North Dakota’s taxpayers and landowners have been left “holding the bag” when it comes to the state’s Bakken Restart program, a report out from Northwest Landowners says, and they want lawmakers to reconsider using any more federal tax money to plug and reclaim wells.
North Dakota used $66 million of its CARES Act funding to put unemployed oilfield workers back to work during the pandemic. The program has been looked at as a national model, with legislation filed by Sen. Kevin Cramer being included in the bipartisan infrastructure plan that is still working its way through Congress.
But North Dakota failed to limit its payments to true orphan wells, NWLA president Troy Coons told reporters during a teleconference on Tuesday, scheduled at the same time lawmakers were meeting in a room next door to consider the use of $1.1 billion in ARPA funds.
Among the appropriations requests that body has heard are two from the Division of Oil and Gas for energy. One of them asks for $6.4 million to convert up to 32 abandoned or orphaned wells into livestock water supply wells. The other request asks for $1 million to pre-permit carbon dioxide pipeline corridors.
Coons said he sees serious problems ahead for landowners if complaints or problems with the Bakken Restart reclamations arise in the future.
“NDIC has advocated for the law that would require landowners to wait seven years to simply ask the question to review a well on temporary abandoned status,” he said.
Many landowners, he added, told him that they were not given notice of the CARES Act plugging and reclamation operations that were completed on their land until right before the contractor was ready to do the work, which didn’t give them much time to review what was being proposed for their land.
“In many cases, contractors asked landowners to sign a liability release for the work that the contractor and NDIC admitted up front would not result in a full reclamation,” Coons said. “Many of these reclamation sites are never finished, and remediation is not complete.”
Some landowners who had surface use agreements with an operator are also getting stiffed in another way as well, Coons added.
“Now that the NDIC has confiscated these wells, the landowner no longer receives annual payments,” he said. “And the NDIC has failed to finish its job and does not appear to have any plan to do so, unless additional taxpayer funds are released.”
Coons said North Dakota should reform its bonding requirements, eliminate blanket bonds altogether, and implement moratoriums on operators transferring old wells down the value chain. The latter results in wells owned by companies least likely to be able to address plugging and reclamation once the well’s useful life has ended.
Coons said NWLA continues to advocate that the first operator pay into a fund that will follow a given well site to its end.
“Otherwise, the problem will only grow,” Coons said. “Currently, our taxpayers are funding the effort, when the responsibility lies with the operator. That is wrong morally and legally. The operators who profited from the oilfield should be cleaning up their wells when they are done. But, they do not because the NDIC allows them to pass of their oilfield assets to less than solvent operators, until the oil wells finally are left with an insolvent operator.”
NWLA also says the data they have compiled shows that the state has been significantly underestimating the true costs of reclaiming and plugging old wells. That means the bonds currently being required are likely to often be insufficient to cover the costs of plugging and reclaiming wells.
Recently passed legislation adds to what he believes is already a financial and legal time bomb for landowners.
“The North Dakota Legislative Assembly passed specific laws in 2019 to ensure that it is the landowner who will be responsible,” he said. “The new law says that if no other viable responsible party can be located after the department’s reasonable investigation, the department shall consider a person that becomes an owner fo the property, after the release of the responsible party. That person who becomes an owner after the release is an innocent landowner.”
Coons said he has had landowners tell him at at some of the sites remediated with CARES Act funding contractors merely removed some gravel from the top, and called the job done.
“So there’s a lot of looming concerns (about these wells),” Coons said. “And will that liability lie with those companies? Will it like with the state? Or is it gonna lie with the property owner, who in many cases did not have the right to say no to access, because of the right of ingress. But yet our state has taken actions to leave the liability with them.”
North Dakota Department of Mineral Resources spokeswoman Katie Haarsager said the Division of Oil and Gas has not yet had an opportunity to fully review the NWLA’s report, but did address a couple of key points in an email to the Williston Herald.
“Since receiving CARES Act funding, it was made clear that we would ensure all locations were properly reclaimed, however, that we would not be able to address any contamination on locations outside of the well pad by the initial Dec. 30, 2020, CARES Act deadline,” she wrote. “We of course plan to work with the landowners on the reclamation of these properties.”
North Dakota plugged 339 wells in 2020-21, totaling $42,159,580, Haarsager said. The costs of plugging wells ranged from a low of $51,115 to a high of $523,382, an average cost of around $124,000.
Reclamation costs, meanwhile ranged from a low of $8,270 to a high of $1.88 million. Total reclamation costs for 2020 are $27.17 million for 183 wells, an average cost of around $148,472.
“With this information, the state has been able to adjust the single-well bonding required of an operator,” Haarsager wrote. “And, additionally, (the state) has changed the rules where a well in abandoned status cannot be transferred to another operator without single-well bonding in place.”
The primary objective of the CARES Act funding for plugging and reclaiming wells was keeping oil and gas workers employed, Haarsager added, while at the same time removing a potential future liability.
The initial estimate was that the Bakken Restart would keep 1,200 or so people working, but it actually employed 1,380 people for plugging operations and more than 1,925 for reclamation, a total of more than 3,305 in all.