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Dems want audit for oil regulators, health dept.

BISMARCK -- Landowners and Democratic lawmakers urged a committee Thursday to support a bill that would require performance audits of two state agencies with leading regulatory roles for oil and gas development in North Dakota.

BISMARCK - Landowners and Democratic lawmakers urged a committee Thursday to support a bill that would require performance audits of two state agencies with leading regulatory roles for oil and gas development in North Dakota.
House Bill 1259 would require performance audits within the next two years of the state Department of Mineral Resources’ Oil and Gas Division and the state Department of Health as it relates to enforcement of oil and gas development and oilfield waste rules.
House Minority Leader Kenton Onstad, D-Parshall, who is sponsoring the bill with three Democrats and one Republican, said it was prompted by concerns from landowners and recent articles in the New York Times and other publications that have generated public skepticism about North Dakota regulators.
“I don’t think the current directors have anything to fear from a performance audit, but the public would like to check on the two agencies that are constantly in the news,” he testified to the House Political Subdivisions Committee.
Fred Anderson, a Department of Mineral Resources geologist, testified against the bill, saying a performance audit would duplicate a “rigorous and comprehensive” audit of the division completed by the state auditor’s office last year. He said Oil and Gas Division staff spent more than 300 hours working with auditors on the seven-month-long audit, which involved looking at oil and gas drilling permits, field inspections, reporting and compliance.
However, state Audit Manager Jason Wahl said the office hasn’t conducted a performance audit of the division like the one proposed in the bill. The work done previously was a routine two-year fiscal audit with a “limited review” of areas deemed as high-risk, he said.
“The work that would be required in this performance audit would neither be duplicative nor something that I think our office has really taken a look at thoroughly,” he told the committee.
As part of last year’s audit, the auditor’s office informally recommended that the Oil and Gas Division undergo an independent review and approval of all permits issued.
Daryl Peterson, a Bottineau County landowner who claims multiple saltwater spills on his land haven’t been properly cleaned up, said the audit request is “far from a witch hunt” and will show where improvements are needed in state inspections and spill investigations.
Several Democratic lawmakers referred to last year’s critical performance audit of the state Game and Fish Department as an example of how a performance audit can shed light on problems that a routine fiscal audit doesn’t capture.
Performance audits can be initiated by the state auditor, by the Legislative Audit and Fiscal Review Committee or by lawmakers through session law.
Rep. Patrick Hatlestad, R-Williston, questioned Onstad on why no one had asked the review committee for the performance audits before now. Onstad said the bill request “is not unusual.”
Even if lawmakers don’t approve the bill, Wahl said the auditor’s office has determined the Industrial Commission’s enforcement of oil and gas rules are at a higher risk of noncompliance, and it’s likely to move up on the state auditor’s priority list for a performance audit.
“From our office’s perspective, obviously, this is a high-risk area, so I would say within the top five right now,” he said.
No action was taken on the bill.
A separate bill heard by the committee Thursday would expand the three-member Industrial Commission by two members, adding the state Public Service Commission chairman and the state tax commissioner.
The panel has consisted of the governor, attorney general and agriculture commissioner since it was formed in 1919 to manage the state-owned bank and mill.
Rep. Keith Kempenich, R-Bowman, the prime sponsor of House Bill 1179, said it would foster better communication between commission members, who currently are restricted from having frank discussions outside of official meetings because it takes only two of them to create a quorum subject to the state’s open meetings law.
Kempenich said what spurred him to introduce the bill was the “special places” policy approved by the commission last March to allow for more public notice and comment on applications to drill for oil and gas on public lands around some of western North Dakota’s most scenic areas. The proposal, brought by Attorney General Wayne Stenehjem, drew backlash from the oil industry, in part because it initially applied to private lands, as well.
“To me, it looked like there should have been some communication before that was dropped on the table,” Kempenich said.
Kempenich said he also believes the commission has overstepped its authority, adding, “There’s a separation of powers issue in this.” Expanding the panel would force a member who’s pushing an issue to gain support from two other members instead of just one, he said.
Karlene Fine, the commission’s executive director and secretary, testified against the bill, saying the three-member commission has served the state well and that adding members would “dilute the accountability” on decisions made.

 

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