North Dakota energy growth slowed by new gas flaring rules
By DAN MURTAUGH
Bloomberg
North Dakota’s oil output grew slower than expected in July, possibly as a result of new rules passed to reduce the amount of natural gas wasted at wells.
The state produced 1.11 million bpd of oil in July, up 1.7% from June, according to data from the state’s Department of Mineral Resources.
The increase wasn’t as large as the state expected, Lynn Helms, the department’s director, said on a conference call. One possible reason is that producers might be waiting to bring new oil wells online until gas infrastructure is in place, he said.
About 26% of the gas produced in North Dakota was flared at the well in July, down from 35% in January.
“It may be that producers are focusing on flaring and gas capture,” Helms said.
North Dakota passed new rules in July trying to reduce the amount of gas flared at the wellhead. With oil prices much higher than gas, some producers weren’t willing to wait for gas pipelines and processing plants and were just burning gas in order to extract the valuable oil.
New Rules
The new rules, which go into effect in October, will give the state power to curtail oil output and levy fines of as much as $12,500/day to producers who don’t meet requirements.
Horizontal drilling and hydraulic fracturing in an underground layer of shale rock known as the Bakken have boosted North Dakota from an energy afterthought to the US’s second- largest oil-producing state, behind Texas.
The number of energy rigs in North Dakota rose to 185 this week, according to data from oil-field services firm Baker Hughes. That matches the level reached Aug. 15, which was the highest in two years.
With North Dakota oil such a prominent part of the energy landscape, a new price benchmark should be developed that reflects the price producers can sell for straight from the well, Helms said. Current benchmarks in Oklahoma and Minnesota are at various times higher and lower than the price on the ground, he said.
“It would be nice to have one that accurately captures what the tax department sees as the price paid at the well,” he said.
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