Order For Oil Conditioning Was Likely Too Much Micromanagement For Industry's Taste

Back in November, as the North Dakota Industrial Commission was considering new regulations for conditioning crude oil before shipment, I interviewed North Dakota Petroleum Council Vice President Kari Cutting (audio at the link). In addition to representing the industry, Cutting is a chemist with a long history of working with oil, and I asked her what she and her organization were looking for from the Industrial Commission in terms of regulations.

It may surprise some of you, given the tone of the media reporting on this issue, that the oil industry actually isn’t opposed to conditioning. They are very much supportive of setting benchmarks for conditioning oil. What Cutting told me is that they oppose the government micromanaging how the industry hits those benchmarks.

Yesterday the Industrial Commission handed down their new regulations. So far the Petroleum Council hasn’t commented on them – when I reached out they said their membership was still digesting the new rules and so they weren’t taking a position yet – but by my reading of the order (see below) it probably leans too far in the direction of micromanagement.

In addition to setting a benchmark for oil conditioning (a maximum of 13.7 psi vapor pressure), the NDIC also lays out what temperatures must be used in the treatment process. The industry had hoped that the NDIC would leave the door open to innovation in treating the oil, allowing companies to develop techniques that are more effective and/or could save them money, and while the order does allow for alternative methods they must be approved by the NDIC before they can be used.

Given how competitive the oil industry is, and that these companies would no doubt want to keep any new process they’ve developed under wraps from competitors, that may well be an obstacle to improving this process.

Still, this probably isn’t as bad as it could have been.