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Falling oil price, rig counts helping operators meet N. Dakota gas flaring rules

Washington — A combination of low oil prices and tumbling rig counts is assisting North Dakota operators in complying with a state mandate to reduce flaring of associated natural gas production, the state's top oil and gas official said Friday.

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"It has helped," said Lynn Helms, director of North Dakota's Department of Mineral Resources. "It has given companies some breathing room to be able to achieve gas capture goals more easily."

On Friday, Helms announced that oil and gas production had reached an all-time high in North Dakota in December, climbing to nearly 1.23 million b/d and 1.51 Bcf/d, respectively. But the pace of production growth has slowed and will likely flatten in 2015 due to low oil and gas prices and falling rig counts, Helms said.

The state's rig count fell to 137 on Friday, its lowest level since July 2010 and a 37% drop from the all-time high of 218 in May 2012. Helms said he expects 15 additional rigs to be idled by this spring, as operators curb drilling and wait for prices to climb.

While there were 12,124 producing wells in December, a new state record, there were just 246 drilling permits in January, down 2% from December's 251 drilling permits and nearly 34% from the all-time high of 370 permits in October 2012.

Helms said this anticipated production slowdown, however, has allowed operators to more easily comply with gas flaring rules, many had said months ago they would struggle to meet.

"They just don't have as many rigs to look after, as many completions to worry about and so the scheduling of those [flaring requirements] is quite a bit easier," Helms said.

Last year, the North Dakota Industrial Commission set a series of benchmarks that require operators to limit flaring to 26% by October 1, 23% by January 1, 15% within two years and 10% by 2020. If producers fail to meet the flaring reduction targets, then they face the threat of production curtailment penalties.

The commission Friday reported that 24% of associated gas was flared in December, down from a state record of 64% in 2011. January's target is 23% and operators are likely to meet that, Helms said.

Helms said while the recent price plunge has helped reach these goals, some operators are scaling production in order to meet the reduced flaring requirements, including one company which "choked back" production by 5,000 b/d to meet the goal. He said this trend would continue if crude prices climbed.

"It is going to mean some reduced oil production in order to get there," he said. "I think there's going to be some sacrifices"

--Brian Scheid,
--Edited by Derek Sands,