By Stephen Edelstein, Guest blogger
October 23, 2013
If North Dakota were a country, it would rank fifth behind Russia, Nigeria, Iran and Iraq on the list of worst natural-gas wasters, according to the World Bank. Why is North Dakota ranked so poorly? Because of flaring. The practice costs the state’s mineral-rights owners $1.2 billion per year in lost revenue. Edelstein explains what flaring is and why it’s causing the state to waste excessive amounts of natural gas.
Crucially, the practice costs the state’s mineral-rights owners $1.2 billion per year in lost revenue they would otherwise receive if the gas were captured as a fuel rather than wasted as a byproduct.
Last week, mineral rights owners filed lawsuits against 10 oil and gas companies operating in North Dakota, claiming they were owed money in lost royalties for the flared gas.
Such excessive flaring flies in the face of the policies of most international oil companies (IOCs), according to a source who has worked all his life in the global oil-and-gas business, but preferred to remain anonymous.
“IOCs would have a no-flare policy,” he said “they would gather and sell [the gas] … or not produce new-field developments if it led to flaring beyond testing flares and emergency flares.”
Flaring used to be an industry-standard practice in cases where there was no demand for natural gas or ability to redirect it, but efforts by oil companies and the Global Gas Flaring Reduction Partnership–a public-private group formed by the World Bank in 2002–have curtailed it.
“Maybe the ND fields aren’t IOC-owned, but smaller producers who have different policies.” the source suggested.
“Or maybe some of the infrastructure promised to gather and market the gas didn’t show up on time,” he said, “but this is surprising to me.”
Still, he noted that $1.2 billion a year is not considered a large amount of lost gas by the industry.
Natural gas is an increasingly large part of United States energy production.
The EPA has proposed rules to limit emissions of carbon dioxide, a greenhouse gas, from new power plants. If the new rules are enacted, coal-fired plants may no longer be economically viable.
Consequently, the next big emissions battle could be over whether coal or natural gas will be the dominant fuel for power generation.
According to the Energy Information Administration, only two of 127 new plants expected to open next year will use coal.
[hat tip: Kamal Elias]