The North Dakota Public Service Commission, PSC, is sending a message to pipeline companies that they can convert pipelines, but “don’t stomp on state law and private property owners to do it,” one commissioner said.
In an Oct. 8 case the PSC granted a siting permit for Hiland Crude LLC to convert an existing 197-mile long gathering line into a transmission line. However, Hiland submitted only 15 of the 20 necessary landowner waivers and the PSC is requiring those additional five waivers before allowing Hiland to proceed.
Commissioner Julie Fedorchak told Petroleum News Bakken that including the requirement for the waivers in a permit is a first for the PSC.
“I felt it was pretty important especially in this environment where we’re seeing more of these,” Fedorchak said. “If you’re going to come in and build it as a gathering line and you even have an inkling that you’re going to convert this down the road, you better be making sure you meet the standards.”
As oil and gas volumes increase in the Williston Basin, more and more pipeline companies are choosing to convert gathering pipelines to transmission lines.
The state statute definition that differentiates the two is a bit confusing and the Legislature is likely to consider a change to it in the upcoming session, Fedorchak said.
Exactly what’s the difference?
In short, a gathering pipeline becomes a transmission line when both storage and compression are added. As far as regulatory structures, gathering lines are inspected by the state’s Oil and Gas Division and construction requires self-certification. There are no permits involved other than gaining easements from landowners. Transmission lines are governed by the PSC and the process is much more rigorous. The pipeline must be sited which includes a large payment, as well as submitting environmental and cultural studies. In addition, transmission lines require a 500-foot setback from a residence, school or business unless the operator can obtain a waiver from any of those entities. The project is also open to public comment at a hearing.
Fedorchak said the PSC has received five requests for conversions. The process is similar, but slightly easier on operators since the pipeline is already in the ground.
“Most companies are converting because they didn’t think they’d need as much capacity,” Fedorchak said. “But you could also look at it and say maybe they’re doing this with the intention of being a gathering line at first, but shortly thereafter converting to a transmission line. Once it’s already in the ground, they don’t have to do as much work on the front end with these cultural studies. They can build it, start using it, and get this conversion … because the permitting process is shorter.”
Fedorchak said she doesn’t want to encourage or incentivize companies to circumvent the process because that defeats the purpose of the siting law. And she admits it is hard to prove the motive of a company. But she hopes the Hiland Crude order sends a message to pipeline companies.
“You can build them - the law allows you to do it right now,” she said. “But if you’re going to, don’t expect us to do your dirty work … either get the waiver or move the line, but don’t ask us for permission for something you couldn’t get done yourself.”
A new definition?
The state’s Department of Mineral Resources Director Lynn Helms said he suspects in most cases the larger volumes of oil and gas have pushed companies to ask for the conversion, but the statute wording has resulted in confusion for companies.
“I have not seen any explicit evidence that people were trying to circumvent or game the system but there have been too many of these situations,” Helms said, “and that kind of begs the case of should we be looking at that definition.”
However, Helms added, until the North Dakota Industrial Commission started requiring gas capture plans prior to issuing drilling permits, many gathering companies and operators were not communicating with each other on how many wells would be drilled and where.
“I tend to give them the benefit of the doubt that it is moving faster and bigger than anybody thought,” he said.
Fedorchak is working on new language for the statute but it is a challenge to write it in a way that doesn’t simply create a new loophole. She has considered changing the specifications to include size, so for instance, anything smaller than an 8-inch pipe would be considered a gathering line and anything larger is transmission. But she’s concerned companies would simply construct multiple smaller lines instead of a 12- or 16-inch line to avoid PSC siting.
“No matter how you look at it, you’re setting up a situation where companies can skirt the siting criteria,” she said.
It’s certainly not unprecedented. She explained that when wind energy was sited at 100 megawatts, everything started coming in at 99 megawatts. It was then lowered to 50 and companies aimed for 45. But the PSC also recognizes the urgent need for more pipelines so the regulatory structure needs to be reasonable, she said.
“I don’t like them asking for permits on lines already constructed, but I have to remind myself the line is already constructed so us dragging it out, requiring them to jump through a lot of hoops to get our permit to operate in a more efficient way is allowing more trucks to be on the road for longer periods of time,” Fedorchak said. “It is quite a balancing act to be firm and hold these companies to high standards while also getting infrastructure done.”
Finding a ‘hook’
Part of the PSC’s permit requirements for transmission lines includes reclamation criteria that need to be met or the agency can pull the permit. Fedorchak said it is a “pretty substantial hook” that doesn’t exist on gathering lines. She feels if there were greater penalties on the gathering side, landowners wouldn’t feel the need to take matters into their own hands and deny easements.
PSC requires a certification document that every company must sign indicating what it will do to reclaim the land. Fedorchak said she recently shared the document with some landowners and they responded favorably to the list of requirements.
“The Watford City folks said this is every single issue we have problems with, so I’m hoping that document will provide a model for use on the gathering lines in some way, shape or form,” Fedorchak said.
Watford City Mayor Brent Sanford said reclamation is definitely better on transmission lines due to PSC’s enforcement, and gathering lines really are a problem. He said landowners enter contracts with “just so many layers” and then when land isn’t reclaimed properly, trying to gain access to someone who can help is like “a black hole and very frustrating for them.”
