An energy study to determine whether salt caverns could be used in North Dakota to store gas and liquids is running millions of dollars over budget.
The three-member North Dakota Industrial Commission on Thursday voted to reallocate $2.5 million from another study project to complete a core analysis that's integral to the salt cavern study. The other study, which deals with underground gas storage, requires only another $500,000 to complete.
The commission on the recommendation of Deputy Executive Director Reice Haase also reallocated $500,000 that had been intended to acquire land for drilling a test well. That became unnecessary when project officials in the spring chose an abandoned well pad as the testing location to begin drilling.
The $500,000 will be used to help pay for the services of an industry board that is advising the University of North Dakota's Energy and Environmental Research Center, which is conducting the study. The purpose is to determine the feasibility of constructing underground salt caverns in western North Dakota for energy resource storage, including natural gas, hydrogen and hydrocarbons. Core analysis refers to the collection of core samples of salt and surrounding rock zones, and testing those samples.
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The rise in the original $9.5 million budget -- which the Industrial Commission approved in May -- is due to challenges faced while drilling, according to Haase.
“Whenever you drill a well, there’s a risk involved," he said. "Industry, they’re aware of the risks whenever you drill a well, and potential costs increase based on whatever issues you may encounter."
The core analysis will cost $700,000. It will cost another $2.3 million to complete geologic modeling and engineering, according to Haase.
He said EERC officials went to the Oil and Gas Research Council, whose mission is to promote growth of the oil and gas industry in the state, and the group recommended that the immediate needs of the salt cavern study be funded first -- drilling and core analysis.
“The most time-sensitive aspect of this project was that core analysis," Haase said. "Now that we’ve gone through the expense of drilling a test well and collecting that core, once you collect those samples you have about a month before those samples start to naturally degrade. And we need to get our laboratory analysis done before that happens."
The $2.3 million needed to complete the geologic modeling and engineering remains to be added to the study's budget.
The Oil and Gas Research Council on July 26 discussed options including a request to the Emergency Commission -- which decides on state agency funding requests between regular legislative sessions -- allocating the remaining Oil and Gas Research Program funds for the current state budget cycle, or determining if there are remaining funds from other projects that could be reallocated.
“Salt cavern projects, it’s very strategic for our state. If we have the opportunity to create salt caverns for underground storage, it’s not just for natural gas. We could store strategic supplies of propane storage that would help us a lot,” Haase said, noting that propane shortages in the past have impacted farmers, especially in wetter seasons.
He added that the council over the next month will work to source the remaining funding for the salt cavern study.
The Industrial Commission is made up of the governor, agriculture commissioner and attorney general.
Reach Jackie Jahfetson at 701-250-8252 or email@example.com.