FUELFIX Flaring cap may divide drillers
Easing the state cap could divide drillers and anger environmentalists
Texas considers easing its limits, an option that could anger environmentalists.
Texas is facing a burning question that’s pitting the state’s economy against its environment and oil drillers against each other.
With natural gas pipelines in the Permian Basin reaching 98 percent of capacity, Texas is weighing whether to keep intact or loosen strict state regulations that limit flaring, the process used by drillers to burn off excess gas pumped up along with their oil. Now the limit for individual wells is 45 days. After that, without a rare-granted exemption, the gas must be piped away or the well must close.
Shut wells mean less revenue for companies and the state, at a time when oil prices and production are surging. Ending or expanding the cap solves the problem. But it also gives drillers that haven’t paid for space on existing pipes a competitive edge over those that have and could spark environmental protests.
“This is not a simple thing we’re talking about,” said Ryan Sitton of the Texas Railroad Commission, which oversees the oil fields. “It’d be a pretty big policy shift, and we want to be very thoughtful about what the ramifications could be.”
Sitton said he’s meeting with producers across the Permian and hopes to have a decision within six months, when he believes the pipeline-space dilemma will come to a head.
Multiple gas pipelines crisscross the Permian. But as the price of crude has risen, so has production, growing 25 percent in the last year. The gas tied to that boom has filled all but 2 percent of pipeline capacity as of the end of April, according to RBN Energy. Rystad Energy suggests oil output may grow 10 percent more by the end of 2018.
Changing the regulations could affect different constituencies in different ways. Some drillers have paid upfront to guarantee room on existing pipelines, assuming that current limits on flaring wouldn’t be dramatically altered.
Concern that extended flaring could punish companies already heavily invested in the last space on existing lines is a key issue for the Railroad Commission, according to Sitton.
“How do we do something that is fair and equitable for all producers so that we are not having an artificial market impact?” he asked.
With the financial questions are those revolving around air quality. Flaring releases toxic compounds like cancer-causing benzene and matter that is linked to respiratory illnesses, according to the Environmental Defense Fund, an advocacy group against increasing the duration.
Suzanne Franklin, 67, and husband James can see 17 flares breathing fire into the sky from the front porch of their Reeves County ranch. The visible pollution has affected their lives.
“We used to go out and look up at the stars,” she said. “Now, you don’t see any stars.”
Seven counties in the region already rank in the top 10 nationwide for childhood asthma attacks, according to the Clean Air Task Force. More flaring could worsen that.
Texas flares about 3 percent of gas in the basin. Matt Portillo, analyst at Tudor Pickering Holt & Co., said that could rise as much as five times higher in the next year.
Sitton disagrees. A primary role for the Railroad Commission “is to prevent waste,” he said. “If you believe that waste is not dollar waste, but the waste of the hydrocarbon molecule, then we have to be very judicious about when we grant flaring exemptions. Those are the questions that we are trying to get our heads around.”
“This is not a simple thing we’re talking about.” Ryan Sitton, Texas Railroad Commission