Oil revenue way up for tribes; money going to roads, other infrastructure

Three Affiliated Tribes Chairman Tex Hall speaks Wednesday, April 23, 2014, during the Mandan, Hidatsa and Arikara Nation’s Oil and Gas Expo in New Town, N.D. Amy Dalrymple/Forum News Service

NEW TOWN, N.D. – In less than one year, the Three Affiliated Tribes have collected $184 million in oil tax revenue, nearly equal to the amount collected during the entire 2011-13 biennium.

The jump in revenue is primarily due to increased oil production at Fort Berthold, which now produces more than 270,000 barrels per day and accounts for nearly 30 percent of North Dakota’s oil production.

Tribal Chairman Tex Hall said Wednesday if the Fort Berthold Reservation were a state, it would be the No. 7 top oil producing state in the country.

“That’s how fast we’re moving,” Hall said during the Mandan, Hidatsa and Arikara Nation’s Oil and Gas Expo.

But the oil development comes with impacts for the reservation, and Hall outlined several major initiatives the tribe has planned to address them.

The tribe plans to spend $100 million to improve roads on the reservation that have taken a beating from heavy truck traffic, Hall said.

In addition, the tribe is planning $100 million for a proposed bridge project and $65 million in housing for medical staff as its clinic expands to a 24-hour ambulance service in response to an increased number of accidents, Hall said.

“These are all critical parts of the infrastructure needs,” Hall said.

During all of 2011-13, the Three Affiliated Tribes collected $188 million in oil tax revenue, according to the Office of the State Treasurer. Since July 1, the tribe has already collected $184 million in oil tax revenue.

In addition to the gain in revenue from increased oil production, the tribe is now getting a larger share of oil tax dollars resulting from a new tax agreement with the state.

Previously, the state received 80 percent of some of the oil tax revenue while the tribe received 20 percent, which Hall called “totally unfair.” An agreement reached at the end of last year’s legislative session changed the split to 50-50.

The tribe was projected to receive at least $80 million more in 2013-15 as a result of that agreement. However, with income from oil tax revenues running ahead of projections, Senate Majority Leader Rich Wardner said he estimates the tribe will gain at least $100 million.

Wardner, who spoke during Wednesday’s event along with Senate Minority Leader Mac Schneider, said it was “music to his ears” that the tribe is spending the additional tax dollars on roads.

Negotiations between state and tribal leaders were at times tense a year ago when some legislators wanted to stipulate in the agreement that the oil tax dollars be spent on roads. Tribal leaders objected to state government telling the sovereign nation how to spend its money.

Wardner, R-Dickinson, called for the state and the tribe to work more closely together to address issues such as natural gas flaring, handling of oilfield waste and drug trafficking.

“Their issues are our issues,” Wardner said.

One of the major initiatives the tribe is working on is a ¾-mile bridge to cross the Little Missouri River to provide easier access to the Twin Buttes area, Hall said.

The Charging Eagle Bridge, estimated to cost $100 million, would cut a 115-mile commute from Twin Buttes to the rest of the reservation in half, providing better access to health care, education and jobs, Hall said. Many oil companies have said there could be another 100 to 200 wells in Twin Buttes if they could access the area with a bridge, Hall said.

The tribe is holding public meetings on the proposal and has received concern from Twin Buttes community members about the potential for increased crime, Hall said.

In addition, the tribe plans to spend $50 million on a rail spur and site development for a rail-loading facility and diesel refinery near Makoti.

Thunder Butte Petroleum Services CEO Richard Mayer said the rail-loading portion of the project is expected to be complete in September with the refinery scheduled to open in spring of 2016.

Western N.D. airports make pitch for help to FAA

Federal Aviation Administrator Michael Huerta, center, listens during a roundtable discussion Monday, April 21, 2014, in Williston, N.D., about airport needs in western North Dakota. He is hosted by Sen. Heidi Heitkamp, Sen. John Hoeven and Rep. Kevin Cramer. Amy Dalrymple/Forum News Service

WILLISTON, N.D. – Federal Aviation Administration Administrator Michael Huerta didn’t bring his checkbook to western North Dakota on Monday, but he pledged to partner with the state to address the challenges of rapid growth.

Huerta toured Williston’s airport, which saw a nearly 152 percent increase in commercial boardings in 2013 alone and has maxed out its facilities to keep up with the growth spurred by oil development.

“The FAA can’t respond as quickly as we’ve grown,” said Steven Kjergaard, manager of Williston’s Sloulin Field International Airport.

Huerta, along with North Dakota’s congressional delegation, also heard from airport administrators in Dickinson, Minot and Bismarck, which are also experiencing spikes in boarding numbers and strains on facilities.

“It’s not just one community, it’s really half a state,” said Andy Solsvig, director of the Minot International Airport.

North Dakota is breaking aviation records each year, from the number of gallons of fuel sold to the number of pilots licensed in the state, said Kyle Wanner, interim director of North Dakota Aeronautics Commission.

“We’ve never had more destinations available to the public and we’ve never had more flights per day,” Wanner said. “We could grow faster if the infrastructure was there to accommodate these needs.”

A study identified $857.2 million in aviation needs for North Dakota through 2022, with 62 percent of those capital needs coming from in oil-impacted communities, Wanner said.

Wanner estimates that after anticipated federal, state and local funding sources are applied, the state would still have a shortfall of $372.2 million in aviation needs through 2022.

The needs include:

- Williston city officials support relocating the airport and constructing a new facility to accommodate the increased traffic and larger jets. An option of expanding at the current location is also being studied.

- Dickinson’s Theodore Roosevelt Regional Airport needs a new runway to handle larger aircraft and a new terminal to accommodate more passengers.

- Minot’s airport has an expansion project underway, but still needs additional funding.

- In Bismarck, the airport’s runway needs reconstruction due to its age and increased use.

The officials emphasized that the western North Dakota cities are among the fastest-growing in the nation.

“We need an airport that’s going to continue to grow with the population and meet the needs of southwest North Dakota,” said Matthew Remynse, manager of the Theodore Roosevelt Regional Airport in Dickinson.

Huerta said the representatives conveyed a “compelling picture” of the state’s needs. But the FAA’s budget is $3.3 billion, and competition for the discretionary funding is strong due to a backlog of projects, he said.

Huerta said North Dakota will need to prioritize the projects.

“I can’t fathom that we could do all of these things at once,” Huerta said.

Sen Heidi Heitkamp, D-N.D., said safety challenges at North Dakota’s airports will become more serious as more pressure is put on the airports.

“I think North Dakota has to make a pretty persuasive argument to be at the top of the list as it relates to safety,” Heitkamp said.

During the tour of the Williston airport, Kjergaard showed officials the terminal that was designed for about 10,000 per year. Today, the airport sees about that much commercial traffic in one month.

“Clearly the need here in Williston is dramatic,” said Sen. John Hoeven, R-N.D. “We need to do something and we need to get going now.”

Boardings of commercial service airports

2013

2012

2011

2010

2009

Bismarck

237,683

236,172

196,414

194,043

181,114

Dickinson

35,125

23,822

18,958

10,354

8,961

Minot

222,083

224,421

150,450

90,823

66,771

Williston

94,459

37,508

27,774

15,897

11,229

Source: North Dakota Aeronautics Commission

UPDATED: Oil Patch truck driver charged with illegal dumping

This image from the Department of Mineral Resources shows an area of alleged dumping of saltwater, a byproduct of oil production, on a Williams County, N.D., gravel road from Feb. 11, 2014. Submitted photo

WILLISTON, N.D. – Criminal charges have been filed against a truck driver accused of illegally dumping oilfield waste in western North Dakota, and the trucking company he worked for could face more than $1 million in civil penalties, officials said Tuesday.

Leo Slemin, a driver with Black Hills Trucking of Wyoming, has been charged with a Class C felony for allegedly illegally dumping saltwater, a byproduct of oil production and an environmental hazard.

Black Hills Trucking faces potential fines from two state agencies for alleged repeat illegal dumping incidents and for hauling waste without a license since 2008.

In addition, the companies that hired Black Hills Trucking to haul their waste also could face penalties from the North Dakota Department of Health, said Dave Glatt, environmental health section chief.

A Department of Mineral Resources inspector witnessed Slemin on Feb. 14 driving a truck along a stretch of road in southwest Williams County with valves on the underside of the truck open, allowing saltwater to flow directly onto the ground, court records say.

The criminal charge, which is a violation of the North Dakota Industrial Commission rules, is being handled by the Attorney General’s Office.

“The state will not hesitate to bring criminal and civil actions when we learn of instances of illegal dumping,” Attorney General Wayne Stenehjem said in a statement. “Those who blatantly disregard rules designed to protect the environment and keep our citizens safe will be held accountable for their actions.”

Slemin is scheduled to appear in Williams County District Court on Monday. Court information does not list an attorney for Slemin, who is from Mountrail County, according to a news release.

The Feb. 14 incident the inspector witnessed occurred in an area where numerous reports of illegal dumping have been received.

The Department of Mineral Resources, on behalf of the North Dakota Industrial Commission, issued a civil complaint against Black Hills Trucking seeking more than $950,000 in penalties for repeat dumping of waste on gravel roads alleged during February and March.

Surveillance equipment recorded the company’s trucks with saltwater pouring from open valves driving to and from a Williams County saltwater disposal well, the Department of Mineral Resources said.

A representative from the Williston office of Black Hills Trucking said the company has no comment.

In addition, the North Dakota Department of Health has issued the company a notice of violation for operating without a waste hauler’s license and other violations. The amount of fine will be determined through a hearing process, but some violations carry possible penalties of $12,500 per day, Glatt said.

Operating without a the proper license to haul oilfield waste carries a penalty of up to $1,000 per day, and health officials believe the company operated without a license since 2008, Glatt said.

The company had a permit and allowed it to expire May 9, 2008, according to the health department’s notice of violation. The department sent two notices in 2008 reminding the company to renew the license.

“There really is no excuse for them not to know that they need a license,” Glatt said.

Health officials will be investigating which oil companies hired Black Hills Trucking to haul the wastewater, and those companies could be fined as well, Glatt said.

The Oil and Gas Division verified that the company’s trucks were not hauling wastewater shortly after the company was notified of the violations, said Alison Ritter, department spokeswoman.

Health officials will be investigating which oil companies hired Black Hills Trucking to haul the wastewater, and those companies could be fined as well, Glatt said.

Stenehjem urged citizens and other waste haulers to report any suspected illegal dumping to authorities.

“The majority of waste haulers should not have to compete with those few who illegally cut corners,” Stenehjem said.

Newcomers enter race to lead boomtown

Marcus Jundt, right, candidate for Williston mayor, talks to residents April 7, 2014, about his campaign during an event at the Williston Brewing Company. Amy Dalrymple/Forum News Service

WILLISTON, N.D. – Williston is the fastest-growing small city in America, and two among the thousands of new residents want to be the town’s mayor.

Entrepreneur Marcus Jundt, who moved to Williston to open restaurants, and archaeologist Jim Purkey, whose family moved to North Dakota after job layoffs, are challenging city commissioner and lifelong Williston resident Howard Klug for mayor.

Mayor Ward Koeser, who will retire in June after 20 years as mayor, said he’s pleased to see new Williston residents getting involved in local elections.

“To me, it’s a good sign of health, and it means that people want to get involved in the community,” he said.

Williston, the epicenter of North Dakota’s oil boom, has some of the highest rental prices in the country and resources, such as police and fire protection, that are stretched thin. Many other local races on the June ballot also have candidates who have moved to town recently.

Klug said residents encouraged him to run because they want a mayor with longtime roots in the community who knows how city government can run.

“Personally, I think I can do the community good and I do love this community,” said Klug, who has served on the commission for six years. “It’s my town.”

Howard Klug, part owner of The El Rancho Hotel in Williston, N.D., and a city commissioner, is running for mayor of Williston. Amy Dalrymple/Forum News Service

Jundt, who moved to Williston 3½ years ago and is CEO of Williston Holding Company that has invested more than $15 million locally, said he’s running for mayor because he think the city can do better and think bigger.

“I’m running for a vision of where we can be and I’m running because I think I can be the best messenger for that vision,” Jundt said.

Purkey said he struggled with the idea of running for mayor of a town he’s lived in since December 2012. But friends encouraged him to run as an advocate for citizens who don’t feel like their voices are being heard.

“A lot of citizens feel alienated from the city council,” said Purkey, who moved with his family from Wichita, Kan., after job layoffs and is making Williston his permanent home.

Jim Purkey, candidate for mayor of Williston, N.D., works at Books on Broadway in Williston on Saturday, April 12, 2014. Amy Dalrymple/Forum News Service

Klug, elected to the city commission in 2008 and re-elected in 2012, said he hears from residents that the city is on the right track as it responds to rapid growth. He said he’s running for mayor because there is work to do, including completing major street and infrastructure projects, enhancing the city’s downtown and developing affordable housing.

“I think it’s going to come together in a few years and Williston will be a great town, the best town,” Klug said.

Klug has worked at the The El Rancho Hotel for 30 years and is part owner. It’s adjacent to Williston Brewing Company, one of our restaurants owned by Jundt, and signs promoting Jundt for mayor can be seen in the restaurant’s windows from the hotel lobby.

“I find it amusing,” Klug said.

Jundt holds events every Monday night at Williston Brewing Company to get to know residents. He told a recent gathering that his campaign budget is $100,000.

“I think this is the most important election in the history of the city,” said Jundt, a Minnesota native whose career as a restaurateur includes co-founding Kona Grill.

Jundt said Williston should find ways to keep more oil revenue locally, such as through directly or indirectly taxing the oil industry, to support police and fire departments, build new schools and improve the city’s quality of life.

Jundt interviewed to serve on the Williston City Commission last year when a seat became vacant, but was not selected by the commission.

Purkey, whose family first lived in an RV in Watford City and commuted to Williston due to lack of housing, said he’s running a grassroots campaign to represent people who are struggling to find affordable housing.

“We need someone who knows what it’s like to try to struggle day-to-day in this city environment and looking at the needs of the everyday citizen,” he said.

Purkey is an archaeologist, but after years working project-to-project, he began working at Williston Home and Lumber so he could have stable income for his family. He works Saturdays at Books on Broadway in downtown Williston and has worked as a substitute teacher in Williston.

If elected, Purkey plans to hold regular public forums. He said he’s attended city commission meetings that are so packed residents can barely get in the door and they don’t feel like their voices are being heard.

Koeser said he does not plan to make an endorsement for the mayor’s race.

“I’m just glad there are options for people,” he said.

Small town adding activities with enrollment growth

Players for the Ray, N.D., high school baseball team watch their teammates at bat during a game on Thursday, April 10, 2014, in Ray. Amy Dalrymple/Forum News Service

RAY, N.D. – The high school here has a baseball team for the first time since the 1970s, supported by a growing school enrollment and a “baseball fanatic” superintendent.

Ray Public School, in the heart of the Oil Patch, is competing in Class B Region 7 this spring after the community raised money to purchase equipment for the new team.

It’s the first time Ray has had a high school baseball team except for one year in the 1970s, said Ben Schafer, the superintendent and one of the team’s coaches.

“They’re pretty excited about having a baseball team again,” said Schafer, in his second year with the district. “I think everywhere should have a baseball team.”

The K-12 district enrolls about 270 students and is expected to increase as new housing developments in the booming area are constructed. The Census Bureau estimated Ray’s population to be 609 in 2012.

Fifteen students are on the roster this spring and younger kids have expressed an interest in the sport, Schafer said.

“Hopefully we can sustain it,” he said.

Tanner Garman, a junior who plays centerfield for the Jays, said he was excited to join the new team.

“Everyone should get the opportunity to play,” Garman said.

Haley Hodenfield, a senior, is one of three female players on the team. The school doesn’t have enough interest in girls’ softball, so Hodenfield and the other girls asked to be on the boys’ team.

“I’ve always dreamed about playing baseball,” said Hodenfield, a lifelong resident of Ray.

Community interest in the team’s games has been strong.

“Our town has always liked baseball,” Hodenfield said.

The Ray program is one of three new Class B baseball teams this year, said Matt Fetsch, an assistant director for the North Dakota High School Activities Association.

High schools in Stanley, also in oil country, and Oakes, in the southeastern part of the state, also formed new teams this year, Fetsch said. It’s been more common for North Dakota to see decreasing numbers of teams due to declining numbers or teams combining with neighboring schools, he said.

“That definitely goes against the norm compared to other activities,” Fetsch said.

Ray Public School also recently added cheerleading, Schafer said. The district doesn’t have any immediate plans to add more activities, but that could change with interest and community support, he said.

“You just never know with the growth what can happen,” Schafer said.

N.D. oil production up slightly in Feb, but still slowed by winter

WILLISTON, N.D. – North Dakota oil production increased 1.7 percent in February to 951,340 barrels per day, according to preliminary numbers released today by the Department of Mineral Resources.

Winter weather again slowed oil production, with 18 days during the month with temperatures five or more degrees below normal. The month also had four days with wind gusts too high for some crews to operate, Director Lynn Helms wrote in his monthly update.

In addition, more than 100 wells were shut down during the month to minimize natural gas flaring while the Hess Corp. gas processing plant at Tioga was converting to an expanded plant.

North Dakota produced nearly 1.1 billion cubic feet per day of natural gas in February, according to the preliminary figures.

The percent of natural gas flared remained at 36 percent, which ties the historical high set in September 2011. The Hess plant is now operating and should be at full capacity soon, Helms said.

Rail transportation of crude oil fell slightly in February to 67 percent, the North Dakota Pipeline Authority said.

North Dakota had 10,186 producing oil and gas wells in February, the preliminary figures show, which is a new all-time high for the state.

Texas competition, winter, to limit N.D. oil production, study says

MINOT, N.D. – North Dakota oil production, which is poised to break the 1 million barrels per day benchmark, will peak at 1.2 million to 1.5 million barrels per day over the next five years, limited by winter weather and competition from Texas, a Bismarck engineering firm said this week.

KLJ developed projections of the state’s oil and gas activity through 2019 that the firm will use as baseline assumptions for a study being conducted for a legislative committee.

The findings, which received input from industry and state agencies, include:

– Oil Patch communities should anticipate cyclic population levels, as drilling and hydraulic fracturing operations will be more intense during warm weather months.

– The level of truck traffic will remain high, despite additional pipeline development. As the total number of wells increases, trucks will be required to service and maintain those wells.

– The Bakken will face competition from the Eagle Ford and Permian basins in Texas, which are projected to displace Bakken crude from Gulf Coast refineries by late 2016 or early 2017. That will force more Bakken crude to East Coast and West Coast markets, primarily by rail.

– North Dakota railroads are projected to make improvements within the next five years to accommodate oil trains without interfering with agricultural products.

KLJ CEO Niles Hushka presented the projections to the Legislature’s Interim Energy Development and Transmission Committee this week.

Conservative estimates show it will require 40,000 wells and 20 years to complete drilling activities in the Bakken and Three Forks formations. Some projections put the total well count in the North Dakota Williston Basin as high as 120,000, the study says. North Dakota had 10,100 producing wells in January, including 6,935 Bakken and Three Forks wells.

Hushka said companies are expected to complete an average of 2,100 to 2,300 wells per year over the next five years in North Dakota. The main reason they won’t drill more wells is a limit on how much money they have to spend, he said.

“Companies have other places to invest their money,” Hushka said. “We are in direct competition with the Permian and the Eagle Ford. It’s cheaper to drill in the Eagle Ford and they don’t have winter, which is a significant factor.”

The industry is shifting to what Hushka called “batch drilling” and “batch fracking,” in which multiple wells are drilled at the same location, followed by fracking of those wells in a condensed time period.

That allows the industry to gain efficiencies, but it also has some logistical challenges. For example, Bakken wells require an average of 1 million to 1.5 million gallons of water for fracking. If an operator is fracking 10 wells at one location, it would require 10 million to 15 million gallons of water.

“We have a lot of traffic that’s going to be generated to that pad over a narrow period of time, which affects infrastructure,” Hushka said.

The batch development methods, along with challenges of operating during harsh winters, will mean more development will be concentrated during warm weather months, he said.

The state, which produced 933,128 barrels of oil in January, already is seeing a slowdown in winter months, with 660 wells waiting on fracking crews at the end of January.

“We’re going to see some severe cyclic demands for temporary labor, just like we do in construction today,” Hushka said.

The state is expected to add 13,000 to 15,000 miles of pipeline through 2019, the report says. The new pipelines are expected to have enhanced technology and automation features to detect leaks, Hushka said.

“The good news about automation is it’s catching small problems before they become big problems,” Hushka said.

The firm will use the baseline assumptions to guide a third phase of its study, which will involve forecasting over the next five years and presenting legislators with recommendations. The study, which will cost $125,000, will give legislators an overview of oil and gas impacts that can guide them during the next legislative session.

Sen. Connie Triplett, D-Grand Forks, who had been critical of KLJ during a previous presentation, said this week she’s impressed with what the firm presented. She had advocated for a study that looked beyond five years and asked that the study mention some potential advancements, such as shifts in global markets, that may be significant in the future.

“We need, as legislators, to at least be aware of the longer view, so we don’t panic about the notion that they’re just going to lay their rigs down and drive away,” Triplett said.

Sen. Philip Murphy, D-Portland, questioned the study’s assumption that oil trains will not interfere with agriculture transportation when he hears from ag producers who are at a “panic point” about rail availability.

Hushka said the rail concerns are expected to be addressed within the next five years as railroads complete expansion projects.

“I know that doesn’t help your constituents who want it moved today,” Hushka said.

Growing oil town calls rec center plans ‘as critical as streets’

WATFORD CITY, N.D. – Leaders in this booming town say a $56 million indoor recreation facility and events center is key to keeping working families in the community.

If approved, the project would be funded with city sales taxes and a gross oil production tax loan program designed for critical city infrastructure.

Mayor Brent Sanford said the city is making the case that an indoor pool, event venue for up to 3,000 people, indoor walking track and other amenities are vital to attracting and retaining a workforce in Watford City.

“This is as critical as pipes and streets,” Sanford said. “If you don’t have it all, your community is not whole and you’re not a desirable place to live.”

Watford City, the county seat of the fastest-growing county in the country, doesn’t have enough facilities for the growing numbers of kids involved in hockey, gymnastics and other sports, Sanford said. The community has never had an indoor pool and adults don’t have space for recreation basketball or volleyball. Census estimates recently released put McKenzie County’s 2013 population at 9,314, not including temporary workers, a 46.5 percent increase since 2010.

Gene Veeder, McKenzie County Economic Development director, said community members have listed an indoor recreation center as a priority for years.

“The public has asked us to help occupy adults and youth, especially during the longer winter months,” Veeder said. “That’s one of the rubs you get in a small community that’s so remote, is ‘What am I going to do?’”

The proposed 240,700-square-foot facility would have an indoor pool, two sheets of ice for hockey and skating, three basketball courts, concert or event venue and conference rooms. It would be located east of Watford City adjacent to a new high school that voters overwhelmingly approved last month. The land was donated, Sanford said.

Residents will vote in June on a sales tax measure that would finance the events center, a new hospital and future community projects such as airport improvements, affordable housing and park facilities, Sanford said. Currently Watford City’s sales tax is 1 percent, which expires this year, and voters will decide whether to raise that to a total of 1.5 percent.

If approved, Watford City could borrow up to $20 million for the events center, using sales tax revenue to make the bond payments, Sanford said.

The city also can borrow up to $54 million from the Bank of North Dakota for critical city infrastructure projects, with repayment coming from the city’s share of state oil and gas gross production tax, Sanford said.

Watford City leaders are considering using half of the loan for the events center and the other half for a new sewage treatment plant, new roads, water towers and other infrastructure, Sanford said.

The gross production tax is what oil companies pay to the state in lieu of property taxes on oil and gas wells. Most of Watford City’s sales tax revenue comes from oil and gas activity, which is more heavily concentrated in McKenzie County than anywhere else in North Dakota.

“We’re going to look to leverage those business-based tax inflows and pay for something that residents have wanted for a long time,” Sanford said.

If voters approve the sales tax, the project would need to be presented to the local Roughrider Fund Committee and City Council for final approval, Sanford said.

Local leaders have lobbied for a larger share of the state’s oil tax revenue, and Sanford said they will continue to do so.

Veeder said he expects to hear from detractors who will criticize spending $56 million on an events center. But the center will be a “community-maker,” Veeder said, and getting families to stay in Watford City is critical to supporting the workforce needs.

Williston recently opened a $76 million recreation center, funded primarily through sales tax revenue, which leaders there say they hope will attract more families to town.

“People aren’t just workhorses, they need to have some things to do with their life,” Veeder said. “We think this will let them do that.”

New state rules call for leak-proof containers for filter socks

Ron Ness, president of the North Dakota Petroleum Council, testifies to a legislative committee on Tuesday, April 8, 2014, in Minot, N.D., about the disposal of filter socks. Amy Dalrymple/Forum News Service

BISMARCK – North Dakota announced new rules Wednesday for oilfield waste known as filter socks that aim to prevent the illegal stockpiles of the waste that have been turning up in remote corners of the Oil Patch.

Starting June 1, oil, gas and saltwater disposal wells will be required to have covered, leak-proof containers designated for disposal of filter socks, which are known to contain naturally occurring radioactive material.

The new permit requirement from the Oil and Gas Division of the Department of Mineral Resources will require the containers for saltwater disposal wells at all times. The containers will be required for oil and gas wells during the drilling and completion processes, the stages when filter socks are used.

Communities in western North Dakota have reported numerous incidents of illegal dumping of filter socks, including the recent discovery of an abandoned gas station in the Divide County town of Noonan where the waste was stockpiled.

Mountrail County Commissioner David Hynek told a legislative committee this week that the county recently paid for the disposal of 30 filter socks discovered on a township road near New Town.

“Something needs to be done about this issue, whether it’s having a severe enough penalty put in place to cause folks to rethink what they’re doing,” Hynek said Tuesday during a meeting of the Interim Energy Development and Transmission Committee in Minot.

The new requirement aims to promote compliance with state law, which requires the waste to be hauled out of state to appropriate landfills.

“It’s cutting down on that chance that someone will choose to dispose of it illegally,” said Alison Ritter, Department of Mineral Resources spokeswoman.

Companies that don’t comply with the new requirement could face penalties, Ritter said.

The North Dakota Department of Health also is developing new rules related to disposal of radioactive waste generated in the oilfield. The department plans to announce proposed rules in June that relate to “cradle to grave” tracking requirements for the waste.

The health department also notified oil companies March 13 that they must use waste haulers licensed by the health department.

Ron Ness, president of the North Dakota Petroleum Council, told legislators this week that companies purchase a filter sock for $1.80 but need to pay between $180 to $600 to dispose of it in Texas or Idaho or another state that accepts the waste.

Ness said the state should adopt a method of handling the waste while holding companies accountable for illegal dumping.

“Let’s figure out a North Dakota solution for a North Dakota waste,” Ness told the committee.

The health department also has hired Argonne National Laboratory to study naturally occurring radioactive material generated in the oilfield, which is expected to guide an additional set of state rules related to the waste.

The estimated cost to clean up the abandoned filter socks in Noonan is about $12,600, which will be paid for by an Oil and Gas Division fund for abandoned oil and gas wells and site restoration.

The fund comes from oil and gas taxes, penalties from violations and fees collected by the Oil and Gas Division. The fund is capped at $75 million with $5 million available per year.

Rep. Todd Porter, R-Mandan, vice chairman of the legislative committee that met this week, asked staff to prepare a bill draft that would increase the funding available. Porter suggested raising the cap of the fund to $150 million and making $10 million available per year for situations such as the abandoned waste in Noonan.

Farmers say land protections ‘failing miserably’

Farmer Darwin Peterson of rural Antler, N.D., testifies to the Legislature’s Interim Energy Development and Transmission Committee on Tuesday, April 8, 2014, in Minot, N.D. Amy Dalrymple/Forum News Service

MINOT, N.D. – Darwin Peterson is the third member of what he hopes is a fifth-generation farm.

But the Bottineau County man worries about the quality of land he’ll be able to pass on to his grandson after it was damaged by saltwater, a byproduct of oil development, when a pipeline ruptured in 2011.

Peterson told a legislative committee Tuesday this will be the third season he’s unable to plant on the cropland that was affected by the spill, and remediation efforts by the company responsible have had limited results.

“It’s been too little and way too late,” Peterson said of the remediation.

The Legislature’s Interim Energy Development and Transmission Committee met all day Tuesday in Minot and heard about two hours of testimony from farmers and ranchers who suffered saltwater damage to their lands related to oil development. The damage ranged from salt that leached from brine ponds dating back to the 1950s to a pipeline spill that occurred last August.

Peterson, who lives near Antler, said the state should develop and enforce remediation procedures and standards to protect farmland.

“Quality water, air and the preservation of our lands can coexist with the development of our oil reserves,” Peterson said.

Pete Artz, who testified on behalf of his brother, Mike Artz, who had a saltwater pipeline spill last August on his land in Bottineau County, said landowners need better protections from the state. His brother has been left with huge financial losses but no offer of compensation, Artz said.

“The system we have in place is failing miserably,” Artz said.

New oil and gas rules that took effect April 1 give the state oversight over saltwater lines and other pipelines that didn’t exist before, Lynn Helms, director of the Department of Mineral Resources, said during a break in the meeting.

Landowners had pushed for additional rules, including gauges on saltwater lines to detect leaks.

Helms said that typical pipeline monitoring systems would not be effective for saltwater lines. He said a pipeline that carries 1,000 barrels of saltwater a day would have to be leaking 240 barrels a day before the technology would detect the leak.

“It doesn’t seem to be a realistic solution,” said Helms, who attended the meeting but was not asked to testify.

Paul Lohn, president of Pipeline Controls LP, traveled from Texas to testify to the committee about relatively new fiber optic technology that can detect anomalies in a pipeline. The technology can detect a change in temperature, which occurs when a pipeline begins to leak, and can detect a sound that indicates a pipeline is leaking, Lohn said.

Lohn estimated that the technology costs $300,000 a mile to install in a new pipeline. However, installing the system for existing pipelines would likely be cost-prohibitive, he said.

Some speakers testified that companies responsible for spills had not been fined or given penalties. Helms said the enforcement process to levy a fine or other penalty can take years to work through the legal system.

“A lot of what these folks are frustrated with is there isn’t instant justice,” Helms said.

Bob Grant of Berthold, a board member with the Northwest Landowners Association, said saltwater damage “is the death of the land,” and the state should implement the latest scientific knowledge in reclamation.

“I think it’s time that we make sure that we do it right. We need to have land here for future generations,” Grant said. “We’ve been pretty poor in the past, the way it looks to me.”

Rep. Marvin Nelson, D-Rolla, an agricultural consultant and a committee member, testified that there is technology that could better define an area that was affected by a saltwater spill. Nelson also said there are remediation techniques involving drain tile and flooding the affected area with water that have not been done in the state.

Researchers from the Energy and Environmental Research Center at the University of North Dakota and North Dakota State University gave committee members an update about a broad Bakken study. The work now includes soil scientists and range scientists from NDSU studying spill remediation and land reclamation.

Committee members said they plan to continue discussing land protections issues and collecting more information, including assessing the current level of fines the state can impose for oil and gas violations.

“There’s a lot yet to work on,” said committee chairman Sen. Rich Wardner, R-Dickinson. “We want to stop that kind of stuff from happening going forward.”