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North Dakota eyes federal money for expansion of oil well plugging program

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Garrett Van Dyke, left, and Jesse Zanh, both with Ham's Well Service, anchor a cable stretching to the top of the 96-foot-tall derrick and workover rig while plugging an abandoned oil well southwest of Antler in Bottineau County.

North Dakota’s top oil regulator wants to extend the state’s abandoned well plugging program by tapping into $4 billion made available in the federal infrastructure bill for the purpose of cleaning up old oil and gas sites across the nation.

Tens of millions of dollars could potentially come North Dakota’s way each year over the next decade to continue the work the Oil and Gas Division started in 2020 to clean up hundreds of wells. Other oil and gas states also are eligible to apply, and advocates for North Dakota landowners say the rest of the country could learn from the state’s experience.

The funding is meant “to tackle this problem nationwide and to improve state regulations and federal regulations so that the problem not only doesn’t continue to grow but doesn’t continue to extend and require another infusion of money at some point in the future,” State Mineral Resources Director Lynn Helms said.

“We’re really excited about that,” he added.

North Dakota spent tens of millions of dollars in federal coronavirus aid plugging more than 300 abandoned wells and reclaiming the sites over the past two years. The cleanup work is ongoing. State officials billed the program as a way to keep oil workers employed when the pandemic prompted a downturn in their industry, as well as a means to address the growing number of wells producers had abandoned.

The sites are referred to as abandoned because some have sat idle for years after their owners concluded they were no longer profitable.

While landowners are eager to see abandoned wells dealt with, some advocates have concerns about the way the program was implemented last year.

“If they would be more thoughtful in the approach to this, we could do a much better job than last time when it was very rushed,” said Troy Coons, chairman of the Northwest Landowners Association.

Coons’ group released a report last month evaluating North Dakota’s program. Among the concerns it raised is that reclamation work meant to restore a well site to its original state was sometimes left incomplete, with contamination from saltwater spills still lingering. Saltwater is a byproduct of oil production and can render land infertile if it leaks.

The work the state did at some contaminated sites placed a Band-Aid over the problem, Coons said.

Reclamation work in North Dakota over the past two years has cost $148,000 per well on average, but it can vary widely, according to data from the Oil and Gas Division. One site cost nearly $1.9 million. That’s in addition to the plugging process, which took place first and cost $134,000 on average per well.

Helms said the state initially overestimated how quickly it could complete reclamation work during colder fall and winter weather. The additional funds available through the infrastructure bill President Joe Biden signed into law earlier this month could help North Dakota address the unfinished work.

“You can very quickly plug a lot of wells and pretty quickly remove the equipment and eliminate the potential for future contamination, but the process of cleaning up past contamination and actually reclaiming and remediating the site is a multi-year process,” Helms said.

The bill designates some money specifically for improving regulations surrounding abandoned wells, and Helms said all 31 oil and gas producing states are eyeing it.

“It’s going to be a collective effort to learn from each other and to teach each other, and also to hire some experts,” he said.

The Northwest Landowners Association has for years called for stronger bonding requirements to ensure enough money is available to plug wells if their owners shirk their cleanup responsibilities at the end of a well’s life.

The group would like to see the state no longer allow multiple wells to be placed on the same bond and instead require that oil companies secure a bond for each well they operate. Regulators in a number of states are looking at the issue, said Derrick Braaten, an attorney for the association. The costs associated with plugging and reclamation in North Dakota over the past two years were at times more than regulators expected, and that data could be particularly useful for people elsewhere to study, he said.

The leader of another group that has long advocated for stricter bonding rules said the requirements should be based on the true cost of cleanup.

The state should also be more stringent about which idled wells qualify for assistance, said Scott Skokos, executive director of the Dakota Resource Council.

“It should probably be for wells that don’t have owners or have bankrupt owners," he said. “If that’s not the case, then it’s just a bailout to existing operators.”

Helms estimates North Dakota has 575 remaining abandoned wells.

The federal program stems from bipartisan legislation sponsored by U.S. Sen. Kevin Cramer and Rep. Kelly Armstrong, both North Dakota Republicans.

Meanwhile, North Dakota legislators earlier this month approved spending $3.2 million of American Rescue Plan Act money to convert 16 abandoned oil wells into freshwater wells for drinking water. Private landowners or grazing associations will use the wells, especially for providing livestock with water.

The state has already converted five such wells over the past two years, Helms said. The process involves somewhat different procedures than if the state were to completely plug a well up to the surface, and it’s slightly cheaper, he said.

The infrastructure bill also makes $11 billion available for abandoned mine cleanup. In North Dakota, the Public Service Commission is tasked with cleaning up old coal mines that operated before stricter laws took effect in the 1970s surrounding reclamation.

“We have hundreds of abandoned mine lands that could be reclaimed,” Commissioner Randy Christmann said.

He would like more information about requirements surrounding the federal program, but he said he would be interested in having North Dakota apply. The state receives about $2.8 million each year for mine cleanup via a federal reclamation fee.

Reclamation projects administered by the PSC can range from a couple hundred dollars to more than $1 million, Christmann said.

Reach Amy R. Sisk at 701-250-8252 or amy.sisk@bismarcktribune.com.

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