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Amy Dalrymple, Forum News Service, Published August 15 2013

ND agency leader says new federal rules could slow oil drilling on reservation

BISMARCK – Proposed federal rules on hydraulic fracturing would slow oil activity on the Fort Berthold Reservation and other lands in North Dakota, the state’s top oil and gas regulator said Thursday.

Lynn Helms, director of the Department of Mineral Resources, said during his monthly oil production update that proposed Bureau of Land Management rules would slow the process of getting permits and add unnecessary expenses.

“It will be something we can work through over time and achieve variances to the BLM rule, but that will be a slow process,” said Helms, who met with bureau representatives this week.

North Dakota oil production increased 1.3 percent in June to an average of 821,415 barrels per day, according to preliminary figures released Thursday.

Although that represents another record for the state, the figure is about 1 percent below what officials predicted for June and built into state revenue forecasts.

“That’s close, but any time that we’re under forecast, we’re concerned and we want to make sure that our forecasts are accurate because our state revenues depend on that,” Helms said.

Helms attributed the smaller increase to wet weather that prompted road restrictions to extend into mid-June, making it difficult for crews to haul water and sand needed for hydraulic fracturing.

Fracking crews have been working to catch up this summer, and Helms expects larger production increases for July and August.

Proposed federal hydraulic fracturing rules would have the most significant impact on the Fort Berthold Reservation, which accounts for 25 percent of the state’s oil production, Helms said. With the new requirements, it could take more than one year to get a permit to drill and complete a federal well, he said.

The rules also would affect the National Grasslands, as well as activity on private lands that have small tracts of federal minerals.

“It could mean some slowdown even in development on private lands,” Helms said.

U.S. Interior Secretary Sally Jewell said last week during a visit to the Bakken that she favors having baseline federal regulations on hydraulic fracturing because not all states are as sophisticated as North Dakota and have rules related to fracking.

Jewell said states that exceed the federal rule should be able to follow the state’s guidelines.

North Dakota was among the first states to regulate fracking, Helms said, which includes requiring companies to report the chemicals that are mixed with water and other ingredients and pumped into wells. But several states don’t have similar rules.

“In some part, I think the states are somewhat responsible for this in not moving as quickly as they should have,” Helms said.

The deadline to submit comments to the BLM is Aug. 23.

The drilling rig count in North Dakota has held steady at about 185, and Helms said he expects that count to continue holding steady because there’s no economic driver to expanding it. The state’s record rig count was 218 in June 2012.

“The rigs have become so efficient that they’re capable of drilling at least as many or more wells than completion crews can complete,” he said.

Natural gas production increased 3.9 percent in June. The flaring of natural gas decreased from 29 percent to 28 percent. The historical high was 36 percent in September 2011.

North Dakota Industrial Commission members will begin discussing at their meeting next week possible policy changes to reduce that percentage more quickly, Helms said.

The percent of oil transported by rail fell slightly to 68 percent in June, but overall volumes transported by rail held steady, said Justin Kringstad, director of the North Dakota Pipeline Authority.

Kringstad said the change was driven by a shift in market prices, which prompted more oil to be transported by pipeline.