Copious amounts of natural gas escapes the surface of the earth naturally during oil production. Oil producers regularly flare the gas – which means they burn it off until it dissipates. This is a very wasteful process and is practiced regularly across the world. It is estimated that 10 billion ft.³ of natural gas gets flared every month just in North Dakota, a phenomenon that burns so bright you can see it on satellite imagery of the earth. In aggregate, 500 billion ft.³ of natural gas is flared across the globe and is generally wasted as heat dissipated back into the atmosphere.
The practice of gas flaring occurs because although these shale areas have oil production facilities in place, there are little to no pipelines there for gathering natural gas. If these areas had some way of capturing and transporting this natural gas, it could be profitably sold, an efficiency gain that would help both business and the environment. The quandary for many oil producers is that most of their wells are just too remotely located for natural gas pipelines to be built economically at scale. There are some environmental regulations drafted against natural gas flaring, but this legislation along with its enforcement is spotty. The problem with cumbersome environmental rules and regulations is that it can be a heavy-handed approach used to cause economic damage to oil producers. Many environmentalists have a disdain for fracking and will use any means available as an excuse to shut down shale oil projects.
Composition of Natural Gas
Natural gas found in different locations have differing compositions.
- Bakken natural gas is rich in a few key components that can be liquified: propane, butane and pentane. Bakken natural gas can be liquified using mobile liquification natural gas systems and then transported by vehicles off-site to be sold. The remaining gas (mostly methane) cannot be liquified and must be wasted as flare.
- Marcellus shale natural gas (West Virginia, Pennsylvania & New York states) has too little of a liquifiable component and thus mostly gets wasted as flare.
A Solution: Sell the Natural Gas as Power
What if oil producers could combust the natural gas and sell the energy it generates back into the power grid? Some companies are already devising systems to re-route the boiling hot water that traditional hydraulic fracking operations generate usable energy. On the prospects of doing something similar with the natural gas generated as a byproduct of oil drilling, Robert Zubrin of Pioneer Energy recently wrote the following in the Wall Street Journal:
A typical flare burning 200,000 cubic feet of gas a day wastes enough energy to produce a megawatt of electricity, about the same as a large wind turbine or solar array. More than 40 states have “net-metering” laws that require utilities to buy electricity from solar and wind generators. These laws are essentially subsidies, but the public has accepted the cost based on the environmental benefits. Such laws should be expanded to include natural gas.
For one, flare-generated power wouldn’t require a subsidy. Currently, utilities must invest in fossil-fuel backups for solar and wind, since their energy is beholden to mother nature. Flare-gas power generators would not be subject to sudden cutoff from nightfall, clouds, snow or other changes in the weather, and so utilities would not need to invest in matching reserve power.
Furthermore, using flare gas to produce power offers greater environmental benefits than solar or wind, because it doesn’t merely offset carbon emissions elsewhere—it eliminates a flare, which would otherwise be a significant source of conventional pollutants with no corresponding benefit. Limiting net-metering laws to privileged renewables makes no economic or environmental sense.
The economics of producing electricity from flare gas work without taxpayer assistance. For example, the current price for commercial electricity in North Dakota is eight cents a kilowatt-hour. If the utility were to pay six cents per kilowatt-hour to buy flare gas electricity for resale to its customers, a one-megawatt flare gas generator could earn its owner $1,440 a day. The generator would pay for itself in about a year.
That would be a good rate of return for the person who owned the generator, but the nation would benefit as well. It would eliminate a major environmental problem while expanding useful energy resources.
Domestic oil production would be more profitable, creating jobs and expanding tax revenue. Some of the natural gas now burned for electricity would be freed up for other uses, including exporting. Prices for natural gas in Europe, China and Japan range from three to six times the U.S. price. If the Obama administration stopped blocking the establishment of U.S. gas-export terminals, some increased supply could be shipped to such markets. This would help free U.S. allies from Russian or OPEC gas-cartel coercion, strengthening the position of the Western alliance.
In previous eras, oil companies would regularly power oil wells using the natural gas that was naturally produced. But now that the EPA requires permits for this kind of back-powering operation for each and every oil / gas well, the oil companies are forced into using electricity off the grid. Since companies can’t afford (both in terms of time and money) the permits required for each and every oil well, they flare the gas instead. In a make-believe world where the permit requirements are waived or significantly eased (as in wind and solar power projects), there’s still the issue of building transmission lines to move the energy at thousands of well locations. And those transmission lines might have to travel pretty far: for the Bakken shale, North Dakota’s sparse population can’t use all that energy, so it would have to be moved onward to nearby more-populated states like Minnesota.