The upcoming 64th North Dakota Legislative Assembly which kicks off in January will consider a variety of issues and needs that are plaguing western North Dakota’s oil impacted counties, but with the new regulations put in place over the past few years, North Dakota Petroleum Council President, NDPC, Ron Ness hopes it alleviates the need to pile on more rules aimed at the industry.
“We’ve been deluged with new regulations and laws, adopting over 70 new rules and laws over the past three years and I’d like to let us see some of those systems work,” Ness told Petroleum News Bakken.
From gas capture plans and mandated flaring targets to waste disposal and pipeline construction, Ness sees the state with no shortage of regulations, so he will encourage legislators to consider more staffing for key regulatory agencies such as the state health department and the Department of Mineral Resources, DMR.
“Since 2009, DMR has probably had a 110 percent increase (in staffing) and I think they need more,” Ness said. “We have added so many rules and regulations and when you keep adding them you have to have people to enforce them.”
The most critical bills to western North Dakota are set to be some of the first to come across legislators’ desks. Those include a funding surge bill to immediately funnel monies to oil-producing counties to ensure contractors can begin constructing roads and other infrastructure in summer 2015, as well as a bill to change the gross production tax formula to distribute a larger share of the revenue to oil-impacted regions. With more than $7.5 billion in oil tax revenues estimated to be collected during the 2015-17 biennium, the legislature faces some challenges in sorting through all the state’s needs and determining appropriate funding.
Growing weary
Though the industry has grown weary of added rules and regulations, Ness said it does expect a fair amount of legislation surrounding pipelines, easements and spills based on the simple fact that the state’s well count has swelled from 3,500 in 2009 to 11,000 wells today. But he hopes the legislature analyzes what has already been done because he “can’t imagine anywhere that has added the type of regulations and the regulatory intensity we have in North Dakota.”
The NDPC will not enter the session with any standalone legislation, but will instead join the efforts of the governor-appointed EmPower North Dakota Commission which will offer proposed bills regarding infrastructure and tax incentives. As Petroleum News Bakken has previously reported, EmPower developed a series of bill drafts and presented them to the interim Energy Development and Transmission Committee in August.
One is a bill that would create sales tax exemptions for personal property to build or expand chemical processing plants, creating value-added commodities from oil products much like the state did with agriculture. Another bill would offer a tax incentive for managing waste by encouraging recycling of drill cuttings for such uses as road improvements rather than sending them to landfills or burying them onsite. Ness said the bigger incentive is to leave no cuttings or reserve pits on the land which is what the landowner wants. He noted that the state’s health department would need to put rules in place to ensure the recycled materials were being put to a beneficial use that would qualify for the incentive. Another bill would provide a sales tax exemption for materials used to construct oil gathering pipelines. With the cost of installing gathering pipe reaching $175,000 per mile, the sales exemption would provide a $2,500 per mile savings. However, pipelines won’t be constructed without easements, and Ness believes right-of-way access will be a thoroughly discussed topic in the legislature as well.
Private property rights
The NDPC formed a right-of-way task force to open communication between industry and landowners and find solutions to the easement fatigue experienced by many farmers and ranchers in the Bakken. The task force recently developed an online information center on NDPC’s website which provides resources for landowners when dealing with easements.
“I think we’ve done a lot in terms of moving the needle on improving communications,” Ness said.
Though some within the industry may still favor eminent domain, Ness said NDPC has no proposals to bring to the legislature regarding land grabs, but understands the frustrations and concerns particularly with the prices being paid to landowners for easements. But he said the right-of-way task force is representative of member companies and proposing eminent domain is not an objective of the group.
Private property rights may also enter the discussion if further requests arise for expanding the Special Places policy instituted by the North Dakota Industrial Commission in April. Currently, the policy requires specific notice for comments on any drilling applications submitted within an area deemed special in the state due to its historical or environmental value, but the zones are limited to public lands. The policy was first proposed by Attorney General Wayne Stenehjem to include both public and private land but the commission chose to test it on public lands first and let the legislature consider broadening its scope.
“In terms of staying off of private land, I think that was pretty loud and clear,” Ness said of the feedback he heard on the policy. “You could see some legislation, but between western communities, farm groups, industry and private landowners there was a pretty resounding message that the commission was going too far by putting infringements on people’s private property.”
Incentivize versus penalize
Other oil industry-related bills being proposed by the EmPower Commission include incentives for carbon dioxide capture for enhanced oil recovery, remote natural gas capture technology, co-locations of easements, and expansions of natural gas or liquid natural gas markets.
“A key component that should not be lost is maintaining North Dakota’s business friendly environment,” the EmPower Commission said in its 2014 policy updates and recommendations report. “While new initiatives will mean hundreds of millions of dollars of new investment in North Dakota, industry has always been able to rely on the state’s willingness to offset a portion of the initial investment through tax incentives.”
