North Dakota starts natural gas capturing plans

BISMARCK, N.D. (AP) -- North Dakota oil companies must submit a gas capturing plan with their drilling permits beginning this month in an attempt to cut down the amount of natural gas that is burned off and wasted as a byproduct of oil production.

The state Industrial Commission, which regulates North Dakota's oil and gas industry, in March unanimously endorsed the proposal, which was self-imposed by the industry. The plan must include detailed information about when a well is slated for completion, its location and anticipated production. The plan also must contain a signed affidavit to show that gas-gathering companies have been consulted so that they may plan to meet the demand.

Lynn Helms, director of the state Department of Mineral Resources, said the ultimate goal is to hook an oil well to a gas gathering line once the well goes into production.

"I think it's going to make a real difference," Helms said of the new rules that began June 1.

North Dakota drillers currently burn off, or flare, more than 30 percent of the gas because development of pipelines and processing facilities to capture it hasn't kept pace with oil drilling. Less than 1 percent of natural gas is flared from oil fields nationwide, and less than 3 percent worldwide, the U.S. Energy Department said.

North Dakota, which is producing about 1 million barrels of daily, also produces more than 1 million cubic feet of natural gas daily. The state is losing nearly $1 million monthly in natural gas tax revenue from flaring, state tax department records show.

North Dakota oil producers can flare natural gas for a year without paying taxes or royalties on it. Companies can then ask state regulators for an extension because of the high costs of moving the gas to market. More than 95 percent of the extensions requested in recent years were granted, records show.

Helms said the practice of granting the waivers will be largely a thing of the past with the new rules in place.

"It's going to be very difficult for companies to get tax and royalty exemptions now," he said.

A group representing hundreds of companies working in North Dakota's oil patch have pledged to state regulators to capture 85 percent of the gas by 2016, and 90 percent within six years.

The North Dakota Petroleum Council's flaring task force said the industry has already invested more than $6 billion in infrastructure to capture natural gas in the past six years and plans to spend at least an additional $1.7 billion over the next two years building gas pipelines and other infrastructure.

Kari Cutting, vice president of the North Dakota Petroleum Council, said industry is committed to curbing the high percentage of flaring in North Dakota.

"I think the industry will follow through on the process and reach goals they collectively set," she said.