Bakken shale explorers told to cut flaring or face crude caps


North Dakota regulators tell crude oil explorers to cut the flaring of natural gas or face limits on the amount of oil they can pump from the Bakken shale formation.

The state's crude output has surpassed 1M bbl/day, behind only Texas, but while Texas captures all but 1% of the natural gas produced, North Dakota burns 30% of its output as waste as the rate of production has outstripped companies' ability to capture gas through pipeline connections at the source.

The North Dakota Industrial Commission is aiming for a 26% reduction in gas flaring statewide by Q4 of this year and another 23% by Q1 2015.

Top Bakken producers include CLR, EOG, KOG, WLL, HES, XOM, OAS, NOG, EOX, MRO.

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Comments (44)
  • machiavelli
    , contributor
    Comments (723) | Send Message
     
    What a freakin waste.
    1 Jul 2014, 07:04 PM Reply Like
  • Michael Bryant
    , contributor
    Comments (6723) | Send Message
     
    No, what a frackin waste.
    1 Jul 2014, 09:48 PM Reply Like
  • Marek
    , contributor
    Comments (1516) | Send Message
     
    It's about frackin time.
    1 Jul 2014, 11:30 PM Reply Like
  • tealone
    , contributor
    Comments (313) | Send Message
     
    It would be interesting to see what future generations (100+ years) would say about the flaring if nat. gas was then a precious commodity. Something like; "too bad those wasteful greedy bast@4ds just flared it away".
    2 Jul 2014, 12:51 PM Reply Like
  • Michael Phillips
    , contributor
    Comments (757) | Send Message
     
    How is the practice of flaring in any way related to the companies being "wasteful greedy bast@4ds", exactly? There's no pipeline. There's nowhere to send all of the gas. What are they supposed to do with it?
    2 Jul 2014, 03:05 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3736) | Send Message
     
    It would be interesting to see if N Dakota really would want to see oil production cut. They can accomplish the same objective via fines or other moves.
    1 Jul 2014, 07:42 PM Reply Like
  • Larry Smith
    , contributor
    Comments (3169) | Send Message
     
    Texas has the pipeline and storage infrastructure to capture and use the gas, North Dakota does not. Until the infrastructure is there, it will be difficult to accomplish the cut.
    1 Jul 2014, 07:51 PM Reply Like
  • King Rat
    , contributor
    Comments (1547) | Send Message
     
    That is a great point, but if the story were worded differently it could ask, "why produce full-throttle when you can't capture it?" Or in other words, "If you could increase your revenue by 41% (70%->99%) for free, why wouldn't you?"

     

    If the infrastructure really is not there, it would seem as though some pipeline MLPs are primed to get rich here.
    1 Jul 2014, 08:57 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (11050) | Send Message
     
    Imagine all of the electrical systems, sewer systems and schools that could be upgraded with the taxes that NG sales would produce if the companies could sell it to Europe.

     

    What's wrong with this country?
    1 Jul 2014, 07:54 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1540) | Send Message
     
    There is nothing wrong with this country. Well there may be some things wrong with it, but nothing as relating to natural gas export. The government is already approved several natural gas export projects and is trying to approve new ones as fast as possible. They have not been built yet, because exporting natural gas by sea requires a lot of expensive infrastructure. It was only recently that natural gas in the US became very cheap and it was even more recently that investors were convinced that this cheap price will continue in the long run. So none of the infrastructure has been built yet. But it will be.

     

    I do not know why you are blaming the USA for any of this.
    2 Jul 2014, 03:09 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11050) | Send Message
     
    Maybe I should blame some other country, like Albania?

     

    We should have started building the "infrastructure" back during the 1970s oil shock but THIS country kept electing clowns who had ZERO vision and foresight and blocked every effort to make the U.S. energy independent.

     

    Now, 40 years later, we are suffering for it and wasting precious NG.

     

    At the turn of the century unleaded cost about $1.39 per gallon.
    2 Jul 2014, 06:02 AM Reply Like
  • Zheeeem
    , contributor
    Comments (437) | Send Message
     
    @Deep

     

    40 years ago, we had no idea so much NG and liquids could be unlocked by fracking. Best to look at this as a case where the technology (fracking) has moved faster than our ability to fully utilize it.

     

    Cheniere has export licenses and should be the first exporter via Sabine Pass. Others such as Dominion and El Paso are just behind. (Note that Cheniere's Sabine Pass operation was originally intended for imports - only a few short years ago - because nobody thought the US would turn into a petroleum exporter.) That said, NG exports will be trivial compared with domestic consumption.

     

    Pipelines, baby, pipelines!
    2 Jul 2014, 06:51 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (11050) | Send Message
     
    40 years ago we knew we would have to secure our energy independence.

     

    Included in that is a nationwide natural gas distribution network.

     

    It is an obvious sign of the decline of America when we look hopelessly on as the NG companies flare away billions in profits because multiple administrations had zero vision for America's energy future.
    2 Jul 2014, 04:07 PM Reply Like
  • noreaster
    , contributor
    Comments (15) | Send Message
     
    In the 1950's regular gas (unleaded did not exist) cost 10-12 cents a gallon.
    In the 1960's it ran up to about 25 cents a gallon.
    In the 1970's it ran up to about 50 cents a gallon.

     

    Reason for run up primarily state and federal taxes added, and added, and added, and added, and added, and added.
    10 Jul 2014, 02:26 PM Reply Like
  • noreaster
    , contributor
    Comments (15) | Send Message
     
    It is not economically sensible to put in pipelines to unknown ng locations before any ng is discovered, drilled, produced.
    Placing the cart before the horse is loose marbles in place of brains.
    10 Jul 2014, 02:31 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3736) | Send Message
     
    Taxes on gasoline in California are about 42 cts per gallon. Yesterday I paid $3.92 per gallon at my local station. So the total tax bite is about 11%. Not a huge burde
    10 Jul 2014, 02:44 PM Reply Like
  • Michael Phillips
    , contributor
    Comments (757) | Send Message
     
    11% isn't a big bite? Think you'd feel the same if you added an 11% tax on to your grocery bill?
    10 Jul 2014, 03:31 PM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3736) | Send Message
     
    I was responding to noreaster, who blames the runup in gas prices on taxes.

     

    If you want to see a big bite, go to Europe. and yes, 11% is not a big burden.
    10 Jul 2014, 03:48 PM Reply Like
  • Michael Phillips
    , contributor
    Comments (757) | Send Message
     
    "and yes, 11% is not a big burden."

     

    Must be nice to be able to live life with compete detachment from reality.
    11 Jul 2014, 09:13 AM Reply Like
  • PalmDesertRat
    , contributor
    Comments (3736) | Send Message
     
    Must be tough being poor.
    11 Jul 2014, 09:19 AM Reply Like
  • Risha
    , contributor
    Comments (3) | Send Message
     
    So true. These companies care about nothing but profits. Ferenghi mentality.
    1 Jul 2014, 08:52 PM Reply Like
  • smkbk
    , contributor
    Comments (28) | Send Message
     
    need to give it away like Humble Oil used to.
    1 Jul 2014, 09:05 PM Reply Like
  • annnn
    , contributor
    Comments (4) | Send Message
     
    Amerada provided free gas to mineral rights owners only in North Dakota for years.
    1 Jul 2014, 10:29 PM Reply Like
  • worldbank
    , contributor
    Comments (435) | Send Message
     
    I agree>>It seems like such a waste, but natural gas is a problem in North Dakota that will take many years to get it down to the "suggested" targets. In order to cut the flaring right now you will need to cut production. I'm not certain what the NDIC is thinking. No pipelines at present, no adequate storage at present, and no rail for natural gas. The state needs infrastructure!! You can capture but there just isn't much available storage at present, and nobody will be giving it away!! The producers are focused on the black stuff because it brings in BIG $$$'s while gas doesn't. The low natural gas pricing hinders the third party pipeline and storage projects because of inadequate ROI's from projected transport fees. That said, there are numerous positive LNG export projects, two of which have received federal approval. One is Sempra Energy (SRE) while the other is Cheniere (LNG), while others are awaiting permits that, when granted will be a game changer. Thus the ND flaring will drop significantly, just need some more time.
    1 Jul 2014, 10:14 PM Reply Like
  • NuclE
    , contributor
    Comments (86) | Send Message
     
    This is just short sighted. Flaring should be illegal in all states period.
    2 Jul 2014, 01:36 AM Reply Like
  • bshgeo
    , contributor
    Comments (61) | Send Message
     
    Making flaring illegal will simply devastate oil and gas drilling and we will be paying high prices as domestic production crashes. Please do no comment on things you do not understand. Uninformed opinions are why we are where we are at in the country. Get educated as too why flaring is necessary and the consequences of "just make it illegal". You would crash our entire economy my friend.
    2 Jul 2014, 10:55 AM Reply Like
  • NuclE
    , contributor
    Comments (86) | Send Message
     
    I doubt it would crash our enonomy. It might slow down the drilling a little bit while they put in the collection systems. There will come a time in human history when we will wish we had that energy back. Wasting energy is just dumb period.
    4 Jul 2014, 02:57 AM Reply Like
  • bshgeo
    , contributor
    Comments (61) | Send Message
     
    Nucie, I am not arguing wasting energy is a poor policy period but rather it is a necessary evil for a period during early oilfield development. My argument is if we follow your comment we should "just make it illegal" is that would damage severely not just ours but the world economies. Infra-structure is being built to collect the Bakken and other shale play flared gas at break neck speed. NOT ONE, as in ZERO, oil companies wants to burn gas up which can add large profits to their expensive wells.

     

    The simple fact is when a new oilfield is located in a state or country for that matter without existing pipeline and other infra-structure to capture the gas flaring must be allowed until production from sufficient wells is established and reserves proven large enough to justify the billions in investment to install the needed infra-structure to capture the value of the flared gas.

     

    If flaring was made illegal the Bakken would never have been developed as the gas could not have been flared and therefore oil production could not have began. Thousands of jobs and great national wealth that play has already created would have been lost as would a big measure of our new energy security. We cannot simply "make flaring illegal nationwide" and expect not to see severe economic shock worldwide. in addition, the development of new plays in areas without infra-structure also would be permanently locked up from ever being developed. This includes numerous new promising unconventional oil plays which at present are just seeing early test wells which require gas to be flared or never to be drilled if it was illegal.

     

    If we did this we will crash our economy and again will need to turn to world oil markets for the majority of of our oil supply. With the USA, China, India, etc. all competing for that limited world oil supply price of oil would be crushing to both ours and the world's economies. Making rash statements we need to just "Ban flaring nationwide" is a hasty response in your understandable desire to prevent waste but before thought of the repercussions of such a policy.

     

    Having 36 years in the oil and gas exploration business I assure you that is the worst policy we could conceive.
    5 Jul 2014, 08:55 AM Reply Like
  • NuclE
    , contributor
    Comments (86) | Send Message
     
    bshgeo
    I just think the oil/gas industry needs to plan better. They know that there may be gas when they drill for oil. You have 36 years of experience so I know you know that. Why not be prepared for what they know will happen. I suspect a little planning could prevent most of the flaring. But I am not here to argue with a 36 year veteran of the industry on how best to make that happen. I am more interested in what you know about where I should invest my hard earned money now that I am retired to get a decent return in the oil and gas industry from responsible companies. I currently own XOM, CVX, BP and DO and two ETF's in the MLP areas of this industry. I am currently looking at COP, HESS and Devon but have not pulled the trigger on either. Too many options!
    6 Jul 2014, 03:20 PM Reply Like
  • bshgeo
    , contributor
    Comments (61) | Send Message
     
    I like these O&G symbols:
    LNG - Lots of potential here for exporting and have approval and the terminal.
    LNREF - small company with sizeable Eagle Ford acreage and production with more acres next to HK and they are profitable with minimal debt.
    EOG Resources - Best driller out there with tons of premium shale acreage.
    HK - Eagle Ford acreage player

     

    I own each of these for the oil and gas side of my portfolio.
    6 Jul 2014, 06:28 PM Reply Like
  • noreaster
    , contributor
    Comments (15) | Send Message
     
    Tell us all you know about oil and ng exploration and production. Sounds like you know nothing.
    10 Jul 2014, 02:33 PM Reply Like
  • miriam ledwith
    , contributor
    Comments (292) | Send Message
     
    OTTR may be able to benefit from this. DVL is correct: the time to get started on an energy policy, other than protecting the petrodollar, was 40 years ago. Remember the gas lines, [not pipelines, but gas lines with odd/even fill up days]. We should be building pipe lines like crazy. mnl
    2 Jul 2014, 07:26 AM Reply Like
  • Spirit1
    , contributor
    Comments (2) | Send Message
     
    How about Enercore who has learned how to turn the flared gas into electricity? This is going to be a big deal.
    ENCR
    2 Jul 2014, 07:52 AM Reply Like
  • Spirit1
    , contributor
    Comments (2) | Send Message
     
    How about Enercore who has learned how to turn the flared gas into electricity? This is going to be a big deal.
    2 Jul 2014, 07:52 AM Reply Like
  • paparam
    , contributor
    Comments (27) | Send Message
     
    No we should not be building pipelines like crazy. There are unintended consequences to every move and the crazier and more impulsive the move the greater the consequences. That is how we got into this predicament in the first place. The extraction of oil needs to slow down to allow everything else to catch up. This includes labor shortages, housing shortages and the big increase in crime as communities break down with the rapid change and influx of people. Sure we are shareholders who want to get rich but a slow and steady approach is what is best for our communities.
    2 Jul 2014, 07:54 AM Reply Like
  • paparam
    , contributor
    Comments (27) | Send Message
     
    No we should not be building pipelines like crazy. There are unintended consequences to every move and the crazier and more impulsive the move the greater the consequences. That is how we got into this predicament in the first place. The extraction of oil needs to slow down to allow everything else to catch up. This includes labor shortages, housing shortages and the big increase in crime as communities break down with the rapid change and influx of people. Sure we are shareholders who want to get rich but a slow and steady approach is what is best for our communities.
    2 Jul 2014, 07:56 AM Reply Like
  • longdated
    , contributor
    Comments (55) | Send Message
     
    One possible solution that is available now:
    http://bit.ly/MzlfyQ
    2 Jul 2014, 08:19 AM Reply Like
  • Brucejfern
    , contributor
    Comments (1691) | Send Message
     
    It is about time for the oil producers there to accept that cost which will either be accomplished by themselves building out midstream to capture or bringing in MLPs to capture.

     

    I would hope MMP stays away from this sector staying pure to oil and petroleum products.
    2 Jul 2014, 09:03 AM Reply Like
  • jack20
    , contributor
    Comments (492) | Send Message
     
    All good points but I think our main thrust for NG is to use it to our advantage before we export it. Keep in mind our foreign competition, Europe,China,Japan etc. pays anywhere from $15-20/cfm vs. $5 in the U.S. The first step, and a huge one, would be for Congress to pass The Natural Gas Act mandating 18 wheelers to run on CNG, but pass it WITHOUT subsidies. Benefits?? (1) We replace 1 million barrels of imported oil/day! (2) Truckers save $1-1.50/gallon on fuel costs! (3)Truck pollution drops by 30-40%! (4) Thousands of Americans go back to work making pipe,laying pipe, building CNG powered trucks and infrastructure etc. This evolution has already started. Time for Congress to put it in high gear!!!
    2 Jul 2014, 12:49 PM Reply Like
  • bshgeo
    , contributor
    Comments (61) | Send Message
     
    Excellent commentary and dead on as to CNG powered trucks and cars.
    5 Jul 2014, 09:13 AM Reply Like
  • Blue22
    , contributor
    Comments (449) | Send Message
     
    In order to effectively recapture flared gas you need an entire infrastructure to do so. I'm talking piping and processing from the wellhead to collection, processing, storage and main gas lines in Canada and the US, which the EPA and environmentalists continue to fight at all costs!

     

    The costs of drilling an oilwell in the Bakken is not cheap! Fracking involves many steps and again costs millions. That puts the average cost of a well at ten million plus or minus several million! The company drilling the well for a small cap oil business usually doesn't own their own rig, especially if they are using horizontal fracking. Gas is always a factor in an oilwell. To recapture it and pipe it to a collection point and into the (nonexistent gas production system in the Bakken) economically viable, incredibly expensive world of gas marketing is far beyond all but the major oil corporations!

     

    The tsunami of cash now enjoyed by the politicians and dreamers of North Dakota has evidently make them drunk with power. They would very effectively shut down most production in their state by misunderstanding the economics of the gas and oil businesses. Just look at the recent calamity caused by a buffoon at the Energy Department announcing the incorrect status of distilled, light oil for two companies to export! Even Valero's stock came tumbling down for no reason at all. But the shorters took advantage, as usual to cause a panic and force down the recovering refinery stocks! Valero makes most of the gasoline and ethanol in this country and a bogus stock short will have to cost us all at the pump! The Energy Department followed up their statement with "Nothing has changed."
    2 Jul 2014, 02:56 PM Reply Like
  • gators
    , contributor
    Comments (979) | Send Message
     
    I think this is good news for CMLP. It is as wasteful to burn off excess nat gas by flaring as it was letting millions of buffalo carcasses rot to harvest the hides. This is also your ND legacy. And wait till you see the environmental damage done. Not necessarily by fracing, but by the treatment of the waste residuals that are collected in lined ponds and bulldozed over when they are full.
    2 Jul 2014, 10:37 PM Reply Like
  • Phil the Fluter
    , contributor
    Comments (164) | Send Message
     
    North Dakota sounds like Russia or Nigeria (or Australia in the 1960s). Most governments in this day and age would ban an operation which continuously flares its natural gas assets. So you have to leave the oil in the ground until gas infrastructure is developed? That's tough isn't it?

     

    Note there are also viable alternatives to utilize the gas other than piping and distribution infrastructure, such as on-site power generation.

     

    I'm genuinely suprised how many commentators try to justify flaring for the sake of convenience to "develop the industry."

     

    I currently hold shares in DVN but am now investigating whether they are involved in this practice.
    18 Jul 2014, 03:25 AM Reply Like
  • bshgeo
    , contributor
    Comments (61) | Send Message
     
    Most governments own all the mineral rights too so perhaps that is a better model of efficiency and wealth creation for the people..... And no most countries would not and today do not ban flaring.
    18 Jul 2014, 09:15 AM Reply Like
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