Texas, ND grapple with gas flaring
Though Alaska has strong laws against venting or burning off natural gas — flaring — except for safety and emergencies, the rules are far less stringent in the nation’s top two oil-producing regions.
Blaming a lack of pipelines and processing facilities, oil and gas producers in North Dakota’s Bakken shale and the Permian Basin in Texas and New Mexico this fall flared more than 900 million cubic feet of gas per day. At that rate over a full year, it would be enough to fill almost 100 good-sized liquefied natural gas carriers.
Overall, U.S. producers vented or flared 235 billion cubic feet, or bcf, of gas in 2017, according to the U.S. Energy Information Administration, or EIA. Alaska was responsible for 7.6 bcf, with Texas at 101 bcf and North Dakota second at 88.5 bcf. The Texas and North Dakota numbers are up almost 25 percent from 2016. Full-year totals for 2018 are not available yet.
It’s gotten so bad that the Dallas Morning News, in a Jan. 10 editorial, commented: “Wasting this resource should depress all of us, because it has great value.”
The gas could be used as heating fuel, to generate electricity, make petrochemicals or plastics. Instead, “discarding it is wasteful and potentially harmful to the environment,” the editorial said. Whether vented or burned, it adds to greenhouse-gas emissions.
But without enough processing plants and pipelines to move the gas to market, it can be a worthless byproduct. Or worse than worthless when producers have to pay another company to take the gas.
Gas prices in parts of the Permian Basin hovered near zero in November, while some trades cost producers a negative 25 cents per million Btu, according to price-reporting agency S&P Global Platts, which said it was the first time on record that gas traded for less than zero at the Waha hub in West Texas.
The zero pricing could continue in the Permian this year, as more oil pipelines get built and companies ramping up their oil production get stuck with more associated gas. The EIA estimated December gas output would top 12 billion cubic feet a day in the Permian, up about 34 percent from a year earlier.
Flaring reached record highs in the Permian in the third quarter of 2018, when companies lit up an average 407 million cubic feet per day, said Rystad Energy, an energy consulting firm. The resulting greenhouse gas emissions are equivalent to the daily exhaust of about 2.7 million cars, according to estimates from the World Bank and U.S. Environmental Protection Agency.
In October, flaring in North Dakota averaged 527 million cubic feet per day — enough to heat 4.25 million average U.S. homes. That’s enough to have met the natural gas needs for all of North and South Dakota, including industrial and commercial demand, according to a report in the North Dakota Bismarck Tribune.
The flaring represented more than 20 percent of October’s North Dakota gas production of 2.56 billion cubic feet per day. As oil production reached a record 1.39 million barrels per day, the additional associated gas overwhelmed processing and pipeline capacity — and ended up in smoke.
Though 2018 was a bad year for flaring, it was still far short of North Dakota’s record in 2014, when producers burned off almost 130 bcf of gas; that’s more than any state ever in the EIA records that go back to 1967. It was a measly 1 bcf in 1982, a quarter-century before the Bakken shale boom.
Industry is hopeful North Dakota will make significant progress on gas capture in 2019. Several gas processing plants and pipelines were announced or under construction in 2018, totaling more than $3 billion in investment, said Justin Kringstad, director of the North Dakota Pipeline Authority.
But as oil and gas production continues to grow, more investment will be needed to move gas to market.
“We’re probably going to need at least another $10 billion or more,” said Ron Ness, president of the North Dakota Petroleum Council. “Our productivity has just outpaced expectations.”
Alaska statute prohibits “the waste of oil and gas” in production. State regulation, enforced by the Alaska Oil and Gas Conservation Commission, defines waste as “gas released, burned, or permitted to escape into the air,” with the exclusion of necessary emergency and operations-related emissions.
North Dakota’s current gas-capture rules, adopted in 2014 and revised in April 2018, require operators to capture 88 percent of Bakken gas. That’s up from an 85 percent requirement earlier in the year and 76 percent in 2014.
The North Dakota Industrial Commission, with much the same job as Alaska’s AOGCC, can require operators to restrict oil production if they fall below the gas-capture percentage, but the penalty is rarely imposed, the Bismarck Tribune reported in October. In August 2018, the industry captured less than 85 percent of its gas production for a fourth month in a row. For at least three of those months, the state declined to restrict production.
North Dakota allows producers to flare as much gas as they want for the first year of a well’s production. After that, a producer may obtain an exemption on flaring limits if it can show “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 … is economically infeasible.”
The rules in Texas are more stringent than in North Dakota, and the increase in flared volumes is a result of the boom in Permian shale oil production, which grew from 1 million barrels per day in 2010 to almost 3.8 million by the end of 2018.
Texas allows producers to seek a 45-day permit for flaring of associated gas, with extensions allowed to 180 days. Anything longer requires a full hearing by the Texas Railroad Commission, which governs oil and gas production. State law requires a cost-benefit analysis for a permanent exemption.
The 45-day permits are easy to get. As of the end of November, state regulators hadn’t denied a single permit request in more than five years, the Wall Street Journal reported in December.
Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide.