BISMARCK, N.D. (Reuters) - North Dakota regulators on Thursday gave the energy industry 10 extra months to reduce the amount of natural gas burned off at oil wells, acquiescing to industry worries that construction delays have made it all but impossible to meet existing targets.
Regulators in the No. 2 U.S. oil producing state stopped short of approving the full two-year extension sought by companies grappling with the steepest price downturn in years. Environmentalists, who had wanted to stick to the original deadline, criticized the decision.
Flaring, the wasteful burning of natural gas that occurs when pipeline infrastructure is lacking, hurts corporate profits as well as tax revenue.
Governor Jack Dalrymple and the two other members of the North Dakota Industrial Commission (NDIC) voted unanimously to change the date when companies must capture 85 percent of natural gas produced from their wells to Nov. 1, 2016.
The extension pushes back potential penalties for companies, including forced reductions in oil output, and gives contractors next summer to try and expand a crucial network of natural gas gathering pipelines.
One environmental activist stood up at the vote’s conclusion and lambasted Dalrymple for being “too cozy with the oil industry.”
“The industry’s presentation has some very real reasons why the goal has become more difficult,” said Dalrymple. “Many of these items they’ve mentioned realistically could not have been expected.”
Industry officials said impediments to gas collection included regulatory delays to construct Hess Corp and Oneok pipelines, as well as technological advancements fueling a 16 percent spike in natural gas production.
While ultimately agreeing with oil producers, Dalrymple used the NDIC deliberations to pressure them by insisting that the final flaring reduction target rise to 91 percent of produced gas by November 2020, up from a previous goal of 90 percent.
“There’s a lot of states that think 90 percent isn’t all that great,” said the governor, a Republican who recently announced he will not seek reelection next year.
Indeed, Texas oil producers collect more than 99 percent of gas from their wells.
The energy industry expressed disappointment with the 90 percent target and the length of the extension, but executives pledged to meet the new goal.
“The goal for 85 percent by November 2016 is achievable,” Phil Archer of Whiting Petroleum Corp, North Dakota’s largest oil producer, told commissioners.
The state has long tried to trim flaring. Lynn Helms, head of the Department of Mineral Resources and a key NDIC advisor, noted that producers collected 95 percent of produced gas when the state’s latest oil boom began in 2008.
“It’s always been my goal to get back to that,” he said in an interview after the vote.
Bowing to pressure, the NDIC in June 2014 imposed four increasingly tighter tranches for how much gas can be burned off.
The state’s oil companies had successfully met each of those goals, collecting 80 percent of produced gas in July, the latest month for which data are available. That went beyond current standards to collect 77 percent.
Reporting by Ernest Scheyder; Editing by David Gregorio