Flaring, an oil producer necessity, falls into regulatory gap

2012-11-27T23:45:00Z Flaring, an oil producer necessity, falls into regulatory gapBy ADAM VOGE Casper Star-Tribune The Billings Gazette
November 27, 2012 11:45 pm  • 

DOUGLAS, Wyo. — There's a lot more going on outside of Douglas than there used to be.

The horizon surrounding Clear View Drive, a rural subdivision road off Converse County Road 52, is suddenly dotted with signs of oil development.

A drilling rig towers to the northwest, maybe a mile or two away from homes in the subdivision. Closer to the west, a flare stack — a tall, thin pipe that widens near the top — juts out of the ground, burning off excess flow from a nearby oil well in a steady orange flame. A couple of other flares also line County 52, separated by maybe a mile and each only several hundred feet from the road.

Energy companies now chase after oil and gas in the area — the southern half of the Powder River Basin — where development had previously been a pipe dream.

And it's all thanks to evolving technology. Well drilling and production are more advanced now than ever, unlocking "tighter," less-permeable hydrocarbon-bearing formations such as those in the Powder River Basin.

But infrastructure hasn't kept up with the drilling. By the time some wells are active, there's no line to transport gases associated with the basin's oil, a much more attractive resource.

So companies burn the gas. It's more environmentally friendly than venting it, they say, and more economic than closing off a well or waiting for months while they wait for a right-of-way permits, landowner agreements and construction needed to put a line in the ground.

The flares continue to burn hydrocarbons, their presence like a flickering candle. And the constant activity, noise and presence of gas has some people spooked.

A group, led in part by Kristi Mogen and Janice Switzer, wants answers about how flaring is regulated and why it's allowed to happen.

Complaints from Switzer triggered a Wyoming Department of Environmental Quality inspection of flares near her home east of Douglas in August.

An agency inspector described at least two flares as "smokey" in a memorandum about the incident filed in October. He added it was "doubtful" either were meeting a state requirement mandating that at least 98 percent of what goes through a flare is gas that is destroyed.

But the flares investigated weren't yet due for an air quality permit from the DEQ, meaning they didn't need to meet that standard. The Wyoming Oil and Gas Conservation Commission regulates flared volume and checks for hydrogen sulfide, a dangerous gas, but doesn't have specific language monitoring air quality in its rules.

The DEQ likely wouldn't have visited the area without receiving a complaint. Mogen thinks she found a regulatory gap.

"Somebody needs to be watching those flares (for air quality standards) from day one," she said.

Shawn Reese, policy director for Gov. Matt Mead, said the issue is likely to be dissected as the state forms a new energy policy.

"Flaring is an issue that reaches into revenue and environmental concerns, and it's something that we frankly need to do a better job coordinating," he said.

Reese said his office has studied how the practice is regulated. He admitted he thinks there are gaps present.

"I don’t know if it’s a regulatory gap, but I don’t think we’re communicating well what the situation is," he said.

In the meantime, Mogen and Switzer each claim their health and land have been affected by flaring. They also consider the noise, light and heat generated by flare towers about a mile away from their homes a nuisance.

"We don't want to live here anymore," Mogen said.

Chesapeake Energy holds 24 of 32 flaring extension permits in Converse County issued by the oil and gas commission. Company spokeswoman Kelsey Campbell said Chesapeake understands that its flares are likely a lot closer than what most homeowners are used to, and that Chesapeake is trying to be sensitive to that fact. The company, she added, is adhering to all Wyoming rules and regulations for flaring.

Flaring a necessity

Oil producers have been flaring for decades. It's a practice they view as a necessity to testing and outfitting an oil well.

In an oil well, some associated natural gas inevitably flows back with the desired product. Often there isn't an available line to lead it to be sold or collected.

But the gas has to go somewhere. That's when it's sent up a flare stack and incinerated.

The practice often extends into production. A gas line isn't a quick and easy project to complete.

That means sometimes companies must wait months until they can fully reduce flaring, especially in previously undeveloped areas like the southern Powder River Basin.

According to state data, the oil and gas commission currently holds 45 flaring extensions, 32 of which are in Converse County.

Chesapeake and others in the industry defend flaring as a necessity for oil production. Sandy Andrew, the company's operations manager in the Rockies, said that by flaring the gas, the company is actually doing all it can to protect the public.

"Flaring the gas actually makes it a much better exhaust than venting," he said. "It’s not just a good idea."

They say flaring is also a way to both protect their own workers and the quality of the well.

"It's like if you don’t have a pilot light running continually in your house, if gas were to escape from your furnace it could accumulate in your house and explode," said Bob King, Wyoming's interim oil and gas supervisor.

Sometimes flaring is a way to protect well integrity. Fluids used for well stimulation — including hydraulic fracturing — can damage the well's ability to produce in the future if shut in the well.

"The ideal is not to shut them in at all," Andrew said, adding that the company sometimes shuts wells in anyway. "It puts extra risk on productivity of a well to have to shut it in. But that’s a business decision we’re faced with at times.

Difficult to understand

It's not easy to understand just how — and when — state regulators monitor and control gas flaring.

The duty is split between two agencies — the Wyoming Oil and Gas Conservation Commission and the Wyoming Department of Environmental Quality's Air Quality Division — when projects are on private or state land. If they're on federal land, the Federal Bureau of Land Management also steps in.

The oil and gas commission regulates the practice during drilling and well testing processes as well as development. Commission rules allow for 15 cumulative, unregulated days of flaring, beginning with the first-day gas or liquids. Producers use that time to test what's coming out of the well and determine what size and type of surface and production equipment will be needed for the well. And they continue to flare.

After the 15 days pass, producers can apply to the commission for a flaring extension. The commission uses extensions to regulate several aspects of flaring, including how much gas can be burned and for how long, and requires reasons for using a flare. Producers must also submit a chemical analysis of what their testing tells will burn.

King said in an interview that the commission closely watches two main criteria when permitting flaring — whether it's considered wasteful and how much hydrogen sulfide is present in the wells.

If the commission deems a flaring extension worthy, it can approve the extension administratively or at a hearing. King said applications usually only go to hearing when they involve areas with "tremendous" amounts of flaring or are in an otherwise sensitive area.

The application length and amount of flared gas allowed varies from project to project. Most commission extensions allow producers six months to flare, which is time usually used to install infrastructure. The longest current extension — recently granted to Bill Barrett Corp. for wells in Laramie County — will expire in December after about seven months.

The volume of gas covered by the extensions also varies. The current permit with the highly daily rate allows for 750,000 cubic feet per day. Several permits are for less than 100,000 cubic feet. Operators can also operate without a flaring extension if they keep incinerated daily volume to less than 60,000 cubic feet. Natural gas currently sells for about $3.50 per million British thermal units, which equates to roughly $3.62 per thousand cubic feet.

Producers have the option of coming back to the commission for additional extensions once they expire, but King said his staff is wary about giving repeated extensions for the same wells.

And as the commission regulates the flares, the Wyoming DEQ also steps in.

The agency requires air quality permit applications be submitted for each well pad, usually due by day 90 of flowback on a well.

According to Steve Dietrich, air quality administrator for the agency, the first 60 or so days are used by producers to study well flows and submit a detailed analysis of the gases present. That information shapes the eventual state permit.

A permit can take anywhere from 60 to 90 days to process and issue, Dietrich said. But that doesn't mean the agency goes 120 to 150 days without regulating the flares.

Under a government-industry agreement, all producers are required to have what's called "presumptive best-available control technology" on each well site within 60 days of production.

While an operation uses the technology, also called PBACT, there's no limit on how much can be flared, but all flares must operate with 98 percent destruction efficiency, which simply means at least 98 percent of what comes through the flare is burned cleanly and not released into the atmosphere.

Better communication

King and Dietrich acknowledged in interviews that the combination of two sets of regulations can confuse bystanders, but both said the two agencies are working together to streamline and better communicate during the process.

King said he doesn't expect the meetings with Wyoming DEQ to generate any changes in regulation, but he thinks they will help.

"It's more a clarification for both agencies and those outside looking in on the process to understand what’s required and when it’s required," he said.

Andrew said Chesapeake continues to draw and re-draw plans for the area near Douglas "every day." The company runs nine rigs in the state, all in Converse County, and plans to bring in a 10th soon. Chesapeake's latest extension with the oil and gas commission expires in April.

The company also plans to host an informational meeting for interested and affected parties in early December.

With more development, flaring extensions will become shorter and shorter. Andrews said in the meantime, the company doesn't look at the practice as a win-win option.

"Flaring is something that we do when we have to," he said. "It’s not something we do as part of our strategy for the development. We’d prefer to sell (gas), always."

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