2016 Bakken Snapshot: Pipelines in Focus

Policymakers and regulators say a new approach to infrastructure monitoring and installation standards will usher in a new era of pipeline quality.
By Luke Geiver | December 01, 2015

Todd Porter was fixing fence at his central North Dakota cattle operation on a foggy November morning when we called to talk about energy issues and policies that will impact the Bakken in 2016. Although Porter—like many regulators and policymakers in the North Dakota—doesn’t live or work in the Bakken play, he has become an expert on the operations of the oilfield and policy creation. Porter serves as vice chairman for the Energy Development and Transmission Committee and as the chairman for the Energy and Natural Resources Committee through his role as a state representative. For Porter, the insight and expertise he and many of his colleagues have gained on the Bakken started to take shape after oil-related policies were first developed in 2007 and ’09. “The knowledge we had to come up with to keep up with this play was unbelievable,” he says. “We had a steep learning curve to make sure we weren’t chasing the industry out of sight.”

Following a historic year for energy-related policy in North Dakota that included a one-time surge of funding to oil development-impacted areas along with a broad funding bill designed to improve the state’s ability to monitor and regulate oil infrastructure, Porter is excited for the year ahead and the new policies it will usher in. The most important variable guiding future policy for Porter and many others, he says, is the results of multiple studies the state funded through House Bill 1358.

Pipelines Are Top of Mind
“HB 1358 will set the stage for the next session for policies regarding gathering lines, saltwater disposal systems, flow monitoring systems, installation standards, best practices and engineering,” he says. “Those are going to be big going forward.”

Through the University of North Dakota’s Energy & Environmental Research Center, the state will learn how to properly monitor and maintain current and future oilfield related infrastructure ranging from crude pipelines to salt water disposal (SWD) facility pressure vessels. Porter is particularly focused on the installation standards that could come from the studies. “If we have really good installation standards, we won’t have to worry as much about the leak side,” he says of pipelines and SWD facilities. Results from the study could be released as soon as December.

Porter isn’t the only one focused on HB 1358 study results. Alison Ritter, public information officer for the North Dakota Oil and Gas Division’s Department of Mineral Resources, says that the DMR team is excited for the opportunity to play a larger role in the state’s oilfield-related infrastructure developments. Through HB 1358, the DMR is now authorized to require bonds on gathering pipelines, as well as request pipeline engineering design drawings, a list of independent inspectors and the inspector’s pressure-testing certificate (which now must be filed within 60 days of performing the test). “I think the pipeline program is the future of this department,” she says. The team has already outlined future goals and tasked a specific team member to head the infrastructure efforts, Ritter adds.

Temporarily Abandoned Well Policy
The DMR’s current reality also includes a new addition to its work on drilled but uncompleted wells. Earlier this year, the DMR was given the go-ahead from the North Dakota Industrial Commission to continue its rules and regulations related to putting a well on temporarily abandoned (TA) status. Under current rule, a well has one-year to be completed after the well reaches total depth. If the well is not completed with in that time, it may be placed on TA status and avoid certain service and fiscal penalties. The TA process has its own servicing requirements and fiscal penalties. As the number of drilled but uncompleted wells grew and talk of policy change towards TA status grew, Ritter said her team wanted to check on the confidence of the NDIC on how the DMR was handling the situation.

“Sometimes things get done just because they have always been done that way and it doesn’t mean that is the right way to do it,” she says. “We wanted to make sure that just because it is the way we have always been doing it that it was the right way. The commission said they approved of the way we were approaching this issue.” Nothing has changed on the DMR’s approach to regulating TA well proposals, other than the emphasis the DMR has placed on taking comments and concerns from vested parties for each individual well that is undergoing review to be, or not be, placed on TA status.

The DMR has created a new well classification, however. Prior to the increase in drilled but uncompleted wells that started in early 2015, the DMR had only two well classifications, one for a well that is drilled or in the completion process, and another for a well that has been put on production. Now, there is an NC well status for wells drilled by not yet complete.

2016 Quick Takes
Just as Porter and Ritter highlight the importance of HB 1358 and its role in shaping how oilfield infrastructure will be developed and regulated, each also points to several federally-linked policies as major pieces of the 2016 Bakken puzzle. Ritter believes that her team will continue to track several regulatory related energy policies in 2016, ranging from fracking on federal lands to regulating particular bodies of water. Each has the potential to impact how the industry operates in the state and how state regulators can regulate the energy industry.

Porter says the state needs to continue to be proactive on regulation, but not overreach. “We don’t want to be the place they [oil producers] come because they have too,” he says. “We have to watch the world oil price to make sure we are competitive. We also have to watch the transportation of our crude to make sure we can get it to markets.”    

Although Porter believes North Dakota’s Bakken play will never return to activity levels seen two years ago without oil at $90 per barrel, he does believe the state has positioned itself well for an increase in activity. “The surge bill was meant to help the state play catch-up to what happened in ’07 through ’09,” he says. Passed earlier this year, the one-time funding mechanism was timed perfectly for the current down-turn, he adds. “The next time the Bakken ramps up the industry and the communities within the oil producing regions should be in a really good position to stay ahead of it.”

Author: Luke Geiver
Editor, The Bakken magazine
701-738-4944
lgeiver@bbiinternational.com

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SIDEBAR

Pro-Energy Policy Production Impacts

Pro-energy policies over the next 20 years could create 2.3 million jobs, add $443 billion to the U.S. economy, increase tax revenue by $1.1 trillion and save the average household $360 per year in energy expenses, according to a study by Houston-based Wood Mackenzie. To complete the study, the company analyzed the likely outcome of U.S. energy policies that remain unchanged, become more constraining or become favorable toward oil and gas development.