UPDATED: Democrats Say Oil Regulation, Promotion Duties Should Be Split

BISMARCK – North Dakota is “ill-served” by an oil regulator who is also charged with promoting development, and the Industrial Commission should eliminate that conflict of interest, the state’s Democratic legislative leadership said Tuesday.

The state Senate and House minority leaders are calling on the North Dakota Industrial Commission to separate the oil regulation and promotion responsibilities of the director of the Department of Mineral Resources, currently held by Lynn Helms.

A letter sent Tuesday to the Industrial Commission cites recent actions by Helms related to the Tioga oil spill, statements regarding the volatility of Bakken crude weeks before the Casselton derailment and a mistake involving the permitting of a waste pit.

“Recent, high-profile incidents across the state confirm the public is ill-served by a director who is charged with regulating the development he is duty-bound to promote,” write Sen. Mac Schneider, D-Grand Forks, and Rep. Kenton Onstad, D-Parshall.

The Democrats cite a portion of the North Dakota Century Code that says it’s the state’s policy “to foster, to encourage, and to promote the development, production, and utilization of natural resources of oil and gas.” The Industrial Commission is charged with regulating oil and gas development and delegates much of that authority to the director of Mineral Resources.

Schneider and Onstad announced they will introduce legislation in the 2015 legislative session that would permanently separate responsibilities of regulation and promotion.

In the near term, the North Dakota Democrats ask the Industrial Commission to use its authority to “establish a firewall” between the promotion and regulation roles, Schneider said.

The Democrats said they intend to base their legislation on an unsuccessful proposal by Dalrymple in his 2011-13 executive budget to create a new division within the Department of Commerce. The division, funded with $600,000 from the general fund, would have been headed by a state “director of energy” focused on promoting development of all of North Dakota’s energy resources, working with communities on infrastructure and administering energy programs to help producers.

Helms, who responded to some of the criticisms during his monthly update on oil production, said he considers his primary role to be a regulator. He said during his time in the position, North Dakota has adopted the country’s strictest hydraulic fracturing rules, the strictest drilling pit rules and will soon adopt the only set of underground gathering pipeline regulations in the country.

In their letter, the Democrats write that Helms had information about the pipeline leak discovered Sept. 29 that spilled more than 20,000 barrels of oil near Tioga but he stayed publicly silent. However, a Forum News Service open records request showed that Helms discussed the spill in an email to his daughter.

“Even accounting for the director’s lack of jurisdiction over pipelines, we believe our state’s oil regulator should have first shared that information with legislators and the public,” the Democrats write. “Perhaps fearful that doing so would detract from his statutory duty to promote oil development, Director Helms stayed silent.”

The letter also cites comments Helms made weeks before an explosive train derailment near Casselton to a legislative committee about a proposed white paper to study the volatility of Bakken crude. Helms told the committee the study of Bakken crude would try to “dispel this myth that is somehow an explosive, really dangerous thing to have traveling up and down your rail lines.”

Days after the fiery Dec. 30 derailment that prompted the evacuation of Casselton, a federal agency issued a safety alert warning that Bakken crude may be more flammable than other types of oil.

“Two weeks later we saw in profound fashion how explosive that crude is,” Schneider said Tuesday.

Helms said Tuesday he is a big fan of the TV show “MythBusters” in which the hosts start with a myth and prove it true or false. Helms said when he used the word myth, it was not his intent to characterize it as false.

Helms, who initially proposed that the study would be conducted through the North Dakota Pipeline Authority, said he later learned that a study of Bakken crude is part of a federal investigation, so there was no need for the white paper.

“We’re happy that there’s a study going on,” Helms said.

The Democrats also cite a Department of Mineral Resources oversight that allowed a drilling waste pit to be located too close to the water well for the city of Ross. Helms has said his department has taken steps to ensure that type of oversight won’t happen again.

Many western North Dakota residents are angry with Helms related to these high-profile incidents, Onstad said. However, Onstad says they should direct that anger to the Industrial Commission, which consists of Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring, who delegate authority to Helms.

“The responsibility is really in their lap. They need to deal with this,” Onstad said. “Or are they more concerned about setting production records rather than the safeguards of our citizens?”

Dalrymple said he hadn’t seen the Democrats’ letter yet, but he said he doesn’t believe that the director’s job needs to be split between regulation and promotion.

“I really feel that it’s clear that regulation is his essential job, and I think he does his job,” he said.

Stenehjem referred questions to Helms and a request for comment through Goehring’s public information officer was not returned Tuesday.

Dalrymple said the state has taken many steps in the last few years to “toughen up” regulation of the oil and gas industry and commissioners are asking for a plan to reduce natural gas flaring.

“It’s true that from time to time Lynn Helms lets his enthusiasm and his excitement about the potential for energy development in North Dakota to get the better of him, and that excitement shows through,” Dalrymple said. “But that does not mean that he is acting as an official promoter of the industry or anything like that.”

Reporter Mike Nowatzki contributed to this report