It is business as usual for oil and gas drillers in North Dakota as they could wait up to 82 more days before the North Dakota Industrial Commission (NDIC or the commission) makes a final decision on new rules designed to reduce natural gas flaring.
North Dakota operators currently flare 36% of the gas produced because development of infrastructure has not been able to keep pace with drilling. This compares to less than 1 percent from all oil fields in the country according to the U.S. Energy Department.
Residents in drilling areas have concerns about the impacts of flaring. Some complain about the noise it creates, while others wonder what effects it could have on their health and the environment.
Operators are able to flare gas for up to one year without paying taxes on the production and are often granted extensions beyond this time frame.
Concerned over environmental and economic impacts, the commission sought industry opinion on ways to correct the problem. One possible solution would be restricting oil production, while imposing new provisions that would reduce the amount of flared gas.
On April 22nd, the NDIC held a special hearing that provided operators and residents the opportunity to voice their respective concerns. As of May 14, the commission has said that it would not make a decision on the field rules for 90 days. With the NDIC’s June meeting scheduled for July 1st, less than 40 days from today, Lynn Helms, the Department of Mineral Resources Director, still anticipates bringing an order to the meeting, but has the benefit of extra time if necessary.
There are many sponsors of energy direct investments active in the North Dakota, namely the Bakken and Three Forks formations of the Williston Basin. Although most sponsors are not operators, their partnerships are working interest owners in the various wells they participate in and could see an impact to investor returns based on the final ruling.
One such sponsor, Bradford Energy Capital, LLC, views the commission’s decision to take additional time before rendering a decision a prudent move.
John Farmelo, President and CEO of Bradford Energy Capital, LLC., commented “We see the delay in mandating this regulation a wise move in the interest of covering all bases before implementation of new regulations that may have unintended consequences. However, the additional capacity to process natural gas in the Bakken, such as the new Hess plant, and the build-out of the infrastructure to move the gas is happening quickly, and organically. Frankly, gas sales are helping our economics where we participate in Bakken and Three Forks wells. As a result, we focus on areas and operators in this play where income from this very hot natural gas is generally expected.”