Burning Money, Fouling the Air: Citizens ask the state to curb flaring

Gas is flared at an oil well location north of Edgerton, Wyoming, near Hwy 387. (Dustin Bleizeffer/WyoFile — click to enlarge)

Gas is flared at an oil well location north of Edgerton, Wyoming, near Hwy 387. (Dustin Bleizeffer/WyoFile — click to enlarge)

By Dustin Bleizeffer
— June 18, 2013

As operators continue to churn out record volumes of oil from the Bakken play in North Dakota, Chesapeake Energy — among other operators — are setting up what could be a rival oil play in Wyoming’s southern Powder River Basin.

Several hundred permits to drill have already been approved, predominantly in Converse County, where the industry is drilling horizontal wellbores that stretch for 2 miles and further.

A gas processing plant north of Douglas has been in operation for decades, yet few new oil wells divert associated natural gas to the plant for processing. (Dustin Bleizeffer/WyoFile — click to enlarge)

A gas processing plant north of Douglas has been in operation for decades, yet few new oil wells divert associated natural gas to the plant for processing. (Dustin Bleizeffer/WyoFile — click to enlarge)

The wells, which cost $5.5 million to $11 million to drill, require multiple stage hydraulic fracturing — or fracking — and they produce a lot of wet natural gas associated with the shale- and tight sands-oil zones. It is common practice to flare — or burn — the natural gas because the volumes of gas do not immediately justify the cost of capturing it, treating it, and transporting it to pipeline networks for commercial sale.

But flaring can be troublesome — especially when it emits dangerous toxins into the air near homes and neighborhoods. There have been several instances of rogue flaring (flaring more gas than allowed) and improper flaring (when the gas isn’t burned completely, emitting more toxins).

It’s also extremely troublesome in times of state and county budget cuts. Operators typically pay no royalties or taxes on gas that is flared. That waste of gas and loss in revenue is justified by the larger revenues that come from oil production.

In May, the landowner advocacy group Powder River Basin Resource Council joined at least nine others in petitioning the state of Wyoming to rework its oil and gas rules to improve oversight of gas flaring, and to step up inspections and enforcement of industry activities.

Even in Wyoming — a state with a rich history of oil and gas development — state officials readily admit that it’s difficult for statute-driven regulatory agencies to keep pace with an industry that’s experienced a quantum leap in technology.

Yet, state leaders don’t particularly like it when citizens and citizen groups attempt to lead such reforms.

Asked for his reaction to the citizens’ petition, Gov. Matt Mead told reporters, “My view is changes in rules and regulations should be driven by the commission (Wyoming Oil and Gas Conservation Commission), or by this office.” Mead added that citizens have an opportunity to comment on any rule changes, but that the changes should be driven by state officials.

Wyoming Oil and Gas Conservation Commission supervisor Grant Black said that his agency formally recognized receipt of the citizens’ petition at the commission’s June meeting. The commission has not said that it will take up a rule-change effort at the petitioners’ request. However, Black said the commission does intend to undertake a broad review of its oil and gas rules and regulations, and through that effort the commission may address some of the petitioners’ concerns and recommendations.

Life in the shadows of drilling and flaring

Count Kristi and Pete Mogen, and their neighbor Janice Switzer — along with many others in the rural Wyoming neighborhood of Clear View Acres subdivision — among the growing number of citizens living in the shadow of America’s onshore oil and natural gas rush.

Since April 2012, they’ve witnessed a well blowout that forced them and their neighbors to evacuate their homes, they’ve been forced to navigate — daily — a huge wave of industrial traffic on rural roads, and they’ve been exposed to the noise and toxins of constant flaring of natural gas.

Kristi Mogen (left) and Janice Switzer, both residents of Clear View Acres subdivision east of Douglas, have lived with drilling and flaring activities since early 2012. (Dustin Bleizeffer/WyoFile — click to enlarge)

Kristi Mogen (left) and Janice Switzer, both residents of Clear View Acres subdivision east of Douglas, have lived with drilling and flaring activities since early 2012. (Dustin Bleizeffer/WyoFile — click to enlarge)

As they sought answers about exposure to toxins and how the state can better manage operators — some proven negligent in following the state’s existing rules — Kristi Mogen said they were ridiculed by other neighbors as greedy opportunists hoping to cash in on deep-pocketed corporations.

“My family felt like we lived through hell last year,” Mogen told WyoFile. “Our whole summer was destroyed — into our winter. Our health was impacted seriously, and I would say we did not turn a corner until about January of this year.”

Mogen said she and her neighbors didn’t expect to live in the middle of an oil rush but they reluctantly must play the role of watchdog. They constantly mine public databases, monitor nearby activities and ask state officials for more accountability from oil producing companies.

Chesapeake Energy, the primary operator in their rural community near Douglas, declined to answer WyoFile’s questions.

After a chaotic spring, summer and fall in 2012, things did get better, said Mogen. She and her neighbors got help from the Powder River Basin Resource Council, a landowner advocacy group. The state issued citations to Chesapeake Energy for rogue flares. Public meetings were held and other efforts have been made to prevent drilling and production activities from interfering with the lives of rural homeowners.

“We know that we are having an impact on the county, and we think most of what we do is a positive for the county,” John Dill, who manages Chesapeake’s Rockies operations, said at a December 2012 town hall meeting in Douglas hosted by Chesapeake.

But the oil play in Wyoming’s southern Powder River Basin is only the beginning to what could be a major extraction effort by the industry.

There’s not much federal land in eastern Wyoming, making the area attractive to rural homeowners and drillers alike. If operators set roots close to existing infrastructure, Mogen says many other homeowners may find themselves living next to oil and gas activity.

In the meantime, Mogen is still seeking information about the current and long-term health risks associated with toxins from the April 2012 well blowout and the constant flaring. The EPA lists a host of toxins related to oil and gas emissions and potential health risks, but site-specific assessments in the Clear View Acres subdivision area are lacking.

“What are the effects going to be on my daughters? I mean we saw it kill our gardens, we saw it affect the health of our family and our cattle. What’s the long-term affect going to be? I don’t know,” said Mogen.

Earlier this year, the Wyoming Department of Environmental Quality installed an air quality monitor near the Clear View Acres subdivision, and it began planning a mobile air quality data collection effort in coordination with the University of Wyoming.

The petition

The petition states, “Since 1995, the Commission has permitted 106,119 oil and gas wells. … In spite of the great increase in the number of oil and gas wells, the basic fundamentals governing the industry — such as setbacks from homes and schools — have not changed in many decades.”

Gas production facilities are under construction near the location of Chesapeake Energy's well that experienced a blowout in April 2012. (Dustin Bleizeffer/WyoFile — click to enlarge)

Gas production facilities are now under construction near the location of Chesapeake Energy’s well that experienced a blowout in April 2012. (Dustin Bleizeffer/WyoFile — click to enlarge)

Flaring gas runs counter to the charge of the Wyoming Oil and Gas Conservation Commission. It is the state’s fiduciary responsibility to collect revenue on these minerals, and the commission’s responsibility to protect correlative rights among mineral owners.

Wyoming statutes declare that the waste of oil and gas resources is prohibited. The state makes exceptions, such as flaring gas as a necessity to completing and putting into production oil and gas wells. Currently, operators can flare up to 60 thousand cubic feet (mcf) of gas per day without notice to the state.

In June 2012, the oil and gas commission granted its supervisor authority to approve natural gas flaring applications up to 250 mcf per day per well, for up to 180 days. The petitioners want the state to require notice of intent to flare to landowners and royalty owners well in advance to beginning a flare, and they want the state to better scrutinize the actual need to flare.

Not all flaring leads to certain commercial oil production. For example, the Wyoming Oil and Gas Conservation Commission recently declined a request by SM Energy Co. to continue flaring from two horizontal oil wells in southeast Wyoming at a rate beyond the state’s standard allowable 60 mcf per day. Combined, the wells were flaring about 320 mcf per day — a necessity, according to SM Energy, in order to keep oil flowing and make the wells attractive for sale.

SM Energy officials said they’d investigated the cost of connecting gas gathering lines to the locations for commercial sale, and it was cost-prohibitive. They also investigated the cost of fixing the wells with controls that would strip the gas of liquids, decreasing the volumes flared and creating revenue from the additional liquids. That, too, was cost-prohibitive, said company officials.

According to the citizen petitioners, state officials perhaps should not have approved a flaring variance for these wells in the first place. It’s a sentiment not lost on some members of the Wyoming Oil and Gas Conservation Commission.

“They are not working diligently enough on marketing solutions prior to (drilling). … I think it may save a lot of time and money to alert them to a very challenging marketing (scenario) prior to drilling,” said commissioner Tom Drean, who also serves as Wyoming’s state geologist.

Regarding flaring, petitioners propose the state should:

  • Require, not merely “encourage” well operators to employ technologies to minimize or prevent flaring during drilling and completion operations (proposed Section 39(b)(iv));
  • Require, not merely encourage, safety methods for the management of sour gas (proposed Section 39(f)(i));
  • Require noise controls for flares operating within one (1) mile of occupied dwellings (proposed Section 39(f)(ii));
  • Require smokeless flares (proposed Section 39(f)(iii)); and
  • Require best available technology to limit emissions from flaring (proposed Section 39(f)(iv)).

The petitioners also asked the state to increase the minimum 350-feet setback of an oil and gas well from homes, schools and businesses to 1,320 feet, or a quarter-mile, and — given recent examples of illegal flaring — to seriously step up monitoring and enforcement of the state’s rules.

“We always talk about developing energy on our own terms,” Marcia Shanor, chairwoman of the Equality State Policy Center — one of the petitioners — said in a prepared statement. “Flaring gas means we lose a valuable resource and forgo royalties and tax revenue while polluting our good Wyoming air. That’s not development on our own terms. Meanwhile, the good neighbors of these wells deal with noise pollution and other flare impacts.”

What’s the revenue loss?

So how much flared gas should the state allow without royalty and taxation? It’s a question the state may struggle with as oil drilling increases in eastern Wyoming. But the state doesn’t even know exactly how much gas is flared currently.

Remember, the state already writes off all gas flares of 60 mcf per day or less. And for wells approved to flare beyond that volume, the state relies on self-reporting from operators — which hasn’t always been accurate.

The state installed this mobile air quality monitoring station near the Clear View Acres subdivision east of Douglas. (Dustin Bleizeffer/WyoFile — click to enlarge)

The state installed this mobile air quality monitoring station near the Clear View Acres subdivision east of Douglas. (Dustin Bleizeffer/WyoFile — click to enlarge)

Wyoming Oil and Gas Conservation Commission supervisor Grant Black recently reported that the state has approved flaring variances (above the standard 60 mcf per day per well) for 65 wells, and that 63 were presently flaring. He said that from late 2010 to May, the industry reported flaring approximately 1,620,209 mcf of gas, representing an average of 1,479 mcf per day total for all wells.

No taxes or royalties are collected from flared gas, which means the state — and private royalty owners — are missing out on millions of dollars in revenue each year.

Wyoming State Lands director Ryan Lance, who also serves on the five-member Wyoming Oil and Gas Conservation Commission along with Gov. Matt Mead, said it’s difficult for his office to figure out the loss in revenue related to wells on state lands.

“The issue is that we normally base our royalty on the price of the product as it was ‘sold’ into a market. Here, there are no sales. As such, we generally know the volumes but don’t have a ‘price’ to afix to it,” Lance told WyoFile via email.

Nor has the state attempted to calculate the Btu content of the gas to estimate potential revenue from liquids that could be extracted from flared gas.

One potentially significant solution to flaring large volumes of gas is to attract interest from a company that would find it economical to gather the gas and treat it for commercial sale.

Last month, the Douglas Budget reported that Texas-based Crestwood Midstream Partners LP has plans to build a $100 million gas processing plant southwest of Douglas, followed by construction of a $200 million gas processing plant northwest of Douglas.

WOGCC Petition for Rulemaking (1) (Text)
— Dustin Bleizeffer is WyoFile editor-in-chief. Contact him at 307-577-6069 or dustin@wyofile.com. Follow Dustin on Twitter @DBleizeffer

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Published on June 18, 2013

  • Sandra G

    As a Wyoming citizen I know only too well how little our voices matter. My sympathies to the folks in this article. We in Sublette County have suffered too.

  • gwarnock

    OMG,, Never ruffle the feathers of our corporate overlords, they may take their ball and go home, well guess what, go home, it is still our gas, it ain’t going anywhere unless we say it is, it has been there for millennia, a few more years will only enrich it more. I am so sick or our greedy bought and paid for politicians I could scream, we have rare earth minerals, wind, solar, uranium and many sources of income if they would be utilized,, gas is NOT the only game in town. VOTE these corporate shills out Now!!

  • maria katherman

    I was among those who also called the WOGC to ask that they seriously consider the petition & to go on record for supporting its points. The woman there that I spoke with began ARGUING with me over the need to change regulations and repeated many times that industry in Converse County is “doing nothing illegal or outside our regulations.” It is shocking to get that sort of response, but it is a clear indication of just who they listen to and just who they work for–& folks, it ain’t us!

  • Bob LeResche

    This is a great article, and pays due homage to the expert, professional petition prepared and submitted by a broad citizen coalition.

    HOWEVER, I am deeply disturbed (and a bit surprised) by Matt Mead’s remarks to the effect that citizens have no business interfering in this way with the government’s regulation of the energy industries. He of course doesn’t acknowledge that the industry has his ear every day in matters of their regulation or lack thereof. Apparently Chesapeake is a “stakeholder,” but Kristi Mogen and Powder River Basin Resource Council, Equality State Policy Council and other citizen groups are not.

    What does this say about the prevailing political philosophy in Wyoming? How can a candidate for re-election express such sentiments during an election year? Because he thinks the electorate believes it too, is probably the sad truth.

    The energy industry is our sugar daddy and overlord, and must not be messed with ….. certainly not by mere “citizens.” It provides jobs. Ignore the fact that many of those jobs are dangerous, often deadly, and essentially un-regulated by OSHA. They are jobs, after all. And it provides tax revenues. Ignore the fact that those revenues are very low by global standards, and that taxes are often avoided by flaring, non-arms-length coal export transactions, under-reporting production, and all manner of other dodges the government ignores. They are revenues, after all.

    A state led by a Governor who can even think such a thing, much less express it publicly, is nothing more than a colony.

  • http://www.uppergreen.org Linda Baker

    From 2008 to 2012 in Sublette County alone, the difference between natural gas produced and natural gas sold was 573,846,642 mcf. Wyoming’s unrealized 6% severance tax on that “lost” gas was $159,901,550. Close to $160 MILLION Dollars. Gone. Five years, one county.

    This “lost forever” gas is vented, flared and used onsite prior to sale: literally passing into thin air.

    On Independence Day we’ll all be paying more taxes at the gas pump, and have been denied $53 millon in federal mineral royalties.

    Really Wyoming???

  • givemeabreak

    There are serious flaws with Wyoming’s mineral severance rules. First of all, they should be changed to a volume basis rather than a “market price” basis. This would stabilize revenues to the state and lessen the impacts of spikes in commodity prices.

    Secondly, allowing the “waste” of any resource is not only environmentally unsustainable, it flies in the face of the people of the state who “own” these resources. Royalties should be paid on all production, this is a cost of doing business for these companies. Wyoming gives industry a free ride in too many areas by turning a blind eye to wasteful and dangerous production practices.

    Finally, for the governor to say the solution should come from his office or from a regulatory agency is hilarious! His party claims to be all about minimizing government and letting the people have their say. Apparently that only works when it’s convenient, and when the “people” want something that government does not, then they should shut up and not be seen or heard from. I’ve got news for the governor and his ilk – the “people” are in charge, not the government.

  • rbd

    If we wait for change to come from the WO&GCC or other State Officials, we will be waiting for a very very long time. Change does not come from Government, change comes from the citizens of this state and those that consider themselves “officials” should take note. These “officials” work for the citizens of this state, not the other way around. How many similar situations exist around the state where the Officials are leading the way, but nothing is happening? Nothing happens without the citizens of this state standing up and being heard.

    I am all for oil and gas development – done in a responsible way in consideration of the residents of this state and local citizens impacted by the development. Some operators take their responsibility seriously, others, like Chesapeake do not. If we rely on the Governor and WO&GCC to monitor and protect the citizens of this state, we might as well pack up and move now because government has a very poor track record of protecting the citizens of this state and/or resolving the issues that arise after the fact. Government is not proactive, it is always reactive. There is a very long list of failed attempts by Government to protect the citizens of this state…………a much longer list than the successes the WO&GCC and other “Officials” have protecting this state.

  • Inky

    The problem with relying on the governor or the commission to change regulations in the face of fast-paced industrial changes, is speed. Whereas citizens near flaring immediately understand there’s a problem, state officials are hyper-cautious about enacting change, lest the Golden Goose get cranky.
    Citizens should be like small children, seen and not heard, while the “adults” study, consider, delay, deny and finally enact watered down regulations after untold damage to citizens and the environment.
    It is, after all, the Wyoming way.

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