North Dakota's oil production fell 3% in December — and the state is now grappling with potential federal restrictions that could hurt future output.

The drop in December production "wasn't unexpected" given relatively low oil prices that month, Lynn Helms, director of North Dakota's Department of Mineral Resources, said in a webcast Friday.

West Texas Intermediate, the benchmark U.S. oil price, hovered below $45 per barrel in December, below the level needed to drill and frack new wells.

WTI has strengthened significantly since then on the heels of OPEC-led global oil production cuts. WTI was at $59 per barrel Friday, a high since the global economy tanked because of the coronavirus pandemic and oil demand was decimated.

At oil's current prices, "we are hearing positive things about drilling," Helms said.

But North Dakota's oil industry — and a state government dependent on oil tax revenue — is quaking about the prospect of a shutdown of the Dakota Access pipeline, its main transportation artery.

Last year, a federal court in Washington, D.C., threw out the Dakota Access' permit to cross Lake Oahe, saying the U.S. Army Corps of Engineers failed to do a thorough environmental review of the project.

Whether the pipeline can continue operating while a proper review is done has not been settled. There is a key federal court hearing on the matter in late April.

"That is of enormous concern to the state," Helms said.

Since 2016, the Standing Rock Sioux Tribe has fought the pipeline — which is very near its land — in court. Indigenous and environmental groups have called on President Joe Biden to shut down the pipeline.

The Biden administration has put a moratorium on new oil-well leases and drilling on federal lands — except for tribal lands held in trust by the U.S. government. The Fort Berthold Reservation in North Dakota — home of the Mandan, Hidatsa and Arikara Nation — is a major oil-producing area.

Helms said the moratorium wouldn't have much impact this year and next on North Dakota as a whole, but would in 2023 if it holds.

"The long-term impact would be a 14% reduction in total North Dakota well count," he said. Lost royalties from those wells would cost the state $285 million over 15 years, Helms added.

North Dakota, the nation's second-largest oil-producing state, churned out 1.19 million barrels of crude per day in December, down from 1.23 million in December 2019.

Natural gas production, however, was up 4% in December over a year ago due to increasing corporate investments in gas processing.

North Dakota companies captured 94% of all gas produced in December, flaring only 6% and meeting the state's environmental goals.

"Every single area of the state is in compliance," Helms said, adding that he couldn't recall the last time that occurred.

Mike Hughlett • 612-673-7003