James MacPherson, Associated Press, Published February 07 2013
North Dakota bill cuts exemption for wasting natural gasBISMARCK – A Fargo Democrat has introduced arguably the toughest legislation to date aimed at curbing the oil industry’s practice of burning and wasting natural gas as an unwanted byproduct of oil production.
Sen. Tim Mathern’s bill hits the oil industry in its pocketbook by cutting out an easily acquired waiver that allows companies to claim an economic hardship of connecting a well to a natural gas pipeline. The amount of natural gas burned off each day in eastern North Dakota’s Oil Patch could heat more than 500,000 homes, Mathern said.
Oil and pipeline officials spoke in opposition of the measure Thursday before the Senate Natural Resources Committee, saying the industries are working as quickly as possible and have invested $4 billion to move the gas to market.
“Nobody dislikes flaring natural gas more than oil producers or royalty owners,” said Ron Ness, president of the North Dakota Petroleum Council.
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 over the past two years were granted, said Mathern, whose bipartisan measure would cut the exemption.
More than one-third of the gas produced in North Dakota is burned off as a byproduct of the state’s escalating oil production, compared to less than 1 percent in oil fields nationwide.
The amount of natural gas that’s torched and wasted daily by drillers in North Dakota’s Oil Patch also is costing the state millions of dollars annually in lost revenue, Mathern said.
“Natural gas flaring is economically and environmentally wasteful,” Mathern told the Senate Natural Resource Committee. “Capturing and utilizing flared natural gas is a common sense strategy that is good for economic growth, creating jobs and avoiding waste.”
Ness, whose group represents more than 400 companies working in the state’s Oil Patch, said revenue from oil production spurs development of natural gas processing plants and pipelines.
“You got to have cash flow for somebody to build these plants and make commitments,” he said.
Oneok Inc., an energy company based in Tulsa, Okla., is the biggest operator of natural gas pipelines and processing plants in the Williston Basin, which includes the Dakotas and Montana. Spokeswoman Danette Welsh said the company is opposed to the measure because it takes time to develop infrastructure to process and transport the fuel.
Welsh told lawmakers that the company has factories in North Dakota capable of processing 290 million cubic feet of natural gas daily, and it intends to complete another this year that will boost the capacity another 100 million cubic feet of natural gas daily.
The company also has about 5,600 miles of natural gas pipelines in the Williston Basin, including about 680 miles of pipeline added last year. The company has plans to install about the same amount of pipelines this year.
“We have made significant progress in accelerating well connections over the past few years and continually look for ways to improve our process,” she said.
John Warner, D-Ryder, one of the bill’s co-sponsors, likened the waste of natural gas to the slaughter of buffalo in North Dakota more than a century ago.
“Buffalo were killed for their hides and the rest was left to waste,” he said.
Natural gas produced from the Bakken and Three Forks formations also is rich in liquids that can be converted into fuels such as butane, propane and gasoline.
“We really need to stop wasting our natural resources,” he said.