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North Dakota Begins Regulating Gathering Pipelines

From the mandate of state legislation (SB 1358) passed this year and two years earlier, North Dakota's oil/natural gas regulators in the Department of Mineral Resources (DMR) have built a new unit for the first time to oversee the construction, operation and maintenance of the state's expanding gathering pipeline systems.

Earlier this year, DMR Director Lynn Helms called SB 1358 the most important piece of state legislation for the oil/gas sector that was passed in 2015 (see Shale DailyAug. 28). The division was first given limited authority over gathering infrastructure by state lawmakers in 2013 through legislation (HB 1333) requiring operators to report where, when and how new gathering pipelines were placed in service.

The significance of the move to regulate this previously unregulated part of the state's oil/gas industry takes on added significance because state and industry estimates are projecting the current 23,000 miles of gathering pipelines in North Dakota to more than double in size to 50,000 miles at an unspecified future date.

"North Dakota was the first state in the nation to regulate gathering lines, and we remain supportive of any other efforts that will help with the construction of new and better pipeline infrastructure," said a spokesperson with the North Dakota Petroleum Council, adding that the council believes that any new regulations should be "based on sound science." The added oversight should help keep the infrastructure "efficient, effective and economic," she said.

DMR's build up with seven of 10 new inspector positions now filled comes at a time when the state Energy and Environmental Research Center (EERC) at the University of North Dakota completed an HB 1358-mandated report on gathering pipelines, making recommendations that are slated to help guide the rollout of the new state regulatory efforts, starting with a rulemaking next year. It's a bottoms-up effort at the DMR to structure the new organization in its oil/gas division, a DMR spokesperson told local news media.

Even with the added regulatory effort, there are no state requirements for operators to notify DMR when they are building new gathering infrastructure. That is one area that the EERC weighed into, recommending that companies be required to give 30-day notices before beginning construction of a new pipeline.

DMR is spotting inspectors in various areas of the Williston Basin, and they are expected to begin shadowing third-party inspectors hired by the companies. Some members of the industry have already hailed this as a way to push more improved pipeline construction.

Under HB 1358, developers and operators of gathering systems are going to be required to provide the state with engineering construction design drawings, a list of independent inspectors, plans for leak detection and an independent inspectors certificate of testing after 60 days, along with providing funds for reclamation programs and pipeline technology studies. In the future, bonds also will be required, according to Kevin Connors, DMR pipeline program supervisor heading the new regulatory effort.

Assuming approval from the statewide Industrial Commission, which oversees DMR, a rulemaking will be conducted next year, including draft rules formulated for public discussion early in the year. The target for having the final rules in place is Jan. 1, 2017, Connors told NGI's Shale Daily on Thursday.

Connors said the EERC report recommendations will be part of the rulemaking considerations, including the need for prior notification to the state before gathering lines are built, maintenance/corrosion control requirements, and amendments to existing rules regarding materials used in gathering systems. "The bottom line is the report advocates better pipeline installation, more thorough third-party inspections, and more state involvement in determining the root cause of pipeline failures," he said.

In the absence of state regulation, all of the past work on root causes of pipe failure has remained confidential in legal proceedings between operators and various third-parties. "That's part of the frustration expressed in the EERC study, that we in the state haven't been able to learn from these catastrophic spills," Connors said.

Although North Dakota is the first state trying to address this regulatory void, Connors doesn't see his work as necessarily leading to a model for other states. "The rulemaking I am diving into looks at developing a program unique to North Dakota," he said. "These pipelines need to be designed for our environment, and most of what I am looking at are really tailored to what we have here in North Dakota."

North Dakota's expansion to cover gathering systems follows the fourth in a series of methane emission studies sponsored by the Environmental Defense Fund (see Shale Daily, Aug. 17).

In an interview last summer, the study's principal author, Anthony Marchese, professor of mechanical engineering and director of the engines/energy conversion laboratory at Colorado State University, said there are an estimated 445,000 miles of gathering pipelines nationally and they are all largely unregulated. The methane emissions study concentrated on gathering facilities and processing plants, leaving essentially undocumented the pipelines’ contribution to the overall emissions.

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