The Legislature’s Administrative Rules Committee approved a new set of oil and gas rules Monday, but regulations that add transparency to royalty statements won’t take effect until July 2019.
The new rules require oil companies to clearly identify the amount and purpose of each deduction taken from royalty payments.
Bruce Hicks, assistant director for the North Dakota Oil and Gas Division, said regulators heard from royalty owners who are frustrated about deductions taken from their payments and the lack of information explaining them.
“Royalty owners indicated that, when they asked for any type of followup on this, they get really vague and ambiguous statements,” Hicks said.
The rules require any deductions taken from oil and gas royalties to be labeled under categories of transportation, processing, compression and administrative costs.
The requirement takes effect July 1, 2019, to give oil companies time to comply. In addition, Hicks said the date will allow time to respond if legislators decide to further address the royalty statement issue during the 2019 session.
Sen. Kelly Armstrong, R-Dickinson, a member of the committee, said he thinks the rule will resolve many of the concerns royalty owners have regarding deductions taken from their payments.
“I think a lot of the animosity out there is because it’s very difficult to get the information,” Armstrong said.
Brady Pelton, government affairs manager for the North Dakota Petroleum Council, said a preliminary estimate shows it will cost about $500,000 per operator to upgrade software systems to comply.
The industry group has a task force that is working on implementing the requirements, he said.
Gov. Doug Burgum, chairman of the North Dakota Industrial Commission, said in December that oil companies could be proactive and comply earlier.
Also Monday, the committee gave unanimous approval to other oil and gas rules that will take effect April 1.
The other rules include a requirement for companies to file a document known as a sundry notice for a spill that is not adequately cleaned up. Another rule gives the Department of Mineral Resources discretion to require a site assessment before or after reclamation.
Troy Coons, chairman of the Northwest Landowners Association, said the new rules are a step in the right direction to better protect the land.
“We’re happy, but there’s definitely more to do,” Coons said.
The Industrial Commission approved the rules in December after taking input during four public hearings around the state. The committee's action was the final step for the regulations to move forward.
A list of rule changes is available at www.dmr.nd.gov/oilgas.