North Dakota leaders eye trans-state natural gas pipeline with federal coronavirus aid money
A proposal to put $150 million into a natural gas pipeline roughly tracking Highway 2 across the state has emerged as a top priority for Gov. Doug Burgum and leading lawmakers heading into the Legislature's special session next week.
BISMARCK — As North Dakota lawmakers prepare to distribute hundreds of millions of dollars in federal coronavirus aid next week, a proposal to facilitate the construction of a trans-state natural gas pipeline has emerged as a top priority for Republican leaders.
Specifics of the project, which would roughly track Highway 2 from the Bakken oil fields to Grand Forks, are still being hashed out, but a plan to put $150 million out of the state’s federal American Rescue Plan funding into trans-state natural gas delivery has the backing of Gov. Doug Burgum and leading lawmakers in both legislative chambers.
North Dakota has long struggled to find capacity for the large volumes of natural gas that come up alongside oil in the Bakken. Right now, the state lacks the infrastructure to capture, process and export all of that gas, leaving many companies in western North Dakota to burn off the excess, a wasteful practice that contributes to climate change.
As Bakken wells continue to mature, North Dakota gas production is expected to climb higher and higher compared to its oil output.
Historically, companies might have responded to that trend by flaring off more gas. But today’s tightened regulations and the environmental policies of some producers mean shifting oil and gas ratios could force a different kind of reaction: to leave more oil in the ground. By one state regulator’s modelling, oil producers in North Dakota will have to begin curtailing output in two to four years without more solutions for natural gas.
“It seems that folks are looking at this as (maybe) a now or never,” North Dakota Pipeline Authority Director Justin Kringstad told state leaders at a recent meeting of the Industrial Commission, the three-member business regulatory panel chaired by Burgum.
If North Dakota leaders can facilitate the construction of a trans-state natural gas pipeline, proponents believe it would kill two birds with one stone. They argue that boosting capacity to take gas out of western North Dakota would help ameliorate concerns of scaled-back oil production while also attracting industrial businesses in need of natural gas hookups to the eastern part of the state.
While draw-downs in oil production would come with a substantial blow to state coffers, Kringstad estimated construction of even a narrow pipeline system would yield between $180 million and $200 million in annual oil and gas taxes for the state.
Still, some conservatives in the Legislature have questioned whether the state should put its thumb on the scale for an industry or for any specific companies.
Williston Republican Sen. Brad Bekkedahl said he trusts industry leaders to come up with solutions for the natural gas problem, especially since no company will want to scale back oil production at today’s high prices. A longtime resident of the Oil Patch, Bekkedahl said oil and gas companies have been discussing a host of different market-driven fixes.
"My issue wasn't whether this was the best (solution) or not," Bekkedahl said. "It was that this was being promoted as the only one, and there's other solutions out there.”
The trans-state pipeline idea isn’t new, but there previously was little urgency or political will to bring a project to fruition. Kringstad said there were at least two similar private-sector proposals in recent years that fell through because of lack of industry backing.
Though many lawmakers are looking to write a $150 million check for the pipeline when they convene for their special session next week, Senate Majority Leader Rich Wardner, R-Dickinson, said the Legislature will need to match that sum in a future session to put together the $300 million total that pipeline companies said they need to incentivize the project.
Several companies expressed interest in taking on the pipeline this time, Wardner said, including the Tulsa, Oklahoma-based Oneok and Bismarck-based WBI Energy.
Whatever proposed pipeline investment might come out of the upcoming special session, none would be near enough to cover the full cost of the job, which Kringstad estimated between $800 million and $1.2 billion.
Some in competing energy sectors expressed worries about what the ambitious pipeline development could mean for their own industries.
Mike Rud, the executive director of the North Dakota Propane Gas Association, said providers in the state’s much smaller propane industry, which provides gas to around 50,000 mostly rural North Dakota homes and businesses, expect a trans-state pipeline would leave their businesses fighting to stay afloat.
“If natural gas folks want to put a line across the state, that’s no problem,” as long as it’s not done with taxpayer money, he said.
While Rud expressed concern for the future of his industry, he also questioned whether natural gas delivery would bring the long-term economic boost to the state that leaders have touted.
“I’ve heard that story before,” said Rud, “and it’s not really what’s happened” in the state’s rural communities.
Lawmakers have until 2026 to burn through their $1.1 billion in federal coronavirus relief funding, but some backers of the pipeline proposal, including Burgum, are eager to push it forward as soon as possible. If the state doesn't act quickly to help get the pipeline into the ground, proponents argue that North Dakota risks losing out to Midwestern rivals.
At the recent Industrial Commission meeting, Burgum raised the possibility of Iowa, which already receives Bakken natural gas, beating out North Dakota for a prospective, lucrative agribusiness contract, “all because we can’t get a big enough pipe into Grand Forks.”
Readers can reach Forum reporter Adam Willis, a Report for America corps member, at firstname.lastname@example.org .