Industrial Commission Implements Incentive System for Natural Gas Capture

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While the state industrial commission can penalize oil companies for breaking rules, it also plans to reward companies that exceed expectations. The industrial commission held its monthly meeting in Watford City.

In a unanimous vote, the industrial commission approved a 90-day volume credit for operators that exceed natural gas capture goals.

Department of Mineral Resources director Lynn Helms says the credit will be awarded on how much the company captures per cubic feet above the set goal, and those credits will be rolled into the next month.

"That is my hope. It motivates the Newfields, the XTO's and some of the companies that are just barely making it to push that bar up a little bit to do something to bank 1 or 2 percent for those extenuating circumstances," Helms said.

The commission may apply all or portions of the credits to a month in which the operator cannot meet the capture goal. Credits cannot be transferred to another operator, and the unused credits expire after three months.

"Those credits are going to be limited, they are not going to be used just because they want to. They are going to meet one of those test," Helms said.

Some of those tests that might allow companies to use their credits are safety issues, federal regulatory restrictions or delays, possible reservoir damage and delayed to access to electrical power.

"At the end of the day we want to get more gas processed and less flared," said Gene Veeder, McKenzie County Economic Development. "I think it makes sense and it's a pro-business idea to incentive people who work hard to get those things done rather than act from a penalty side."

The program is set to go into effect next month.

The commissioners also approved a plan to give oil companies an extra year to bring new wells online. Before, oil producers only had one year. Producers will still have to apply for an extension. The new change will more likely create delays, but it could mean higher tax revenue down the line for the state.