On June 1st of this year, I came back to the Montana Petroleum Association (MPA) as the interim Executive Director. BLM and their new bonding rules have serious implications and consequences for Montana’s oil and gas businesses. On June 6th the Montana Wildlife Federation published a statewide opinion piece praising the BLM for new bonding rules. On June 13th BLM director Stone-Manning was grilled by the US Senate Energy Committee. Montana Senator Steve Daines asked her if she had spoken to Montana oil producers. She had not but agreed to a meeting. On August 28th she met with MPA members who told her how devastating these rules were. She pointed out that the rules were final, but the SBA had funds available to help in the form of loans. These rules were strategically timed so that the Biden-Harris administration could circumvent what is known as the Congressional Review Act. That means the rules are effective and now requires Congressional or Court action to change.
It’s been a whirlwind summer for me getting up to speed on what the Biden-Harris Administration’s attack on oil and gas has done to MPA members. I wish to give you a perspective.
Individual bonds went from $10,000 to $150,000 and a statewide bond went up to a half million minimum. These bond requirements are retroactive, which means all wells previously drilled will have to upgrade bonds. At our meeting with BLM, they explained the rationale for that number. It’s based on five oil wells, 2 of which were in Montana. The costs of these two average about $175,000. These two wells were large wells with long access roads to get to remote areas. BLM failed to recognize that there are many sizes of wells and a majority are much smaller than the two that they used as a reference point. These bonding levels have no leeway for small marginal, also called stripper wells, that produce less than 15 barrels a day or 90 mcf of natural gas. These stripper wells have a very small footprint and are shallow. Prices to plug these wells are less than $10,000 with exceptions running to $17,000. In addition, there are 1648 natural gas wells with an even smaller footprint. The ownership of all these wells is vested in 60 companies doing business in Montana, predominantly from Browning to Wolf Point, including tribal ownership. When you couple these bonding rules with methane rules that EPA passed at the same time, most, if not all of these wells will be plugged and abandoned. Many of the 60 companies will cease to exist even though these marginal wells are currently profitable.
I have not even attempted to calculate lost revenue to the Federal and State Treasuries, or the impact of lost royalty revenue will have on many families across Montana. These bonding rules will increase energy costs to some unknown degree. The impact of closed oil and gas businesses will trickle to service providers and other businesses across the hi-line.
These are Biden-Harris policies. On November 5, Americans, especially Montanans, can make a change in the leadership in our Country and in our State. If things do not change we will have to start thinking about the cost of chargers to plug in our cars, trucks and tractors. Think hard before you mark your ballot and make sure you VOTE!
By David Galt, Interim Executive Director of the Montana Petroleum Association
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