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Oil rep: Rules will deter drilling

Rig operator Cole Richter of Bowman works Thursday afternoon on-site at Rig 3 northwest of Dickinson. He is on a crew with Team Well Service out of South Heart, which is owned by Ron and Shirley Buckman.

WILLISTON -- Oil regulations that take effect in April will discourage drilling in North Dakota, and at least one operator is already moving south, according to an industry representative.

The new rules will add $400,000 to the cost of each well, making it less cost-effective for companies to do oil exploration in areas where the Bakken formation is less prolific, said Ron Ness, president of the North Dakota Petroleum Council.

The new rules also increase the bond requirement for oil wells from $20,000 to $50,000, making North Dakota's requirement 2.5 times more expensive than other states.

"Many of these changes are onerous and costly," Ness said.

The Industrial Commission presented the regulations this week to the Legislature's Administrative Rules Committee.

Alison Ritter, public information officer for the Oil and Gas Division, said these are the most sweeping rule changes to the state's oil and gas industry in 30 years.

They are designed to keep up with technology and other changes in the industry and to protect the state's resources, she said.

"We really feel like these rules are necessary to make sure the oil industry stays good stewards to the land," Ritter said.

Dumping liquid drilling wastes into an open pit is banned under the new rules, except in cases where the oil well is less than 5,000 feet deep. Instead of going into pits, the liquid wastes will have to be disposed of at authorized sites or stored in tanks.

The so-called reserve pits came under scrutiny last year when heavy spring flooding swamped some 30 of them, despite warnings from regulators to shore them up. Regulators later levied $3 million in fines against 19 companies that failed to protect oil field waste pits from spring flooding.

The new rules require that existing waste pits be emptied and reclaimed within a year.

In addition, companies also will be required to disclose the chemicals used in hydraulic fracturing. The rules also call for tougher requirements related to the construction of wells to ensure that the groundwater is protected, Ritter said.

"We want to have tough rules," Ritter said. "We want to make sure that the integrity of that well is going to be structurally sound enough to last the 30 years that some of these wells are anticipated to last."

The role of the legislative committee that reviewed the rules is to make sure the Industrial Commission is not overstepping its authority.

"Nothing in those rules exceeded the authority of the oil and gas regulators," said Rep. Kim Koppelman, R-West Fargo, the committee chairman.

Ness said adding to the cost of doing business means that companies will be less willing to do exploratory drilling in areas that are outside of the core Bakken formation.

Ness said he knows of one operator who plans to drill in South Dakota as a result of these new rules. He declined to name the company.

Ness cautions that if the price of oil drops, these new regulations could be extra burdensome for the industry.

"Today there's a lot of activity going on," Ness said. "But we just need to think back to the '80s and '90s and early 2000s when we were trying to encourage everything we could."

The Associated Press contributed to this report.

Dalrymple is a reporter stationed in the Oil Patch for Forum Communications Co.