Flaring task force recommends capture plans before drilling, further look at right of ways
By Katherine Lymn
Forum News Service
BISMARCK -- Requiring gas capture plans before drilling instead of a year into it, easing right-of-ways for pipelines and incentivising infrastructure are keys to achieving the ultimate goal of capturing 95 percent of natural gas, a flaring task force told the North Dakota Industrial Commission Wednesday in a plea for cooperation.
The North Dakota Petroleum Council task force was formed to tackle the industry’s No. 1 issue: that 29 percent of the natural gas that comes up from western North Dakota oil wells is flared off, outpacing infrastructure to capture and process it.
The task force said its proposals could increase capture to 85 percent in two years, 90 percent in six years and ultimately 95 percent, with the full engagement of the Industrial Commission, the Legislature, the Three Affiliated Tribes, industry and landowners.
Under the recommendations, producers and gatherers must submit “Gas Capture Plans” (GCPs) before filing for a drilling permit instead of a year into production. A sample Continental Resources plan included the gas gatherer, the distance from the gatherer to the well, the pipeline capacity and the location of the gas processing.
For failure to submit or follow a GCP, companies could be subject to denial or suspension of permits, or to restriction on production until they’re in compliance.
After the presentation, Gov. Jack Dalrymple, a member of the Industrial Commission, said he was impressed.
“I think you’ve done some good work here,” he said, especially intrigued by the GCP idea, which is something he said the commission has discussed before.
He said the commission wants to develop its own plan for reducing flaring, and will work with the task force toward that end.
Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring make up the Industrial Commission with Dalrymple.
The GCP requirements are central to the plan and were contentious among industry players, EOG Resources’ Eric Dille, the task force chair, said in an interview before the Industrial Commission meeting Wednesday.
“Some companies think that goes too far and that really we don’t need to do that,” he said.
“We actually put in there that if you don’t comply, that at the discretion of the NDIC they might deny permits,” he said. “That is very tough for industry to say. Curtailing production … is like cutting of your right arm if you’re an oil producer.”
As the regulatory body, the Industrial Commission would decide who -- the Department of Mineral Resources, the state Department of Health or another entity -- would monitor and enforce the plans.
Currently, a gas capture plan is required a year after production begins. The proposed changes would go into effect for new drilling permits starting June 1, and for existing flaring wells, producers would need to submit a plan by either September or March 2015 depending on the size of the well.
Petroleum Commission President Ron Ness said the “key to this whole pitch” is planning ahead on day one, rather than after the fact.
Along with the GCP requirements, the task force Wednesday asked the Industrial Commission to help in the flaring fight in ways only the state can, like tax incentives on pipelines, electric transmission and value-added ventures like liquefied natural gas.
At the meeting, Stenehjem discussed the need to improve infrastructure.
“There's a lot of things that the state can do that in the long term won’t cost us anything,” he said.
Right-of-ways ‘single largest time delay’
The task force says the primary cause of natural gas flaring is the inability to obtain certain right-of-ways to lay pipeline, and recommends the formation of another task force for that issue.
“Right-of-way is the single largest time delay in getting pipe in the ground so (in) reducing flaring,” Dille said, adding that compared to other states such as Texas, North Dakota has more restrictive eminent domain, or “quick take,” laws.
“In states like Texas, you can go ahead and put pipe in the ground and work out a price,” he said.
The North Dakota Pipeline Authority, county leaders, landowner groups and industry would all have a seat on that task force.
The group will also look at issues with Indian reservation land -- Dille said Fort Berthold is working on a right-of-way form that he says is “very legally onerous” that could “jeopardize our leases.”
“It’s just some very strange stuff,” he said.
Meanwhile, producers are entering into confidentiality agreements with gathering and processing companies to share plans so the midstream companies know where to invest in infrastructure.
Traditionally, said Continental Resources’ Jeff Hume, who also presented Wednesday, the midstream companies would design systems based on internal forecasts.
Hume said the “friction” for producers like him is convincing the midstream companies “of the growth that we have still in front of us.”
The flaring task force, made of big-time upstream and midstream players in the Bakken, has met more than 20 times since September.
Since most companies had a hand in the task force, presenters weren’t expecting their proposal to be a big surprise for many Wednesday. But some smaller companies will be seeing it for the first time.
“There will be some additional, probably, questions from industry in general after today’s presentation,” Dille said.
Forum News Service reporter Mike Nowatzki contributed to this report.