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North Dakota oil may have issues in the future

North Dakota oil production is steadily increasing, but there may be other issues that could hurt the industry.

The Department of Mineral Resources director Lynn Helms told members of the Government Finance Committee that the statewide production of July was 1.1 million barrels.  The Preliminary Office of Management and Budget predicted production to be at 1.3 million daily barrels at the beginning of 2015 and 1.4 million by the end of 2017.  Although the production numbers look good, dropping oil prices and state flaring regulations may cause negative effects.

In June crude oil was priced at $90 per barrel and now it’s down to about $73 per barrel.  According to Helm all the markets are set at this price and this could affect Bakken’s oil productions.

Natural gas flaring could hit production levels hard, too.  In July state flaring was at 26 percent which was the first benchmark to make set by the state’s new flaring regulations.  Flaring statewide was supposed to be at 26 percent by October 1 and 23 percent by January 1, 2015.  Helms explained how 24 operators were below the July benchmark.  He also explained how the current levels could lead to a negative impact of 90,000 barrels of oil a day if the October 1 benchmark isn’t met.

 Related article regarding North Dakota vs. Alaska in the oil industry.

Helm also mentioned how most of the flaring done was on tribal land:

That’s a big issue. One-third of our oil comes from the tribal land.

Back in August officials of the Three Affiliated Tribes proposed a gas capture plan requiring operators to pay royalties on flared gas.  The attorney general is finalizing a legal analysis of jurisdiction of state, tribal and federal agencies on tribal land as it relates to flaring, according to Nick Smith of the Bismarck Tribune.

It is possible that the states flaring percentage will be above the October 1 requirement due to flaring issues on the reservation, according to Helm.

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