ND gets to work on new flaring law
North Dakota is in the process of implementing and enforcing a new law that incentivizes well operators to flare less gas.
The Industrial Commission's Oil and Gas Division is updating its administrative code based on the new law which, as of July 1, doubled the time an operator could be exempt from taxes and royalties and added two open-ended ways for operators to use the natural gas to be exempt.
The bill wording was purposely general so as to encourage entrepreneurs to come up with new ideas for capturing and using the gas in innovative ways, Oil and Gas Division Director Lynn Helms said.
"Basically the idea is to provide a tax incentive for opportunities to use other means, like on-site processing or electrical generation, at the rig site," Oil and Gas spokeswoman Alison Ritter said.
The two new forms of exemption are to compress and use the gas some way, like for fuel or making fertilizer, or to use the gas for a "value-added process" to reduce the volume or intensity of the flare.
Operators could already be exempt by equipping a well with a generator that consumed at least three-quarters of the gas.
While the rules are "a step in the right direction," the state can do more to reduce flaring, Environmental Law and Policy Center staff attorney Jennifer Cassel said.
"We think it's a major concern, the fact that the Bakken night sky now looks more like New York City or Chicago than what historically was western North Dakota," she said.
She said flaring is a true waste of a valuable natural resource, and the compounds it emits are a danger to the environment.
The North Dakota Petroleum Council formed a task force on flaring, NDPC Vice President Kari Cutting said in a statement in response to the law.
"The industry has made an unbelievable capital investment in excess of $4 billion for gas gathering and gas processing infrastructure and will continue that magnitude of investment for many years to come," she said.
Gas infrastructure picking up
Compared to its big brother oil, natural gas is worth less and is hard to process and transport -- thus, about a third of it is flared. But operators have been picking up the pace.
The Minneapolis Federal Reserve FedGazette reported earlier this year on a North Dakota "infrastructure boom" in processing and transporting gas. In the past five years, it reported, firms have built six new plants and expanded existing ones, more than doubling the Bakken's processing capacity.
With the growing ability to capture and use gas, Cassel said, "we're certainly hopeful and expecting that (North Dakota) will decrease the number of exemptions that it grants in light of that increased capacity."
She said another exemption -- which allows operators to continue flaring if they prove it's economically unfeasible to connect a well to a pipeline -- is a loophole that has become the rule rather than the exception.
The public hearing for the Oil and Gas code on applying for tax exemptions is Oct. 1 at the division office in Bismarck. There's also then a 10-day comment period through Oct. 11.
"Flaring is something that the state has kept its eye on," Ritter said.
"We do realize it is a waste."