American Oil and Gas Reporter - January 2015 - 225

portunity to participate in the process if they
believed a common carrier or utility had not
lived up to the requirements for nondiscriminatory access, Stevens recalls.
"All these questions go back to the
same old problems small producers have
experienced," he reflects. "We are guaranteed reasonable nondiscriminatory access, but that has not always been the case.
We would suggest to the commission-and
we have done this-that nondiscriminatory access rules and regulations for gas util-

ities and common carrier pipelines be reiterated by the RRC to the pipelines
when they sign a T-4 and indicate their status."
The Alliance questioned early on
whether the additional requirements were
necessary and worth the cost to pipelines,
producers, and the RRC, Stevens says.
"There will be more costs to everybody
involved," he predicts. "We are putting a
more involved process in place. We think
there will be more hearings. We think there

will be more protests. There is going to be
a cost to everybody, not the least of
which is to the pipelines.
"As much as we have been critical in
the past of some aspects of the pipeline industry, we also know we need them in general, and we need them because we are
flaring gas," Stevens adds. "We need
them to get our product to market, so we
think an extended process, which I sense
may not be totally necessary, will cost
more."
Ì

North Dakota Adds Conditioning Rule
By Dan Larson
Special Correspondent
BISMARK, N.D.-The North Dakota
Industrial Commission concluded a busy
year in December, when it adopted crude
oil conditioning requirements to address
national concerns over potential rail shipment hazards.
For their part, industry representatives
conveyed oil and gas companies' willingness to comply, but also wondered if the
rules would increase costs amid a price decline, threaten well site safety, and hinder
efforts to reduce flaring.
Although the North Dakota Petroleum
Council appreciates the state's efforts to
improve public safety, the group fears regulators have implemented the rules without due consideration for their costs, indicates NDPC President Ron Ness.
Vapor Pressure Standards
Adopted at its Dec. 9 meeting, the
North Dakota Industrial Commission's Order No. 25417 "sets operating standards for
conditioning equipment to properly separate production fluids into gas and liquid."
The order specifies temperatures and
pressures for equipment operation "to
ensure light hydrocarbons are removed before oil is shipped to market."
Under it, operators must condition
crude oil to a vapor pressure that does not
exceed 13.7 psi, a standard one pound lower than the national limit of 14.7 psi. Although it does note differences in equipment types and conditioning methods, the
order does not allow for exceptions to the
pressure limit at the point of shipment.
According to Ness, compliance means
companies must purchase testing equipment, train employees or pay for new contract services. "Other operators will need
substantial investments in well site equipment," he observes. "This will result in millions of dollars in expenditures at a time
when operators must reduce costs in a low
price environment."

Early in the process, Ness says, industry representatives objected to the order's prescribed methods and the possible safety issues associated with operating equipment at
110 degrees F during summer months. It remains an open question, he says, whether the
rule will lead to a number of unintended consequences that hinder the industry's efforts
to capture more associated natural gas.
"With many operators required to add
equipment, meeting the April 1 deadline may
be extremely difficult, especially if work is
impeded by severe winter weather," Ness
warns. "We will, however, work as quickly as possible to comply."
Current Compliance
North Dakota Department of Mineral
Resources Director Lynn Helms estimates that 80 percent of Bakken wells can
produce oil below the 13.7 psi limit by operating well site equipment according to
manufacturer specifications. Of the remainder, 15 percent can prove compliance by
sampling and testing, he says, while 5 percent of wells will need to use alternative
methods to condition crude before they obtain commission approval.
According to DMR, the order is effective April 2, 2015, after which the Oil & Gas
Division's staff of 30 field inspectors may
begin visually inspecting gauges to verify
temperatures and pressures. Violations are
subject to a penalty of $12,500 a day.
North Dakota regulators developed the
standards after a number of hearings on the
matter, and also drew from hundreds of
pages of public comment and a federal
study. In January 2014, the federal Pipeline
and Hazardous Materials Safety Administration issued a safety alert advising shippers, carriers and emergency responders
that the "type of crude oil being transported from the Bakken region may be more
flammable than traditional heavy crude."
Concerned about the implications,
NDPC notes, the association commissioned a study that concluded Bakken
crude was no more volatile than other light

sweet crudes (AOGR, July 2014, pg. 181).
Although NDIC recognized the findings,
a statement from the commission indicates
it wrote the order "based on science from
the testimony received."
Regulatory Cloud
The fact that the NDIC adopted the
sweeping oil conditioning rules less than
a year after PHMSA flagged Bakken
crude as more volatile than other crudes
was highlighted in news stories. NDIC's
crude conditioning order came after a national publication questioned whether the
commission, which is composed of the
state's three top elected officials, was too
close to the industry it regulated. "The swift
introduction of crude conditioning rules in
North Dakota strongly suggests that local
regulators have acted more quickly and effectively than the federal authorities,"
Reuters suggested in a December piece.
For its part, NDPC is quick to cite the
pace of new state regulations. When
NDIC issued new rules covering saltwater and liquids gathering pipelines in November, NDPC welcomed the rules, saying they "will further enhance safety,
monitoring and locating standards."
Nevertheless, the group notes, those
raise to 47 the number of regulations the
state adopted in 2014, which raised to 70
the quantity of regulations added during the
past four years.
"We must be mindful that some rules
may create burdens and bureaucratic red
tape, and hinder efforts to reduce impacts,"
Ness cautions. "Overburdening the industry with regulations inhibits the innovation
needed to develop technologies and more
responsible operations."
Ì

Coming In February
Gulf of Mexico special reports,
spotlighting one independent's major new deepwater field development
projects.
JANUARY 2015 225

American Oil and Gas Reporter - January 2015

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