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Mike Nowatzki, Forum News Service, Published December 04 2013

Company could face penalties for unpermitted natural gas pipeline in northwest ND

BISMARCK – An Oklahoma-based company could face civil penalties for installing and operating a natural gas pipeline in northwestern North Dakota without the proper state permits, a state utility regulator said Wednesday.

Hiland Operating LLC began installing the 6.5-mile-long pipeline in Burke and Divide counties in November 2008 and completed it in March 2009, according to documents filed with the state’s Public Service Commission.

In a letter dated May 9, 2012, Hiland Operating’s attorney notified the commission that the company wasn’t aware it needed siting approval because it assumed the pipeline was a gathering line under state law and not a larger transmission line, which would fall under the commission’s jurisdiction.

Commission staff concluded the pipeline was a transmission line, and Hiland Operating filed its application for a route permit and certificate of corridor compatibility Jan. 31.

The commission was scheduled to consider granting the permits during its meeting Wednesday, but the matter was held over until the next meeting at the request of Commissioner Julie Fedorchak.

“My concern is how do we handle effectively the potential violation that they had in operating this pipeline for a number of years without the permit,” she said.

Under state law, anyone who constructs or operates a transmission line without first securing the required certificate or permit is guilty of a Class A misdemeanor and subject to civil penalties of up to $10,000 for each day the violation persists, not to exceed $200,000.

“I think it’s really important that companies take this very seriously, and that’s why I want to make sure that we’re looking at this carefully and setting the right precedent in this case,” Fedorchak said.

Fedorchak said she couldn’t say yet whether Hiland Operating will face financial penalties, adding, “We just need to talk through it a little bit.”

“The fact that they came forward themselves and wanted to go through the process correctly, we wouldn’t have known about it if they hadn’t done that,” she said. “In my mind, that says a lot about the company.”

Fedorchak also noted that the law states the company must have “willfully” violated the law for penalties to be imposed.

“I don’t know that that’s the case in this instance,” she said.

With its principal office in Enid, Okla., Hiland Operating LLC is associated with Hiland Partners, whose board chairman is billionaire oilman Harold Hamm, CEO of Continental Resources Inc.

The company replied to questions about the pipeline in an email Wednesday.

“When Hiland Partners completed construction of the Norse Gas Plant in 2009, it did not correctly understand the statutes governing siting of the natural gas residue pipeline,” the email said. “Therefore, the pipeline was not sited. The pipeline, however, was built and has operated in compliance with safety regulations implemented by the ND Public Service Commission. Hiland Partners became aware of its misinterpretation through its experience building its next natural gas residue pipeline and self-reported the situation to the PSC. Hiland Partners regrets making the error and apologizes for any additional work its error may have caused the commission or its staff.”

The 6-inch steel pipeline transports about 10 million to 20 million cubic feet of natural gas per day from Hiland Operating’s Norse Gas Plant near Powers Lake to a transmission line owned by Williston Basin Interstate Pipeline Co. It cost about $1.5 million to build, according to documents filed with the commission.

The pipeline has been inspected and no problems were found, Fedorchak said.

Commissioner Brian Kalk said it’s uncommon for a company to seek permits after the pipeline is already in the ground. He said it’s only happened one other time during his five years on the commission, adding, “Once is too much.”

“Sometimes the companies, they come in and they just either don’t know or they don’t check,” he said. “But I think it’s incumbent upon us to make sure that these companies know what the rules are.”