State sets geothermal inspections

Nevada’s Division of Minerals plans to inspect all of the state’s oil and geothermal wells by the end of the first quarter after an audit found it was not conducting routine inspections.

The division grants permits for oil and geothermal drilling and reviews an entity’s plans and operations in the process. But the Legislative Auditor, whose audit covered the three-year period from June 30, 2010 to July 1, 2013, found the division did not regularly perform follow-up inspections to ensure the wells were in compliance.

The division did inspect oil or geothermal sites experiencing problems. And it is not mandated by law to conduct regular inspections although the division agrees routine reviews are needed.

“No statute says we will do inspections on any periodic time basis,” says Richard Perry, administrator, who took the reins at the division from Alan Coyner late last year. “But it is implied and that’s why we agreed to do it.”

The division accepted all four of the audit’s recommendations. In addition to developing a schedule of inspections, the audit recommended the division more thoroughly document inspections and convey the results to operators, obtain verifiable evidence of the results of geothermal well blowout prevention tests and establish a process to follow-up with owners of abandoned mines to ensure the mines are secured.

In its response to the audit’s findings in late November, the division said it had started up an inspection program and already looked at 97 percent of the state’s oil wells and 15 percent of its geothermal wells. By last week, that division had completed inspections on all of the state’s oil wells and 69 percent of its geothermal wells, according to Perry.

Nevada has 111 oil wells, all in Elko, Eureka and Nye counties and almost all on federal land managed by the Bureau of Land Management. In 2012, the wells produced 368,000 barrels of oil valued at $33.5 million. There are 430 geothermal wells located mostly in northern Nevada and about 40 percent are on BLM land.

Geothermal wells are required to have blowout prevention equipment which must be tested under pressure. Right now, regulations say the division must witness the tests, but the division in its response to the audit said the tests “can occur at any time, day or night,” making it infeasible to guarantee attendance by division personnel. So the division had been working with the BLM, who sometimes witnessed the tests, and with the operators to provide proof of testing.

The division now has proposed amending the regulations so verifiable results on the blowout tests from the operators can suffice. The changes have been approved by the Commission on Mineral Resources and are winding their way through public hearing and the Legislative Council Bureau approval process, says Perry.

The audit said the division had been effective in securing 642 abandoned mines in the three-year audit time frame, but had been lax about following up with notified owners to ensure compliance. In its reply, the division said personnel turnover in it abandoned mines land program had created problems. As remedy, the division said its database of abandoned mines is being restructured and will be queried every month to see if contacted owners are providing evidence of securing their mines with routine notification to counties of any problems.

The division has 11 full-time employees and in fiscal year 2013 collected $2.1 million in mining claim fees and $173,000 in oil, gas and geothermal industry fees, which fund its operations.