North Dakota Governor Jack Dalrymple is embarrassed by how much natural gas is squandered in his state. As of April, the latest data available, 30 percent of natural gas produced here was burned, or flared, rather than being sold on the market. In fact, in 2012, North Dakota wasted more natural gas than any other state, according to the Energy Information Administration. But that could soon change now that the state’s regulators are forcing oil companies to cut back on flaring.
Why does North Dakota waste so much gas? The gas is a byproduct of drilling for oil, the more profitable product which nearly all companies operating in the Bakken shale are seeking. Nearly all of North Dakota’s natural gas – 99 percent – comes from oil wells, according to Lynn Helms, director of the state’s department of mineral resources.
Compare that to Colorado, where four percent of natural gas comes from oil wells, or even Wyoming, where only 1 percent comes from oil wells – the exact opposite ratio of North Dakota. In those places, the vast majority of gas comes from dedicated gas wells, where companies have an incentive to capture every last bit of it. Not so with oil companies, whose chief product is 22 times more valuable than natural gas right now, meaning there is little financial motivation for them to capture gas.
In June, the North Dakota Industrial Commission, which regulates the oil and gas industry, began to require oil companies to submit plans showing how they intended to capture natural gas at new wells, rather than flare it off. On July 1, the Commission gave it’s new rules some teeth: if companies don’t meet flaring reductions – about three-quarters of gas from new and existing wells must be captured by October 1. The rule get stricter after that – if they don’t meet the new mandates, oil companies will be forced to cut back on oil production. That will hurt.
The goal is to dramatically reduce not just the percentage of gas that’s flared, but also the overall volume — a challenge, given that oil production in North Dakota is predicted to rise and the state’s biggest contributors to the flaring problem, wells on the Fort Berthold Indian Reservation, aren’t even subject to the new rules (although they are included in the state’s reduction targets). Still, by 2020 the state hopes to cut flaring by 83 percent from current levels.
Not everyone is impressed. Wayde Schafer of the Sierra Club’s Dakota Chapter says the rules don’t go far, or fast, enough. He would like the state to cut the overall volume of gas that will be flared in 2020, around 100 million cubic feet a day, even further.
Ron Ness, president of the North Dakota Petroleum Council, also had concerns, even though the oil industry heavily influenced the outcome of the flaring plan. He was concerned oil companies might be penalized for things beyond their control, such as when a gas processing plant shuts down or a pipeline breaks, forcing the companies to flare gas again.
He also would have preferred more penalties than just reducing oil production. “We wanted curtailment as a last resort,” he said.
Back in the Pioneer Room in the basement of the North Dakota Capitol where the new regulations were under consideration, Governor Dalyrmple voted to approve the new rules along with the other two members of the state’s Industrial Commission.
“I just hope that what we do here today, we’re serious about it,” he said, “because otherwise it’s just going to be meaningless if we don’t stand by it.”
Meaningless, and, for the Governor, embarrassing.