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Thanks to North Dakota, US waste of natural gas grows rapidly

The United States is posting rapid growth in the waste of natural gas in new oil fields where the fuel is either burned or vented into the atmosphere.  Experts say the process damages the environment and fails to maximize the return to investors.

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"The increase in US gas flaring is from the Bakken oil field in North Dakota," Chris Elvidge, a NOAA researcher who has analyzed the satellite flaring data writes in an e-mail interview. "It's possible that current low prices for natural gas may be contributing to the decision of the companies operating in North Dakota to flare the gas off rather than invest in the infrastructure to capture it and bring it to market."

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Others, too, are concerned about that possibility. "As long-term investors, we are concerned that flaring of natural gas wastes a valuable product," wrote a group of 37 investors in March in an open letter to oil companies operating in the area. "Even at today’s depressed wellhead price of under $3.00 per thousand cubic feet, the 100 million cubic feet of natural gas that were flared each day in North Dakota last year represent approximately $110 million in lost revenue."

Still, there are signs that at least some infrastructure to collect and process gas is being put in place. One expected new processing plant and expansion of another should add about 230 million cubic feet of gas processing a day by 2013, according to the North Dakota Pipeline Authority.

But with thousands of new wells expected to be drilled in the coming decade - and gas flared from many of them across the 15,000 square mile expanse of North Dakota - it remains a question whether the pace of such construction can keep up with drilling and flaring.

"We need to continue to build the infrastructure and get [the infrastructure] put in place to handle that natural gas," says Alison Ritter, a spokeswoman for the North Dakota Department of Mineral Resources in Bismarck. "We're not happy about the flaring. But this Bakken field is still relatively new area and very rural. So it will take some time to get it built."

Overall worldwide flaring dropped 20 percent between 2005 and 2010. But in 2011 there was a global increase propelled by growth in flaring in the US and Russia.  

“It is a warning sign that major gains over the past few years could be lost if oil-producing countries and companies don’t step up their efforts,” Bent Svensson, manager of the World Bank's Global Gas Flaring Reduction partnership, said in a statement on new data released July 3.

In an interview, Mr. Svensson adds that he believes that the bump-up in flaring is temporary and that it will resume its downward path soon. The World Bank's partnership program to reduce flaring was just renewed for another three years in June.

Still, a big factor in reducing the global flaring problem has to do with price - and with national policies concerning air pollution, he notes. In Norway, for instance, natural gas production facilities are required to be built before oil production can commence. There are also stiff pollution-related fines for flaring gas that costs companies about $2 per million Btus, roughly the current cost of natural gas in the US, Svensson says.

North Dakota officials say industry is stepping up and has invested billions in gas. "The price isn't slowing it down," Ms. Ritter says. "It's just taking time to get the processing plants built. We're confident industry is investing in natural gas in our state."

But in North Dakota, producers can flare natural gas for one year without paying taxes or royalties on it - and ask for an extension due to economic hardship associated with connecting the well to a natural gas pipeline, the EIA reported in November.

"We think the trend is going downward with small hiccups," Svensson says. "The question is whether we are reducing gas flaring enough overall.... We think a good mixture of policies and incentives, but also regulation, is the way forward."

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