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Regulators to consider revising natural gas flaring policy

Natural gas is flared Thursday, April 12, at an oil well site north of Ross, N.D. (Tom Stromme / Bismarck Tribune)

BISMARCK — North Dakota's oil industry is advocating for the state to keep its current gas capture targets but make some tweaks to the policy that regulates natural gas flaring.

A North Dakota Petroleum Council task force studying ways to reduce flaring and spur infrastructure development recently completed its work and delivered recommendations to state regulators.

The North Dakota Industrial Commission is set to discuss the recommendations on Tuesday, April 17, and consider revising the gas capture policy.

"I do anticipate that there's going to be changes to that policy," Director of Mineral Resources Lynn Helms said Friday.

North Dakota oil production held flat in February at 1.17 million barrels per day while natural gas production hit a record at 2.1 billion cubic feet per day, according to preliminary figures the agency released Friday.

Flaring decreased from 310 million cubic feet per day in January to 256 million cubic feet per day in February. Companies captured 89 percent of Bakken gas produced statewide in February, exceeding the state's requirement of capturing 85 percent.

The state requirement is set to increase to 88 percent in November, a level regulators and industry leaders had cautioned could be difficult to meet as natural gas production is expected to continue breaking records.

But the industry group's gas capture task force is now recommending that the gas capture targets and the timeline should stay the same with some other revisions to the policy.

"I believe that with the recommendations they've made, and with the additional pipeline capacity and infrastructure, they're feeling more confident that 88 percent is achievable," said Kari Cutting, vice president of the North Dakota Petroleum Council.

Some of the group's recommendations include changing the way natural gas outside of the core Bakken area is treated in the policy and extending credits for companies that beat the gas capture targets.

In addition, the industry group recommends semi-annual reviews of companies' gas capture results and requiring companies that fail to meet the targets to submit gas capture improvement plans.

Companies that fall below gas capture targets can be forced to reduce their oil production, but regulators have rarely imposed production restrictions on companies as the policy is currently written.

However, companies have voluntarily reduced their oil production in order to meet the gas capture targets.

For example, natural gas flaring reduced significantly at Fort Berthold in February, with 87 percent of the Bakken gas captured on the reservation. But in order to achieve that, oil production on the reservation decreased about 13,000 barrels per day.

"You can definitely see operators reacting to the need to do gas capture on Fort Berthold and some of the difficulties dealing with a federal regulatory environment," Helms said.

There had been preliminary discussion at the Industrial Commission about excluding Fort Berthold from the gas capture targets because of challenges getting timely federal regulatory approvals for infrastructure projects on the reservation.

However, the industry group recommends keeping a level playing field with Fort Berthold flaring included with the gas capture policy. Cutting said the industry wants to continue to encourage investment both on and off the reservation.

In February, most of the flaring occurred at wells that were connected to pipelines but the infrastructure was inadequate to capture all of the gas produced, said Justin Kringstad, director of the North Dakota Pipeline Authority.

"Wells are getting connected much faster than they have in the past. Now it's optimizing and expanding those networks out in the field," Kringstad said.

So far in 2018, about $3 billion in natural gas infrastructure investment has been announced for North Dakota, Cutting said. But many of the projects won't be processing and transporting gas for 26 months, she said.

"Better technology is leading to increased production, and increased production is spurring the economics for greater investment," Cutting said. "It's just a process that needs to continue."

The Industrial Commission meets at 11 a.m. Tuesday in the Coteau Room in the Judicial Wing of the North Dakota State Capitol.

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