North Dakota seeks solutions to excess gas flaring, including possible petchem investment

With natural gas production at or near record highs and flaring continuing to be far above the state's limit of 12%, the North Dakota Industrial Commission (NDIC) issued two announcements related to its efforts to reduce flaring and maximize the value of natural gas and NGLs that are co-produced with the state's oil production.

On November 15, NDIC will hold a public hearing for stakeholder comments on improving its gas capture strategy and what it called "regulatory clarity needed around gas gathering agreements."

NDIC is seeking to avoid service interruptions on gathering pipelines, which have been the cause of some of the flaring exceedances in the last two years.

NDIC's other announcement, made on October 28, is to fund a $300,000 study to determine if the composition of NGLs produced as a byproduct of oil drilling changes over the life of a well. The study will be used to assess the feasibility of construction of a petrochemical plant in North Dakota, said Pipeline Authority Director Justin Kringstad.

A report is expected by May 1, 2020.

Gas gathering meeting

In announcing the gas gathering public hearing, NDIC noted that in August 2019 the state captured a record amount of gas, on its way to breaking the 3 Bcf/d production volume for the first time ever (see article).

"This captured volume [2,435,760 Mcf/d] is close to 150% more than what was being captured just five years ago as a result of over $4.7 billion of infrastructure expansions in gas gathering and processing on behalf of industry. However, the potential exists for the state to capture an additional 271,172 Mcf/d," said North Dakota Department of Mineral Resources Director Lynn Helms. "Reviewing the application of this existing statute is a step in the right direction that could clear a path forward for more gas gathering infrastructure which can be used safely and efficiently to its fullest extent."

One question for stakeholders will be if the state's non-discrimination statutes for gas gathering pipelines, created under North Dakota Century Code 38-08-06.2, are affecting North Dakota's ability to capture natural gas to its fullest extent. As NDIC explained, the most common contractual arrangement in the state is one with interruptible capacity through which a shipper has no guarantee or right to transport gas on a system. But this can lead to "unreliable gathering capacity, increase in well shut-ins, and an increase in flaring," NDIC said.

The less common contractual arrangement is providing a shipper with firm capacity. "However, the current regulatory framework is not clear on whether providing firm capacity to producers would be in violation of existing non-discrimination statute or how 'discrimination' is defined," NDIC said, and it's seeking public input.

Reprinted from PointLogic News. For more natural gas news from IHS Markit,visit the PointLogic website.

Kevin Adler is an Editorial Director, Natural Gas at IHS Markit.

Posted 12 November 2019.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.