North Dakota oil and gas regulators ordered operators to condition crude oil from the Bakken, Three Forks, and Sanish formations, effective Apr. 1, in efforts to improve rail transportation safety.
The conditioning standards require the removal of light hydrocarbons, ensuring crude oil going to rail terminals has a vapor-pressure limit of 13.7 psi. The final order adopted the American National Standards Institute measure for vapor pressure instead of a Reid vapor pressure as earlier proposed.
On Dec. 9, the North Dakota Industrial Commission voted unanimously to require producers to heat crude to at least 110° F. at 50 psi. The heating temperature of the fluids requirement was dropped to 110° from earlier proposals for 115° or 120° (UOGR, Nov-Dec 2014, p. 7).
NDIC members are North Dakota Gov. Jack Dalrymple, Att. Gen. Wayne Stenehjem, and Agriculture Commissioner Doug Goehring.
"This is all designed so that everyone knows the crude oil is being treated," said Lynn Helms, North Dakota mineral resources director. "We want people to know that we've gone 1 psi below the [national] standard so crude oil in North Dakota will be conditioned using separators and heater-treaters."
The costs for producers to comply will vary widely depending upon their individual field setups, Helms told reporters in Bismarck, ND.
Helms sent inspectors to 300 heater-treaters throughout the state, finding 55% already operated within the new standards. About 33% operated at lower temperatures than the new standards while another 12% applied no heat at all to crude oil.
"Those 12% were predominantly smaller producers who were cutting costs, and they will be affected greatly by the new standards," Helms said.
Previously, industry questioned NDIC's oil-conditioning proposals, saying crude oil was being unfairly singled out. Some have suggested that the new standards could slow production and increase costs.
The safety of transporting Bakken crude by rail came under scrutiny because of some major accidents, including a rail car explosion in Lac-Megantic, Quebec, that killed 47 people as well as a train explosion near Casselton, ND, in 2013.
"This commission order was written as a matter of safety," NDIC said. "Rail accidents across the country have drawn attention to the need to better understand how Bakken oil is produced and processed at the well site."
The commission initially received 1,114 pages of testimony from 33 groups or individuals. Subsequently, the record was opened again and an additional 141 pages of testimony from 25 groups or individuals were provided on the working draft order.
Technical corrections made
Helms outlined a proposed oil-conditioning order during November, and NDIC reviewed additional technical comment and made what it called some technical corrections to what became the final Order No. 25417.
In the supplemental comments, the American Fuel & Petroleum Manufacturers (AFPM) said its study on Bakken crude oil characteristics confirmed Bakken crude is consistent with other light, sweet crude types and is safe for rail transportation.
Vapor-pressure levels have little impact in a derailment that releases significant flammable liquid and that might result in a fire, AFPM said, adding "studies have shown that vapor pressure is not a dispositive indicator of pool fire significance in a derailment."
AFPM also said the NDIC oil-conditioning standards were preempted under federal hazardous material transportation law.
"While North Dakota's goal of improving the transportation safety of Bakken crude is laudable, the means chosen to achieve that goal are questionable," AFPM said.
The American Petroleum Institute questioned NDIC's set of parameters for operators, and said NDIC had not provided research findings that supported the new standards.
API recommended more research "to ensure that any requirements make a meaningful improvement to safety and do not produce unintended consequences."
Rail terminals in North Dakota, Montana, and Canada load Bakken and Three Forks crude because the formations extend across state lines and the US-Canada border.
"The interconnectedness of the region is evident," API said. "Therefore, API recommends that NDIC consider the potential implications of imposing distinct state regulations on an otherwise interconnected system governed by federal regulations."
Requirements imposed by individual states could differ or conflict with regulations in other jurisdictions, which could "result in a patchwork of crude oil specifications," API said.
Separately, Hess Corp. submitted a comment to NDIC saying rail-loading stations involve interstate commerce because most North Dakota crude oil is shipped elsewhere for refining.
"Applying an additional layer of state regulation on these shipments necessarily burdens interstate commerce," Hess said, adding the order could slow the transportation of Bakken crude oil and conflict with federal transportation safety law.
In comments about the draft order, the North Dakota Petroleum Council (NDPC) said the proposed standards could introduce new risks and unintended consequences to operations, including "increased flaring at a time that operators are putting forth their best efforts to meet the NDIC's flaring goals."
NDPC said it believed the order also carried potential for increased emissions.
"This draft order puts the focus back on the commodity when several studies have already shown that Bakken crude does not pose greater risk than other crude oils," NDPC said. "Further action to prevent derailments is needed, such as track and railcar inspections."
Oasis Petroleum North America LLC of Houston recommended an annual test for wells or central delivery points that have had two consecutive quarterly tests with results below the pressure threshold.
"By specifying in the order the types of equipment that must be used, the order may limit operators' ability to continue" developing conditioning methods, Oasis Petroleum said. "We expect to continue to work with our downstream crude oil gathering and trucking entities to ensure the crude oil is safety transported to the refinery destinations as the Williston basin continues to grow."