Tuesday, February 7, 2017

Flaring Natural Gas - An Oil Industry Pastime

Back in November 2016, the Obama Administration announced its Methane and Waste Prevention Rule, a final rule that would have ultimately led to a reduction in the release of natural gas into the atmosphere from oil and gas operations on public and Indian lands.  This release is known as flaring, a procedure that is used to burn off what is generally considered to be a low-value product by the oil industry.  

Here is a video showing gas well flaring in the Bakken of the Williston Basin:


Sally Jewell, former Secretary of the Interior, stated that the purpose of the new final rule change was:

"....to prevent waste of our nation’s natural gas supplies is good government, plain and simple.  We are proving that we can cut harmful methane emissions that contribute to climate change, while putting in place standards that make good economic sense for the nation. Not only will we save more natural gas to power our nation, but we will modernize decades-old standards to keep pace with industry and to ensure a fair return to the American taxpayers for use of a valuable resource that belongs to all of us.”

The goal of the final rule was part of the Obama Administration's goal of cutting emissions from the oil and bas sector by 40 to 45 percent from 2012 levels by the year 2025 as well as getting fair value for the flared gas from the oil and gas industry.  To give us a sense of the dimensions of the issue, according to a study by the Bureau of Land Management, in 2014, 375 billion cubic feet of natural gas was flared from federally-controlled and Indian lands, enough to supply the energy needs of 5.1 million households for a year.

The Bureau of Land Management manages more than 245 million acres of surface land and 700 million acres of subsurface rights.  In 2015, production from the 100,000 federally-controlled wells reached 183.4 million barrels of oil, 3.3 billion gallons of natural gas liquids and 2.2 trillion cubic feet of natural gas, accounting for 5 percent of the nation's oil supply and 11 percent of the nation's natural gas supply.  The total production value of the produced oil and gas was in excess of $20.9 billion in 2015 with an additional $2.3 billion in royalties.

The rule change would have been phased in over time with an implementation date of January 17, 2017 and would have seen royalties charged to well operators on the flared gas to ensure a return to American taxpayers.  Royalty rates would have been set at or above 12.5 percent of the value of the natural gas produced.  The BLM estimated that the rule would pose costs to the oil and gas industry of between $114 million to $279 million per year over the next ten years and would produce benefits of between $209 million and $403 million annually.  Interestingly, a 2014 study by the Western Values Project found that the value of flared natural gas flared on federal lands ranged from $427.2 million and $508.6 million in 2013 with between $53.4 million and $63.6 million in federal royalties being lost.  Here is a table showing the volume of flared gas from onshore federal lands and its value going back to 2009:


The rule change was also aimed at protecting the environment since methane is roughly 25 times more potent as a greenhouse gas than carbon dioxide and accounts for 9 percent of all U.S. greenhouse gas emissions with one-third of that amount coming from the oil and gas sector.  The final rule was expected to reduce methane emissions by 35 percent from the 2014 emissions level.

Given all of that background and to little fanfare, the newly minted 115th Congress has changed things.  House Joint Resolution 36 provides for congressional disapproval under Chapter 8, Title 5 of the final rule of the Bureau of Land Management as noted above.   Here is the text of H. J. Res. 36:



Here's how the vote went:


And that puts a very quick end to the Bureau of Land Management's attempt to put an end to natural gas flaring by the oil and gas industry.  Congress certainly doesn't waste time when they have a "bee in their collective bonnets", do they?

4 comments:

  1. Other than the fact they are idiots as determined above, the fact they voted so strongly along party lines is part of the reason so many of us think so little of those we have sent to Washington.

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  2. Given that the land from which the oil and gas is under government control (therefore factual ownership), not private property, and O&G companies operating thereon have close crony alliances with the federal government (a fascistic arrangement) the outcome of the vote does not surprise me.

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  3. CORRECTION: Given that the land from which the oil and gas is extracted is under government control (therefore factual ownership), not private property, and O&G companies operating thereon have close crony alliances with the federal government (a fascistic arrangement) the outcome of the vote does not surprise me.

    ReplyDelete