Landowners claim no compensation for oil land use
Near Fryburg, Terry Logan's land is largely a sea of grassland and some gentle hills, interspersed by fences—and in places conspicuous patches of rust-colored earth where nothing grows.
This land has been in the Logan family for 80 years. For 30 of those years, Logan's shared his land with oil companies—several, in fact, swapping ownership of a pocket of nine oil wells strewn across his land for years now. The wells sit idle now. Most lack any mechanical equipment. The only one that still has a pumpjack sees the apparatus scorched with rust, its hammerhead laid beside it, all motionless.
Ash-colored cracked earth stands out even amidst the gravel, a pale stain a few yards away from the broken pumpjack. Logan said it wasn't long ago that this was an open pit. The soil is now too contaminated even for weeds.
"They won't reclaim it," Byron Richard, a Belfield rancher and friend of Logan's, said. "They won't return it to the owner. And if you try and use (the land), they'll kick you off."
Richard said that the site regularly produces detritus, rust blows off into the fields and creates troubles for the landowner.
"It's the landowners out here who deal with the mess, they don't get compensated. You would be better off with a wind tower," Richard said. "You can make yourself $10,000 a year. Take up about the same amount of acreage, you wouldn't have the mess. This thing has sat here 30 years and hasn't produced a dollar for the landowner."
Logan said that the company which owns the site—currently, the sign next to the well names Scout Energy Management—won't allow him to use the land even just to place hay. This well has sat idle for decades. They all have. The oldest are 30 years old, but none of them are producing, and none of them have been reclaimed.
Logan has documents from the North Dakota Industrial Commission that reveal wells placed on temporarily abandoned status back in 1997—and still under that status in 2016. One of his complaints is filed against the Hess Corporation for that long-abandoned well. Logan said that when the NDIC was looking into it, representatives from Hess treated him like a "bosom buddy" where before he'd spend hours on the phone trying to get hold of them.
"So we worked out a deal, they sent me a little bit of a check and then nothing happens," Logan said. "I call that number they gave me—get put on hold for two hours."
Logan's land continues to play host to these decades-old wells—land which he still pays taxes on, land which is visibly scarred by the presence of empty oil wells.
His case is hardly isolated.
Ted Tescher has property about 15 miles southwest of Medora he leases from out-of-state owners. The owners are city folk, so he leases the land—the owners have no mineral rights, but the land is occupied by some wells, and Tescher's story rings similar to Logan's.
"They came and drilled another well and never paid them one penny for damages. This well has transferred ownership about three other times," Tescher said. "This one well has not produced oil in 23 years."
Tescher places the blame squarely at the feet of the NDIC.
"The Industrial Commission is doing a really, really poor job of policing this," Tescher said. "Nobody produces oil and they don't make them clean it up ... the landowner is up a bunch of problems, they don't police it, they don't take care of it. They're supposed to get rid of weeds around them to prevent a fire."
The problem is bad enough, Tescher said, that when you have companies swapping well ownership, it leaves the state holding the short end of the stick.
"When they sell a company to another company, the biggest problem is these small companies, they forfeit their bonds and the state is up a bunch of problems," Tescher said.
Stark County Commissioner Jay Elkins shared his experience of oil well woes.
"We had had some issues with an oil company in the Taylor/Gladstone area ... quite a few years ago," Elkins said in an interview. "But the fact of the matter was that they had just walked away and left them under an operating status. They were not operating these wells, they had drilled them but there was no production. The sight was for lack of a better word unsightly. They had open pits."
The cost and burden ultimately fell to the taxpayers, Elkins said.
"The state took it upon themselves to reclaim these wells. The oil company never stepped up to the plate and reclaimed the wells themselves," Elkins said. "What happens here, as long as that well is still there and considered operating, it really is a balance to that company's ... it's really an asset on the balance sheet of that company and consequently they have no incentive to close these down."
Elkins didn't think this is a case of an oversight from the NDIC, and he emphasized that they are "overwhelmed" by the number of sites in the state. Elkins—and Richard, too—both suggested that an area the state needs to look at is the bonding cost for these wells, costs they think may be too low.
"I would just about assume ... to reclaim a well was $250,000 in reclamation costs. They probably bonded at one-fifth of what the cost is and the fact is, all of that needs to be looked at by the Legislature. The more wells out there, the more problems exist. It's not all companies, it's just a few bad actors."
At that bond rate, it's cheaper for the company to let the well lie. Elkins suggested a shorter time-frame requirement for oil companies to either put a well into production after being drilled or else start reclaiming.
"Some of these wells were never producing wells but it was easier to walk away from it and leave it on the balance sheet," he said.
Richard said that the law as it stands lacks bite.
"We thought it was a simple matter of the Industrial Commission telling them to do it and if they don't there's a fine, but it's apparently not that simple," Richard said. "I'd like to know what teeth they got at all."
In the ribs
Lynn Helms is director of the North Dakota Industrial Commission. As such, he sits at the helm of a major regulatory body in the state for oil and gas drilling—and in an interview, he spoke to what that means for landowners like Logan, Tescher, Richard and Elkins.
"Dealing strictly with the surface damages or surface compensation, the Legislature specifically placed that outside of the jurisdiction of the commission," Helms said. "That is outside the statute and enforced from the district courts. We don't have any control over that."
The rules governing surface owner rights state that agreements between oil companies and landowners are private agreements.
"The rules are that the surface owner is supposed to be compensated for loss of production from whatever acres are being occupied by the well and roads," Helms said. "If that was cropland or grazing land or whatever, whatever loss of income over the life of the well, they are supposed to be compensated. The statute recommends annual payments but it allows one-time lump sums."
Helms spoke to what the NDIC can do to bring bad actors back on script.
"We can adjust the bonding if it's an issue, we can issue notices of violation and complaints and work through the courts to try and force a company to do what the rules say. Ultimately we can confiscate wells that have been orphaned and get them off the landscape," He said. "We do that with a handful of wells every year."
The government claiming private property is no simple matter, though.
"So it's a two-year process from the time they stop paying and producing quantities, it's a minimum two-year process," Helms said. "There's a legal due process we have to go through, we have to docket it for a hearing, hold a hearing, listen to the surface owner, mineral owner, operator input, what they testify about the well, make a decision, get the industrial commission to issue an order that's appealable for 30 days, then we can go to court and basically get rid of the well. It's a fairly lengthy process. It's private property and in our country you can't take someone's private property without due process. Our due process is you wait a year see if they sell any oil."
The NDIC's scope is set by the Legislature, which in 2015 established the rule that a well that has been temporarily abandoned or left in idle status can remain as such for seven years, after which time the surface owner can request the NDIC take action.
"The Legislature sat down and ... decided seven years was the right amount of time to let a company work on redevelopment plans or return to production plans," Helms said. "If the company is able to convince the commission to let them keep the well, it can be reviewed every two years after that. There's no hard deadline that a well can absolutely not go beyond this point but the Legislature did debate this and pass that law."
So if the government regulatory bodies cannot help landowners like Logan, Richard suggested that industry advocates—like the North Dakota Petroleum Council—should do more to keep everyone playing fair.
"If they're not going to police their own, somebody has to," Richard said. "Why don't they call out the bad actors themselves?"
Ron Ness, president of the Petroleum Council, said that it could be possible for his group to intercede if landowners provide some evidence of clear wrongdoing.
"If somebody sends us a photo then we as the industry can reach out to those companies and say, 'Hey, pay attention to this,'" Ness said. "It's not our job or responsibility but it's part of something we try to do. Sometimes those are neighbor-type disputes that are beyond our ability to have an impact."
Ness said that issues between well operators and land owners are often individually unique and that the NDIC and North Dakota law have existing rules and protections in place. Still, Ness suggested they've been able to connect people and companies before.
"Certainly if somebody can't be reached or something like that, we've been very successful in ... being able to reach out to somebody who needs a little poke in the ribs, give 'em a poke in the ribs," Ness said. "But ultimately that's something you want the landowners and the operators to work out."