The rapid expansion in tight oil production with its associated natural gas has made the United States the fourth largest source of flared gas in the world. The waste, emissions, and pollution caused by this flaring threatens not only the environment and human health but, ultimately, the license to operate for oil and natural gas companies. Responding effectively to the challenge of flaring requires technically and economically sound solutions that also enjoy political credibility and support. To be most credible, solutions for flaring need to be developed through open and transparent processes that provide for candid and constructive engagement by a diverse group of stakeholders.
In January 2020, the Energy Institute at the University of Texas at Austin and Columbia University’s Center on Global Energy Policy gathered senior executives from the US oil and natural gas industry; current and former state government regulators; technical, market, and academic experts; and non-governmental organization (NGO) representatives with expertise in this topic for a workshop under the Chatham House Rule to discuss challenges and potential solutions to gas flaring, primarily in the Permian Basin. The gas flaring workshop focused on trends in gas flaring and greenhouse gas emissions in the United States, flaring and public policy, the disconnect between production growth and midstream infrastructure capacity, best practices and technological solutions for minimizing flaring, and regulatory and other solutions.
Participants identified challenges to tackling flaring in the Permian, including poor data quality, the disconnect between the start of associated gas production and the availability of pipelines and other takeaway capacity, and the competition gas faces in the important Texas and California markets from lower-emission energy sources, and from coal in Texas. Participants also discussed potential solutions to these and other Permian flaring challenges. While not all solutions had consensus support, the following is a brief summary of some of the suggestions discussed:
- Best practices. There was general agreement that the industry should demonstrate leadership in developing best practices for reducing gas flaring, and they should be shared with operators across the industry. Several participants referenced best practices established under the Methane Guiding Principles initiative as an appropriate model for this activity.
- Flaring data. New technologies such as drone, aircraft, and satellite imaging can provide better flaring data that can be used to hold specific Permian operators accountable for their performance. Industry leaders could work with the states to make flaring data more transparent, accurate, and accessible to the public. There was general agreement among participants that this is an important solution.
- New uses and storage options. New technologies offer potential new uses for associated gas, such as enhanced oil recovery and mobile LNG to replace Permian diesel use, drive field turbines, generate power, or be used as marine fuel to reduce flaring. Permian reservoirs can temporarily store gas, although delays in selling the gas would hurt the economics of a project.
- Regulation. The ability to flare liberally reduces the economic incentives for producers to invest in the infrastructure required to process and ship associated gas. Thus, regulation may be necessary to constrain flaring. Any regulations put in place to reduce flaring will work best if they build on what the industry is already doing
- Performance-based targets. Motivated oil and gas companies could take a leadership role and develop performance-based targets to voluntarily improve the industry’s flaring performance today, which could possibly become part of state regulation at some point. Internalizing the cost of surplus gas disposal
- Internalizing the cost of flaring would incentivize companies to curtail or end the practice, in the same way they internalize the costs of wastewater they produce. Companies could be required to commit to takeaway gas infrastructure before wells can be brought online. Taxing flared gas would create an economic incentive for companies to invest in equipment and infrastructure to avoid flaring. Many participants noted flaring should not be the lowest cost means of dealing with surplus gas.
- Better coordination with midstream infrastructure. Producers could extend production plans out for a longer period (e.g., five years or more) and communicate them to midstream providers. Upstream companies could commit to firm transportation plans that could then be used to underwrite new gas infrastructure investment.
- Pipeline permitting. Several producers suggested that permitting of pipelines could be streamlined, as could resolving issues around eminent domain to speed up pipeline additions.
- Oil and gas companies should work more actively with other stakeholders on a transparent process to reduce gas flaring. The industry also needs to show significant progress over the next one to two years to be credible. Greater use of natural gas with existing technology. Gas from the Permian Basin can be used either for additional LNG exports from the U.S. or for local power generation.