Last week North Dakota’s top energy regulator admitted he was concerned about investment groups such as hedge funds buying oil assets in the state.
According to Reuters media, this concern is prompting Department of Mineral Resources Director Lynn Helms to run background checks on potential buyers. During a monthly conference call Helms said he is worried that some buyers will lack experience managing oil and gas facility operations. “It is a big concern,” he said, due to such facilities’ inherent safety risks.
North Dakota law dictates that oil and gas producers must bond their wells, which the state receives as an insurance policy in the event an operator abandons the well and it needs to be plugged. State regulators have control over these bonds, and as a result, Helms or members of the Industrial Commission have the power to block the sale of assets by refusing approval of the bond transfer.
The state has conducted these background checks for about two years, according to Reuters. Helms said, “We don’t just look at the company but we also get a list of their officers and directors and look a little bit into them as individuals.”
The comments were prompted because with oil prices remaining stubbornly low, oil and gas companies are hunting for cash. Last year, Occidental Petroleum Corp sold its entire Bakken acreage and assets to a private equity fund. Helms said, “We’re looking at a mechanism to require bonding of those operations,” much to the chagrin of some potential investors.