Sixty out of 68 operators in North Dakota met their gas capture targets capturing 78 percent of produced natural gas in October, exceeding the state’s goal by 4 percent according to data released by the Department of Mineral Resources, DMR, on Dec. 12. That 4 percent provides some cushion as the state’s capture goal rises to 77 percent on Jan. 1, 2015. It remains at that target until Jan. 1, 2016, when operators will be required to capture 85 percent of the gas.
DMR Director Lynn Helms said with the exception of a few operators, companies in the Bakken were actively capturing the gas and providing midstream companies with a greater sense of what to expect from production.
“I think the big impact of gas capture is behind us,” Helms said in a Dec. 12 monthly press conference.
Overall, he is pleased with the industry’s efforts to be in compliance with the gas capture targets.
“I couldn’t be happier,” Helms said. “What has happened since January of last year is exactly what we wanted to have happen. The plan has come together.”
Helms added that plunging oil prices have tightened the spread between oil and gas so operators are seeing “a tremendous amount of profit” in capturing the gas versus flaring it. While only a few months ago oil was worth 30 times the price of gas, now the range is closer to 10 times and providing an opportunity for much-needed profit from gas capture.
Getting into compliance
Of the eight operators who didn’t hit the 74 percent gas capture goal set by the North Dakota Industrial Commission for Oct. 1, Emerald Oil, North Plains Energy, Petro-Hunt and Zavanna are likely to curb production in order to get into compliance, according to Helms. The other four appeared to not be in compliance, but some noncompliance issues were due to reporting errors or in the case of Kodiak Oil and Gas, after it merged with Whiting Petroleum its gas capture rate went from 70 percent to being in compliance as a combined company.
Helms said Zavanna was only capturing 39 percent of its natural gas, but as Petroleum News Bakken reported on Dec. 14, Zavanna has applied to the commission for a flaring exemption as it awaits completion of its new gas plant. It was scheduled to come on line in September, but has encountered delays.
“They (Zavanna) are on the docket to talk to the Industrial Commission about the need to produce wells, flare wells and purge all their gas gathering lines to bring that plant on production. That’s the kind of thing we knew we’d run into and have to address with companies,” Helms said.
With the plant’s projected processing capacity of 45 million cubic feet per day expandable to 90 mmcf, Helms said it is a key piece of infrastructure within the Springbrook area northeast of Williston.
Williams County operators appear to struggle the most with compliance but among the four companies, production curtailment could also occur in Divide, Mountrail and Dunn counties. The four flaring violators will receive notices to that effect in December and DMR will check to ensure the companies complied when November production is reported in January.
“If January comes around and November production shows they didn’t make the production restrictions, then there is some possibility of some type of penalty,” Helms said.
System can’t be ‘worked’
DMR obtains monthly production data and uses it to calculate flaring percentages. When a company is identified as being out of compliance, DMR will contact the company for a more detailed audit to determine if there were reporting errors to explain the non-compliance. Since reports are collected from the producer, transporter and purchaser, Helms said it would be very unusual for someone to be able to “work the system” and report inaccurately in an effort to flare without consequence.
Justin Kringstad of the state’s Pipeline Authority reported that the number of wells being connected to gas gathering facilities is exceeding new wells going on production. In October, 197 new wells were brought on production while operators were able to connect another 218 to gathering infrastructure.
FBIR makes great strides
The Fort Berthold Indian Reservation also continues to gain traction on gas capture, exceeding the goal by reaching 75 percent. Helms said his office has met with the Department of the Interior, DOI, to gain feedback on jurisdictional matters with tribal government. DMR and DOI are working on bringing newly elected Chairman Mark Fox and other tribal staff into the conversation. In August, the Three Affiliated Tribes submitted its own gas capture proposal to the industry, but Helms said those plans have been put on hold.
“We’re going to come to a resolution that’s a lot more like the state’s plan than the initial tribe plan,” Helms said, “but I can’t predict exactly what it will look like.”
