North Dakota regulators will hold a hearing next month to get input on how to clarify requirements for natural gas gathering agreements, an effort to encourage more gas-related infrastructure and reduce wasteful flaring.
Officials say they have heard concerns from the oil and gas industry about a law dealing with agreements between oilfield producers and gas purchasers.
The agreements are related to gas gathering systems, which include a network of small pipelines that carry gas away from wells for further processing.
Most contracts between producer and purchaser provide for “interruptible capacity,” in which the producer has no guarantee of access to a pipeline at a given time, according to a statement from the state's Industrial Commission, which is a three-member panel chaired by the governor that regulates the oil and gas industry.
It’s less common that the agreement is for “firm capacity.” Under such an agreement, a producer purchases space on the gathering system, guaranteeing the ability to send gas through the pipeline.
In cases in which contracts allow for interruptible service, a producer might have to temporarily shut down wells or flare gas if no space is available on the pipeline system when the company wants to use it.
Regulators hope to provide more clarity on the matter, as it’s unclear to some in the oil and gas industry whether providing firm capacity violates a part of state law that is essentially meant to keep companies from playing favorites in accepting gas from multiple producers. The law prohibits "discrimination" in purchasing gas from producers with wells in the same oil and gas reservoir.
Some companies have told regulators that they will not provide firm capacity until the state makes clear that it’s allowed, according to a sheet of discussion points distributed earlier this week at an Industrial Commission meeting.
State Mineral Resources Director Lynn Helms told the commission that providing that certainty “would add a tool to the toolbox that potentially could get larger infrastructure built quicker.”
Officials want to see more facilities built to process gas, as well as more pipelines to gather it from well sites. North Dakota’s oil fields have experienced record-high flaring levels this year, as oil production grows but the amount of related infrastructure to capture it has not kept pace.
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