Burning money

Clifford Krauss has an article in The New York Times about natural gas in North Dakota:

Across western North Dakota, hundreds of fires rise above fields of wheat and sunflowers and bales of hay. At night, they illuminate the prairie skies like giant fireflies. They are not wildfires caused by lightning strikes or other acts of nature, but the deliberate burning of natural gas by oil companies rushing to extract oil from the Bakken shale field and take advantage of the high price of crude. The gas bubbles up alongside the far more valuable oil and, with less economic incentive to capture it, the drillers treat the gas as waste and simply burn it.
Every day, more than one hundred million cubic feet of natural gas is flared this way; enough energy to heat half a million homes for a day. The flared gas also spews at least two million tons of carbon dioxide into the atmosphere every year, as much as 384,000 cars or a medium-size coal-fired power plant would emit, alarming some environmentalists. All told, thirty percent of the natural gas produced in North Dakota is burned as waste. No other major domestic oil field currently flares close to that much, though the practice is still common in countries like Russia, Nigeria, and Iran.
With few government regulations that limit the flaring, more burning is also taking place in the Eagle Ford shale field in Texas, and some environmentalists and industry executives say that it could happen in Oklahoma, Arkansas, and Ohio, too, as drilling expands in new fields there unlocked by techniques like hydraulic fracturing and horizontal drilling.
“North Dakota is not as bad as Kazakhstan, but this is not what you would expect a civilized, efficient society to do: to flare off a perfectly good product just because it’s expensive to bring to market,” said Michael E. Webber, associate director of the Center for International Energy and Environmental Policy at the University of Texas at Austin.
The oil companies say economic reality is driving the flaring in the Bakken, the biggest oil field discovered in the United States in four decades. They argue that they cannot afford to pay for pipelines and processing plants to capture and sell the gas until they actually drill oil wells and calculate how much gas will bubble out of the oil. And reinjection of carbon dioxide, commonly done in conventional oil fields, is more difficult and expensive in less permeable shale fields.
“This field covers fifteen thousand square miles, so it takes time to go and test what’s there and then build a gathering system and plant,” said Harold G. Hamm, chief executive of Continental Resources, one of the biggest oil producers in the Bakken.
The widespread flaring is a step backward for a domestic energy industry. Most oil and gas fields in the United States have well-developed facilities to gather and process gas. But the recent rise of shale drilling has changed the economic calculus. Natural gas prices have plunged since 2008, as vast shale fields laden with gas are tapped through hydraulic fracturing and horizontal drilling. Meanwhile, those same techniques have opened up other shale fields rich with oil.
With oil prices high amid strong global demand and leases as short as five years for land in the Bakken, drillers have found it more profitable to just grab the oil and burn the gas. Building out the infrastructure to handle gas would substantially raise costs and slow development, and efforts so far to use the gas for electrical generation have had limited success because it contains components that burn too hot. “I’ll tell you why people flare: It’s cheap,” said Troy Anderson, lead operator of a North Dakota gas-processing plant owned by Whiting Petroleum. “Pipelines are expensive: You have to maintain them. You need permits to build them. They are a pain.”
Although capturing the gas is the best option, scientists say that flaring is better for the environment than venting the gas into the atmosphere. Pure natural gas is mostly methane, which has far greater heat-trapping qualities than carbon dioxide.
Regulations on flaring are loose in North Dakota, as they are in most states, and there are no current federal regulations on flaring at oil and gas wells. That is largely because flaring has not been a significant concern since the 1970s, when the federal government insisted that oil companies re-inject gas into Alaska’s North Slope rather than flare it.
So far, North Dakota health officials say that flaring has not produced any serious air pollution problems. But flaring could eventually become another environmental headache for an industry already under attack over concerns that hydraulic fracturing, also known as fracking, could jeopardize water quality.
The federal Environmental Protection Agency has recently proposed new air emissions standards for fracked wells, and it has also begun to ask oil companies to compile data on greenhouse gas emissions from drilling and other operations.
“One day a regulator is going to say, ‘I’m not going to give you one more permit until you tell me what you are going to do with the gas,’” said Charif Souki, chief executive of Cheniere Energy, who hopes to eventually export the excess gas in liquefied form.
Environmentalists are also beginning to express alarm. “It’s time for the regulators to take a hard look at the impacts of flaring and make sure that available solutions to the flaring problem are required before there is any further widespread expansion of the practice,” said Amy Mall, senior policy analyst at the Natural Resources Defense Council. Some of the companies working in North Dakota, including Whiting, are investing $3 billion over the next three years in pipelines and several large processing plants to deliver gas to Midwest markets rather than burn it.
Whiting, a Colorado company that was one of the early explorers in the Bakken, sees particular value in the gas found here because it contains large amounts of propane and butane that it can extract and sell at a profit in addition to the gas itself. The company is rapidly expanding oil drilling while building and expanding two plants to process its own gas as well as gas produced by others. Whiting was flaring eighty percent of the gas in its first major Bakken field in 2007, but says it has now reduced its flaring to twenty percent across all fields, which will fall further when its second gas plant comes online. “Our goal is to have zero emissions,” said James T. Brown, Whiting’s president and chief operating officer. “It’s a waste to be wasting all of this energy.”
While the projects by Whiting and others could reduce flaring over the next two years, some executives acknowledge that it will be a continuing problem as the industry increases the number of wells in the area from 5,000 to a projected 48,000 over the next twenty years.
Wayde Schafer, the Sierra Club’s North Dakota conservation organizer, said that the industry needed to slow down development if it could not protect the air. “You can do it fast or you can do it right,” he said.

Rico says that 'you can do it fast or you can do it right' is, or ought to be, the capitalist's motto...