O&G Industry Responds to Bakken Gas Flaring Scrutiny

While the environmental and economic arguments for restricting or eliminating gas flaring are compelling, the Energy Policy Research Foundation in Washington, D.C. notes that if gas flaring is restricted, the loss in oil production would be very costly. In June 2012, about 660,000 barrels of oil were produced daily in North Dakota, as well as 713 million cubic feet (MMcfd) of natural gas. Those figures hint at the economic impact from lost production if natural gas flaring is restricted, the foundation said.

Flaring in the Lone Star State

In Texas, the state’s oil and gas regulatory agency, the Texas Railroad Commission, recently sent letters to drillers warning them about state laws on natural gas flaring, said Christi Craddick, a commissioner with the agency, at the Winter NAPE Business Conference in Houston. Texas laws cover natural gas flaring, and some oil and gas drillers, particularly those in the Eagle Ford play, were not following those rules, according to Craddick.

The Texas Railroad Commission allows operators to flare gas for up to ten days before a well is completed, and it issues permits allowing gas flaring. However, drillers must have the permits renewed every 45 days if they plan to continue flaring. Operators not complying with the regulations could be subject to a penalty.

Gas flaring is a difficult issue to solve because the price of natural gas is currently too low to warrant the building of an infrastructure to capture and transport the gas. However, restricting or eliminating gas flaring means that oil production is being restricted or eliminated, too.

A possible solution, some say, is a carbon tax. When natural gas prices are high, there is a greater incentive to capture the gas, rather than flare it. That also means that operators are more likely to comply with existing regulations when prices are high. If there were a tax on all emissions, producers would save more by emitting fewer emissions. In essence, a reduction in emissions would result in lower taxes for the producer.

The carbon tax would also encourage moving from higher polluting fuels to lower ones, and it would promote conservation by encouraging end-users of energy to conserve. If conservation were increased, analysts at the Carbon Tax Center say, our existing sources of energy would last longer. That would allow the pace of production to slow, which in turn would allow for the building of a more comprehensive infrastructure to capture natural gas when future oil wells are drilled.


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