Helms: Bureaucracy Hurts Effort For Energy Independence

MEDORA, N.D. – North Dakota’s top oil and gas regulator took aim at federal agencies Thursday for unnecessarily interfering with the state’s energy development.

Lynn Helms, director of the Department of Mineral Resources, said North Dakota’s approach is to let the market work and intervene when it doesn’t. In Washington, D.C., he said the approach is to write one-size-fits-all rules to cover everything that could possibly happen.

If the nation adopted North Dakota’s approach, the country could become energy independent, Helms said during the North Dakota Petroleum Council’s annual meeting.

But while political leaders are subject to elections, “that opportunity doesn’t really seem to hold for federal bureaucracies,” Helms said.

Jim Martin, regional administrator of the Environmental Protection Agency, said during the event’s regulatory panel that he’s he’s been meeting with

North Dakota officials about the challenges in the Bakken and how they can work together.

“The bottom line is we want to work with you in identifying these issues and partnering to solve them,” Martin said.

EPA representatives have made visits to North Dakota this year to gain a better understanding of the Bakken, Martin said.

“The rapidity of development is stunning,” Martin said.

Jamie Connell, state director for the Bureau of Land Management for the Dakotas and Montana, said the agency is taking several steps to improve the timeliness of approving drilling permits on federal lands.

Helms told industry representatives he’s proud of how they are following the North Dakota Industrial Commission’s new set of rules that took effect April 1. Companies began voluntarily implementing most of the practices 10 months earlier, Helms said.

However, compliance with the requirement of publicly disclosing the chemicals used in hydraulic fracturing needs to improve, Helms said.

During April and May, 77 percent of companies disclosed chemicals to the website FracFocus. Eight companies will receive letters that they are in violation of the new rule.

Helms also said that policy-makers need to keep in mind that the Bakken is not immune from competition. North America has 45 shale basins, excluding Alaska, Helms said.

While the Bakken is still the hottest oil play, the Eagle Ford formation in Texas has “come on like a freight train,” Helms said.

Companies that are big players in the Bakken – EOG Resources, Conoco Phillips, Marathon and Statoil – also operate in the Eagle Ford, which has cost advantages over the Bakken, Helms said.

A Bakken well costs $9 million to $11 million to complete today, while a well in the Eagle Ford costs companies $6 million to $8 million, Helms said.

“We are competing for capital with the Eagle Ford,” Helms said. “It is a big player.”

In Helms’ monthly report on the state’s oil production numbers, he noted that rapidly escalating costs consumed companies’ budgets faster than many anticipated. He attributes the increased costs to labor shortages in the Bakken and the increase globally in the price of India’s guar beans, a key ingredient for fracking.

“They’re needing to slow things down and stretch that out so their budget can extend through the fiscal year,” Helms said.

The rig count was down to 187 Thursday, the same level it was in July 2011.

Helms said officials predicted the rig count to begin leveling off as companies secure their leases and switch to higher efficiency rigs.

One-third of the drilling applications he approves are now for multi-well pads, compared with 12 percent at the start of the year, he said.

“We’re really making the transition into phase two with this drilling process,” Helms said.

With a rig count of around 200, it will take about 18 years to complete the drilling, Helms said.

“We’re in this for the long haul, guys,” he said.