By Daniel Roda-Stuart, Fellow
With oil and natural gas production, it’s not only the industry that benefits monetarily. Mineral rights holders (the people who actually own the oil and gas deep below the earth’s surface) benefit too. Depending on where you look in the United States, who owns these mineral rights varies. In many places those minerals are owned by individuals and in other situations it’s the federal or state government.
In the Western U.S., it can often be Native American tribes that own the rights to these resources. And the revenue from the production of these tribal resources can be invaluable for funding education, health care, and other programs. So, what happens when faulty equipment and poor practices allow valuable natural gas to escape to the atmosphere before making it to the sales line? It can result in millions of dollars of lost royalty revenue for Native American tribes.
A recent EDF analysis focuses on the value of this wasted gas and the financial impacts to the Northern Ute tribe in the Uintah Basin of Northeastern Utah. Read More
When operators pull oil out of the ground, it often comes up with copious amounts of natural gas. This “associated gas” can be captured and brought to market, creating an additional revenue source for operators. But if no gathering infrastructure or other methods of capture are deployed, operators either vent the gas to the atmosphere or burn it off with controlled flares. Venting results in the release of methane, a powerful greenhouse gas. Flaring results in troublesome emissions as well, including CO2 and hazardous air pollutants.
According to the Wyoming Oil and gas Conservation Commission (WOGCC), Wyoming’s oil and gas operators vented and flared more than five billion cubic feet of natural gas in 2014. Five billion cubic feet of gas that could be sold to generate taxes and royalties, heat homes and power machinery across the country, instead was wasted. Read More
Everyone agrees that burning off as much as a third of the natural gas produced in North Dakota is a terrible waste of an important natural resource. The flaring problem arises out of the fact that energy companies are primarily drilling for oil in North Dakota. A lot of natural gas comes out of those very same wells, though; and since the infrastructure isn’t in place to take that gas to market, companies end up flaring gas as a “waste” byproduct of oil production.
This isn’t a problem that can be fixed overnight. Building the gathering systems, processing capacity and transmission pipelines to get this gas to market requires major planning and investment. But we also have to recognize that in a capital-constrained world, the incentive is for companies to put their next dollar toward the next oil well – not toward lower-return (but still lucrative) investments in gas infrastructure. If a company’s bottom line was all that mattered, that might be fine. But we have other issues at play here.
Flaring natural gas undermines national energy security, has negative impacts on the region’s air quality, results in unnecessary greenhouse gas emissions and represents millions of dollars of lost revenue for the state, local governments, schools and mineral estate owners. In fact, in 2012 alone, flaring resulted in the waste of around $1 billion in fuel – or enough gas to heat more than a million homes.
This post was co-authored by Tomás Carbonell, EDF Attorney, and Brian Korpics, EDF Legal Fellow
Last Thursday, the Department of the Interior’s Bureau of Land Management (BLM) hosted a public forum in Washington, D.C. on venting and flaring of natural gas from oil and gas operations occurring on federal lands. This was the third in a series in which BLM received public comments on various options aimed at addressing the extensive and unnecessary loss of gas from onshore federal oil and gas leases. EDF is encouraged to see BLM taking on this vital issue, and we delivered testimony urging BLM to take strong and timely action to uphold its responsibility to minimize waste of our nation’s natural resources and ensure oil and gas development minimizes impacts to our climate and public health.
Reducing waste of natural gas on federal lands is a core element of the President’s strategy to reduce methane emissions, and for good reason. BLM is tasked with managing 700 million acres of federal lands – making it the largest single land management agency in the federal government – and it has broad responsibilities for the significant oil and gas resources located on those lands. Almost 40 million acres of BLM lands have already been leased for oil and gas production, accounting for approximately 14 percent of all onshore natural gas production and 8.5 percent of all onshore oil production in the United States.
Despite the scale of oil and gas production on federal lands, BLM’s policies covering venting, flaring, and other losses of natural gas are over three decades old. These obsolete regulations allow producers to waste significant amounts of natural gas that could be cost-effectively captured using today’s technology. The Government Accountability Office (GAO) found in 2010 that between 4.2 and 5 percent of all natural gas produced onshore on federal lands was vented, flared, or lost in fugitive emissions — enough gas to heat about 1.7 million homes each year. A more recent study by the Western Values Project found that vented and flared methane could cost taxpayers nearly $800 million in coming years.
Holly Pearen, EDF’s Attorney for the Natural Gas Campaign, contributed to this blog post.
The federal government notified 36 states last week that it plans to temporarily stop monthly mineral revenue payments as a part of the mandatory sequestration budget cuts. These cuts will hit western states especially hard with an estimated $26 million cut coming to New Mexico over the next six months, $8.7 million to Utah, $8.4 in Colorado and $5.5 in California, while North Dakota and Montana will see $3.2 and $2.5 million in cuts, respectively, according to data from the U.S. Department of Interior’s Office of Natural Resources Revenue.
However, no state will be hit as hard as mineral resource and federal lands-rich Wyoming, which has been notified to prepare itself to lose $53 million in federal mineral revenue payments through July.
The money is the state’s share of royalties paid by producers who operate on federal leases in Wyoming. Not surprisingly, Wyoming officials are very unhappy with the federal plan, both its details and the way it was announced to the states via letter with little forewarning. As Wyoming Governor Matt Mead said in a statement: "As far as communications go, this method of passing along significant information that greatly impacts Wyoming gets a grade of F minus or worse. It is not acceptable."
While Governor Mead has vowed to fight the plan and is working with the Wyoming Attorney General, Wyoming’s congressional delegation and neighboring states to come up with a strategy to oppose the cuts, we would like to offer a suggestion. Perhaps Interior should make up the shortfall owed to the states by charging royalties on vented and flared natural gas? Read More