Explaining a tiered approach to enforcing North Dakota’s new flaring regulations has answered many of the concerns of the oil and gas industry doing business in the Bakken.
On July 21, the state’s Department of Mineral Resources, DMR, Director Lynn Helms and industry representatives met to clarify certain aspects of the new order that became effective after a vote from the North Dakota Industrial Commission, NDIC, on July 1. The key to the order is to meet gas capture targets at regular intervals in order to reduce flaring to about 5 to 10 percent by 2016. The first target is to capture 74 percent by Oct. 1. The industry, however, felt the order left many unanswered questions and compiled a list of more than 60 questions which were then whittled down to about 10 to bring to Helms.
DMR spokeswoman Alison Ritter told Petroleum News Bakken that the biggest concern of the industry was how compliance would be addressed. Helms explained that gas capture targets will be reviewed according to each operator, and DMR production auditors will first determine if an operator is in compliance on a state level. If so, then no further action will be taken. This system of review will continue based on county, field, and finally, by well.
“It’s broken down piece by piece, and if they’re meeting those goals at certain levels then it won’t be broken down further,” Ritter said. “Production curtailment would be applied to an individual well.”
Currently, DMR’s production auditing department consists of three staff members to review every operator’s gas capture progress, but Ritter said her office plans to request permission from the legislature to hire additional employees to handle the workload. She also notes that any necessary production restrictions would be directed by Helms and not subject to a vote by the NDIC.
As Helms mentioned in his monthly production results press conference on July 14, midstream companies plan periodic outages for maintenance and this would affect the ability to hit gas capture targets. He told the industry that these scenarios would be addressed on a case-by-case basis.
“It’s tough to make a large blanket statement because there are going to be so many varying factors that play into events,” Ritter said.
Many questions engineering-specific
She said many of the questions from the industry were engineering-specific as production curtailment is “a much more complicated matter than just turning down the wells,” she noted.
In the order, the commission ruled to allow all infill horizontal wells within the Bakken and Three Forks pools to produce at a maximum efficient rate for 90 days and allow operators to remove the first 14 days of flowback gas from the total monthly volume calculation. It leaves another 76 days for an operator to get connected to a gathering facility or utilize remote capture processes in order to hit the gas capture target. If unsuccessful, the operator faces production restrictions. If they can capture 60 percent of the gas through remote capture, then they can produce up to 200 barrels a day. If 60 percent isn’t captured, they are restricted to 100 barrels a day until they implement a solution.
The industry questioned the 14-day initial flowback aspect of the order, wondering how that should be accounted for and reported. Ritter said the department is working on clarifying that aspect of the order, but the industry will need to note those 14 days on the compliance form they submit to DMR.
“They want to make sure all the boxes are checked when they submit their information,” Ritter said.
Because the first gas capture target must be met by Oct. 1 and production is not audited until December, the earliest that production restrictions would occur is Jan. 1.
Ritter said while it does delay some enforcement, the extra time could become an advantage for everyone.
“There is a problem with the lag because it lags when we can actually enforce, but there’s also a benefit to the lag because it also gives operators a chance to realize that certain areas may be out of compliance and what can they do to fix it,” she said.
Targeting problem areas
North Dakota Petroleum Council flaring task force Chairman Eric Dille attended the meeting with Helms and told Petroleum News Bakken that the tiered approach is a good way to target areas that are problematic.
“That’s where the attention needs to go,” Dille said. “If you’re operating in an area with a good collection system and you have enough compression and processing, then that’s not really the problem.”
He said operators will certainly be watching their own compliance and reporting.
“Which only makes sense for each operator to do that and not rely on DMR to get the numbers together,” he said.
Industry is not confident that it will be able to get all necessary pipeline constructed to meet the gas capture targets on a tight timeframe, so how production looks at the end of the year remains to be seen.
“I think there’s going to be a lot of people running really hard to get into compliance by the last quarter of this year,” Dille said.
If found to be out of compliance, being able to submit a new gas capture plan that shows the operator will have a compressor on site within a few months or that it will implement other plans to reduce flaring eased some industry fears.
“It’s real money when you start cutting back production,” Dille said. “So I guess the governor has signed on to let the state take that financial hit. When you start messing with rate of return and things like that, it gets a company’s attention real quick. So there’s going to be very tough business decisions made and it could be good or bad.”
Helms plans to meet with industry representatives again before the Oct. 1 target date, and Dille said it may be with a broader group in order to get everyone’s questions answered.
“Hopefully we can work it out, I do think it is a work in progress,” Dille said.
After working through some details, Ritter said DMR plans to compose a letter to the industry replying to the 10 questions, but noted that NDIC is chartering new territory with the order and it could entail some fine-tuning along the way.
“Since this is different than what’s ever been done before we may find along the way things that may need to change either on our end as far as how we receive the information, or how we process the information, or just ways that maybe will work better - things we may need to change” Ritter said. “The order has definitely laid the framework and now we have to make sure we can apply it and make it work efficiently for our office.”
