With increasing frequency, my landowner clients have complained about gas flaring, especially in the Eagle Ford Shale. Landowners are beginning to insist that their leases require royalty payments on flared gas. Landowners also complain of the odors and noise from gas flares.
The San Antonio Express News has recently published a four-part series, Up in Flames, on flaring in the Eagle Ford, after a year-long investigation. Among its findings:
- Since 2009, flaring and venting of natural gas in Texas has surged by 400 percent to 33 billion cubic feet in 2012. Nearly 2/3 of the gas flared in 2012 came from the Eagle Ford.
- Gas flared in the Eagle Ford resulted in more than 15,000 tons of volatile organic compounds and other contaminants into the atmosphere in 2012 -- more than was emitted by the six oil refineries in Corpus Christi.
Part Three of the Express News report focuses on the role played by the Texas Railroad Commission in regulation of gas flaring. Under RRC regulations, a company can flare gas for 10 days after a well is completed; after that, the company must apply for a permit if it flares more than 50,000 cubic feet of gas per day from the lease. The Express News asked the RRC for records showing the 20 leases in the Eagle Ford with the most gas flared and vented in 2012, and for the permits allowing those companies to flare that gas. It turned out that seven of the 20 leases lacked the necessary flaring permits -- a fact that the RRC apparently had not noticed until the newspaper asked for the information.
The RRC's lack of enforcement of its own rules was a subject of criticism of the agency in the last Sunset Commission review of the RRC. The Sunset Commission report said that the RRC "pursues enforcement action in a very small percentage of the thousands of violations its inspectors identify each year. Part of the reason for the large number of violations is that the commission's enforcement process is not structured to deter repeat violations. The commission also struggles to present a clear picture of its enforcement activities, frustrating the public."
RRC rules provide for a fine of up to $10,000 per day for flaring without a permit. After the Express News pointed out that seven of the 20 highest flaring leases in the Eagle Ford had no flaring permit, the RRC fined two of the companies more than $60,000 and is considering action against the others.
According to the report, the RRC could not point to a single instance when it denied a permit to flare gas -- sometimes for more than 180 days.
Most of the Eagle Ford production is oil -- some natural gas is produced with the oil, but with high oil prices and low gas prices, companies don't want to shut in wells until pipelines can be laid to gather the relatively small amounts of gas produced with the oil. So, the companies flare the gas. Burning the gas produces carbon dioxide, a greenhouse gas. If the gas is not burned completely, or if it is vented, methane and volatile organic compounds are released into the atmosphere.
Last year the RRC appointed an Eagle Ford Shale Task Force to identify and make recommendations to address issues resulting from exploration and production activities in the Eagle Ford play. One of its recommendations was to modernize state regulations, reduce waste of natural gas, and make flaring an "option of last resort." One of the commissioners, David Porter, said that he had "directed commission staff to apply a higher level of scrutiny to applications for flaring and venting operations and to shorten time frames for compliance when violations are reported." No word yet from the Commission on how that "higher level of scrutiny" has affected flaring in the Eagle Ford.
Bottom line: operators will continue to flare gas as long as it is to their economic benefit to do so. The Railroad Commission will not deny permits to flare the gas. If landowners are able to require royalty payments on flared gas, the lessee's economic incentive to flare the gas will be reduced. Eventually, gas prices will rise, gathering lines will be installed, and flaring will decrease. Until then, flares continue to light up the night sky in South Texas.