The fossil fuel production boom in North Dakota’s Bakken formation is generating more than 260 million cubic feet (Mcf) of natural gas per day, but 30 percent of that is lost through flaring.  In 2012 alone, flaring in North Dakota resulted in the loss of approximately $1 billion in fuel.  Also, while flaring cuts down on the greenhouse gases (GHGs) that would be contained in emitted natural gas that is not flared, emissions from flaring in the Bakken formation still produced GHGs in 2012 equivalent to adding 1 million cars to the road. 

Those are some of the highlights in a new report on North Dakota’s flaring activity from Ceres, a coaltion of investors and advocacy groups that promotes sustainability leadership.  

“The practice is environmentally damaging, economically wasteful, and a potential threat to the industry’s long-term license to operate,” states the report, which was written by two members of Ceres’ Oil and Gas Program.

Cost of infrastructure

The report notes that flaring generally occurs when natural gas is burned on location due to a lack of gather pipeline infrastructure or economic alternatives.  That lack of infrastructure, as well as the apparent disinclination of energy companies to build it, are precisely the two causes of excessive flaring in North Dakota, according to the report.

“First, natural gas has a much lower relative value than oil,” the report states.  “For production occurring in May 2013, the North Dakota Industrial Commission reported that the oil to gas ratio was 30 to 1, reflecting the relatively high market price of oil and correspondingly low price of natural gas.  A large differential between the prices for oil and gas acts as a deterrent for developers to invest capital in natural gas utilization.”

“Permissive” North Dakota

Flaring is also insufficiently discouraged by North Dakota, claim the researchers.  Under current North Dakota regulations, companies are allowed to flare natural gas for the first year of a well’s production, precisely the time when the large percentage of the well’s natural gas production occurs.  After the first year, companies can apply for a further flaring exemption if they can demonstrate that capturing the natural gas is economically unfeasible. 

Since many wells are located in remote regions, companies can easily make this demonstration.  As a result, in the past 2 years, North Dakota regulators approved over 95 percent of extension requests, according to the report.  “When compared to other resource rich states like Texas, California, or Alaska, North Dakota’s flaring regulations are unusually permissive,” say the researchers.

10 percent goal

The report adds that North Dakota regulators have set a public goal to reduce flaring by at least 10 percent by an unspecified future date.  However, given the upward trend in production, a 10 percent reduction will still result in more gas being flared in the state in 2020 than in 2010, say the researchers.  

Three companies that have taken “important steps” to curb routine flaring are singled out in the report.  In addition, investors in the state’s oil and gas industry have continued to be outspoken proponents of flaring reduction, states the report.

Recommendations
The Ceres researchers make the following recommendations:

• North Dakota should provide incentives such as tax breaks to promote capturing natural gas that is now flared.
• The state regulatory regime should be revised to drastically reduce flaring.
• Energy companies should work together to share best practices and strategies for minimizing the flaring of gas.