Few people have a better understanding of energy policy issues in North Dakota than Rich Wardner. In addition to serving in the North Dakota House of Representatives from 1991 to 1997 and in the Senate since 1999, he served as Senate President Pro Tempore in the 2011 session and as majority leader in the 2012 session. Wardner is also a member of the state’s Emergency Commission and five interim committees, including the Energy Development and Transmission Committee, which he chairs. That committee studies comprehensive policy for all facets of energy in North Dakota.
Wardner recently shared with Petroleum News Bakken some of his views on oil and gas-related issues the state is facing during the legislative interim and what might be ahead in the next full legislative session.
Petroleum News Bakken: First, do you think the oil and gas-related bills passed during the 2013 legislative session are effectively addressing the issues they were intended to address?
Wardner: It is too early to tell if the legislation to decrease flaring and the use of the Department of Agriculture's mediation services for oil and gas pipeline easements are effective, however, the $620 million for state highways in oil country has made a positive impact on the road infrastructure. Also, the legislation that appropriated funding back to political subdivisions is coming in over estimates, which will aid in meeting the needs in oil impacted country.
Petroleum News Bakken: What oil and gas related issues do you see that were not addressed by legislation in the 2013 session that should have been?
Wardner: The area of pipeline monitoring. Oil companies that have pipelines need to know when a pipeline leak occurs, so that they can address the situation quickly.
Widening U.S. 85
Petroleum News Bakken: You have been a vocal proponent of widening U.S. Highway 85 between Watford City and I-94 at Belfield, some 60-plus miles. What do you think the prospects are for getting that done?
Wardner: I believe it will be accomplished. It may not happen as fast as many of us would like, however, it will happen. Over $300 million has been dedicated to Highway 85 between Watford City and Williston by the North Dakota DOT and construction of the four lane undivided highway has begun. Environmental issues, four lanes past the north unit of the Teddy Roosevelt National Park and constructing a four lane bridge across the Little Missouri River will be challenges that have to be overcome. Currently the two lane highway is overwhelmed by the truck traffic. Public safety is the number one concern on Highway 85.
Petroleum News Bakken: How should it be funded, and how soon could work on that project potentially begin?
Wardner: The state needs to set aside funding dedicated to a four lane Highway 85 until the project is completed. There has been preliminary work done by the North Dakota DOT, but the construction south of Watford City needs to start as soon as funds are dedicated, which would happen after the 2015 legislative session if approved.
Oil and gas taxes?
Petroleum News Bakken: The Energy Development and Transmission Committee recently commissioned a study by a private sector consulting firm to evaluate the future of North Dakota’s oil and gas industry for the legislature to use as guidance in determining how oil and gas tax revenues are collected and distributed. Can you provide some detail about the focus of the study and when is it expected to be completed?
Wardner: The scope and focus of the study is to determine the correct oil and gas tax rate to meet the needs of the political subdivisions affected by the oil and gas production and impacts, as well as the State of North Dakota. The consulting firm will not only study local trends in the oil and gas industry, but also global trends with respect to demand and future production. The study will be completed at end of August of 2014 and the consulting firm will report to the legislative committee in early September of 2014.
Petroleum News Bakken: There have been some calls from within the oil and gas industry for North Dakota to lower its oil and gas production and/or extraction taxes in order to be more competitive with other western oil and gas producing states. What are your thoughts on tax reductions for the oil and gas industry?
Wardner: The 5 percent oil and gas production tax would not be changed, because it is shared with the political subdivisions in oil and gas country as an in lieu of property tax. The 6.5 percent extraction along with the tax incentives when oil drops below the trigger price of approximately $53 per barrel for five consecutive months needs to be studied to make sure industry and the State of North Dakota are treated fairly. The state wants the oil companies to continue to invest in North Dakota; however the state has to meet the needs from impacted areas. The study should give us some insights as to the tax rate that will best serve the oil industry and North Dakota into the future.
The next session?
Petroleum News Bakken: While the 64th North Dakota legislative session is still a year away, we are now one year into the interim – at this point what do you see as potential oil and gas-related issues that the next legislature might face?
Wardner: Increased funding to highly impacted counties, cities, schools, emergency services and law enforcement in oil and gas producing counties. Flaring, monitoring of pipelines and land owner issues will also have several proposals in the legislative process.
Outside North Dakota
Petroleum News Bakken: You recently attended an energy conference in Alberta, followed by a side trip to the oil sands. Can you provide some details about the conference and what your take-home was from both the conference and your tour of the oil sands?
Wardner: Alberta's oil sands has an estimated 169 billion barrels of oil and currently Alberta produces 1.8 million barrels per day. Their goal to develop new markets and increase production with a new technology called steam assisted gravity drainage (SAG-D) that will give Alberta the ability to triple production in a short period of time.
Mexico is inviting private oil companies into their country to help them ramp up production. Mexico has a nationalized oil company and they are not getting the results they had expected. The oil shale plays in other parts of the United States are increasing production and the talk was that the North American continent will be self-sufficient by 2020. It tells me there will be competition for the Bakken light crude on the world market, therefore, we in North Dakota, need to get our infrastructure needs in oil country taken care of and study our state oil and gas tax policy so that we can keep oil companies investing in the North Dakota oil patch.
