Lost value going up in flames
Now maybe North Dakota finally will get serious about curbing the enormous waste spewed every day from the fiery stacks of natural gas wells dotting the prairie like industrial birthday candles. The state's regulators and politicians have dithered and wrung their hands while flaring has tripled in volume over the past three years. One recent estimate put the waste in lost natural gas revenues at $1.2 billion a year.
"There's a lot of shareholder value going up in flames due to flaring," an analyst for Ceres, a nonprofit group that tracks environmental records of public companies, told a reporter earlier this year. "Investors want companies to have a more aggressive reaction to flaring and disclose clear steps to fix the problem."
Yes, they do. And now they have acted. Last week, mineral owners filed lawsuits against 10 oil and gas companies operating in North Dakota, contending they are owed untold millions of dollars in lost royalties for flared natural gas. Attorneys for the plaintiffs are seeking class-action certification for the cases. They contend the companies are flagrantly exceeding flaring limits and deadlines that the state has been lax in enforcing.
The disgraceful flaring in North Dakota has been an issue of national and international concern. Some large investors signaled their dissatisfaction more than a year ago. In March 2012, a group of 37 investors representing $500 billion in assets wrote a public letter to major shale oil producers saying they were concerned that excessive flaring "poses significant risks for the companies involved," citing the impact on air quality and climate change.
To be fair, capturing natural gas in the booming Bakken Formation is an enormous challenge, given the low price of natural gas and the remote locations of the wells. Industry in North Dakota has invested more than $6 billion in infrastructure, including pipelines and processing plants, to move natural gas from the wellhead to market. Coincidentally or not, the industry announced the formation of a task force pledged to sig-nificantly reduce" flaring in the Bakken oilfields on the very day the mineral owners' lawsuits were filed.
Since 2010, industry has more than tripled the amount of natural gas it gathers at oil well sites and sends to market. The North Dakota Pipeline Authority has set a goal of ultimately reducing flaring to between 5 and 10 percent over the next decade, compared to the current 29 percent.
The eyes of the world are on North Dakota. Last year, the World Bank called North Dakota one of the world's worst offenders in flaring natural gas. If North Dakota were a country, according to the World Bank report, it would rank fifth in the world, behind Russia, Nigeria, Iran and Iraq. That's not a flattering comparison. North Dakota must make a meaningful reduction in flaring. If companies and state regulators can't do the job, mineral owners and their lawyers just might do it for them.