BISMARCK - The North Dakota Industrial Commission voted Tuesday, Nov. 20, to give the oil industry more flexibility to meet natural gas flaring regulations, emphasizing policies that encourage the industry to invest in gas capture.
Commissioners, led by Gov. Doug Burgum, changed the goals of the gas capture policy first adopted in 2014 to focus on increasing the volume of captured gas rather than reducing the flared volume.
Commissioners also dropped the goals of reducing the number of wells flaring and reducing the duration of flaring. Instead, they added a goal of incentivizing investment.
The three-member commission cited “the staggering pace of gas production” as the reason for revisiting the policy, saying it must be balanced with the infrastructure that’s in place and how the industry is evolving.
North Dakota operators flared a record 457 million cubic feet per day of natural gas in September due to inadequate processing plant capacity, pipelines and other infrastructure.
The volume of natural gas captured in September also hit a record at nearly 2.1 billion cubic feet per day.
For gas produced before November, the commission’s policy required companies to capture 85 percent of Bakken natural gas. The industry has fallen short of that target for five months in a row.
Companies can be forced to restrict oil production for capturing less than 85 percent, but those restrictions are rare.
Tuesday's action by the Industrial Commission further expands the number of circumstances that allow a company to be in compliance with the gas capture policy even if the company’s flaring rate exceeds the benchmark.
The gas capture target increases to 88 percent for natural gas produced in November, which will be reported in January.
Director of Mineral Resources Lynn Helms recommended that commissioners postpone the 88 percent gas capture requirement for two years. However, the commission stopped short of changing the timeline in anticipation of a change to the way flaring is regulated on the Fort Berthold Reservation. The Bureau of Land Management plans to defer regulation of flaring on trust lands to the Mandan, Hidatsa and Arikara Nation starting early next year.
Because of that change, Burgum said it seems inappropriate to include flaring from Fort Berthold trust lands in the state’s gas capture policy.
Flaring rates are highest at Fort Berthold, in part due to additional challenges getting federal approval for pipelines and other infrastructure. Statewide, operators captured 83 percent of Bakken natural gas in September. But that percentage was 71 percent on Fort Berthold trust lands.
Burgum said he’s reluctant to change the gas capture targets until the commission understands what the impact will be of removing flaring from Fort Berthold trust lands from the gas capture calculations.
Burgum commended the industry for investing nearly $5 billion in gas capture infrastructure. He said adding flexibility to the policy is critical to attracting additional investment.
“Additional capital is the only thing that’s going to solve our challenges of capturing record amounts of gas,” Burgum said.
Agriculture Commissioner Doug Goehring said he’s concerned that companies may increase the use of eminent domain for pipelines if they don’t get flexibility on gas capture requirements.
Attorney General Wayne Stenehjem said he’d like to see mini benchmarks added so the commission can track how the state is doing along the way to get to the ultimate goal.
“We want to get to 91 (percent). Maybe as technology improves, it’ll be even better,” Stenehjem said.
State regulators sought input from an oil industry task force on changes to the gas capture policy but did not solicit comments from the public.
Katie Haarsager, spokeswoman for the Oil and Gas Division, said the commission can revise its gas capture policy or guidance document without a public comment period. This is the third time the commission has voted to either extend the deadlines for gas capture or give the industry more flexibility.
Derrick Braaten, a Bismarck attorney who represents landowners and royalty owners, said he doesn’t think the commission is taking the right approach to encourage investment.
“To me, it’s too much of a nice guy approach,” Braaten said. “I understand being business-friendly, but businesses respond to regulatory environments, too.”
Shelly Ventsch, who lives near flaring oil wells near New Town, said she’s frustrated that the commission sets goals but doesn’t fine companies that fail to meet them.
“I can’t even have a dark sky at all anymore because it is just a ring of fire around me,” Ventsch said.