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North Dakota

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North Dakota is America’s third-largest oil producing state1 due to the rich Bakken and Three Forks Formations.2

Statutory and Regulatory Framework

The North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division (“the Commission”)3 administers the oil and gas laws found in the North Dakota Century Code and the North Dakota Administrative Code (“NDAC”). Specifically, the Commission is charged with regulating “[t]he drilling, producing, and plugging of wells[;] . . . chemical treatment of wells[;] . . . [t]he spacing of wells[;] . . . [o]perations to increase ultimate recovery[;] . . . [d]isposal of saltwater and oilfield wastes[; and] . . . [t]he underground storage of oil or gas.”4 North Dakota’s Oil and Gas Conservation regulations generally subject hydraulic fracturing operations to many of the same provisions as conventional operations; for example, provisions governing well permitting,5 bonding,6 setback,7 well spacing,8 well construction,9 waste disposal,10 pits,11 and reporting12 are generally applicable to both conventional and hydraulically fractured wells. However, hydraulic fracturing-specific regulations govern the act of stimulating a well.13

The North Dakota Department of Health, Environmental Health Section administers provisions of the NDAC that protect the state’s air, land, and water resources.14 The North Dakota Department of Trust Lands regulates oil and gas lease agreements, bonus payments and royalties, rights-of-way applications and procedures, surface damage agreements,15 and seismic surveys.16

Recent News and Developments

Gas Capture Plan and Flaring Reduction Policy

On March 3, 2014, the Commission adopted a drilling permit review policy requiring producers to submit a gas capture plan with every drilling permit application,17 part of its state-wide flaring reduction policy (Commission Order No. 24665, or the “Order”).18 Pursuant to the Order, gas capture plans submitted at permit hearings must include information on area gathering system connections and processing plants, the rate and duration of planned flowback, current system capacity, a timeline for connecting the well, and a signed affidavit verifying that the plan has been shared with area midstream companies.19 These requirements became effective June 25, 2014.20

The Order states that these measures will help meet the State’s targets for reducing flaring; North Dakota originally intended to capture 77 percent of gas production by January 2015, 85 percent by January 2016, and 90 percent by November 2020.21 In September 2015, the Commission pushed back the deadline for achieving an 85 percent reduction to November 2016, added an 88 percent reduction milestone by November 2018, and increased the final November 2020 target to a 91 to 93 percent reduction.22

To ensure these targets are achieved, the Commission will compel operators to curtail production from wells found to be in violation.23 However, the Commission will allow all infill horizontal wells to produce at a maximum efficient rate for 90 days.24 After that time, the operator must either connect the well to a gathering facility or implement remote capture processes.25 There is a narrow exception for infill wells that cannot be economically connected to a gas facility26 this exception applies to approximately 1,000 wells, most of which produce less than 100 barrels of oil.27
A bill filed by nine state lawmakers in January of 2015 that would have subjected North Dakota’s flaring policy and conditioning standards (as well as all other “rules of general applicability”) to additional legislative review or possible voidance was unanimously voted down when the bill came up for a vote before the North Dakota Senate.28

North Dakota Actions Addressing Safety of Bakken Crude-by-Rail Shipments

Complementing federal efforts to improve transportation of crude by rail, the Commission issued new conditioning standards on December 9, 2014, which require that all crude oil produced in the Bakken region to be conditioned to reduce its volatility. Commission Order No. 25417 (“the Order”) establishes temperature and pressure limits for oil conditioning equipment, with a target of achieving a Reid vapor pressure of no greater than 13.7 pounds per square inch.29 The Order also prohibits operators from blending lighter hydrocarbons back into the oil before shipping.30 In addition to setting new conditioning standards, the Commission will also require transload rail facility operators to inspect Bakken crude and report any shipments that violate federal crude oil safety standards.31 The Order became effective April 1, 2015.32 In December 2015, the Commission approved an order authorizing a Bismarck-based oil field technology company to test a prototype unit designed to help operators more easily comply with the new crude conditioning rules.33

North Dakota Industrial Commission Finalizes New Rules Designed to Control Pipeline Spills

On June 29, 2016 the Commission finalized a comprehensive set of new rules addressing site construction, underground gathering pipelines, and spill containment.34 The rules require all crude oil and produced water underground gathering pipelines to be bonded,35 and all gathering pipelines installed in environmentally sensitive areas will be subject to additional requirements.36 If horizontal directional drilling (“HDD”) is to be used in an environmentally sensitive area, an HDD plan prepared by the owner must be filed with the Commission prior to commencement of HDD.37

Last updated September 2016.

Sources & Uses: Petroleum & Other Liquids: Data: Crude Oil Production, U.S. ENERGY INFO. ADMIN. [“USEIA”] (Aug. 31, 2016), https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm.

Geography: Maps: Oil and Gas Related Exploration, Resources, and Production: Shale Gas and Oil Play, Lower 48 States, U.S. ENERGY INFO. ADMIN. [“USEIA”] (June 30, 2016), https://www.eia.gov/maps/images/shale_gas_lower48.pdf.

See North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division website, https://www.dmr.nd.gov/oilgas/.

4 N.D. CENT. CODE § 38-08-04(2)(a)-(f).

5 N.D. ADMIN. CODE 43-02-03-16.

Id. 43-02-03-15.

7 N.D. CENT. CODE § 38-08-05(2).

8 N.D. ADMIN. CODE 43-02-03-18.

Id. 43-02-03-21.

10 Id. 43-02-03-19.2.

11 Id. 43-02-03-19.3-.5.

12 See generally id. 43-02-03.

13 Id. 43-02-03-27.

14 See North Dakota Department of Health: Environmental Health website, http://www.ndhealth.gov/EHS/.

15 ND Department of Trust Lands: Rights-of-Way & Oil/Gas Surface Damage Agreement Procedures (last visited Sept. 21, 2016), https://land.nd.gov/surface/right-of-way.aspx.

16 ND Department of Trust Lands: Construction Aggregate, Clay, Coal, and Geophysical Exploration Permit Application Procedures (last visited Sept. 21, 2016), https://land.nd.gov/surface/surfaceapps/prospecting/.

17 North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division: Policies & Guidance: Drilling Permit Review Policies, http://www.nd.gov/ndic/ic-press/DMR-drill-3-03.pdf.

18 Order No. 24665 of the Commission, Case No. 22058 (July 1, 2014), https://www.dmr.nd.gov/oilgas/or24665.pdf.

19 Id.

20 North Dakota Industrial Commission, Department of Mineral Resources, Oil and Gas Division, Notice to Hearing Applicants re: Gas Capture Plan Required Hearing Exhibit (May 15, 2014), https://www.dmr.nd.gov/oilgas/GCP%20Hearing%20Exhibit%2005-15_09_16.pdf.

21 Order, supra note 18.

22 Mike Nowatski, ND Regulators Delay Flaring Goal in 2016, Raise Overall Target for 2020, INFORUM (Sept. 24, 2015), http://www.inforum.com/news/3846527-nd-regulators-delay-flaring-goal-2016-raise-overall-target-2020.

23 Order, supra note 18, at 5-6.

24 Id. at 5.

25 See NORTH DAKOTA INDUSTRIAL COMMISSION, NORTH DAKOTA INDUSTRIAL COMMISSION ORDER 24665 POLICY/GUIDANCE VERSION 102215, https://www.dmr.nd.gov/oilgas/GuidancePolicyNorthDakotaIndustrialCommissionorder24665.pdf.

26 N.D. ADMIN. CODE 43-02-03-60.2.

27 Maxine Herr, Heat Is on to Meet Flaring Goal, BISMARCK TRIBUNE (Sept. 12, 2014), http://bismarcktribune.com/bakken/breakout/heat-is-on-to-meet-flaring-goal/article_dfc24f26-3ac7-11e4-85c2-bb976f6ae66d.html.

28 Mike Nowatzki, N.D. Bill Could Void Flaring, Oil Conditioning Standards, THE DICKINSON PRESS (Jan. 13, 2015), http://www.thedickinsonpress.com/energy/bakken/3654696-nd-bill-could-void-flaring-oil-conditioning-standards.

29 Order No. 25417 of the Commission, Case No. 23084 (Dec. 9, 2014), https://www.dmr.nd.gov/oilgas/Approved-or25417.pdf.

30 Id.

31 Id.
32 Id.

33 Patrick C. Miller, Test of New Crude Conditioning Process Coming to the Bakken, THE BAKKEN MAGAZINE (Dec. 30, 2015), http://thebakken.com/articles/1410/test-of-new-crude-conditioning-process-coming-to-the-bakken.

34 Order No. 27349 of the Commission, Case No. 24957 (June 29, 2016), https://www.dmr.nd.gov/oilgas/or27349.pdf.

35 N.D. ADMIN. CODE 43-02-03-15(8).

36 Id. 43-02-03-29.1(4)(k).

37 Id. 43-02-03-29.1(3)(a)(1)(c)(viii).

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