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N.D. Oil Industry Flares Off $1B Worth of Natural Gas…But Balks at Investments in Renewable Fuels

August 29, 2013

           

As it turns out, the oil and gas industry really does have "money to burn." According to a recent study, government data show that nearly 30% of the natural gas extracted as a byproduct of fracking for oil in North Dakota is being burned off, or "flared." That's right, three out of every 10 cubic feet of natural gas extracted in North Dakota ends up being burned at the wellhead and released into the atmosphere. The study, released by Ceres in July, concludes that the practice of flaring in North Dakota "...is environmentally damaging, economically wasteful and a potential threat to the industry's long-term license to operate." No kidding? The report estimated natural gas flaring in North Dakota emitted 4.5 million metric tons of carbon dioxide (CO2) in 2012, which is equivalent to the annual emissions of approximately 1 million cars. In the lexicon of lifecycle greenhouse gas analysis, this means 3-5 grams of CO2-equivalent emissions per megajoule should be added to the carbon intensity score of gasoline/diesel produced from Bakken crude oil to account for flaring alone. Notably, there are several other aspects of fracking that make it considerably more carbon intensive than conventional oil production (e.g., most crude from the Bakken is shipped by rail instead of pipeline; significant emissions are related to transportation and disposal of fracking materials/process aids; increased refining intensity due to presence of high levels of naphthenic acid; etc.). Incredibly, current regulations like the RFS and LCFS assume the carbon intensity of crude oil from the Bakken is no different than light, sweet conventional crude oil. ND Gas Fields from Space While the negative environmental impacts of flaring are obvious, there are tremendous economic consequences as well. As the report points out, "[t]he environmental impact of flaring is not its sole cost. The combustion of natural gas during production represents a significant economic cost for oil and gas producers..." Indeed, natural gas flaring in North Dakota represented roughly $3.6 million in lost revenue per day in May 2013—or more than $1.3 billion per year on an annualized basis. But oil and gas companies are making so much money on the crude oil they are producing via fracking that they don't even miss the extra income that could be captured through efforts to curb flaring. To put the amount and value of natural gas flared in the North Dakota in context, consider the following:
  • The amount of natural gas wasted in one year in North Dakota could power roughly 35 large ethanol plants (i.e., 100mgy capacity) for an entire year.
  • The natural gas wasted in North Dakota last year is enough to meet the annual needs of nearly 1.3 million homes. That's roughly the number of households in Los Angeles or Chicago.
  • The value of the natural gas wasted in North Dakota last year is equivalent to the current value of approximately 1.5 billion ethanol RIN credits that can be used for RFS compliance by oil companies who refuse to blend ethanol beyond the E10 level.
  • The value of the natural gas wasted in North Dakota last year is roughly equivalent to the cost of installing some 6,000 E85 pumps and the supporting infrastructure (underground tanks, etc.).
  • Approximately 100,000 retail stations—about 75% of the U.S. total—could be outfitted to sell E15 for the amount of money that is going "up in smoke" via natural gas flaring in North Dakota.
Clearly, the economic and environmental costs of natural gas flaring in the Bakken are staggering. If nothing else, the findings of the new Ceres report underscore the hypocrisy of Big Oil's claim that it can't afford to invest in the distribution infrastructure needed to bring larger volumes of renewable fuel to the consumer and comply with the RFS. If the oil and gas industry can afford to burn off $1 billion worth of natural gas in one state every year, it can certainly afford to make the infrastructure investments needed to meet the RFS and enhance consumer choice at the pump.