Tom Stromme – Bismarck Tribune – The number of abandoned oil and gas wells in North Dakota has grown 10% over the past two years to more than 700 amid low oil prices, and state regulators are considering new rules to try to keep the problem from getting worse.
“It’s starting to become out of control, and we want to rein this in,” Oil and Gas Division Assistant Director Bruce Hicks said Wednesday at a meeting of the state’s Industrial Commission.
Officials say they don’t want to see North Dakota face the same challenges as other states such as Pennsylvania. A 160-year legacy of oil and gas drilling there has led to hundreds of thousands of abandoned wells and complaints from regulators that the cost of plugging and reclaiming the sites falls to the state.
The Industrial Commission on Wednesday advanced a series of draft rules surrounding abandoned wells for public comment and scheduled hearings for October. The changes come as part of a package of updates to state rules on numerous oil and gas issues.
Among the changes under consideration, the Oil and Gas Division is proposing that abandoned wells sold by one company to another must be fully bonded by the purchaser. Companies sometimes buy abandoned wells and could decide to restart them one day under the right conditions, like higher oil prices.
A bond is an assurance of money to pay for plugging and reclamation should the company abandon a well site and ignore its responsibility to clean it up.
Hicks said some companies with “junk” wells in North Dakota have tried to unload them by selling them to another operator.
“They’re wells that are not economic, and another company picks it up, and it’s a tremendous liability,” he said.
State Mineral Resources Director Lynn Helms estimated that an abandoned well costs $150,000 to plug and reclaim.
The state also is seeing more wells placed on “temporarily abandoned” status after they remain inactive for a year.
Wells can stay unplugged under that designation, sometimes for decades if approved by the Oil and Gas Division. A state law passed in 2015 resulted in a rule change allowing landowners to request that regulators take action on those wells after seven years.
Under the draft rules before the commission today, when a company wants to temporarily abandon a well, the division would consider the company’s future plans to begin operating the site again within seven years. After seven years, the division could require additional bonding if the well were to remain under that status.
One other rule change before the Industrial Commission would double the bond requirement to $100,000 for commercial injection wells that are used to dispose of saltwater underground. Saltwater is a byproduct of oil production and comes up to the earth’s surface at well sites.
“The whole paradigm of commercial disposal wells has shifted in the last 10 years or so,” Helms said.
Before the shale oil boom took off, most injection wells were operated by drillers who used them to dispose of saltwater from their own oil wells, he said.
Today, more than half of disposal wells are owned by companies that focus on the saltwater business but do not drill for oil.