Budget Cuts Could Reduce ND’s Oversight Of Oil, Gas

BISMARCK – Balancing North Dakota’s budget could lead to less oversight of oil and gas development and fewer inspections of gathering pipelines at the same time that oil activity is expected to be on the upswing.

Lynn Helms, the state’s top oil regulator, said inspections of well sites and facilities would be reduced by half in 2017-19 if the Department of Mineral Resources budget is cut at the levels proposed by former Gov. Jack Dalrymple or Gov. Doug Burgum.

Inspections of gathering pipelines, a new regulatory program developed after high-profile spills, also would be cut in half under funding cuts proposed by Burgum, Helms said.

North Dakota lawmakers are expected to significantly reduce the number of state employees in order to balance a budget plagued by declining revenues.

But Helms cautions that cutting too many oil and gas field inspectors and other staff would mean they’d have to visit oil sites in the Bakken less often.

“We will regulate and inspect and enforce to the level that you can afford,” Helms recently told members of the Senate Appropriations Committee. “We cannot do it to the level you’ve grown accustomed to with either one of these executive budgets.”

Helms’ “essential” budget to maintain the current level of enforcement includes 103.5 full-time positions. That is 13 more jobs than proposed by Burgum but less that the department is currently authorized to have.

Senate Appropriations Chairman Ray Holmberg, R-Grand Forks, said the committee’s goal is to reduce the number of employees to reach a balanced budget, but the level of reduction is still being studied.

“It’s a fine line. We’re nowhere near making those decisions yet,” Holmberg said.

Meanwhile, oil companies are holding job fairs and announcing plans for increased activity as oil prices begin to rebound.

Thirty-eight drilling rigs were operating in North Dakota on Friday, a level that could be up to 50 by the end of 2017, Helms said.

The state’s budget forecast is built more conservatively with a rig count of 40 starting in July and increasing to 55 by 2019.

Although the rig count is nowhere near the 200-plus North Dakota saw at the peak of the oil boom, each rig is now more efficient and drills more wells in less time.

North Dakota, the second-highest oil-producing state, is projected to add another 2,000 wells in the 2017-19 biennium for a total of 19,400.

During that timeframe, North Dakota is also projected to add 2,500 more miles of gathering pipelines. New rules that took effect in January give state pipeline inspectors more authority to oversee installation of gathering pipelines that transport oil and produced water, but budget cuts would reduce the number of people in the field.

Burgum, who also serves as chairman of the North Dakota Industrial Commission, said the state’s goal is to ensure safe and responsible oil development.

“We’ve got a deep commitment to making sure that we’re appropriately resourced to make sure we do all the regulatory work that we need to do, to make sure we’re developing our industry in a safe and responsible way and that we’re protecting our environment as we do that,” Burgum said.

Holmberg said he favors adding some flexibility into the department’s budget to allow it to add contingency employees if oil activity significantly picks up.

For example, if the rig count and well count hit a certain level, the department could go before the Legislature’s Emergency Commission to request adding more employees, Holmberg said. The committee is still working on the details, including what the source of funding would be.

“We’re cognizant that they need flexibility and without flexibility, then they could be stuck,” Holmberg said.

Helms also noted that if oil activity increases, that means that the state would also have more revenue to pay for contingency positions.

Troy Coons, chairman of the Northwest Landowners Association, urged lawmakers to fund the oversight of oil and gas development.

“I think we’ve reached a good point. I don’t think we can lose ground,” Coons told members of Senate Appropriations.

The North Dakota Department of Health, which also regulates some aspects of the oil and gas industry, would lose one employee in the Air Quality Division and one employee in the Water Quality Division under Burgum’s budget.

“Obviously those were needed individuals, but we’re able to tighten our belts, try to do things a little bit differently,” said David Glatt, co-acting state health officer and chief of the Environmental Health Section. “It challenges the folks that are here, they’ll be doing a little bit more field time.”

The Solid Waste Division, which includes jurisdiction over oilfield waste, would not lose any positions under the budget proposal, Glatt said.

The North Dakota Public Service Commission did some significant reorganization to reduce its budget, but the main impacts will affect grain licensing and not the regulation of oil and gas utilities, said Chairman Randy Christmann.