2019 Senate Energy and Natural Resources Committee
Total Page:16
File Type:pdf, Size:1020Kb
2019 SENATE ENERGY AND NATURAL RESOURCES COMMITTEE SB 2344 2019 SENATE STANDING COMMITTEE MINUTES Energy and Natural Resources Committee Fort Lincoln Room, State Capitol SB 2344 2/1/2019 Job Number 32003 ☐ Subcommittee ☐ Conference Committee Committee Clerk: Marne Johnson Explanation or reason for introduction of bill/resolution: A bill relating to injection or migration of substances into pore space; relating to pore space and oil and gas production. Minutes: 4 Attachments Vice-Chair Kreun: Opened the public hearing. Senator Jessica Unruh, District 33 (0:20-4:25) Introduced the bill, please see attachment #1, See attachment #2 for amendments. Representative Todd Porter, District 34 (4:50-) Testified in support. I am a co-sponsor of this bill. In 2009 session we worked on a bill that came to us at the request of the North Dakota Industrial Commission. It was during a time period where there was a definite war on coal fired generation. We were looking at the ability to sequester CO2, no other state had a law in place to do CO2 sequestering; we were looking, once the Supreme Court decided that CO2 was a perceived problem that needed to be dealt with; we needed to find a fix for our coal fired generation plants. We passed a bill that developed pore space for the injection of CO2. This bill, this system was not for anything other than the storage of CO2. It was to be piped out to areas where pore space existed, it was to be injected and stored. At some point, when it was determined to be filled, and certified by the NDIC, then the state of North Dakota would end up owning it in perpetuity, because of the liabilities that would exist, that it did stay with the surface. While the pore space for the injection and storage of CO2 was not severable, and belong to the surface, at a point the state of North Dakota would own that CO2 injected into the ground from our coal fired power plants. So fast forward to today, part of the confusion on tertiary recovery and the injection of fluids or gas into the ground for enhanced oil recovery has got combined into the pore space bill that we worked on in 2009 that was specifically for storage of CO2. That it had nothing to do with other than figuring out how to capture the CO2 at the source, move it someplace and inject it. Inside of this bill, as we work on Project Tundra, and we have a reprieve on our coal fired industries; we’re using that as an opportunity to work on projects that EERC has been commissioned not only through our lignite energy fund, but also our oil and gas research fund to figure out what can we do to make sure our electrical generation system stays at its peak and our 800 year supply of lignite coal remains useful and beneficial. So Project Tundra captures the CO2 and moves Senate Energy and Natural Resources Committee SB 2344 2/1/19 Page 2 it by pipe or truck to our old oil fields. Into units where it will be injected for secondary tertiary recovery. This language inside of this bill is necessary to delineate that when we did the bill in 2009, SB2139, that that was for storage of CO2. What we’re doing now is enhanced oil recovery, and it is a different animal. We need to make sure we’re clear in our laws on what we’re doing. One is storage that belongs to the surface, inside of enhanced oil recovery that belongs to the pore space of the mineral estate, that is the beneficial owner, the mineral owner. Senator Roers: You’re talking about delineating the two ownership units, one with the surface one with mineral, I assume that at the same time there’s liability or exposure that goes with those units if something goes wrong. Is that some of the purpose? Representative Porter: Partially; the big delineation is that you have split estates. Someone who owns the minerals has always had the right to use whatever means necessary to get the most out of their personal property. That belongs to that mineral estate, the storage of a gas, injected in there for the purpose of storage, that belongs to the surface. It still does with this bill. If it’s used for the recovery of the mineral estate, then it belongs to the mineral estate and is and regulated as such. Senator Roers: How big are these storage areas we’re talking about? We’re talking about the wells drilled in the 70 and 80s, correct? Is there large storage capacity in these wells? Representative Porter: I would tell you that Mr. Helms or someone from EERC would be able to tell you. They will tell you what some of these unit sizes are, and how many wells are inside of that. The spacing units are different. Senator Piepkorn: I believe you said that after a certain time ownership goes to state? Representative Porter: That is correct. As we did that bill, it was going to be stored in perpetuity, and after a certain time, the state would certify that it’s sealed and stored. The liability for that gas would go from the surface owner to the state of North Dakota for the next 100,000-200,000 years in hopes that if there was ever a beneficial use for that CO2, they could retap into that storage vessel underground in that pore space, and out it to use in the future. I don’t believe there are any in North Dakota, but Montana has natural gas storage underground in some sandstone areas. They inject it when they need it and bring it out when need it. Senator Piepkorn: This was done to benefit the state, were there any possible negative effects to storing the CO2? Representative Porter: In 2009, the only potential harm we saw was if the cavern leaked. That was the responsibility of the oil and gas division to make sure it was being placed into pore space that was contained on the top and the bottom by layers of dense rock. That was really the only risk, the other risk is that it would leak into atmosphere. Doug Goerhring, North Dakota Agriculture Commissioner (15:20-16:40) Testified in favor, please see attachment #3. Senate Energy and Natural Resources Committee SB 2344 2/1/19 Page 3 Ron Ness, North Dakota Petroleum Council (17:05-18:30) Testified in favor. As we get closer to Project Tundra, this becomes an increasing risk. In Chapter 47, with the surface owner retaining the damages and payments that result of impact on surface. I don’t think that actions in 2009 were intended to creep into that section. We think it will insure and eliminate that uncertainty of risk when you walk the path of these big projects you’re certain where your liabilities lie. Jason Boher, Lignite Energy Council (18:40-19:10) Testified in support. From the coal industry perspective, it gives certainty for us to do what we need to do for further development in industry. It protects the property rights of everybody involved. Lynn Helms, Director, North Dakota Industrial Commission, Department of Mineral Resources (19:35-23:40) testified in support, please see attachment # 4 What you see on the front of the page is the results of a study the EERC did for the Industrial Commission showing what happens if you take a Bakken Three Forks well pad, rather than flaring the gas, store it in the Bloom Creek formation, it’s about 7,000 feet in depth, it has incredible porosity and permeability. They used the characterization done for Project Tundra to model what would happen if we captured that produced gas and stored it instead of flaring it. What you see is pictures of gas going in and out, that’s the upper right hand corner. Pictures of what the gas plume at its maximum extent in the lower left corner. It occupies a space a mile in diameter. The gas plume would stay under the spacing unit. You can see the economics in the right hand corner. The initial cycle is not economic, the second and third cycle are. The overall project economics result in recovery of gas at just under $3 per 1,000 cubic feet. Interesting to note, industry’s projections for the value of natural gas in 2017 was $2.96 per M, and for 2019 $2.88. I bring that up because you can see this project stores and reproduces the gas at $2.96, which means it can’t endure any additional burden from having to compensate for pore space being temporarily used for the storage of natural gas. The economics aren’t there. They type of things, the uncertainties surrounding the Supreme Court decision, put this in too uncertain for people to progress with it. On the backside is potential benefits and economics. A single demonstration project, estimated to cost about $16 million to implement, could add five additional well completions, reduce flared volume by 618 million cubic feet, and yield $28 million in additional gross production and extraction taxes. If it works and is applied statewide, you could be looking at over the next 10 years, 100 additional well completions, 111 billion cubic feet of gas that would be stored and recovered as opposed to flared and an additional billion dollars in gross production and extraction taxes. A very compelling case for passing SB 2344 and removing the uncertainty that would prevent this underground storage of produced gas from taking place.