North Dakota reviews oil market problems, defers action decisions

April 23, 2020
North Dakota regulators have been discussing problems in oil markets but are not ready to order output reductions or take other steps to cope with the current slump.

North Dakota regulators have been discussing problems in oil markets but are not ready to order output reductions or take other steps to cope with the current slump.

The North Dakota Industrial Commission met Apr. 21 to consider what actions might be appropriate. The commission is composed of Gov. Doug Burgum, Attorney General Wayne Stenehjem, and Agriculture Commissioner Doug Goehring.

Lynn Helms, director of the Oil and Gas Division of the state’s Department of Mineral Resources, told the commission about 5,000 oil wells in the state have been shut in, an approximation based on his division’s conversations with producers.

Those shut-ins have cut the state’s production by almost 300,000 b/d or about 20% from its February average of 1.45 million b/d.

Helms advised against a decision to order output prorationing for now. The Department of Mineral Resources will continue to monitor the market situation and gather information.

Hearing on possible action

The state empowers regulators to prevent waste, and the state code defines waste as production in excess of transportation or storage capacities or in excess of reasonable market demand. To reduce waste, regulators can issue an emergency order to cut production.

The Oil and Gas Division plans to conduct a hearing to consider what the impact might be of such an emergency order. As of Apr. 23, no date had been set for the hearing.

Texas and Oklahoma regulators similarly have hesitated to order prorationing of oil production. Members of the Texas Railroad Commission have said they do not want to mandate production cuts on their own, without a joint multistate action and cutbacks by other nations.

North Dakota regulators remain in frequent communications with other state regulators primarily through the Interstate Oil and Gas Compact Commission.