*UPDATE* On Flaring and North Dakota
By now, you’ve probably read some of the recent stories about two things that the vast majority of Americans will never see in person: 1) North Dakota, and 2) flaring at the wellhead. But what is actually happening out there in the Peace Garden State -- aside from the virtual full employment and state budget surpluses that tight oil development from the Bakken continues to deliver? EID takes a look at the facts.
UPDATE (2/15/2013, 11:27am ET): During a sparsely covered House hearing earlier this week, Rep. Marc Veasey (D-Tex.) asked U.S. EIA Administrator Adam Sieminski about flaring in North Dakota, as well as any potential related concerns in the Eagle Ford shale in south Texas. Veasey wondered if there were “any technology on the horizon” that would allow us to reduce flaring in places like Texas, North Dakota, and even Alaska.
Here is Sieminski’s response (his remarks begin at the 1:01:05 mark in the archived webcast):
“Although there’s a significant amount of flaring taking place in the Bakken formation right now, I think the latest statistics from North Dakota suggest that it’s actually coming down. It had been as high as 35 or 36 percent of the gas. It’s now down slightly below 30 percent. This is usually indicative of infrastructure build-out needed in a new area.
“The gas is associated with the oil production in North Dakota. I suspect that over time, the pipeline networks will be built out in North Dakota and those numbers will come down even further. Although it seems like a lot of gas, when you just look at the percentage in North Dakota, the amount in North Dakota is less than one-third of one percent. So less than one-third of one percent of total U.S. gas production. And so it’s actually a very small number.
“You’re correct, sir, in that there actually has been some flaring in the Eagle Ford, essentially for the same reason. Eagle Ford is in a part of Texas that’s actually not heavily populated, it doesn’t have the same pipeline infrastructure that you see in other parts of Texas. It’ll just take a little bit of time, and companies are working on that.
“On the technology side, there has been an effort to look into small LNG liquefaction facilities that might be put in place in some of these remote areas where you could turn that natural gas that’s being flared into a liquid, which would be easier to transport. So I think there is a lot of thinking going on in the industry, and although those satellite pictures showing the sky at night and the amount of light being given off in some of these new producing areas seem startling, it is I think relatively small proportion. It’s fairly normal in the course of development in new areas.
“Very quickly, in Alaska, there is a lot of gas that comes up in Alaska with the oil, but it’s re-injected back into the formation. So there’s very little flaring taking place in Alaska.” (emphasis added)
—Original post, February 5, 2013—
By now, you’ve probably read some of the recent stories about two things that the vast majority of Americans will never see in person: 1) North Dakota (which is too bad; it’s a beautiful place with great people), and 2) flaring at the wellhead.
Flaring is a tightly controlled, closely regulated process — one that’s used both as a safety mechanism to regulate and control pressure levels, and as means of converting methane gas into CO2, especially in those cases where there’s not enough natural gas to produce in commercial quantities from the well. Of course, in a perfect world, you wouldn’t need to flare any natural gas – you’d direct every bit of it into a pipeline, and then send it out for sale. But transport infrastructure takes time to build, and it’s tough to build a pipeline out to a wellsite if you don’t even know if there’s enough natural gas out there to produce.
Most of the big national stories on the flaring phenomenon haven’t really focused on any of that stuff, though. Much more intriguing to them is that some flaring sequences can apparently be seen from space. National Public Radio – apparently puzzled that any lights were present in that part of the country at all – links flaring to everything from air pollution to rising tempers. A feature piece for New York Times Magazine also mentions flaring in North Dakota – just before the author describes the state as a place “where winters are brutal and culture is thin.” (Geez, New York — tell us how you really feel about the Midwest…)
So then, notwithstanding NYT’s dim and completely misguided view of North Dakota’s cultural scene: what is actually happening out there in the Peace Garden State? You know, aside from the virtual full employment and state budget surpluses that tight oil development from the Bakken continues to deliver? Below, EID takes a closer look at the facts.
Regulations and Infrastructure
As with any process related to oil and gas, the first (and almost always false) assumption put forth is that flaring is unregulated. How else to explain those bright lights that NASA has photographed from space? How could the state allow that?
Well, in reality, the entire system is heavily regulated and closely monitored, and a sober explanation of the facts should prove useful – even for us temper-prone and uncultured flat-staters.
As noted by the North Dakota Department of Mineral Resources (DMR), the oil and gas division of the state’s Industrial Commission “implements and enforces rules and regulations to limit the production of oil produced from wells that are not yet connected to a gas-gathering system.” After a well is completed, a period of time must be allowed to assess flow rates and stabilize production, and the state limits the total amount of oil that can be produced during that process. This helps operators and regulators determine what, if any, added infrastructure will be needed. During this period, when gas is produced as a byproduct, it is flared off.
The alternative would be to either vent the gas or force a serious incident to occur. The state could also theoretically require costly new pipelines to be built before a well is even proven, but as mentioned, not every well drilled will produce commercial quantities of hydrocarbons. There’s also a fundamental economic problem: Why would any company underwrite millions of dollars in pipeline infrastructure without knowing that it will have a product to deliver to consumers?
Now, you might be saying, “That makes sense. But what about all these wells in the Bakken that are clearly proven?” The DMR has some reassuring words about that, too:
“Now that the size of the natural gas resource is proven, operators in the state are rapidly planning and building the gathering pipelines and processing plants as well as access pipelines to the large interstate pipelines that cross the state.”
In other words, before the infrastructure can be put in place, operators need to prove their wells will produce enough product to justify the expense. Remember, it was just a few years ago when North Dakota barely ranked in the top 10 of oil-producing states (it’s now ranked second, behind only Texas). Now that it’s known there are sufficient quantities of gas and its associated liquids, the industry has been investing billions of dollars in new pipeline and processing infrastructure.
Here’s how North Dakota’s governor, attorney general, and agriculture commissioner described it to members of the U.S. Congress a little over a year ago:
“Industry also plans to invest over $3 billion in natural gas gathering and processing infrastructure in 2011, 2012, and 2013. As this investment is made and gas gathering infrastructure is built, policy can be expected to focus even more toward preventing waste in the natural gas arena. By year end 2012, natural gas processing capacity is expected to increase 389% from 2006. North Dakota’s natural gas processing plants will have the capacity to process one billion cubic feet of natural gas per day.”
In his 2013 State of the State Address, Governor Dalrymple provided an update on the progress:
“Our production of natural gas has also more than doubled from two years ago. We have encouraged the gathering of natural gas and have also doubled processing capacity since the end of 2010. By 2014 we expect to have capacity to process 1.36 billion cubic feet of natural gas per day. We are also promoting the use of natural gas at the well site instead of diesel fuel, and today we are seeing a leveling off of the percentage of natural gas that is being flared.”
However, even with these facts – clear regulations in place, growing investment in pipelines and other infrastructure – there’s still plenty more to the story.
Two other questions people ask about flaring are: “If we’re burning off all of that gas, aren’t we wasting a lot of energy? And what’s flaring mean in terms of air emissions?” Let’s address the first question…well, first.
The Financial Times recently reported on flaring and provided this nugget of information:
“More than 1,000 wells were connected to the gas-gathering system in 2012, but that has not been enough to cut the proportion of the state’s gas being flared, which has remained stuck at about 30 per cent.”
Flaring 30 percent of all gas produced sounds high, but it leaves out an important fact: the overwhelming majority of energy produced from North Dakota wells comes out in the form of oil or other liquids. Let’s look at flared gas as a percentage of the total energy produced in North Dakota, as highlighted by the state’s governor, attorney general, and agriculture commissioner:
Shale development in general – and hydraulic fracturing in particular – is typically discussed in the context of natural gas. That’s to be expected, especially when you consider all of the economic and environmental benefits that increased supplies of affordable natural gas have provided the United States. But in North Dakota, the story is clearly a bit different, and it’s important to recognize the amount of energy being harnessed and utilized by operators in the state, especially compared to the amount that’s being flared – which, as explained earlier, is clearly preferable to most of the alternatives.
As for environmental impacts, last summer the World Bank described flaring as a “warning sign” in terms of air emissions, and that the global increase in flared gas was “due largely to increased hydrocarbon production in Russia and shale oil and gas operations in the US state of North Dakota.”
That could be cause for alarm, but again, context is helpful.
First of all, despite the World Bank’s rush to judgment in its mentioning of North Dakota alongside Russia in terms of global flaring, just a few paragraphs later the Bank states that “Russia still tops the world’s flaring countries, followed by Nigeria, Iran and Iraq.” The United States – as a whole, not just North Dakota – is fifth.
Additionally, global flaring accounts for about 360 million tons of GHGs, according to the World Bank. In 2010, General Electric estimated that global flaring accounted for about 400 million tons of CO2 equivalent GHGs, equal to approximately two percent of global CO2 emissions from energy sources.
So, after we do a little arithmetic, we find the U.S. share of global flaring is actually incredibly low. The World Bank estimates global flaring at 140 billion cubic meters (bcm) of natural gas, while the United States flared 7.1 bcm. That means the United States accounts for about five percent of all flaring worldwide – even though we’re now the largest natural gas producer in the world and are projected to overtake Saudi Arabia in oil production by the end of this decade.
As for North Dakota specifically, in 2011 the state produced approximately 156 billion cubic feet (bcf) of natural gas, and the U.S. Energy Information Administration notes that in May 2011, 29 percent of that gas was flared, or 45.2 billion cubic feet. Converting back to cubic meters, that’s approximately 1.28 bcm, or 18 percent of the total amount of gas flared in the United States. We’ll let you decide whether that’s good or bad, especially considering the fact that North Dakota is the second largest oil producing state in the country.
What does this mean in terms of emissions? Recall that the World Bank found 140 bcm of flared gas equated to 360 million tons of GHGs. Based on that ratio, GE’s estimates, and some additional basic math, flaring in North Dakota accounts for just 0.017 percent of global greenhouse gas emissions – less than two one-hundredths of one percent.
It’s not surprising that North Dakota’s new role as a major oil supplier to the U.S. energy portfolio is receiving the spotlight, nor is it unexpected that some folks would begin questioning a practice they don’t fully comprehend. The fact that we’re talking about a state that most NYT employees would have trouble finding on a map only adds to the confusion and sense of hyperventilation.
Examined in a vacuum, flaring in North Dakota might be seen as an escalating environmental problem – a “prairie fire” with no extinguisher in sight. Of course, the reality is quite the opposite. With billions of dollars being invested in new infrastructure and clear regulations on the books, it’s clear that continued development of the Bakken Shale will not only yield additional economic and energy security benefits, but also advance along an increasingly efficient and responsible path.
Shale Boosts U.S. Economy from Coast to Coast
We all know that responsible oil and natural gas production has been an economic boon to regions across the country, and as the Wall Street Journal highlights this week, the economic growth emanating from developing natural gas from shale is not limited solely to those areas lucky enough to have the formations underneath them.
We all know that responsible oil and natural gas production has been an economic boon to regions across the country, from communities throughout Pennsylvania benefiting from Marcellus Shale development to the rapidly expanding housing business in south Texas. And, of course, North Dakota boasts the lowest unemployment rate in the country, thanks in large part to the development of the Bakken Shale.
But the story doesn’t end there. Indeed, as the Wall Street Journal highlights this week, the economic growth emanating from developing natural gas from shale is not limited solely to those areas lucky enough to have the formations underneath them:
The economic benefits of rising energy production are spreading far beyond the traditional oil patch, to Ohio and Pennsylvania, Nebraska and New York, North Carolina and Idaho. Truck drivers from pretty much anywhere can find work related to the surging energy business. Private-equity firms completed $24.8 billion of energy deals of all types last year, up from $8.5 billion in 2010, according to data tracker Preqin. Manufacturing plants are returning to the U.S. to take advantage of cheap natural gas, spurring major investments in petrochemical and steel production in the Gulf Coast and Midwest.
Landowners in huge swaths of the country where shale is found are raking in money for leasing their mineral rights. Consumers throughout the U.S. are paying lower bills for heating and electricity because of cheap natural gas. Even the U.S. balance of payments with other countries is improving because of the new energy economy.
“This is probably the biggest stimulus we have going,” says Michael Lynch, president of Strategic Energy & Economic Research, a consultant based in Amherst, Mass. Some $145 billion will be spent drilling and completing U.S. wells this year, up from $13 billion in 2000, estimates Spears & Associates Inc., an oil-field market research firm.
The growth in energy exploration and production is due to the widespread use of horizontal drilling and hydraulic fracturing, or fracking. Horizontal drilling allows energy companies to extract gas and oil up to a mile away from the actual well. Meanwhile, fracking—which involves pumping millions of gallons of water, sand and chemicals to break open dense rocks and release hydrocarbons—has enabled the industry to tap into energy-rich shale formations once overlooked by petroleum geologists.
In Nancy County, Nebraska — a largely agricultural county west of Omaha — demand has picked up so much for the area’s sand deposits that a local company has expanded its workforce by nearly ten-fold. As a member of the county board of supervisors described the situation, “This deal here is like winning the lottery.” Similarly, in western Wisconsin, the number of sand mines has increased substantially, creating over 1,000 jobs in just the past four months.
Of course, as the Journal also highlights, areas that have a long history of oil and natural gas development are also reaping significant benefits. (Houston became the first major metropolitan area to regain all of the jobs it lost during the recession, thanks to increased exploration for oil and natural gas in shale.) But these benefits extend beyond job creation and (enormous) economic growth:
Beyond simply adding jobs, communities from Pennsylvania and Ohio to Colorado and Texas that are home to this energy boom are experiencing a new emotion: optimism. Jeff Dahl, chief executive of MTR Gaming Group Inc., which operates a casino and resort in Wheeling, W.Va., says he is seeing consumer confidence rising as landowners get leasing bonuses of thousands of dollars and companies compete for workers.
“People are beginning to believe this is a game changer for the region,” says Mr. Dahl. The result is more spending on dining out and entertainment.
Of course, this economic revival is also paving the way to increased energy security, as domestic output of oil and natural gas reach new highs and reliance on OPEC becomes less necessary. Turns out we’re producing so much that energy prices are falling, which means consumers pay less for utility bills and manufacturers can invest more in the United States … all of which, in turn, means more capital to invest in U.S. businesses and the ability to create even more U.S. jobs.
Hosts two-day Global Shale Gas Initiative Conference in Washington this week
We’re familiar with names like Barnett, Bakken and Marcellus – but what about Silurian or Changbei? Read up on them, because not too long from now, it’s a good bet we’ll be hearing a lot more about these here in the US. Thanks to the good work of the folks over at the State Department, shale gas went global this week – and below, we recap the event in case you weren’t able to attend. Following are select excerpts of a press conference held earlier this week where David L. Goldwyn, Coordinator for International Energy Affairs at the State Department, runs through what went down:
On the Global Shale Gas Initiative Conference and Countries that Participated:
We’re up to 20 countries and 10 federal entities, as well as state and local regulators. The reason we’re doing this is it’s part of the State Department’s effort to promote global energy security and climate security around the world. The U.S. shale gas phenomenon has transformed global energy markets. Because we have discovered and we have the technology to develop efficiently large quantities of gas from shale, global prices of liquefied natural gas have decreased. Gas has become cheaper. Gas is now competitive with coal on a BTU basis, which means that countries that might use coal can now not make an economic choice, but on a competitive basis choose gas for their next level of power generation.
On Shale’s Role in Providing Energy Security and Affordability Around the Globe:
[T]his has been a terrific boon for ourselves and for global energy security, and other countries want to replicate this process. And we wish them the best in doing this, but there are a lot of things that governments need to know in order to develop shale gas safely and efficiently. And that’s why we organized a regulatory conference where we could teach them what they need to know. Now, their motivation and our motivation as the State Department to engage on this issue should be clear for foreign policy and energy security reasons. Countries around the world need diversity of energy supply. There are countries with millions of people – in fact, tens and some hundreds of millions of people – without access to electricity services. They need a feedstock and they need it for base load energy.
State and Federal Regulations, Safety, Environment:
[W]e have, in our country, an umbrella of laws and regulations that makes sure this is done safely and efficiently. We have federal regulation of air and water. We have state regulation of land use and water. We have the capacity to monitor and to regulate. And even then, there’s the need for enforcement… We’ve also had a representative from the Groundwater Protection Council, and this is an association of state regulators, because in our country, it’s really the states that are on the front lines of safe drinking water regulation. In 33 states, the state leads or co-partners with the Environmental Protection Agency. So we’ve spent a lot of time talking about water, because water is scarce in a lot of these countries.
On Groundwater Protection, Hydraulic Fracturing:
[S]afe water and safe regulation plays a huge part in our discussions. It’s really one of the main reasons that we held the conference in the first place. And while hundreds of thousands of wells have been drilled successfully in the United States so far, the lesson that we want all these countries to understand is that you have to have technically competent people operating and you have to have laws and regulations in place first. We have safe – we have safe – Clean Air Act. We have safe drinking acts. We have rules about where you can drill. We have rules about what sort of casings you have to have. And so, if done responsibly, it can be done safely, but these countries need to know you need laws and regulations in place first. I wouldn’t paint the development with a broad brush.
On the Overall Success of the first Global Shale Gas Initiative Conference:
The bottom line is that we’ve had a really successful conference, because these countries have a lot of questions. People are enthusiastic, but they’re careful. There’s a lot that they need to know and there’s a lot they need to stand up in terms of regulatory capacity before they’re ready to engage in this. And so from our point of view, this has been a big success. We want people to have rational expectations about what they have. We want them to understand that it takes not just good commercial terms but really good government and good governance in order to make sure this is done safely. So it’s another of the examples of our using smart power or creative diplomacy to try and improve energy security, but to help countries learn what they need to know.
NOTE: Click HERE for a full transcript and video of Mr. Goldwyn’s press conference from earlier this week.