North Dakota Grants Exception to Flaring Restrictions

In July of last year, the North Dakota Industrial Commission, the administrative body charged with regulating oil and gas production, responded to media and public pressure by promulgating strict new rules to reduce the amount of gas flared in the state. Under these rules, producers may flare for 90 days without restriction. After the 90-day period, they must meet gas capture requirements or face production restrictions. Further, the Commission now requires gas capture plans to be in place prior to issuing drilling permits. These new rules have been heralded as a major step toward reducing flaring without unduly stifling development.

Unfortunately, the realities of infrastructure development have made the difficulty of implementing this new policy apparent. Last week, the Commission granted a six-month exception to the new flaring rules for 105 oil wells owned by XTO Energy. The wells were supposed to be connected to a pipeline extension slated to be built in 2015. However, the pipeline developers reached an impasse in easement negotiations with the Three Affiliated Tribes, forcing the pipeline to be rerouted and pushing the completion date out at least a year.

Initially, XTO requested exceptions through the third quarter or 2016 for 143 wells that would have been connected to the new pipeline. The Commission denied the exception for some wells because they were drilled after XTO knew the pipeline project was not going forward as planned. At the end of the six-month exception, XTO must go back before the Commission to request an extension.

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