Ruling on Bakken conditioning delayed, new standards imminent

By Luke Geiver | November 13, 2014

Although the North Dakota Industrial Commission has delayed the implementation of new crude conditioning standards, the eventual adoption of new regulations that will impact the Bakken shale play are imminent. The NDIC met this week to discuss the new standards but have agreed to allow public comments in addition to those already generated following a September hearing on the new standards until Wednesday Nov. 19. If the NDIC chooses to approve the standards following the extended comment period, the new oil conditioning regulations will take effect Feb. 1, 2015.

Following the meeting by the NDIC and members of the North Dakota Deparment of Mineral Resources Oil and Gas Division—the state entity that would be responsible for enforcing new conditioning standards—Lynn Helms, division director and team held a press conference to discuss the pending standards. “There is a desire to get this done ASAP,” Helms said. “I think the industry needs that certainty.”

The proposed order “sets operating standards for conditioning equipment to properly separate production fluids into gas and liquid. The order includes parameters for temperatures and pressures under which the equipment must operate to ensure that light hydrocarbons are removed before oil is shipped to market,” the NDIC said in a statement.

“The proposed order will adequately reduce the volatility of Bakken crude,” Helms said, adding that the new standards would produce a liquid hydrocarbon that will behave better than the unleaded gasoline that many use in cars or lawnmowers.

The crux of the new standards is linked to Reid Vapor Pressure. Under new regulations, Bakken crude cannot be characterized with a RVP of more than 13.7 pounds per square inch. National standards are ususally near 14.7 psi and according to Helms, multiple studies have shown that roughly 80 percent of Bakken crude contains an RVP of roughly 11.8.

Although new standards will cost some portions of the Bakken industry money, the new standards don’t appear to be substantial, he said. “We really believe the vast majority of Bakken crude oil will fall well below the standard and that is because many operators are already implementing a thorough in-field operation,” Helms said.

Field operations that include heater treaters or heated liquid separators at the well pad will allow many operators to continue producing crude under the 13.7 threshold. Third party-testing will be needed periodically to verify the RVP of Bakken and Three Forks crude.

The DMR can and will perform field checks on gauges placed on field equipment. Transload facilities and pipeline operations could have to report crude loads that do not come in under the 13.7 number to the DMR, a situation that could require investigative work by all parties involved to figure out where non-compliant oil was sourced from.

Those found in violation of the standards will face a $12,500 fine for each day the oil is left unconditioned.

To bring crude oil in compliance, operators need to remove many of the natural gas liquids such as butane, propane, ethane and others from the hydrocarbon stream. Doing so lowers the RVP to acceptable levels. The NGLS could be piped or flared, but bring less than half the monetary value of crude. 

Under the proposed standards, blending crude oil produced from the Bakken system with liquids recovered from gas pipelines prior to oil sales and blending crude oil with liquids such as condensate, pentanes, butanes or propane prior to sale would be prohibited.