Flaring the night away

September 6, 2013 admin

bakken_vir_2012317The development of shale gas and oil in the United States is growing exponentially, and that has been a blessing and a curse. Concerns about water and air pollution are well documented, and recently a lesser-known worry about the boom in shale energy — flaring — is making headlines.

In December 2012, NASA released satellite images of American oil and gas fields that light up the night skies as brightly as some metropolitan areas. Those bright lights make up part of the more than $100 million of natural gas “flared” industrywide each month — burned off into the air — according to a July 2013 report by sustainable business consultant Ceres.

“In 2012 alone, flaring resulted in the loss of approximately $1 billion in fuel and the greenhouse gas emissions equivalent of adding nearly 1 million cars to the road,” notes Ceres’ Flaring Up: North Dakota Natural Gas Flaring More than Doubles in Two Years. The report also states:

“The majority of North Dakota gas (roughly 70 percent) is ultimately marketed; however, a significant percentage of the state’s natural gas production is burned off in flares due to a lack of pipelines, processing and compression infrastructure. Some individual companies have shown leadership in curbing flaring, legislators have introduced incentives to limit flaring, and several billion dollars have already been invested in additional gas pipeline and processing infrastructure. In addition, the state has set a goal to limit flaring to no more than 10 percent of produced gas.”

The primary reason so much gas is flared is largely one of economics. In North Dakota, the Bakken fields are mostly drilled for oil, and natural gas is treated as a byproduct.

One variable in this equation that could change minds about whether or not to burn off “excess” natural gas is the continued pressure brought by anti-flaring efforts. Regardless of how you see the issue, the pressure has led some companies to change their flaring practices, and more could follow if the calls grow stronger. And these industry commitments to reduce flaring should interest investors — increasing demand for natural gas storage and distribution infrastructure requires investment to build it, after all.

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thm_AndrewCampbellDrew Campbell is senior editor of Institutional Investing in Infrastructure.

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