North Dakota Will Not Impose Oil Production Cuts

North Dakota’s oil regulators decided on Tuesday not to impose any oil production restrictions amid the coronavirus pandemic, The Bismarck Tribune reported.North Dakota follows Texas and Oklahoma in deciding not to mandate proration. Instead, they will let the market decide for itself how much oil should be produced.

In May this year, the Railroad Commission of Texas voted against the idea of pro-rationing production in Texas after Ryan Sitton, the Commissioner who first floated the idea, failed to convince his two co-commissioners that mandatory cuts were essential.

Now the North Dakota Industrial Commission unanimously rejected this week the idea of pro-rationing, as many producers and mineral owners from the Fort Berthold Indian Reservation opposed the idea of mandatory production cuts.

“Let’s let the private sector hammer out some of these things and where government can assist and intervene we’ll do so, but it’s probably best if we don’t go down this road,” state Agriculture Commissioner Doug Goehring, who sits on the three-person North Dakota Industrial Commission, said.

While North Dakota’s oil producers were grappling with low oil prices, they suddenly faced this week a new major hurdle to their plans after a federal judge vacated authorization for the Dakota Access Pipeline – operational since 2017 – and ordered it shut within 30 days.

If Dakota Access is shut down pending a new environmental impact assessment, it could stifle the Bakken oil industry in North Dakota. According to The Bismarck Tribune, North Dakota state officials are concerned that if Dakota Access shut down, the Bakken crude could lose value, and some producers might leave the state.

“In North Dakota alone, the oil industry provides more than 50% of all state tax revenues and supports over 55,000 jobs. This order will directly harm North Dakota’s economy and its citizens,” Ron Ness, President of the North Dakota Petroleum Council, said, commenting on the court order.

“Shutting down the pipeline will cut off North Dakota oil producers from the safest, most reliable and economic method of transporting our high-quality Bakken oil to the best markets in the country. Increased rail traffic will impact North Dakota and regional farmers by creating rail capacity issues as harvest season ramps-up this fall,” Ness added.