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In North Dakota's oil bonanza, natural gas goes up in flames

North Dakota sees more than $1 billion a year in natural gas go up in flames
In North Dakota, energy firms scramble to build pipelines for surplus natural gas
Energy companies must now explain how they will limit gas flares before they drill

Frank and Wanda Leppell once lived on a quiet cattle ranch in the middle of a rolling prairie, the lowing of cattle and the chirping of sparrows forming a pleasant soundtrack to their mornings. No more.

Not since the pasture they began leasing in 2009 became part of one of the nation's most productive new oil fields. Not since a well barely 200 yards from their front porch began shooting a torch of burning gas skyward, 24 hours a day, with a force as loud as a jet engine.

"My bedroom's like day — I don't need a night light," said Wanda Leppell, who has pleaded with state officials — so far without success — to do something. Her husband minces fewer words. "Rotten noise," he says. "Rotten smell, and terrible waste."

The rapid escalation of energy production in shale formations across the U.S. has produced a bonanza of oil, but it has left many states scrambling to handle the natural gas that often flows in large volumes along with the crude. Gas pipeline construction often lags behind the development of new wells, and the result is that billions of dollars' worth of gas that might be warming homes or fueling power plants is going up in smoke.

The issue is at its most severe in North Dakota, where the amount of gas flared in the Bakken oil field has nearly tripled since 2011, sending gas worth more than $1 billion a year into the sky.

The flames have produced a collective glow that, on satellite images, makes rural North Dakota resemble a large metropolis and prompted environmental analysts to warn that flaring annually releases as many climate-changing greenhouse gases as 1 million automobiles.

Republican Gov. Jack Dalrymple, saying he is "embarrassed" by a gas flaring record that he says has "been easy on companies," has vowed that the state will strictly enforce new rules aimed at cutting the waste. State officials say the regulations, which took effect in June, will curb the proportion of total natural gas production flared from 28% in May to 10% in 2020.

"We will reduce flaring — it's just that simple," Dalrymple said.

The pledge hasn't soothed the Leppells, whose 30-acre homestead has become surrounded by three well pads since they purchased it in 2009 — one of them directly on the 1,200-acre pasture they lease. Because they only rent the pasture, they earn no royalties, unlike many North Dakota farmers and ranchers who have become wealthy from oil earnings. They say the state should have required infrastructure for capturing and marketing the gas before allowing more oil wells, which now gush $2.5 billion a month worth of crude.

"All of the details should have been worked out long ago," Wanda Leppell said. "Instead, I'm sitting here as a guinea pig because, you know, money talks."

Leppell doesn't want to move — the couple relocated an old family house onto the then-secluded property when they bought the land — but she does worry about the health effects from living near so much flaming gas. Producers hold permits for 45 wells within 1.5 miles of their farmhouse. Her husband, a fire chief for 20 years, is concerned that a gas flare could spark a grass fire on a gusty day, something he said he has seen happen several times.

Advances in hydraulic fracturing and horizontal drilling have led to a nearly 200% increase in North Dakota oil production since 2010, mirroring a similar boom in Texas. But unlike states such as Texas and Pennsylvania, North Dakota drew mainly oil-drilling companies, attracted by the riches in the 360-million-year-old Bakken formation. Projected oil revenue far surpassed those from what was thought to be a minor amount of natural gas.

When gas recoveries surpassed forecasts, natural gas companies that had ignored North Dakota were forced to scramble to build pipelines needed to get the gas to market, officials said. A weather-shortened construction season, hilly terrain and haggling with landowners for rights-of-way have slowed the process.

Though crude oil can be shipped by truck, train or pipeline, only pipes can safely move natural gas. Financial incentives to build gas pipelines have been relatively low, with natural gas valued at 22 times less than North Dakota oil was in May.

"There was a delay for them to realize the size and sheer amount available," said Alison Ritter, spokeswoman for the North Dakota Industrial Commission, which regulates the industry.

Now, across western North Dakota, pilot lights torch gas streams as high as 20 feet into the air. At Theodore Roosevelt National Park, a remote expanse of barren buttes and rolling grasslands more than 30 miles from the nearest large city, complaints have arrived about air and light pollution.

In Texas, where pipelines are abundant, barely 1% of the gas produced statewide is flared. Since 2006, North Dakota's natural gas industry has added enough pipeline to stretch from Los Angeles to Miami and back twice. But the number of wells not connected to a pipeline has doubled, leaving about 10% of North Dakota's 10,000 wells lacking the necessary connections to processing plants.

"When you're drilling as many wells as we are and the infrastructure is behind, we worked on ways to reduce flaring and we saw numbers drop percent by percent, but we just couldn't quite catch up," Ritter said.

Because the market couldn't "achieve the desired result," the Industrial Commission recently ordered what amounted to "a huge sea change" in the industry, Department of Mineral Resources Director Lynn Helms told reporters. Companies submitting drilling permit applications must now explain how they will limit flaring, and if they exceed either flaring or pollution targets, the state can impose limits on oil production.

The proposed penalty regime takes effect in October. Had it been in effect in April, oil production would have been reduced by about 5%, Helms said.

Fearing that penalty's bite, the industry has submitted plans to build 1,000 miles of pipeline and additional processing plants. At least 400 miles of key pipeline segments are scheduled to be in place by 2017.

"It has to make economic sense for us to [build] it, of course, but I don't think anyone in our business wants to see production curtailments, because it could affect all of us, and the state," said Brad Borror, a spokesman for Oneok Partners, the leading mover of natural gas in North Dakota.

Environmental activists concerned about the greenhouse gas emissions and wasted energy say they will watch to ensure that lawmakers properly fund enforcement of the new rules. Ritter said she was already meeting with drillers to see whether they were following through on either transporting more natural gas or testing machines that can productively use it on the spot.

Oneok had initially expected in 2010 to process 100 million cubic feet of gas per day, and it spent $400 million on pipelines and processing plants. With requests pouring in from drilling companies, it now expects both its costs and processing capacity to escalate eightfold by 2016 to meet demand. Across North Dakota's natural gas capture industry, $6 billion has been invested since 2006, according to the North Dakota Petroleum Council.

At Oneok's processing facility in Williston, about 40 miles from the Leppells' ranch, natural gas comes in through three steel pipes. In a maze of tanks sitting on what was once a wheat farm, the gas is churned through 32,000-rpm turbines and subjected to below-freezing temperatures and high pressure to separate natural gas (primarily methane) from fuels such as propane and butane.

At a recent public hearing on Oneok's latest proposed plant, a pair of citizens shared concerns about high power use at the plants browning-out residences and water runoff flooding farms. But the community has largely accepted the development if it means reduced flaring, officials said.

Wayde Schafer, a North Dakota organizer for the Sierra Club, said his primary concern was creating greenhouse gas emissions without harnessing any energy.

"They had the power to slow down the issuance of permits until the infrastructure was there," he said. "The natural gas wasn't going anywhere."

paresh.dave@latimes.com

Copyright © 2015, Los Angeles Times
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