Texas gas flaring draws lawsuit from pipeline company

  • Natural gas is seen being flared at an oil well in North Dakota. Flaring has become a major issue in Texas, where a lack of pipeline capacity and low prices have led to thousands of permits allowing hundreds of millions of cubic feet per day to be burned off in order to keep up oil production. The practice has led to a lawsuit by a pipeline company against Texas oil and gas regulators. (Photo/File/AP)

Flaring of natural gas has ended up in court in Texas. But it’s not what you might think.

It’s not an environmental group suing to stop the practice of burning off gas in the field. It’s a pipeline company that wants state regulators to require a gas producer to put the fuel into a pipe and move it to market.

“Flaring has long been recognized as wasteful and environmentally harmful,” Tulsa-based Williams Cos. said in its lawsuit, filed Nov. 20 against the Texas Railroad Commission, which regulates drilling and production in the state.

The commission “is vested with the duty to prevent the waste of oil and gas,” Williams said in its lawsuit; not to mention that flaring is bad for the pipeline business.

The steep increase in gas production in Texas — more than 29 billion cubic feet per day in September, about double the volume of 15 years ago — has outpaced pipeline capacity and markets, leaving some producers with the economic decision that it’s better to burn or vent the gas into the atmosphere than to sell it.

Pipeline companies are trying to build more capacity, but nearly as fast as more gas comes up as a byproduct of oil production.

Flaring and venting in the Permian Basin alone — in Texas and southeastern New Mexico — reached a high of 750 million cubic feet per day average for the third quarter of this year, according to estimates released Nov. 5 by analysts at Rystad Energy, up from 600 million to 650 million during the previous nine months.

Texas, the No. 1 gas-producing state, accounted for 51 percent of all the flared or vented gas in the country in 2018, according to the U.S. Energy Information Administration.

The state a year ago granted temporary permission to Exco Resources to burn off gas from its wells in the Eagle Ford shale. The producer has flared billions of cubic feet since then, according to a Dec. 4 report in the Houston Chronicle.

Williams would rather Exco put the gas into its pipelines and filed suit to contest an Aug. 6 regulatory order allowing Exco to continue burning gas from 138 wells. The Texas Railroad Commission vote was 2-1.

It would be too expensive to use the pipelines, Exco said in its filings with regulators. Besides, there isn’t enough room in the pipes to handle all the gas, the producer said.

“Without a flaring exception, Exco will have to shut in the 138 wells, which could cause damage to the wells and the reservoir, resulting in a waste of hydrocarbons,” the company said.

Flaring exemptions are relatively easy to get in Texas. The regulatory agency granted almost 7,000 flaring and venting permits in fiscal year 2019, almost double the amount of just two years ago and almost 50 times the 152 permits granted in fiscal 2009.

Texas law allows regulatory staff to issue permits for 45 days at a time, but no more than 180 days total. Anything over 180 days requires commission action.

Flaring “may be necessary if the well is drilled in areas new to exploration” that lack pipeline connections, the commission explains on its website.

“I have some serious concerns about the frequency and ease with which this commission grants flaring exemptions,” said Commissioner Wayne Christian, who voted against the Exco permit on Aug. 6. “The price of gas right now is a lot of incentive to flare out of convenience and economics rather than necessity,” he said at the meeting, as reported by the Houston Chronicle.

With U.S. natural gas prices stuck near 20-year lows, Christian expressed concerns about the economic incentive to burn off gas rather than building new pipelines to move it to market.

Voting to approve Exco’s request was Commissioner Ryan Sitton, who also cited economics. Shutting in nearly $500,000 per day of oil coming from Exco’s Briscoe Ranch wells to prevent burning roughly $10,000 per day of associated gas would be a waste that the commission is charged with preventing, he said, according to S&P Global Platts reporting.

In its lawsuit, Williams said the state has not denied any of the more than 27,000 flaring permit requests received in the past seven years, according to the Houston Chronicle report.

Environmentalists accuse state regulators of being weak on enforcement and doing nothing to limit carbon dioxide emissions from flared gas or methane emissions from vented gas.

In a letter to the Texas Railroad Commission, Environment Texas, an Austin-based group, asked the commission to stop issuing flaring permits. The letter was signed by environmentalists, scientists, Native American leaders, legislators and retired Shell Oil Co. president John Hofmeister.

“At current prices, flaring in the Permian Basin burns an excess of $1.8 million a day worth of natural gas,” the letter said.

The Environmental Defense Fund said the commission’s Exco decision gives operators a “blank check” to turn down pipeline connections because they can flare instead.

No court date has been set for the Williams lawsuit.

Nationwide, the volume of gas that was reported vented or flared reached a record-setting average of 1.28 billion cubic feet a day in 2018, according to the U.S. Energy Information Administration. In 2018, the percentage that was vented or flared increased to 1.25 percent of gross withdrawals, up from 0.84 percent in 2017.

Two states, Texas and Bakken Shale producer North Dakota, accounted for 1.1 bcf per day, or 82 percent of the reported vented or flared gas.

Reducing gas flaring throughout the U.S. would provide substantial economic and environmental benefits, according to a paper from the Center for Energy Studies at Rice University’s Baker Institute for Public Policy in Texas.

“Flaring and venting of gas in West Texas’s Permian Basin — and certain other parts of the U.S. — have reached sufficient scale that taken in aggregate … increasingly looks like ‘wasting one resource to produce another,’” wrote Gabriel Collins, the institute’s Baker Botts Fellow in Energy and Environmental Regulatory Affairs.

“Regulators in Texas — the flaring capital of the U.S. — have thus far proven highly deferential to industry on the issue of flared and vented gas, even allowing producers to flare when they are connected to a functional pipeline gathering system,” Collins wrote.

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Larry Persily is a former Alaska journalist, state and federal official who has long tracked oil and gas markets and projects worldwide. He is the Atwood Chair of Journalism at the University of Alaska Anchorage School of Journalism and Public Communication.

Updated: 
12/24/2019 - 1:22pm

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