Tribal leadership on the Fort Berthold Indian Reservation is hoping to motivate operators to stop flaring by imposing fees on flared gas, but it may be overstepping its bounds.
The Three Affiliated Tribes recently sent a six-page letter to operators outlining a proposed gas capture plan to manage flared gas. The document’s foundation is a Bureau of Land Management, BLM, notice (NTL-4A) regarding royalty payments on oil and gas dated Jan. 1, 1980. In the letter, the tribe said that although the BLM notice has existed for decades, it questions if the plan has been managed effectively.
“We do not believe that the NTL-4A mandate for gas conservation on well and lease flaring basis is complete and recommend additional documentation and oversight,” the letter states.
To supplement the BLM notice, the tribe intends to require that operators submit gas capture plans to be reviewed quarterly for adherence.
“This approach allows the operators to work out their best method of preventing flaring on their acreage,” the Tribe said. “A part of the Tribe’s GCP (gas capture plan) requires operators to pay a percentage of gas royalties on a stair step time schedule.”
The letter further states that the tribe reserves the right to take all produced gas on the reservation scheduled to be flared if the operator is unable to sell it or use it to power operations. But Theodora Birdbear, chair of the Dakota Resource Council’s oil and gas task force, questions that right.
“I believe there’s a lot of flaring happening on individual tribal landowner lands and I don’t know that they have the right to take that (gas) from individual mineral owners,” Bird Bear told Petroleum News Bakken.
The tribe’s letter states that its flaring regulation is based on a mandated royalty system rather than a North Dakota Industrial Commission “penalty program.” Under the proposed plan, which would take effect 60 days after Tribal Council approval, operators can flare gas for 30 days, but then must pay 25 percent of royalties on new wells and 75 percent on infill wells. After 90 days, that percentage rises to 50 percent for new wells. After 180 days, operators must pay 75 percent of royalties flared on new wells and 100 percent on infill wells. New wells that are still flaring after 270 days will be subject to a 100 percent royalty payment on flared gas. However, the tribe reserves the right to approve exemptions and Bird Bear sees that as problematic. “The industry pretty much has its hooks in the current administration and we’ve seen the consequences,” she said.
Sovereign rights
In 2008, the Three Affiliated Tribes signed an agreement that assigned power over the reservation’s oil production to the state. It allowed companies to conduct exploratory drilling on the reservation without fear of potential federal or tribal taxes because the state had ultimate authority. However, the agreement was revised in 2010 and again in 2013, so the language now states that oil and gas wells are “subject to applicable federal, tribal, and state regulatory provisions for the life of the well.”
The NDIC implemented new flaring rules on July 1 which give the state the right to impose oil production restrictions if producers fail to meet gas capture goals, the first being 74 percent gas capture by Oct. 1.
“We certainly hope the state and the tribe can concur on who has regulatory authority,” North Dakota Petroleum Council President Ron Ness told the Associated Press. “It doesn’t do anybody any good to try to determine whose rules you got to follow.”
The tribe believes its approach does not burden operators with additional oversight, but rather “achieves the most important goal; ensuring that flared gas will be measured and royalties paid.” The letter acknowledges that some operators say they may curtail production on the reservation due to NDIC rules. If that happens, the tribe plans to bill an operator based on estimated and projected royalty gas produced and flared rates.
“The Tribe’s gas royalty revenues should not be adversely affected by an operator’s failure to honor the Tribe’s Sovereign Right,” the letter said.
Bird Bear said revenue has blinded the tribal administration and it is not considering other impacts of flaring.
“Their priority is on the immediate revenue versus the long term costs to human health and the degradation of air quality here on Fort Berthold,” she said.
About one-third of all of the state’s flaring occurs on the reservation. The tribe said every year millions of dollars’ worth of natural gas is flared on its land and the fees would support environmental analysis programs and develop a system to use the gas for electric power.
“More than ever before, the Tribe supports cleaner energy … cleaner air,” it states in its letter to operators.
The tribe also plans to create a timelier and efficient pipeline right-of-way and permitting process on the reservation, saying its analysis of the approval process indicates “all parties - operators, BLM, BIA, and the Tribe - have contributed to the length of time for approval.”
Oil development on the Fort Berthold Indian Reservation accounts for nearly 400,000 barrels of oil per day of the state’s million barrels of daily production. There are more than 1,200 active wells on the reservation which spans a million acres in west-central North Dakota.
