North Dakota lawmakers mull Bakken crude regulations

Oil producers in North Dakota’s Bakken and Three Forks formations could be required to strip gases from crude oil showing high vapor pressure before transporting the oil under new standards being considered by the North Dakota Industrial Commission, which met Nov. 13.

The proposals would establish operating standards for conditioning equipment to separate production fluids into gas and liquid. A working draft includes parameters for temperatures and pressures under which equipment must operate to ensure light hydrocarbons are removed before oil is shipped.

A final commission decision is expected in December, and the commission reopened a public comment period now scheduled to close late Nov. 19. A special commission meeting is expected to be scheduled by Dec. 11. The proposed rules, if adopted, would become effective Feb. 1, 2015.

In September, testimony was taken during a public hearing in Bismarck, ND, on possible steps to reduce volatility before oil is stored or transported.

Trains carrying crude have been involved in major accidents during the last 18 months, including an explosion in Lac-Megantic, Que., that killed 47 people.

The US Energy Information Administration said in a daily briefing on Nov. 13 that the volume of oil and petroleum products shipped on the US rail system increased more than 10% through October compared with same period during 2013.

“Rising US crude oil production, particularly in North Dakota's Bakken shale formation—where pipeline takeaway capacity is limited in moving the state’s growing oil volumes to market—is one of the main reasons for this increase in rail shipments of petroleum and petroleum products,” EIA said.

North Dakota State Mineral Resources Director Lynn Helms told reporters he believes most crude from the Bakken formation would fall “well below the standard,” and that the proposed regulations would ensure oil “in a stable state” before being moved by rail.

Helms noted, “There are times and places where the standards aren’t met, and we want that to happen less and less.” His department drafted the proposals for the Industrial Commission, which on Nov. 13 said it wanted time to review the proposal.

North Dakota Gov. Jack Dalrymple, who chairs the Industrial Commission, called the proposal “an excellent working draft.” Atty. Gen. Wayne Stenehjem and Agriculture Comm. Doug Goehring also are commission members.

Kari Cutting, vice-president of the North Dakota Petroleum Council, said regulators are focusing on crude oil rather than focusing on ensuring that trains transport Bakken crude safely.

“We support the setting of a vapor-pressure specification,” Cutting said, “but the additional stipulations are evidence of putting the responsibility back on the commodity” rather than the transportation system, adding the proposals would “micro-manage” Bakken oil producers.

The proposed regulations outline a process that requires operators to run crude through equipment that heats the crude to force gases out from the liquid.

Helms estimated 15% of existing Bakken producers lack the equipment needed under the proposals. Those producers would have to submit to quarterly tests to demonstrate oil from their wells meet the state’s proposed Reid vapor pressure of no more than the 13.7 psi limit. National standards identify crude oil to be stable at 14.7 psi, the commission said.

The proposed standards would prohibit blending condensate or natural gas liquids into crude, and rail loading terminals would be required to tell state regulators about any oil received that exceeded the vapor pressure limits.

Helms said staff from his department would conduct field inspections to enforce compliance once the order is approved and effective. Oil companies that do not comply could face a fine of as much as $12,500/day.

Contact Paula Dittrick at [email protected].

*Paula Dittrick is editor of OGJ's Unconventional Oil & Gas Report.