Vast Energy Resources Wasting Away in the Texas Permian Basin a Special Report on Natural Gas Flaring FLARING REPORT 2
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Vast energy resources wasting away in the Texas Permian Basin A special report on natural gas flaring FLARING REPORT 2 I Introduction 3 II Trends in the Texas Permian 5 III Regulatory solutions 7 IV On-site gas capture opportunities 8 V Conclusion 10 Table of contents FLARING REPORT 3 I. Introduction A new Texas oil boom is in full swing. Oil isn’t the only resource in abundant The United States Geological Survey supply. There’s also ample natural gas (USGS) estimates 20 billion barrels of (known as associated gas), freed from untapped oil reserves in one single area underground shale during hydraulic of the Permian, an oil and gas basin fracturing, the process of pumping contained largely by the western part of millions of gallons of chemicals, sand and Texas and extending into southeastern water down a well to break apart rock and New Mexico 1. release the fuel. A rush to produce higher Earlier this year 2, the Energy value oil, however, has some Permian Information Administration (EIA) drillers simply throwing away the gas. predicted the Permian Basin would Lack of access to gas pipelines, low gas experience the country’s highest growth prices, and outmoded regulations are in oil production, and in August EIA driving this waste. reported the Permian has more operating A new analysis of the amount of Texas rigs than any other basin in the nation, Permian gas lost due to intentional with oil production exceeding 2.5 million releases (venting) and burning of the gas barrels per day 3. Meanwhile, companies (flaring) by the top 15 producers in recent including ExxonMobil are investing billions boom years reveals a wide performance in leases 4, and oilfield services giant gap. Data suggests that companies and Halliburton reports hiring 100 employees a regulators can do much more to limit month to keep pace with demand5. routine flaring 6. FLARING REPORT 4 In 2015 alone, enough This is wasteful, environmentally When methane leaks, it also does so with harmful and, for some oil and gas toxins like benzene, hydrogen sulfide, Permian natural gas operators, business as usual. toluene, and xylene, as well as smog- was flared to serve all Emissions of unburned natural gas are producing volatile organic compounds. of the Texas household also harmful to human health. Although Flaring helps to combust most of these, needs in the Permian West Texas counties tend to be more but spawns a host of other pollutants like 9 10 counties for two and a rural, oil and gas air pollution is a concern particulate matter and sulfur dioxide . for families living nearby. A Clean Air The potential health impacts of these 7 half years . Task Force report ranked seven Texas air pollutants range from irritation of Permian counties in the top 10 worst eyes, nose, and throat to chronic or fatal U.S. counties at risk for asthma attacks8. illnesses such as cancer 11,12. FLARING REPORT 5 II. Trends in the Texas Permian Basin Oil and gas air pollution in the Permian is not a new problem. Of FIGURE 1 Texas’ top 25 flaring counties in 2014, Comparing Wasted Gas Volumes in Eagle Ford Shale and Permian Basin ten were in the South Texas Eagle Ford Vented and flared volumes of associated gas have steadily risen in the Permian from 2009 to 2016. shale and 14 were in the Permian. When After 2014, it makes up the majority of vented and flared associated gas in all of Texas. oil prices sank in 2015, flaring in the 100,000,000 Eagle Ford dropped (Figure 1). In the Permian, however, where oil recovery 80,000,000 remained somewhat profitable, flaring volumes increased for 2015. Increased 60,000,000 venting and flaring tightly links to the number of well completions, as 40,000,000 this activity is highest in the months following new well construction. With (Mcf) Thousands of Cubic Feet 20,000,000 more flaring coming, it is imperative for both companies and state agencies 0 to consider practical regulatory and 2009 2010 2011 2012 2013 2014 2015 2016 operational changes to avoid pollution and stop the needless waste of a Eagle Ford Permian Other valuable natural resource. FLARING REPORT 6 How Do Permian Operators Stack Up Low performers encountered unique operational situations And What Can We Learn? Companies from Figure 2 that were low- (remote well location, high percentage of new EDF analyzed Texas Railroad performers in 2014 and 2015 include COG wells, etc.) that could have led to a high rate Commission data detailing industry’s Operating, Energen Resources, XTO Energy, of flaring. Yet consistent under-performance flaring activity in several Permian counties13 Apache, and Cimarex Energy. suggests that better practices and approaches to assess how top producers performed Low-performing companies may have would lead to improvements. compared to the region’s average flaring rate in 2014 and 201514. High-performing companies captured more of their FIGURE 2 Rate of Permian Gas Wasted by Top 15 Oil Producers associated natural gas, posting lower flaring Venting and flaring as a percent of total production in 2014 and 2015 for the top Permian producers rates. Low-performing companies did not 10% capture as much and therefore had higher flaring rates. Some are wasting nearly 10 9% percent of the associated gas they produce. 8% 7% On average, Texas 6% Permian operators 5% 2015 average flaring rate4% flared their associated 4% 2014 average flaring rate3% natural gas at a rate 3% of 3 to 4 percent in 2% 2014 and 2015, over 80 1% billion cubic feet (Bcf) 0% COG Operating Energen Resources XTO Energy Apache Cimarex Energy Chevron USA EOG Resources Oxy USA/Occidental Permian Devon Energy Pioneer Kinder Morgan Laredo Petroleum Energy Parsley Endeavor Energy Crownquest Operating in total volume. Because of the steep drop in new drilling activity in 2016 and subsequent drop in flaring, EDF analyzed 2014 and 2015 data to examine operators in a “high well completion” context – similar to what can be expected in the coming boom years. 2014 2015 High performers Companies in Figure 2 that were high-performers in 2014 and 2015 include Pioneer, Kinder Morgan, Laredo The analysis in this report is drawn Petroleum, Parsley Energy, Endeavor from publicly available data from the Energy, and Crownquest Operating. Texas Railroad Commission and its There may be valuable lessons from findings are therefore limited to oil and these operators that should be applied New Mexico gas operations in the Texas portion throughout the Basin. The high- of the Permian basin. However, a performing companies’ production has significant portion of the Permian also extends into southeastern New remained high while their rate of flaring Texas has remained lower than the basin average. Permian* Mexico which is also experiencing It is possible for an operator to have intensive, new development. While varying rates of flaring for a given period it is beyond the scope of this report, due to different operational circumstances. nothing in this dataset indicates that But because these operators maintained a flaring is any less of a problem in New lower rate over a prolonged period of high Mexico’s Permian and an analysis of production, from 2014 through 2015, they *Approximate boundary New Mexico-specific Permian flaring are likely attaining some consistency in data is a worthy focus of further performance that could be replicated by investigation. other companies. FLARING REPORT 7 • A detailed map of the gas gathering pipeline system indicating the proposed point of tie-in. • Information about the capacity of the gathering line. An analysis and plan for the use of alternative on-site gas capture technology options at the proposed well site and how much such alternatives would reduce or eliminate flaring. If gas capture technology can be economically deployed and reduce the need for flaring, the flaring permit should require the use of the gas capture strategy as a condition of the permit to flare. Require best flaring technologies to III. Regulatory solutions minimize waste and protect air quality. In those instances where a producer can’t capture the associated natural physical waste or prevent a mineral A central factor of this more than 80 gas of its wells and a permit to flare is owner from accessing their fair share billion cubic feet of natural gas waste issued, the gas should be burned off of the mineral resources. This would are state regulations that make it easy as efficiently as possible. At present, give associated gas stronger regulatory to burn energy resources rather than however, Texas only requires “high status as a valuable natural resource capture and sell them. Texas can, and efficiency” flares – those that perform requiring sound conservation practices should, create a regulatory environment with a design destruction efficiency rather than a byproduct to be conserved that encourages companies to not flare of 98 percent - in the Barnett Shale17. only if there is an immediately available gas and supports a level playing field Additionally, rules in the Barnett allow pipeline16. for operators already employing flare- the use of an automatic ignition system reducing best practices. or a continuous pilot. These rules can Eliminate permanent flaring permit help reduce pollution from flaring and exemptions and require operators with Require the Texas Railroad should apply throughout the state of flaring permits to plan ahead. Commission and operators to treat Texas. If a company’s desire to flare associated wasted gas as a valuable resource. gas is simply due to a matter of timing, Under current state policy, producing Improve record keeping and reporting whether it be two, three, or six months oil takes precedence over the waste and requirements to ensure vented and 15 until a pipeline can be installed, it should other detrimental impacts of flaring .