Critics doubtful North Dakota measures will curb wasted gasBISMARCK, N.D. (AP) — Legislation headed to Gov. Jack Dalrymple's desk that offers North Dakota oil drillers tax breaks if they stop deliberately burning and wasting natural gas will do little or nothing to significantly dim the burning glow over North Dakota's oil patch, critics say.
By: JAMES MacPHERSON,Associated Press, Associated Press
BISMARCK, N.D. (AP) — Legislation headed to Gov. Jack Dalrymple's desk that offers North Dakota oil drillers tax breaks if they stop deliberately burning and wasting natural gas will do little or nothing to significantly dim the burning glow over North Dakota's oil patch, critics say.
The Republican-sponsored bills offer oil companies tax incentives for capturing and using the otherwise unwanted gas, a byproduct of the state's booming crude production. But critics say the measures lack teeth and won't completely compel drillers to stop deliberately torching and wasting the gas.
Records show 275 million cubic feet of natural gas goes up in smoke each day in North Dakota, or enough to heat more than 1 million homes daily. Records also show flaring accounted for about 5 million tons of carbon dioxide emissions in North Dakota last year, or about the same amount that 945,000 automobiles would emit. The hundreds of flares in the oil patch emit a collective blaze so bright that it has been photographed from space.
"It's fine to offer a carrot but you also have to have a stick to ensure something actually gets done," Wayde Schafer, a North Dakota spokesman for the Sierra Club, said of oil companies' practice of burning or "flaring" natural gas. "Providing incentives relies on good faith from the oil industry and that hasn't proven to be effective."
The Legislature has passed a pair of bills that give tax breaks to companies if natural gas is collected and used for agricultural, industrial and railroad purposes. Projects that also convert natural gas to such things as farm fertilizer or electricity also would be given incentives. The measures that were endorsed last week by lawmakers had not reached the Dalrymple's desk on Thursday.
Bob Harms, a former oil industry lobbyist and lawyer for Dalrymple's predecessor, John Hoeven, said the measures amount to little more than a cosmetic attempt at curbing an increasingly unacceptable practice to North Dakotans.
"It's window dressing," said Harms, an outspoken critic of flaring who's also reaping royalties from oil wells on his land in western North Dakota. "These bills will help but they do nothing to significantly reduce flaring."
More than 30 percent of the state's gas production is being burned off because development of the pipelines and processing facilities needed to handle it has not kept pace with production. The U.S. Energy Department says the national average is less than 1 percent.
Lynn Helms, director of the state Department of Mineral Resources, said the measures are estimated to cut flaring in North Dakota's oil patch by 10 percent.
"It's very significant but it still only gets us to 20 percent," Helms said.
Both Helms and Ron Ness, president of the North Dakota Petroleum Council, said increased infrastructure is the answer to the flaring problem.
"We've got to get those pipelines in place," said Ness, whose group represents more than 400 companies working in the oil patch.
Justin Kringstad, director of the state Pipeline Authority, said about $4 billion in infrastructure improvements have been built in North Dakota to capture natural gas and move it to market, but another $5 billion to $10 billion in gathering systems is needed to keep pace with the state's record oil production.
Helms said it could be five to seven years before the flaring percentage reaches single digits.
There are currently 18 natural gas processing plants operating in the state, Kringstad said. Natural gas is being collected at more than 6,000 wells while nearly 1,500 wells are burning the gas, he said.
Terry O'Clair, the state Health Department's air quality director, said the flare emissions in the state's oil patch continue to fall within acceptable air quality guidelines.
"Even though it is not creating a lot of pollution, it is a waste of a natural resource," O'Clair said.
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. More than 95 percent of the extensions requested over the past two years were granted, records show.
Lawmakers killed a Senate bill early in the session this year that was the toughest legislation to date aimed at curbing the oil industry's practice of burning and wasting natural gas. The bill would have cut the easily acquired waiver that allows companies to claim an economic hardship of connecting a well to a natural gas pipeline.
Harms, the former oil industry lobbyist, said the state likely won't get be able to snuff out extraordinary flaring unless companies are required to capture and utilize natural gas once it comes to the surface with oil.
"There needs to be a change of mindset," said Harms. "We have to be less willing to accept flaring as an unavoidable consequence of oil production."
Helms, the state's top regulator, said North Dakota, the nation's No. 2 oil producer behind Texas, has rules similar to that state, which allows oil producers six months to capture natural gas before taxes are imposed.
"We're not way out of line with Texas," Helms said.
But North Dakota's rules for flaring are lax compared with Alaska, a state North Dakota passed last year to become the second-leading oil-producing state in the nation. Alaska only allows flaring under certain conditions and the state flared less than 1 percent of its natural gas production in 2012, Dan Seamount, commissioner of the Alaska Oil and Gas Conservation Commission.
"We want to minimize waste as much as possible," Seamount said. Companies that flare natural gas are charged two times the commodity's value, he said.
"Operators who try and make the case that economics justify flaring gas is not an excuse that will fly with us," Seamount said. "Natural gas is too valuable. We can use that gas."