Thousands of wells in the Bakken Shale area dot the landscape and are producing gas as a byproduct of hydraulic fracturing and horizontal drilling for oil. Because North Dakota lacks adequate infrastructure, drillers are forced to burn off whatever they can't capture and ship to market. In April alone, such wells burned 10.3 billion cubic feet of natural gas, according to the state, valued at nearly $50 million.
North Dakota's regulations have struggled to keep pace with the drilling and flaring. Burning off natural gas degrades air quality. And it is being reported that some producers aren't paying all the royalties and taxes owed on the gas that is flared. Energy companies lose out on gas revenue, too, but that is offset by what they generate from Bakken crude oil.
Stung by criticism that it has allowed oil producers to flare wells indefinitely, the North Dakota Industrial Commission on June 1 adopted rules requiring that gas-capture plans be submitted for companies to get a new drilling permits. The rules require producers to identify gas-processing plants and proposed connection points for gas lines but don't affect permits that already had been issued. The commission, which promotes as well as regulates the drilling industry, on Tuesday is expected to announce measures to limit flaring of existing wells. The federal government also is considering new limits on flaring.
In the past five years, North Dakota has climbed from the country's sixth-largest oil producer to the only state after Texas to produce more than a million barrels of oil a day. That has brought investment and job growth to a state economy once largely dependent on agriculture. While Texas captures all but 1% of the natural gas produced, North Dakota burns 30% of its output. Oil companies can ship crude, which fetches 20 times more than gas per barrel of oil equivalent, in tanker trucks to pipelines or rail terminals. Transporting natural gas requires a pipeline connection at the source, however, and North Dakota has far fewer of such pipes and less processing capacity than other oil-producing states. (WSJ, 6/30/2014)