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38-08-06.1. NATURAL GAS WELL STATUS DETERMINATIONS AND 

FINDINGS. Repealed. 

Source: N.D. Century Code. 

38-08-06.2. DISCRIMINATION IN THE PROCESSING AND PURCHASING OF 

GAS PROHIBITED. Gas produced in this state must be processed and purchased without 

discrimination between producers in the same reservoir, recognizing the right of the purchaser to 

establish reasonable quality standards for acceptance of gas, which must be applied without 

discrimination among producers. After notice and hearing, for good cause, the commission may 

relieve any person of the duty to process and purchase gas produced in this state without 

discrimination. 

Source: N.D. Century Code.

38-08-06.3. INFORMATION STATEMENT TO ACCOMPANY PAYMENT TO 

ROYALTY OWNER - PENALTY. Any person who makes a payment to an owner of a royalty 

interest in land in this state for the purchase of oil or gas produced from that royalty interest shall 

provide with the payment to the royalty owner an information statement that will allow the royalty 

owner to clearly identify the amount of oil or gas sold and the amount and purpose of each 

deduction made from the gross amount due. The statement must be on forms approved by the 

industrial commission and contain the information that the commission prescribes by rule. A 

person who fails to comply with the requirements of this section is guilty of a class B 

misdemeanor. 

Source: N.D. Century Code.

38-08-06.4. FLARING OF GAS RESTRICTED - IMPOSITION OF TAX - 

PAYMENT OF ROYALTIES - INDUSTRIAL COMMISSION AUTHORITY.

1. As permitted under rules of the industrial commission, gas produced with crude oil 

from an oil well may be flared during a one-year period from the date of first 

production from the well. 

2. After the time period in subsection 1, flaring of gas from the well must cease and the 

well must be: 

a. Capped; 

b. Connected to a gas gathering line; 

c. Equipped with an electrical generator that consumes at least seventy-five 

percent of the gas from the well; 

d. Equipped with a system that intakes at least seventy-five percent of the gas 

and natural gas liquids volume from the well for beneficial consumption by 

means of compression to liquid for use as fuel, transport to a processing 

facility, production of petrochemicals or fertilizer, conversion to liquid 

fuels, separating and collecting over fifty percent of the propane and heavier 

hydrocarbons; or 
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e. Equipped with other value-added processes as approved by the industrial 

commission which reduce the volume or intensity of the flare by more than 

sixty percent.

3. An electrical generator and its attachment units to produce electricity from gas and 

a collection system described in subdivision d of subsection 2 must be considered 

to be personal property for all purposes.

4. For a well operated in violation of this section, the producer shall pay royalties to 

royalty owners upon the value of the flared gas and shall also pay gross production 

tax on the flared gas at the rate imposed under section 57-51-02.2. 

5. The industrial commission may enforce this section and, for each well operator 

found to be in violation of this section, may determine the value of flared gas for 

purposes of payment of royalties under this section and its determination is final. 

6. A producer may obtain an exemption from this section from the industrial 

commission upon application that shows to the satisfaction of the industrial 

commission that connection of the well to a natural gas gathering line is 

economically infeasible at the time of the application or in the foreseeable future or 

that a market for the gas is not available and that equipping the well with an 

electrical generator to produce electricity from gas or employing a collection 

system described in subdivision d of subsection 2 is economically infeasible. 

Source: N.D. Century Code. 

38-08-07. COMMISSION SHALL SET SPACING UNITS. The commission shall set 

spacing units as follows: 

1. When necessary to prevent waste, to avoid the drilling of unnecessary wells, or to 

protect correlative rights, the commission shall establish spacing units for a pool. 

Spacing units when established must be of uniform size and shape for the entire pool, 

except that when found to be necessary for any of the purposes above mentioned, the 

commission is authorized to divide any pool into zones and establish spacing units 

for each zone, which units may differ in size and shape from those established in any 

other zone. 

2. The size and shape of spacing units are to be such as will result in the efficient and 

economical development of the pool as a whole. 

3. An order establishing spacing units for a pool must specify the size and shape of each 

unit and the location of the permitted well thereon in accordance with a reasonably 

uniform spacing plan. Upon application, if the commission finds that a well drilled at 

the prescribed location would not produce in paying quantities, that surface 

conditions would substantially add to the burden or hazard of drilling such well, or 

that the drilling of such well at a location other than the prescribed location is 

otherwise necessary either to protect correlative rights, to prevent waste, or to effect 

greater ultimate recovery of oil and gas, the commission is authorized to enter an 

order permitting the well to be drilled at a location other than that prescribed by such 

spacing order; however, the commission shall include in the order suitable provisions 

to prevent the production from the spacing unit of more than its just and equitable 

share of the oil and gas in the pool.