The oil industry is pumping crude from the Bakken shale formation in North Dakota at a pace so fast that it is flaring, or burning off, more than one-third of all natural gas produced in the state. Thanks to North Dakota gas flaring, the United States now leads the world in wasting natural gas, the CS Monitor reported.
The United States is flaring so much natural gas into the atmosphere - burning it as oil-field waste rather than extracting energy from it in power plants - that it now leads the world in the growth rate at which it is trashing that energy source.
"The oil industry can't keep pace with itself
," the Washington Post
reported last week.
There aren’t enough pipelines or gas-gathering stations to capture the natural gas that is found along with the oil. So oil companies in North Dakota are simply burning — flaring — the gas. Decades ago, that was common, but today in the United States it’s virtually unheard of. Nationwide, the amount of natural gas being flared is well under 1 percent. But North Dakota is flaring 34 percent of its gas.
The amount of natural gas flaring in the U.S. has grown 223 percent in the past five years. In 2007, the U.S. was 14th place among the world's top flaring nations. As of last year, the U.S. was in 5th place according estimated flatted volumes from satellite data collected by the World Bank. Worldwide flaring dropped 20 percent between 2005 and 2010, with the only increases occurring in the U.S. and Russia.
As the oil companies race to "take advantage of the high price of crude" the New York Times reported, there is "less economic incentive to capture it, the drillers treat the gas as waste and simply burn it." Building infrastructure to capture the natural gas from the oil wells would reduce their profitability, so its cheaper for drillers to just destroy the gas.
The Monitor reported:
"The increase in US gas flaring is from the Bakken oil field in North Dakota," Chris Elvidge, a NOAA researcher who has analyzed the satellite flaring data writes in an e-mail interview. "It's possible that current low prices for natural gas may be contributing to the decision of the companies operating in North Dakota to flare the gas off rather than invest in the infrastructure to capture it and bring it to market."
This satellite image is a composite showing nighttime lights data from three years: 1992 as blue, 2000 as green, and 2010 as red. White indicates lighting detected in all three years. Most of the red in the Bakken oil field area is due to gas flaring. Source: National Oceanic and Atmospheric Administration.
This shortsighted approach makes business sense to the drillers because elsewhere in the U.S., widespread hydraulic fracking has produced a glut of natural gas driving its price down to 10-year lows. So instead of capturing 34% of the natural gas produced in North Dakota, it is burned off to keep the shale oil crude more profitable for the drillers. This wasted energy could have powered the nation's electrical plants or a fleet of NGVs (natural gas vehicles). An over-supply of cheap natural gas in the U.S. will not last forever and flaring it off now is wasting something the country will need in the future.
Even oil company investors are calling foul of the waste by the oil companies. Investors a Ceres wrote in an open letter to CEOs of companies with major shale oil holdings:
As long-term investors, we are concerned that flaring wastes a valuable product. Even at today’s depressed wellhead price of under $3.00 per 1000 cubic feet, the 100 million cubic feet of natural gas that were flared each day in North Dakota last year represent $110 million in lost revenue.
"Every day, more than 100 million cubic feet of natural gas is flared this way — enough energy to heat half a million homes for a day," the NY Times
reported. "The flared gas also spews at least two million tons of carbon dioxide into the atmosphere every year, as much as 384,000 cars or a medium-size coal-fired power plant would emit".
Turns out that oil companies can flare as much natural gas as they want without paying taxes or royalties on it for one year with extensional readily available for "economic hardship" according to a November 2011 report by the U.S. Energy Information Administration.
According to current North Dakota state regulations, producers can flare natural gas for one year without paying taxes or royalties on it, and can ask for an extension on that period due to economic hardship of connecting the well to a natural gas pipeline. After one year, or when the extension runs out, producers can continue flaring but are responsible for the same taxes and royalties they would have paid if the natural gas went to market.
Flaring of natural gas is not a given in the oil industry. It doesn't have to happen as the oil is extracted from the shale.
Bent Svensson, manager of the World Bank's Global Gas Flaring Reduction partnership, told the Monitor that in Norway, "natural gas production facilities are required to be built before oil production can commence." In addition, Norway has "stiff pollution-related fines for flaring gas that costs companies about $2 per million BTUs, roughly the current cost of natural gas" in the United States.
Norwegians are motivated to wisely manage their natural resources because they own them and use them fund their pensions. Americans, on the other hand, are capitalists. So we lease our natural resources at fire-sale 1987 royalty rates to corporations so they can be extracted and then sold back to the American people for record profits all the while worrying about the longterm health of Social Security.
Furthermore, there are no current federal regulations limiting flaring at oil and gas wells. So, more burning is taking place wherever shale oil is being exploited because flaring is more profitable to oil industry than building natural gas facilities even though they are wasting a valuable resource.
The NY Times reported:
“North Dakota is not as bad as Kazakhstan, but this is not what you would expect a civilized, efficient society to do: to flare off a perfectly good product just because it’s expensive to bring to market,” said Michael E. Webber, associate director of the Center for International Energy and Environmental Policy at the University of Texas at Austin.
Wasting this energy is a stealing from America's future. We have no regulations to stop the theft. Flaring off a limited fossil fuel, because it is the cheapest way to turn a profit for the oil industry adds to America's greenhouse gas output while benefiting only the oil industry's bottom line. America is not as bad as Kazakhstan. Damned with faint praise and flaring away the future.