state has identified as candidates for plugging are older oil wells drilled in decades past. Each is considered “abandoned” because it has not produced oil for at least a year. Oil companies are supposed to either permanently plug or restart the wells after they have sat idle for a year.
Companies tend to halt production from wells when it is no longer economic to run them. In some cases that is due to a problem with the well, and in other cases it’s due to low oil prices.
Sundhagen noted that there are newer wells in the area drilled into the Bakken formation, and he’s open to having them on his land as the old ones are cleaned up.
“In return, we will work hand in hand with the future producers that come,” he said.
Coons with the landowners association said the group has for years lobbied state officials to strengthen requirements to ensure that well sites are plugged and reclaimed.
“The fact that NDIC had to obtain federal agency funds is the direct result of inadequate planning and is a bright-red warning signal that NDIC needs a different and more aggressive approach going forward,” he said, referring to the acronym for the North Dakota Industrial Commission, a three-member panel chaired by the governor that oversees the Oil and Gas Division.
Bruce Hicks, assistant director of the Oil and Gas Division, responded that the state strengthened bonding rules last year, adding that the state “does have to have a competitive business climate in North Dakota for operators to be here.”
“If we bond everybody out of the state, it is not going to benefit anybody,” he said.
Coons said he knows the state has made progress, but he would still like to see further action.
“You cannot put the property owners and the taxpayers of North Dakota at a significant risk by not bonding properly,” he said.
State officials estimate the average well costs $150,000 to both plug and reclaim.
Many oil and gas producers testified at the hearing as well, informing the commission which wells they would like to see plugged and which they have plans to restart one day. Oil and Gas Division officials asked questions of many of those companies, trying to pinpoint why they had not complied with state plugging requirements and what their timelines are for addressing the problems.
State officials did not make any decisions Wednesday about how to proceed with the program. They are expected to present a proposal to the Industrial Commission down the road.
Reach Amy R. Sisk at 701-250-8252 or firstname.lastname@example.org.