BISMARCK — An environmental group on Monday, Oct. 7, praised a state proposal to strengthen regulations surrounding abandoned oil wells, while a petroleum industry group cautioned that one aspect of the rules could pose problems for idle wells that operators might eventually want to restart.
Their comments came in Bismarck at the first of several hearings taking place this week on a package of oil- and gas-related rule changes put forward by the state Oil and Gas Division.
A portion of the proposed rules seeks to prevent more abandoned wells, which could ultimately fall to the state to clean up.
Scott Skokos, executive director of the Dakota Resource Council, said his group supports tighter rules for wells deemed “temporarily abandoned.”
“Many of our members have been pushing for that kind of reform for years,” he said, adding that some of the group’s members have had idle wells on their property for as long as three decades.
The draft rules would give the state authority to require a company to put up a higher bond if a well remains classified as temporarily abandoned for more than seven years. A bond offers financial assurance that money will be available to plug and clean up a site if a company shirks its responsibility to remediate a well once it is done operating.
Oil companies sometimes request to idle low-producing wells temporarily while they wait to see if better conditions emerge, like higher oil prices, which would make the wells more profitable. Operators otherwise are required to permanently plug a well if it has stopped producing oil for more than a year.
Under the proposed rules, the state would also consider a company’s future plans for a well when deciding whether it can be placed on temporarily abandoned status. Wells can continue to sit idle under that classification so long as they receive yearly approval from the Division of Oil and Gas, though a landowner can request the state step in after seven years to force a company to restart or plug a well.
A representative from the North Dakota Petroleum Council said the proposed higher bond after the seven-year window could be problematic in drilling units where certain wells might one day undergo what’s known as “secondary” or “tertiary” recovery. As wells age and oil production dwindles, operators can inject water or gas underground to help boost the amount of oil that’s extracted.
“It may take that amount of time if not more to properly assess whether or not individual wells within that unit are going to be profitable,” said Brady Pelton, government relations manager for the council.
He said the group understood the intent behind the rules, which aim to address the growing number of abandoned wells and limited public funds available to plug them.
More than 600 are spread across oil-producing parts of North Dakota. The number is small compared to other states like Pennsylvania, where it’s estimated that the 160-year legacy of oil and gas drilling has resulted in hundreds of thousands of abandoned wells, but North Dakota regulators say it’s grown in recent years amid low oil prices.
Skokos, with the Dakota Resource Council, supports several other proposed changes targeting the problem, including that abandoned wells sold by one company to another must be fully bonded by the purchaser. Another change would require higher bonds for saltwater injection wells, which shoot brine, a byproduct of oil drilling, back underground for permanent storage.
Skokos encouraged the state to go further in its regulations by increasing the amount of money companies must put up as a “blanket bond” that covers more than one abandoned well, as well as ensure that companies either put up cash bonds for wells or secure surety bonds through an insurance company. He suggested the state do away with allowing “alternative bonds,” which he said let companies put up equipment like a drilling rig as collateral or offer assurance that they are financially stable.
The state is accepting written comments on the draft rules through Oct. 18. The proposed regulations ultimately will require approval by the North Dakota Industrial Commission, which is a three-member panel chaired by the governor.