The North Dakota Industrial Commission agreed to change regulations to give operators 2 years rather than 1 year to bring a well on stream although producers must apply for an extension on a well-by-well basis.
The change came after operators working in the Bakken formation and other unconventional plays delayed well completions because of low oil prices. That trend resulted in growing numbers of drilled and uncompleted (DUC) wells.
Previously, North Dakota drilling permits expired in 1 year, and producers lost the permit unless they drilled and completed a well within 12 months of obtaining the permit.
In October, NDIC unanimously approved the change to 2 years. The three-member NIDC includes the governor, attorney general, and agriculture commissioner.
During a September news conference, NDIC had said the number of DUC wells running up against the 1-year deadline was increasing. This trend of a building inventory of DUC wells also has been reported in the South Texas Eagle Ford (UOGR, May/June 2015, p. 1).
Under earlier regulations, North Dakota state law considered an uncompleted well to be abandoned and required the operator to seal it after a certain time. NDIC estimated the cost of sealing, or plugging, a well at about $200,000.
NDIC noted that permanently plugging a DUC was of no benefit to the operator or to the state revenue coffers.
State officials said they would work with operators rather than insisting on plugging a well before it could produce. For the state, the change to 2 years means delayed but possibly higher tax revenue.
Lynn Helms, North Dakota Department of Mineral Resources director, said, "The state would prefer to tax the oil at a higher price in the future."
A temporary abandonment (TA) would enable the operator to place a nonpermanent seal on the well casing to shut it down safely for up to 1 year at a time. The cost of a TA well closure was estimated at $50,000 compared with the $200,000 cost of plugging.
Traditionally, NDIC only allows operators to use TA on wells for technical or operational problems.
A TA permit gives the operator a 1-year grace period and can theoretically be extended for subsequent years with state approval.
