Bill would void new North Dakota flaring, oil shipment rules set by 3-member regulatory panel

EnergyAssociated Press

New rules aimed at curbing the wasteful burning of natural gas in North Dakota and making crude oil safer for shipment would be void under a proposal by some Republican lawmakers.

Scrubbing the new regulations would have a serious financial impact on the state and would invite even more onerous regulations by the federal government, state Mineral Resources Director Lynn Helms told the House Industry Business and Labor Committee on Monday. Helms said the regulations underwent exhaustive public and regulatory scrutiny.

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Federal regulators "are prepared to take action if we step aside," he told lawmakers, who took no action on the proposal. The full House will debate it later.

GOP Gov. Jack Dalrymple is chairman of the three-member Industrial Commission that approved the regulations last year, prompted by public concerns over the volatility of Bakken crude shipped by rail and criticism of the amount of natural gas that is burned off as a byproduct of the state's soaring oil production.

Rep. Keith Kempenich, R-Bowman, is pushing legislation that would give lawmakers more oversight of oil-related rules. Kempenich said they should be considered by the Legislature's Administrative Rules Committee, which has the power to block, change or delay new regulations.

The Industrial Commission endorsed a policy in July that sets goals to reduce flaring in incremental steps through 2020, and allows regulators to set production limits if the targets are not met. In December, the commission required oil companies that ship millions of gallons of crude a week by rail to reduce the oil's volatility by removing certain liquids and gases before it's loaded onto train cars.

Kempenich, whose legislative district represents McKenzie County, North Dakota's top-oil producing region, said the rules by the Industrial Commission set arbitrary goals that were crafted for political reasons. He said lawmakers are being left out of the loop.

"There is a lot more policy being made by the executive branch than there has been in the past," Kempenich said.

Kempenich also has filed a separate bill that would increase the Industrial Commission to five members, adding the head of the Public Service Commission and the state tax commissioner.

The commission oversees the state Department of Mineral Resources, North Dakota's oil and gas regulatory agency. Besides Dalrymple, its other members are Agriculture Commissioner Doug Goehring and Attorney General Wayne Stenehjem.

Speaking on behalf of the Industrial Commission, Helms urged lawmakers to kill the measure. He said voiding the new rules could cost the state more than $111 million over the next two-year-budget cycle, largely in lost tax revenue because of additional costs that oil companies would incur to meet the more stringent and costly federal regulations.

Kempenich questioned the projected financial impact.

"If an agency doesn't like the bill, they're going to put a fiscal note on it that would choke a horse," Kempenich said.