BISMARCK – Oil companies producing more than a billion cubic feet of natural gas every day in North Dakota could face oil production restrictions if they fail to meet gas capture goals adopted by state regulators Tuesday as part of a multipronged effort to curb the flaring of natural gas.
Members of the state Industrial Commission voted unanimously to adopt gas capture goals recommended by an industry task force and use production curtailments as an enforcement tool if necessary.
The goals aim to reduce the rate of gas flared from oil wells from about 30 percent currently to 26 percent starting Oct. 1 and 23 percent starting Jan. 1. Future targets will set the allowed flaring rate at 15 percent on Jan. 1, 2016, and 10 percent on Oct. 1, 2020, with the potential for 5 percent at that time.
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“There’s going to be a couple of producers out there who are going to feel the pinch, and they’re going to be scrambling” to meet the gas capture goals, Gov. Jack Dalrymple, the commission’s chairman, told Department of Mineral Resources Director Lynn Helms.
“I think your phone will ring, and I just hope that what we do here today we’re serious about,” Dalrymple said. “And the only exceptions are the exceptions that you have noted in the order, because otherwise it’s just going to be meaningless if we don’t stand by it.”
Wayde Schaefer, conservation organizer for the Dacotah Chapter of the Sierra Club, noted that even if the gas capture goals are met, based on the state’s projected production level of 2 billion cubic feet per day by 2020, operators will still be flaring at least 100 million cubic feet per day – enough to meet the needs of about 1,000 homes for one year, according to the American Gas Association.
“It doesn’t go far enough, and it takes too long to get there,” Schaefer said of the goals and order adopted by the commission, which consists of Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring.
Ron Ness, president of the North Dakota Petroleum Council, said the industry already experienced a major shift when the state began requiring companies to submit gas capture plans with their oil drilling permit applications as of June 1, and more details are needed about the production curtailments.
“We wanted curtailment as a last resort in here, but that’s kind of prevalent,” he said.
North Dakota, the No. 2 oil-producing state behind Texas, currently allows wells to flare for up to one year, after which they must be connected to a gas-gathering system, granted an exemption or pay taxes and royalties on the flared gas.
Under the order approved Tuesday, most wells will be allowed to produce at the maximum rate for 90 days and then may continue to do so if they meet the gas capture goal in place at the time. If they don’t meet the goal, those capturing at least 60 percent of the well’s gas will be restricted to 200 barrels of oil per day. Otherwise, production will be limited to 100 barrels per day.
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Helms said a dozen operators in the Bakken and Three Forks formations already meet the initial capture goal, 10 companies are close and a handful are a ways off and will need significant infrastructure or remote capture technology.
Department staff will have the flexibility to consider an operator’s overall gas capture rate across the Bakken and Three Forks oil pools, so having a single well fail to meet the capture goal won’t automatically trigger production restrictions, Helms said.
Failure to comply with production curtailments would result in a verbal warning, then a written warning and finally a complaint with a civil penalty, he said.
Meeting the capture goals when they take into account flaring on the Fort Berthold Indian Reservation – which accounts for about 30 percent of the 1 million barrels of oil being produced daily in North Dakota – also will be “a huge challenge,” Ness said. The flaring rate percentage on Fort Berthold is in the 40s compared to the 20s off the reservation, Helms said.
Ness also questioned what will happen if a natural gas processing plant goes offline or if the new processing plants figured into the capture goals are delayed.
“Those are going to be huge issues,” he said.
