North Dakota oil producers are wasting billions of cubic feet of natural gas
North Dakota oil drillers are falling far short of the state’s goals to limit the burning of excess natural gas at well heads, five years after the state adopted rules to reduce the wasteful and environmentally harmful practice.
The industry has spent billions of dollars on infrastructure but is at least two years from catching up, and regulators are projecting that the state’s increasing gas production will still outstrip that new capacity.
Environmentalists and even a key Republican say the problem will persist as long as the state doesn’t take a tougher approach with the industry, which has largely avoided financial penalties.
“We need to find an excess flared gas solution immediately,” said Republican state Rep. Vicky Steiner, whose hometown of Dickinson is in the heart of the state’s oil patch. “It’s a shame. I’d like to see us find a use for this.”
“Compliance with the state’s flaring policy is not working,” added Wayde Schafer, spokesman for the state’s Sierra Club chapter. “We need to revisit the policy.”
Flaring is the practice of burning off natural gas that is produced as a byproduct of oil drilling. It’s a picturesque feature of the oil patch, especially at night, but it means wasted money and unnecessary carbon dioxide emissions that worsen global warming.
In 2014, when more than one-third of that gas was being burned off, North Dakota began requiring oil companies to limit flaring to no more than 15% by 2016, and to 10% by 2020. The national average for flaring is less than 1%.
Oil companies endorsed the rules but struggled to meet them from the start. Most have often missed them.
In March, drillers produced a record 2.8 billion cubic feet of natural gas per day, but about 20% of it went up in flames. That was well above the current limit of 12% — and was enough to heat all North Dakota homes for a month 10 times over, according to an analysis by the Legislature’s research agency.
March also was the 13th month in a row that drillers missed the target.
About $4 billion in gas processing plants and pipelines is scheduled to come on line within the next two years, boosting gas-gathering and processing capability by 56%. That would be enough to handle most of the gas produced in the state at present.
But Justin Kringstad, director of the North Dakota Pipeline Authority, said projections show that oil production and its associated gas in two years will outpace even that added capacity. North Dakota is the nation’s No. 2 oil producer behind Texas.
Kringstad said he wasn’t aware of any other planned infrastructure projects. Building a gas processing plant typically takes about three years, he said.
Company officials have warned lawmakers and regulators for years that significantly restricting oil development to curb flaring would hurt investment and the state’s treasury, which increasingly relies on oil and gas revenue.
Lawmakers have opted to accept flaring rather than cut back on production, because oil revenue brings big dollars to their districts, said Steiner, the Republican lawmaker whose district represents a portion of western North Dakota’s oil patch.
“Everybody is taking a share out of the Bakken [formation] right now and nobody wants to get rid of any of it,” she said.
The state’s Republican-led Legislature this year killed two flaring bills. One, sponsored by Democrats, would have required companies to pay royalties if they flared natural gas for more than a year. The other bill, sponsored by Steiner, would have studied some solutions to flaring.
North Dakota oil producers can flare natural gas for a year without paying taxes or royalties on it. Companies can then ask state regulators for an extension because of the high costs of moving the gas to market. Almost all the extensions requested in recent years were granted, Tax Commissioner Ryan Rauschenberger said.
Mike Nowatzki, a spokesman for Gov. Doug Burgum, called natural gas flaring “a recognized issue.”
“The investment in gas processing infrastructure is a high priority and they’ve been making progress in that regard,” Nowatzki said. “The governor realizes there needs to be additional investment. That’s going to be a challenge.”
To meet the gas-capture goals immediately, the Industrial Commission — made up of the governor, agriculture secretary and attorney general — would have to limit oil production, thus reducing the percentage of flared gas.
That’s something the panel has not had an appetite to do. Instead, the commission has either voted to extend the deadlines for gas capture or given the industry more flexibility.
Ron Ness, president of the North Dakota Petroleum Council, said the recent $4 billion in projects coming online to process and move natural gas brings to more than $18 billion that has been invested in North Dakota to handle it in recent years.
“Anybody who says we’re not doing anything is just wrong,” said Ness, whose group represents more than 500 companies working in the oil patch.
Investment in pipelines and processing plants were slowed by low oil prices starting in 2015, Ness said. The current bump in oil production should encourage more investment, he said, but he didn’t know of any other projects planned at the moment.
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