NDIC can decide to plug wells

BISMARCK - An attorney general’s opinion issued Tuesday says the North Dakota Industrial Commission has discretion when deciding whether to plug oil and gas wells that have been abandoned for more than a year.
Rep. Kenton Onstad, D-Parshall, requested the opinion about a year ago to find out what duties the Industrial Commission has to plug wells that have been abandoned - a source of frustration for landowners in his area.
“As long as that well is abandoned and sitting there not reclaimed, that surface owner is losing money,” Onstad said Tuesday. “The longer you let it sit, the more chances you have for problems on that particular site, a leaky tank or an old pipeline or something like that.”
Onstad writes in his request for an opinion that ambiguities in the law and the commission’s inconsistent enforcement “leave landowners in limbo with no foreseeable end.”
Attorney General Wayne Stenehjem, also a member of the Industrial Commission, writes that the commission may enter into contracts to plug abandoned wells under certain situations, but it has discretion about when to do so.
Once a well has failed to produce oil and gas in paying quantities for one year, it can be classified as abandoned.
State rules require abandoned wells to either be returned to production or plugged and reclaimed within six months. However, that may be waived for one year if the commission allows the well to be placed on “temporary abandoned status.”
Companies that request temporary abandoned status typically have plans to return and do something else with the well, such as convert it to an injection well or use it for enhanced oil recovery, said Department of Mineral Resources spokeswoman Alison Ritter.
The director of the Oil and Gas Division can extend the temporary abandoned status on a year-by-year basis.
North Dakota has 343 wells considered to be temporarily abandoned. Of those, 215 wells have been temporarily abandoned for seven or more years, Ritter said.
Rep. Marvin Nelson, D-Rolla, who sponsored legislation this past session related to these wells, said landowners contacted him about abuses of the system, including one temporarily abandoned well site that was used as a storage area.
“There are examples of wells that are on temporary abandoned status that have been on that status for decades,” Nelson said. “Is it really a legitimate temporary abandonment, or does the owner just not want to go through the expense and hassle of properly capping it or what?”
Under state rules, if a well is abandoned for one year or more, the bond posted for the well and equipment at the site are subject to forfeiture by the Industrial Commission. The commission can enter into contracts to reclaim the abandoned well in situations such as when the drilling company has no assets.
In his request for an opinion, Onstad asked if the Industrial Commission has a duty to act when a well is abandoned for more than one year and whether the commission must act in a certain timeframe. Onstad also asks what recourse landowners have if the commission does not act.
Stenehjem responds that the commission “has discretion in deciding when and to what extent it exercises its authority to plug an abandoned well and reclaim the well site.” Stenehjem said the commission also has discretion about the timeframe.
If a landowner believes that an operator failed to plug a well in violation of state rules, the landowner may ask the commission to investigate it, Stenhjem writes.
After reading the opinion, Onstad said if the commission has that discretion, “then why don’t they?”
Landowners with abandoned wells will have another avenue for recourse under a bill approved this past session.
House Bill 1358, which incorporated language from a bill introduced by Nelson, will allow landowners with wells that have been abandoned for at least seven years to request a review of the well’s status. Companies will have to justify during an Oil and Gas Division hearing their reason for temporary abandonment status.
Nelson said the current process is “almost rubber stamp mode,” but the new law will provide more protection to landowners.
Operators have plugged and reclaimed more than 10,350 wells in North Dakota since oil production began in the 1950s, Ritter said.
The state has stepped in and plugged two wells in the past five years, both in 2011, Ritter said. The state also will plug one well this year that was subject to a complaint from the Industrial Commission.
Wells on temporary abandoned status subject to mechanical integrity tests at least every five years and yearly inspections from the state.
The Industrial Commission consists of Stenehjem, Gov. Jack Dalrymple and Agriculture Commissioner Doug Goehring.