Last week North Dakota regulators approved a plan to allow oil and gas producers an additional year to bring a new well online in order to give the industry a buffer zone amidst the persisting oil price slump.
As reported by Reuters, oil and gas companies operating in the Bakken will now have up to two years to hydraulically fracture drilled-but-uncompleted wells. The extension comes with unanimously approved changes made by the North Dakota Industrial Commission, which consists of Gov. Jack Dalrymple, Attorney General Wayne Stenehjem and Department of Mineral Resources Director Lynn Helms.
Prior to the change, companies had only one year to bring new wells into production, but could be granted a six month extension if the window passed. Since oil prices have dropped by more than half since last year, though, more companies are opting to delay the completion of new wells under the market climate improves.
Currently, North Dakota is home to approximately 1,000 uncompleted wells, and without the rule change, companies would be forced to spend billions of dollars after hitting the one-year cut off in December. Some investors feared that the backlog of wells coming online would only add to the current oil market oversupply.
For North Dakota, the change means delayed but higher tax revenues. Helms told Reuters, “The state would prefer to tax the oil at a higher price in the future.” Applications for an extension must be submitted by producers on a per-well basis. Helms anticipates that about half of the 1,000 uncompleted wells will be granted delays, which will likely impact state oil output by approximately 100,000 to 150,000 barrels per day. To read the full report, click here.