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Forum editorial board, Published March 19 2012

Forum editorial: Oil Patch regulation catches up

It should come as no surprise that the oil industry is pushing back on new North Dakota regulations. That’s what the industry does: attempt to work in the least-regulated environment possible. But regulating sensibly and responsibly is what the state is supposed to do, and it appears that’s exactly what changes in specific rules will do.

New regulations that take effect next month are not as onerous as the industry suggests. The requirements will not drive down oil exploration, drilling and pumping in the Bakken play as long as the per-barrel price of crude oil remains high. Price and new technology, not taxes or regulations, are the drivers of the boom in the Bakken.

The industry says the regulations will add $400,000 to the cost of each well, making it less cost-effective for companies to work in less-prolific reaches of the Bakken formation. Less cost-effective is one thing; cost prohibitive is another. Might a profit margin be smaller? Possibly. But it’s a bit premature to conclude that the additional cost per well will be as high as the industry estimates, or that even if costs are up, activity will be curtailed.

The new rules impose stricter requirements for dumping and disposing of liquid drilling wastes, and speedier reclamation of waste pits. What could be more reasonable than to require companies to exercise more care over the environment they are threatening? No company wants to be tagged as a polluter of soil and water, so tougher waste handling requirements work to the benefit of the companies and the landscape.

The regulation changes actually demonstrate that the regulatory structure is far behind. Rules in the Oil Patch have not been significantly changed for 30 years, said a spokesman for the state Oil and Gas Division. Thirty years! Given the historic level of activity in the Bakken play – accelerating at break-neck speed – regulation needs to catch up and keep pace.

Forum editorials represent the opinion of Forum management and the newspaper’s Editorial Board.