North Dakota Orders Limits on Gas Flaring

by Stinson Leonard Street

On July 1, 2014 the North Dakota Industrial Commission (NDIC) imposed new rules that will significantly limit the flaring of natural gas at all existing and future wells. Order 24665 will allow wells completed in the Bakken/Three Forks to continue producing at a maximum efficient rate through September 30, 2014. After September 30, all existing and future wells completed in the Bakken-Three Forks will be required to comply with the new gas flaring policy. Operators are already required to provide a gas capture plan along with their drilling application to ensure these gas flaring regulations will be utilized come the September 30, 2014 deadline.

The North Dakota Petroleum Council Flaring Task Force believes that by implementing these and other rules from the Commission, an estimated 74% of gas will be captured by October 1, 2014; 77% by January 1, 2015, and 90% by October 1, 2020.

The Order provides:

  • The first completed horizontal well on a non-overlapping spacing unit shall be allowed to produce at a maximum efficient rate. This will allow operators to determine what the potential production is at the specific site.
  • The wells that have received an exemption to N.D.C.C. ยง 38-08-06.4 shall be allowed to produce at a maximum efficient rate.
  • All infill horizontal wells shall be allowed to produce at a maximum efficient rate for 90 days beginning on the first day oil is produced from the ultimate producing interval after casing has been run.
  • The gas capture percentage shall be calculated by summing monthly gas sold plus monthly gas used on lease plus monthly gas processed in a Commission approved beneficial manner, divided by the total monthly volume of associated gas produced by the operator. The operator is allowed to remove the initial 14 days of flowback gas in the total monthly volume calculation. The Commission will accept compliance with the gas capture goals by well, field, county, or statewide by operator. If such gas capture percentage is not attained at maximum efficient rate, the well(s) shall be restricted to 200 barrels of oil per day if at least 60% of the monthly volume of associated gas produced from the well is captured, otherwise oil production from such wells shall not exceed 100 barrels of oil per day.

The Commission also will recognize the following as surplus gas being utilized in a beneficial manner:

  • Equipped with an electrical generator that consumes surplus gas from the well;
  • Equipped with a system that intakes the surplus gas and natural gas liquids volume from the well for beneficial consumption by means of compression to liquid for use as fuel, transport to a processing facility, production of petrochemicals or fertilizer, conversion to liquid fuels, separating and collection the propane and heavier hydrocarbons; and
  • Equipped with other value-added processes as approved by the Director which reduce the volume or intensity of the flare by more than 60%.

Consequently, if the North Dakota Department of Health determines a well violates the rules of the gas flaring policy, and/or if the operator receives an audit from the Department of Mineral Resources and the operator is in violation, production from the respective pool may be restricted until compliance is met.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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