Kevin-Sunburst Oil and Gas Producers Speak Out

By Jessica Sena | Posted: Friday, February 6, 2015 12:07 pm

HELENA, MT – Northern Plains Resource Council (NPRC) has identified several priority bills which they are calling “landowner protections” for this year’s legislative session.

Over the last two weeks, the Senate Natural Resources and House Federal Relations, Energy, and Telecommunications (FRET) Committees have held hearings on the bills, which were met with opposition from several Montana oil and gas producers from Shelby, Kevin, Oilmont, Sunburst, and Cut Bank.

Water Testing

SB 172, a bill sponsored by Sen. Stewart-Peregoy (D-Crow Agency) would require notification to all persons within a half a mile of a proposed well site including information on baseline water testing available at the expense of the well’s applicant. Additionally, SB 172 would require two follow-up tests to be completed once a well is plugged.

Proponents, a majority of which are members with NPRC, said that the public has the right to know the quality of their water before and after drilling operations.

Opponents included the Montana Petroleum Association (MPA), and several oil and gas producers, including Gary (Mac) McDermott, representing the Northern Oil and Gas Association and MCR, LLC; and Patrick Montalban, Mountainview Energy Ltd.

The Montana Bureau of Mines and Geology provides publicly available information from existing statewide monitoring wells on the Ground Water Information Center online. The Bureau has wells in every county of Montana, and receives funding through the Resource Indemnity and Ground Water Assessment account paid into through natural resource taxes paid by industry.

Additionally, DEQ and DNRC have conducted recent tests around the state in “high risk” areas where oil and gas activity is prevalent, with grant money appropriated by the Legislature in 2013.

Bonding

SB 173, a bill to increase bonding and impose idle well fees, carried by Sen. Christine Kaufmann (D-Helena) was also heard in Senate Natural Resources. Kaufmann and proponents, including NPRC members, the Montana Environmental Information Center, and Montana Audubon, claimed that wells needed to be properly indemnified, and that increased bonds were necessary to ensure available resources for the proper plugging of wells.

Opponents from north central Montana included Duane and Marilyn Enneberg, Rick Rice, Gus and Billiette Coolidge, Lucille Knap, Mac McDermott, and Patrick Montalban, all representing small oil and gas businesses. MPA and the City of Shelby also testified against the bill, as well as representatives from MDU and Continental Resources.

Increased bonds and idle well fees (which the bill does not define) would effectively shut down development of marginal (stripper) & wildcat wells, said opponents. Low oil prices have already affected the economics of drilling for all operators.

Jim Halvorson, Division Administrator of the Board of Oil and Gas, was present for all bills as an informational witness. Halvorson said that the number of abandoned wells has been on the decline, with only fifty eight remaining on the Board’s file. The oil and gas account has approximately $7 million dollars available, with additional financial resources in the RIGWA account which is capped (per a constitutional requirement) at $100 million dollars annually.

Setbacks

SB 177, carried by Sen. Mary McNally (D-Billings) would establish setbacks from well sites. Using the definition of “inhabitable real property”, wells would have to be 1,000 ft. from property lines and all surface water, lest the surface owner waive the requirement. Several amendments to the bill have since been added, including a provision intended to disallow any interference with mineral rights.

Supporters of the bill, all of the same supporters for the previously stated bill, claimed that it was a bill for property rights, adding that several other oil and gas states have passed setback rules.

Opponents, namely oil and gas producers and mineral owners, claimed that the bill was a regulatory taking of mineral rights, that it lessened the economics of drilling wells, even preventing vertical drilling in many areas, and that it conflicted with existing statute on the designation of spacing units.

A spokesperson for the MPA said that Montana’s oil and gas production pales in comparison to states with setback rules, with Montana ranking 12th in oil production, and accounting for roughly 1% of total U.S. oil production. Setback rules proposed in SB 177 would be the most restrictive of any that have been imposed in other states.

The Board’s Jim Halvorson and Monte Mason for the DNRC rose as informational witnesses.

The State owns roughly 5 million acres in surface rights and 6 million acres in mineral rights. Should the bill, which has been tabled, be revived by a blast motion and passed, mineral owners and State Trust Lands could see a significant decline in production and revenue.

Frac Disclosure & Notification

HB 243, a bill to require a 45 days pre-frac notification and full disclosure of frac fluid chemicals, was sponsored by Rep. Mary Dunwell (D-Helena). The Montana Board of Oil and Gas Conservation (BOGC) promulgated rules in Aug. of 2011 to require prior and post fracturing disclosure of chemicals. Disclosure is available to the public through FracFocus.org.

Opponents stated that the notification requirement was in addition to existing rules and statute for notices, and said that delaying completion operations (fracturing) may jeopardize the process altogether.

Well owners do not always know whether or well will be fractured. Well stimulation activities take place after the drilling. The notice requirement may also open the door for interveners to unnecessarily delay or prevent fracturing, which is a process well owners negotiate with service providers who perform the fracturing.

Opponents also said that there was no demonstrated deficiency with existing rules and regulations.

In November, the USGS study concluded that oil and gas activities in the Williston Basin (Bakken) had not affected groundwater quality. Montana has not had a single case of groundwater contamination by fracturing discovered or reported to the Board by any regulatory agency in the more than 60 years that the process has been used in the state.

Pits

HB 253, a bill to prohibit earthen pits and require closed-loop [drilling] systems, was heard most recently in House FRET. Rep. Virginia Court (D-Billings) was the bill’s sponsor, and said that closed-loop systems were more environmentally beneficial and economically feasible than alternative methods which include earthen pits for drill cuttings.

The bill attracted resounding opposition from Shelby’s Mac McDermott for MCR, LLC. and the Northern Oil and Gas Association, Roy Brown for FX Drilling, John Finstad of Keesun Corporation, Garth Owens of Gasco Drilling, MPA and MonDak Utilities.

Montana’s drilling operations and geology vary considerably around the state, and while many Williston Basin operators have elected to use closed-loop systems in lieu of pits, doing so would not be economic for most small producers or wildcat and exploratory wells. Opponents claimed that shallow wells which are drilled with freshwater rather than salt or oil based mud use pits which are strictly regulated by the BOGC. The BOGC does have the regulatory authority to prohibit the use of pits if a factual situation warrants.

House FRET is expected to vote on HB 253 Monday, February 9th at 3:00 pm.

All other bills have been tabled, but may be brought to life by a blast motion with a majority vote on the floor of their respective sponsor’s chamber. In that event, the bill would be debated and voted on by the entire body of either the Senate or the House. Such motions have until the transmittal deadline, February 26th.

Jessica Sena, a former contributor to the Sun Times, now serves as Communications Director with Montana Petroleum Association.

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