Oil Patch Update. Careful, This Could Ruin Your Day.

Cancel The Industrial Commission Tour Bus

After a couple of dustups over whether or not to grant oil and gas drilling permits on Killdeer Mountain and next door to the Elkhorn Ranch, the North Dakota Industrial Commission announced with great fanfare last Spring it would take a tour of oil country and begin making a list of important places in the oil patch where drilling should not be allowed.

The North Dakota news media jumped all over that.

            The Forum: “North Dakota looks to protect ‘culturally important’ places”
            The Tribune:  “Industrial Commission making a list”

And on, and on, in the state’s other newspapers, all over the radio and television news broadcasts, across the blogosphere. Great publicity, lots of backslapping, coffee klatch chatter like “these guys really do care.”

The Bismarck Tribune editorialized that an Industrial Commission tour of the oil patch “will give the members a better idea what kind of ‘view protection’ might be involved.”

Yeah, well, forget about it. Call Harlow’s and cancel the tour bus. It’s not going to happen.

At the very end of their meeting last week, the members of the Industrial Commission decided their schedules are just too busy for that. More important things to do. Can’t squeeze it in.

Instead, if the members—Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commission Doug Goehring—happen to get out west, they’ll take a look around and see what they can see. Stenehjem said he’s already been doing that. I believe him. Not too sure the other two will get much looking around done.

As for the “list,” well as I said here earlier, “That list pretty much already exists. Jack, just call in Merl Paaverud, Mark Zimmerman and Terry Steinwand, three of your cabinet members you probably don’t see very often, and have them bring in their lists of historic sites, parks, and wildlife areas in western North Dakota. There you go.”

What’s bothersome is that there was much ballyhoo about the Industrial Commission actually getting their “boots on the ground” and reacting to citizen alerts on special areas of the state that should not be drilled. And then making a big new list of places they are not going to allow any new oil wells (maybe even including some wildlife refuges–see the next paragraph). And then not a mention of it in the news media when they say “Never mind.” That’s just the way those politicians want it to happen. Couldn’t have written the script better myself if I was a government media flack.

Leasing A Wildlife Refuge   

One thing the news media did report, kind of, is the lead-up to yesterday’s State Trust Lands mineral lease auction in Medora. What you read in the papers is that the Game and Fish Department was recommending the Trust Lands Department take care not to jeopardize critical wildlife habitat when offering leases in areas their experts were concerned about. I also wrote about it a couple of times before the auction. You can read those stories here and here.

What really happened yesterday is that the Department of Trust Lands went ahead and leased the right to drill for oil and gas right in the middle of two National Wildlife Refuges, in spite of the fact the Game and Fish Department recommended that they advertise that if someone really wanted to lease that, they wouldn’t be able to put an oil well there.

WTF?

Instead of putting a “No Surface Occupancy” restriction on the land, as the Game and Fish Department recommended, the Land Department put a stipulation that whoever leases the land will have to get permission from Game and Fish and the U.S. Fish and Wildlife Service before they can drill a well there. At a glance, that looks like it accomplishes the same objective—if Game and Fish is recommending no well, then they probably will not give permission for one when the lessee comes around asking. But there’s no guarantee that will happen right now. Right now, Empire Oil, for example has leased the right for one of its clients to drill for oil and gas in the middle of a National Wildlife Refuge in Slope County. What happens down the road is up in the air.

Empire didn’t pay much for the lease–$25 an acre for 160 acres—so all that’s at risk is $4,000. Not much of a gamble in the oil patch. I asked Bill LaCrosse, president of Empire, what would happen if the wildlife agencies tell him they won’t allow a well on the refuge. LaCrosse, a serious man who runs a small land leasing company in Williston, spent much of the afternoon Tuesday with one ear glued to a cell phone, connected to the client—an oil company—he was there to represent, and the other responding to the auctioneer’s call for bids. He said he really didn’t think the client for whom he was bidding on the leases was interested in drilling in a refuge, and would probably find a way to get to the oil under the refuge by drilling in horizontally or diagonally from outside the refuge. That was reassuring. LaCrosse is not a driller, nor is he someone who, as I mistakenly said in an earlier blog, a speculator or “flipper” who buys minerals and then tries to resell them. Instead, he’s paid by oil companies to represent them in negotiations for mineral leases. His expertise is in finding the minerals and getting the rights to them. The oil company’s expertise is getting them out of the ground. He’s been around a while, and watched the industry grow, and he says the industry is much more environmentally responsible today than in past years. They have to be. They’re being scrutinized much more than in the past.

No oil company in its right mind would want a story to appear in the paper about one of their wells being in the middle of a national wildlife refuge. Unless, of course, they had gotten permission from the politicians, who appoint the agency officials, who make the rules. You know, the politicians who say they’re going to take a tour of sensitive places, like wildlife refuges, and make a list of places not to put oil wells . . .

Depends On What The Definition of “Immediately” Is

I reported here last week that the Industrial Commission had levied the largest fine in its history, a $1.5 million hit on Halek Operating, for illegally dumping 800,000 gallons of wastewater down a well. In reading through the order by the Commission, I found that it said “The sum of the fines listed in paragraphs (2) through (5) of the above order is $1,525,000 and Halek Operating ND, LLC shall make payment immediately to the Industrial Commission, Oil and Gas Division.” (emphasis added)

So I waited a couple of days and then contacted the Industrial Commission to see if “immediately” meant they’d gotten their check, and I also asked if the order signed by the Commissioners was the final step in the process, or if are there further court proceedings to follow the issuance of that order.

The response: “A party aggrieved by a Commission order can request reconsideration by the Commission and can appeal the order to the district court.”

I guess, with a million and a half dollars on the table, Halek could be expected to do that. But let’s take a look at the Order approved and signed by the Commission. Halek was charged with four counts of violating the North Dakota Administrative Code. From the Order:

“Halek admits to Count One of the complaint . . .”

“Halek admits to Count Two of the complaint . . .”

 “Halek admits to Count Three of the complaint . . .”

“Halek admits to Count Four of the complaint . . .”

Therefore . . .

Based on the evidence . . . it is established that the violations admitted by Halek are amongst the most egregious violations ever pursued by the (Industrial) Commission in a complaint action.” (emphasis added)

 “The evidence and Halek’s admissions prove the violations. The evidence further shows that these are egregious violations causing considerable risk of contaminating underground sources of drinking water in North Dakota. Moreover, there is evidence of deception, concealment, and intentional or willful violation of Commission rules, the Commission’s injection permit, and the Commission’s Order No. 17801.” (emphasis added)

The Commission believes the maximum penalty allowed by law is appropriate under the circumstances.”

Well. There. When someone uses the word “egregious” twice, it certainly doesn’t get more definitive than that, does it? Let’s see if Halek “requests reconsideration by the Commission” or “appeals to the District Court.” That ought to be interesting. Especially since the Industrial Commission just said their fine is “appropriate.”

Oh, and I also asked where the money goes, once the check has been written. Whose account does it get deposited in? The answer: “As of July 1 (pursuant to HB 1333) fines are deposited in the Abandoned Oil and Gas Well Plugging and Site Reclamation Fund of the state treasury. These funds are used to reclaim well sites when all other sources of collection from the operator have been exhausted.”

The nice secretary at the Industrial Commission has asked the Oil and Gas Division staff to notify me when the checks come in. I’ll pass that information along to you.

Somebody fibbed?

Over at the North Decoder website, Chad has posted a followup story about an oil well blowout last December up in the Van Hook neighborhood of Lake Sakakawea. You need to go read this. It is an excellent case of reporting, something the North Dakota news media could use a few lessons on.

Everybody that reported on it when it happened last December quoted the State Health Department and Oil and Gas Division officials saying it was really no big deal. “No threat to the public or the lake.”

Everybody except a Game and Fish Department employee, who went up and took a look for himself. He reported in an e-mail to his superiors “It (the oil, gas and brine water mist) goes out onto the lake approximately 4,100 feet . . . It is a lot worse than has been reported on radio and print media.”

That e-mail was sent December 19, 2012, six days after the blowout. It went to Terry Steinwand, Game and Fish Department Director, whose agency has a state wildlife management area next to the well. It said there was an official from the State Health Department along with the group that observed what the e-mail writer observed. It is now almost 8 months later, and no one has reported the scope of the blowout or subsequent cleanup (coverup?) efforts. You need to go read this story. Here.

Well. Have a nice day.