When a natural gas firm drills up more natural gas than it can store or put in a pipeline, it has to light that gas on fire. That process is called flaring, and it’s the reason why you can see remote areas of North Dakota lit up all the way from space. As the WSJ reports, flaring is kicking off lawsuits from North Dakotan landowners who aren’t satisfied with the royalty checks—or lack thereof—they’re receiving for this wasted gas:
Continental and other North Dakota drillers say they were forced to burn off gas they would have rather sold but for the lack of capacity on the state’s existing network of pipelines….Natural gas that is pumped out of the ground along with more valuable oil is burned at a much higher rate in North Dakota than in other crude-producing states, a legacy of the industry’s rush to pump oil before gas pipelines and processing plants were built.How to value the gas that has been burned off is up for debate. A lower value means less paid in royalties. Those owed royalties are pushing for a higher valuation than Continental wants. They are also pushing for royalties on flared gas the company says is legally exempt from royalty and tax payments under state law, including in cases where wells are hooked up to oversubscribed gas lines. Two-thirds of the gas burned off in North Dakota each month is from wells connected to gathering systems that are overwhelmed with too much gas and not enough processing capacity.“It’s a huge amount of money that is being burned off every month and a percentage of that is owed to the royalty owners,” said Cody Balzer, a lawyer representing North Dakotans who say they should have been paid royalties for gas that was produced but burned rather than sold. “Collectively, it’s millions of dollars a day.”
Flaring is a lose-lose-lose. It’s bad for the planet, because it doesn’t completely combust escaping gas, leading to increased emissions of methane, a particularly potent greenhouse gas. It’s bad for drilling firms, which have taken large risks and invested huge amounts of money into wells, only to see their bottom line being eroded by an inability to bring all of the gas they’ve fracked to market. And, as the above WSJ story shows us, it’s bad for the landowners who allow gas firms to drill on their land, because they’re not getting the amount of royalties they would otherwise be receiving if all of that flared gas were put in a pipeline and sold.The shale revolution is not a discrete event—it requires significant infrastructure investments and reinvestments. Building out our nation’s already considerable pipeline infrastructure to connect to fields in North Dakota’s Bakken shale formation ought to be a top priority if we want to keep riding this domestic energy boom.