The U.S. Bureau of Land Management's (BLM) handling of flaring of associated natural gas on public and tribal lands was criticized in a report released Wednesday by Friends of the Earth, which said too much gas is being flared royalty-free.
Centered on North Dakota's robust Bakken Shale production and called "A Flaring Shame," the report alleges that because of BLM's lack of vigilance between 2007 and April 2013 some 107 Bcf of gas was flared at the government's expense ($524 million worth of resources), resulting in annual carbon dioxide (CO2) emissions equal to what would be produced by 1.3 million cars. In fiscal year 2014, BLM allegedly charged royalties to a "miniscule amount" of flared gas, netting taxpayers less than $200, the report said.
"BLM has the discretion to determine when flaring is or is not economically justified," the report said. "Using this discretion, the BLM has approved the flaring of millions of cubic feet -- and millions of dollars worth -- of taxpayer-owned resources."
On Sept. 18, BLM submitted a new draft proposed rule to the White House aimed at reducing flaring, venting and leaking of natural gas from oil/gas production on federal and tribal lands. "The rule aims to increase our nation's natural gas supplies, reduce environmental damage from venting and flaring, and ensure a fair return for federal taxpayers, tribes and states," a BLM spokesperson told NGI's Shale Daily on Thursday.
While not reacting directly to the Friends of the Earth report, BLM acknowledged that its estimates for 2013 showed 98 Bcf of flared, vented or leaked natural gas from oil/gas production on public lands, and 76 Bcf was flared. The agency estimated that 66 Bcf came from federal and Native American mineral estates, and 32 Bcf from estates of other owners. In total in 2013, roughly 2.3% of the total gas production was lost, equating to $33 million in lost royalties, BLM said.
The environmental group's report focused on the Bakken in North Dakota where flaring has been a major source of concern to both the state and the industry, both of which have worked to reduce it in recent years (see Shale Daily, July 3, 2014).
Using BLM data on more than 50 operators over the 2007 to April 2013 period, the report singled out Continental Resources, the top producer in the Bakken, and Marathon Oil, alleging that Continental was responsible for the flaring and venting of 55 Bcf, and Marathon vented the most of any company with 962 MMcf of natural gas.
Alleging that associated gas produced with oil, which is common in the Bakken, is being wasted and flared in record amounts, the report said the practice adds to the greenhouse gas emissions, particularly CO2. "Last updated 35 years ago, existing federal guidelines allow widespread flaring on public and tribal lands that is almost always exempt from royalties [to the federal government]," said a spokesperson for Friends of the Earth.
Under the existing rules exemptions are granted by BLM based on a variety of conditions, including:
Gas put to "beneficial use" on the drilling site for heating and powering equipment;
Flared or vented gas due to emergencies, equipment failure, or other circumstances when the loss is found to be "unavoidable"; and
Flared or vented gas from wells that predominantly produce oil and no economically viable opportunities are available for the use of the gas.
Earlier this year, BLM issued its rules on fracking on public and tribal lands, but a Wyoming federal district judge on Wednesday put a preliminary injunction in effect against the federal agency implementing the new rules (see Shale Daily, Sept. 30). U.S. District Judge Scott Skavdahl issued his injunction barring implementation of the regulations, saying the federal agency lacks authority to issue the rules. Earlier he had given BLM more time to argue its case (see Shale Daily, July 17).
Neither the North Dakota Petroleum Council (NDPC), nor the state Department of Mineral Resources (DMR), which oversees North Dakota's flaring reduction goals, had an immediate reaction to the Friends of the Earth report. Given the ongoing legal action, NDPC won't comment on the flaring report other than to say it is a practice used globally as a "safety mechanism" in the oilfields, a spokesperson for the council told NGI's Shale Daily.
A DMR spokesperson said BLM should react to the royalty issue raised in the report, but regarding drilling on nonfederal lands in the state, North Dakota's rules "are simple -- you have one year to connect a well without paying taxes and royalties. After that year, operators have to connect to a pipeline, use the gas in a beneficial way, or ask for an exemption, which we rarely see."
In North Dakota, the state legislature would have to change the one-year requirement, and recent attempts to try to do that have failed.