Posted 11/28/18 (Wed)
By Neal A. Shipman
The North Dakota Industrial Commission made the right call last week when it announced that it would be extending its current natural gas capture rate of 85 percent another two years and pushed back the capture rate of 88 percent, which was originally set to increase to 88 percent on Nov. 1, to Dec. 31, 2024.
At the time the Industrial Commission created its original natural gas capture policies, no one would have predicted that the state’s oil and gas industry would produce the record volumes of oil and natural gas that is happening today. And that record production has created challenges for the oil and gas industry in building the needed infrastructure, such as natural gas pipelines and natural gas processing plants, to deal with the record amount of natural gas coming from the wells in the four-county core region of the Bakken.
While the industry has already invested billions of dollars in new natural gas processing plants, primarily in McKenzie County, with more new units planned to be built, the flaring of natural gas is still a big problem.
In September, the state set a record of nearly 2.1 billion cubic feet of natural gas being produced, while the industry also flared a record 457 million cubic feet per day of natural gas due to the lack of natural gas processing plants and other takeaway facilities. No one wants to see this volume of natural gas being flared and lost.
For the past five months as oil and natural gas production has increased, the industry has failed to meet the state’s 85 percent natural gas capture rate, which has required oil companies to impose self-restrictions on bringing new wells online.
It was the choice of either continuing to promote increased oil and natural gas production in the state or slowing down the industry because the natural gas capture rate created the dilemma for the Industrial Commission.
The commission’s final decision to extend the gas capture rate two years was a win-win compromise. First, the extension keeps the state’s oil and gas industry humming, which is critical to North Dakota’s economy. And second, the extension encourages the industry to make midstream investment and incentivizes produced gas storage and enhanced oil recovery efforts
If North Dakota’s oil and gas industry is going to continue to develop and grow, it is going to take cooperation between the state and the industry. Last week’s Industrial Commission’s action let the industry know that the state is willing to do its part to keep the oil and natural gas flowing. Now it is up to the oil and gas industry to continue to make the necessary infrastructure improvements to meet North Dakota’s natural gas capture rates.