Oil and Gas Producers Agree to Reduce Flaring
By Holly Testa, Director, Shareowner Engagement
Oil and gas producers in North Dakota have announced their commitment to reduce flaring in the Bakken field, thanks in part to an extensive campaign organized by Ceres that mobilized their institutional investor members, including First Affirmative, to demand action from companies to clean up their act.
In the wake of mounting scrutiny and criticism of this wasteful practice, the New York Times has reported that “an oil industry task force representing hundreds of companies in North Dakota pledged to make an all-out effort to capture almost all the natural gas that is being flared in the Bakken shale oil field by the end of the decade.”
The plan will increase the percentage of gas captured over six years to 90%. While 10% waste will still be a significant impact, given the exponential growth in the number of wells projected, this commitment does represent a significant and welcome improvement. The industry is also advocating for stricter regulations that will make flaring a rare occurrence for new wells, rather than business as usual.
The remote North Dakota Bakken shale oil field can clearly be seen from space. A Ceres report reveals that flaring in the Bakken wastes a staggering 29% of total production—an ever increasing volume of gas, due to increasing production, being burnt in essence to get rid of it. The volume flared during May 2013 was over 2.5 times higher than the level flared in May 2011.
Why do companies waste so much of such a valuable commodity? New oil reserves are often exploited with a rush of new well construction before the necessary infrastructure to gather the natural gas “byproduct” is in place. Because market rates for natural gas have been low, producers have chosen to flare much of the gas they produce, rather than invest in the infrastructure necessary to collect, process, and sell it.
First Affirmative understands that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?
Mention of specific companies or securities should not be considered a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: March 12, 2014