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Rescuing oil companies from financial loss may come with consequences

Local News

A month ago today the price of oil in this country went negative, signaling a couple of questions:

Where can we store it? And, what kind of economic relief is available for the State, for oil producers and for mineral owners?

Wednesday, a special hearing was held by the State Oil and Gas Division of the Department of Mineral Resources to discuss classifying unprofitable oil as economic waste.

While the price of oil is beginning to creep back up, more than 6,000 wells in North Dakota sit idle. And according to the State Petroleum Council, production is down 500,000 barrels a day.

“So that waste designation carries a lot of importance,” explained Lynn Helms, Director of the Department of Mineral Resources.

Ultimately, the North Dakota Industrial Commission will have to decide whether or not to make the waste classification, but as Helms explains, there are consequences that come along with relieving some pressure for oil companies.

“Typically, it would trigger force majeure clauses in contract commitments, in lease commitments so that cessation production clauses would be suspended, take-or-pay contracts might be suspended. And so there are a lot of consequences over-and-above the ongoing production,” he elaborated.

A couple of out-of-state experts weighed in over the phone, saying the Industrial Commission should step in. But, all in-state representatives said, “Let the free market repair itself”.

“Typically when there’s one action by government, there are three or four unanticipated actions,” added Ron Ness, President of the North Dakota Petroleum Council.

Ken Hall owns land and minerals on the Fort Berthold Reservation. He says the Three-Affiliated Tribes is responsible for 25 percent of oil and gas produced in the state.

“We realize it’s a huge part of North Dakota’s economy. For MHA Nation, it’s an even higher percentage. About 90 percent of their revenue comes from oil and gas production,” Helms shared.

Ken Hall’s wife, Kara, says MHA Nation at least needs a seat at the table in this decision-making process.

“They’re making it very clear that they believe that the jurisdiction for decisions like waste on their leases and their land, would lie with the Bureau of Indian Affairs and the Bureau of Land Management, not with the state,” Helms said.

“The multitude of wasted natural gas flares, burning up 24 hours a day and depicted on shared satellite photos of unnatural spikes of light in an otherwise dark rural North Dakota, advertise the level of waste,” mineral owner and Tribal member Joletta Bird Bear testified over the phone.

She says there are no air quality monitoring sites anywhere on the Fort Berthold reservation.

That was the message from at least one-third of the testimonies, all from MHA Nation. The tribal members ask that the Commission not spend CARES Act money to save the oil companies.
Instead, they say to put people to work reclaiming the land for generations to come.

Helms says a decision is expected at the July 9 Industrial Commission.

Stick with KX News for updates.

Copyright 2020 Nexstar Broadcasting, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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