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NEW FLARING REGULATIONS TO SLOW PRODUCTION

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The North Dakota Industrial Commission is considering a proposal that would cut back on the state’s booming oil production as a means of controlling the amount of natural gas that’s being burned off at well sites and wasted as a byproduct of the more valuable substance, oil. But oil companies are fighting the idea of slowing production, and want regulators to consider self-imposed steps to curb natural gas flaring, such as submitting plans for natural gas gathering before applying for a drilling permit. (Rigzone via The Associated Press). While regulations that slow down or stop production until gas capturing infrastructure is in place certainly would benefit royalty owners and the state’s coffers, it would have a negative effect on the industry, and in turn the state and royalty owners, as major alterations to drilling programs could jeopardize the financing producers rely on to participate in the Bakken play. As mentioned in a prior post, the majority of producers in shale plays such as the Bakken are independent companies, rather than the majors or “seven sisters” (not to say the majors do not have a presence). These smaller companies often rely on financing rather than investor-based capital to finance their drilling programs. With their financing at risk, they’re more likely to focus their efforts in other areas where costs are not as high, such as the Eagle Ford and Permian Basin in Texas, which has the potential to reduce the overall income the state sees from oil production.