BISMARCK – The North Dakota Industrial Commission approved Wednesday an exception from its flaring goals but directed state regulators to draft a policy to address such scenarios in the future.
The three commissioners voted unanimously to grant an exception to Hess Corp. for failing to meet the gas capture goals when unexpected delays occurred during an expansion project.
Hess was adding capacity at its Hawkeye Compressor Station near New Town to process more natural gas, but the company had to shut down some operations for 24 days in November and December. The work was planned months earlier, but the equipment was delivered late, said Director of Mineral Resources Lynn Helms.
As a result, Hess captured 72 percent of natural gas in December while the Industrial Commission’s goal was 74 percent, Helms said. The company asked for temporary limited relief from the flaring goals, which the commission began enforcing Oct. 1.
Gov. Jack Dalrymple, who leads the Industrial Commission with Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring, said the gas capture plan has expectations that companies need to meet.
“Really anytime there’s surplus gas being flared, it should be initially a violation,” Dalrymple said. “And we should have a set policy on exactly how we would penalize that. Then we can hear what the mitigating circumstances are.”
The Industrial Commission can impose fines of $12,500 a day for violations of its rules.
Goehring called the request reasonable and cautioned about discouraging the development of infrastructure if companies are penalized when shutdowns are necessary as part of the expansion process.
But commissioners also said they’re concerned that other companies will ask for exceptions and blame it on delays.
“We don’t want them to think that a variance is going to be a pro forma thing,” Stenehjem said. “The burden’s on them, as far as I’m concerned.”
Commissioners directed Helms and his staff to draft a policy related to planning for shutdowns or other unexpected issues and notifying regulators when flaring goals will not be met.
“We’re going to need to have a consistent policy that doesn’t penalize people for making the investments that they need to make, but that holds their feet to the fire on doing all the planning they can and notifying us when those plans come apart for whatever reason,” Helms said.
This is the second exception to the flaring goals the commission has granted. Commissioners approved an exception for Zavanna for wells near Williston that were flaring while the company brought a new gathering system and gas plant online.
Wells in that area flared as much as 85 percent of natural gas in December, but that percent was down to 20 percent this month and is expected to be zero by the end of March, Helms said.
Also Wednesday, commissioners discussed legislative activity and said they’re getting a mixed message from lawmakers.
Legislators want oil and gas regulators to quickly address several areas such as more pipeline oversight but with fewer employees than requested and with new rules that will add time-consuming bureaucracy, Helms said.
Commissioners directed Helms to advocate during the second half of the session for more funding for staff. The governor’s budget included 22 new staff to oversee oil and gas development, but the House approved 15 positions.
The commission opposes House Bill 1187, which would require all “rules of general applicability” to go through an additional legislative review process. Helms said that requirement takes 10 months and would prevent the commission from being flexible and responding quickly to issues that arise.
Members also oppose Senate Bill 2343, which requires the Industrial Commission to report the fiscal impact of actions that have a fiscal impact of $20 million or more. Helms said any order he signs that relates to seven or more wells would require him to report a fiscal impact.
Commissioners directed Helms to testify against those bills in the second half of the session.
“This is a contradiction and we cannot accomplish the tasks laid out for us in these good bills with the constraints put on us by these bad bills,” Helms said.