BISMARCK, N.D. (AP) — North Dakota regulators have given the oil industry an additional 10 months next year to cut down on the reduction of wasteful flaring of natural gas but also implemented a stiffer long-term benchmark.
The decision Thursday by the state Industrial Commission pleased neither the industry nor environmental groups, but regulators said it's a give-and-take aimed at putting more natural gas on the market to the benefit of both energy companies and consumers.
"I'm interested in the end game — where do we wind up," said Attorney General Wayne Stenehjem, who sits on the commission with Gov. Jack Dalrymple and Agriculture Commissioner Doug Goehring, all Republicans.
Natural gas is a byproduct of oil production. About 20 percent is currently burned off in North Dakota — the nation's No. 2 oil producer behind Texas — because the infrastructure isn't in place to move it all to market. That's enough gas to meet the daily needs of just under 2,000 average U.S. homes, according to data from the American Gas Association.
Under a target system the oil industry helped develop last year, gas flaring is to be reduced to 10 percent by 2020, in incremental steps that included a Jan. 1, 2016, target of 15 percent. Companies must meet the goals to avoid production limits. A handful already have been subjected to production cuts, while others have received temporary exemptions.
The industry sought an extension on the 15 percent benchmark until Nov. 1, 2017, due to problems with federal permits, land access permission for pipelines, and delays in the development of gas processing plants.
The number of drilling rigs has plummeted in North Dakota due to low prices but production remains at near-record levels as drillers concentrate rigs in high-producing areas. Natural gas production is 16 percent higher than anticipated last year, said Eric Dille, director of government relations for EOG Resources Inc. and head of the industry task force that helped develop the gas capture targets.
"We are still committed to capturing 90 percent of gas by 2020," he said. "We're not moving the goalposts. We're just asking for some relief on the interim goal."
Regulators extended next year's Jan. 1 target to Nov. 1 but said they also wanted the oil industry to commit to reducing flaring beyond the 10 percent threshold set for 2020. Less than 1 percent of natural gas is flared from oil fields nationwide, according to the federal Energy Department.
"There's a lot of states that wouldn't think (10 percent) is all that great," Gov. Jack Dalrymple said.
The commission voted 3-0 to set a 2020 benchmark of between 9 and 7 percent.
Industry officials expressed skepticism about being able to meet that, but North Dakota Petroleum Council President Ron Ness said "we will do our best to get there."
Wayde Schafer, a spokesman for the North Dakota chapter of the Sierra Club, said he sees little assurance that flaring will actually be reduced beyond 10 percent, and objected to the 10-month extension of next year's target.
"I was hoping that we'd gotten beyond the tail wagging the dog when it comes to the state regulating the oil industry," he said. "I guess I was wrong."