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North Dakota Sets Rules on Bakken Crude Content

Keeping a commitment it made to federal regulators and others, North Dakota's Industrial Commission (IC) on Thursday released draft regulations for the liquid content of light sweet crude oil that is being produced at a robust rate of more than 1 million b/d.

After further industry and public input, the commission will finalize the rules by Dec. 11 to be effective Feb. 1, 2015.

The new rules mandate equipment through which all Bakken petroleum products are produced to "improve the marketability and safe transportation of the [state's] crude oil [production]." The equipment involves a gas-liquid separator and/or an emulsion heater-treater operating at pressures of under 50 psi, 50-75 psi, and more than 75 psi.

When asked about why ranges are offered, the state's chief oil/gas regulator Lynn Helms, director of the Department of Mineral Resources, said it was to accommodate the different approaches companies apply to their production of Bakken crude, whose content came under fire following a series of fiery rail transport derailments last year involving North Dakota supplies (see Shale Daily, Jan. 3).

The bottom line is that once in effect, the rules will prohibit any blending of condensate or natural gas liquids (NGL) back into crude oil in the Bakken, Helms said. "The rules also include reporting requirements for rail loading stations if they receive supplies that don't meet the pressure requirements of 13.7 pounds-per-square-inch (psi) they need to report it to the state." Violators will be fined up to $12,500/day, the draft rules indicate.

Helms said the draft rules will impose added costs on producers in the state and will diminish the values of some NGLs associated with Bakken crude, but they will provide the safety assurances that the industry and general public need. "I think this is going to cost industry a significant amount of money, but I don't think it is going to be substantial," Helms said. "It won't change the economics of drilling the Bakken/Three Forks shale plays."

The standard being used is a well-established industry certified measure called the Reid Vapor Pressure measurement, and North Dakota proposes to make it 13.7 psi, stiffer than the national standard of 14.7 psi, Helms said. He did not think that the criticism in some parts of the North American industry of the Reid Vapor measurement as outdated will cause any problems.

Noting the 13.7 psi standard covers about 80% of the wells now producing in the Bakken, Helms said the draft rules prescribe operating temperatures for varying pressures "to make sure the crude oil ends up in a stable state, meaning it has less than a 13.7 psi vapor pressure." Winter blended gasoline in North Dakota has a 13.5 psi vapor pressure, he said.

For the 20% of the wells whose operators want to meet content requires in other ways by demonstrating complying on a quarterly basis, "they will have to demonstrate that they are achieving a revaporization pressure of 13.7 psi or less. They will have to get around seasonal weather variations that impact the vapor pressures, but new technologies may help these operators do that.

Several new technologies for on-site equipment to apply to the content monitoring task have been presented to the IC, said Helms, noting that each of them will have to be subjected to public hearings, but the draft rules are written so new technologies found applicable in the future can be incorporated in the state regulations. Some involve so-called stabilization processes that are commonly used with Texas supplies of light sweet crude.

The IC is moving quickly on finalizing the new regulations to keep pace with a four-part federal effort (see Shale Daily, July 24), of which content rules is one part. The other parts are upgrades in rail safety as overseen by the Federal Railroad Administration and tank car design and safety training state-by-state as implemented by the U.S. Department of Transportation's Pipeline Hazardous Materials and Pipeline Safety Administration (PHMSA), the latter in conjunction with the states.

In response to questions about the validity of the sampling in an independent study done for the North Dakota Petroleum Council (NDPC) (see Shale Daily, May 21), Helms said the NDPC work was compared with three other separate analyses of Bakken crude by Canadian, PHMSA and private-sector sources, and the average vaporization pressures average was 11.8 psi in those four studies.

The three IC members said they support the adoption of new standards that improve the safety of oil transport, but asked for the order to include information about how the state will oversee the order’s enforcement and information about possible penalties for violations.  The Industrial Commission consists of Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring.

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