BISMARCK -- The Bakken is an enormous resource for North Dakota with a potential productive area of nearly 15,000 square miles, covering lands in a dozen or more counties.
Putting this into perspective, never before in the U.S. has an oil field of this size been developed. The Bakken's productive areas have had very little, if any, previous oil and gas development and require new infrastructure -- including gathering systems, pipelines and natural gas plants -- to collect, process, and bring to market the natural gas and oil that is produced.
Yes, there is natural gas being flared, and everyone wants to capture the economic value of that natural gas. That includes oil operators, mineral owners and the state, which will collect taxes on that production.
Over the past three years, industry has worked hard to connect more than 1,500 new wells to gas plants. But even with these significant, continuous efforts and as the Bakken continues to expand into new areas, infrastructure development naturally will lag behind newly drilled wells; one logically follows the other.
And in North Dakota, unlike places such as Texas and Oklahoma, brutal winters bring even more challenges to oil development.
ADVERTISEMENT
The Bakken produces both oil and natural gas. The natural gas is flared until infrastructure is built to gather and process it, all under the regulation of the state.
In addition, general infrastructure development by industry is based on a determination that a well is, in fact, economically viable prior to investing in infrastructure in and around it.
Our roads and towns certainly are busier with increased energy development, but this activity will result in quicker infrastructure development and ultimately a significant reduction in natural gas flaring.
The natural gas flared in North Dakota comprises about 4 percent of the value of the production and about 7 percent of the BTUs that the wells are producing.
In other words, if you produce a barrel of oil from the Bakken, you have $80 worth of oil and roughly $6 worth of gas.
North Dakota's tremendous growth of home-grown domestic energy is possible because we are able to begin producing oil in advance of the gas-gathering systems and gas pipelines being completed, often a natural course in resource development.
No one wants to capture the value of the natural gas more than the operators, so they work hard with industry partners to get the necessary infrastructure in place as quickly as possible.
There are four key elements to the natural gas flaring discussion:
ADVERTISEMENT
n North Dakota has rules and restrictions that regulate flaring and were in place long before the Bakken play. These rules specifically require the operator to seek approval to continue to flare the well by showing efforts are being made to build the infrastructure to capture the natural gas.
n In 2009, the Legislature passed a sales tax exemption to incentivize the construction of natural gas infrastructure.
n Through the Oil and Gas Research Council in partnership with private parties, North Dakota has invested more than $3 million in researching new technologies to capture and use natural gas at the well sites.
These technologies include generating electricity on-site from the gas, compressing the gas into cylinders for transportation by truck and using the natural gas instead of diesel to fuel drilling rigs.
n The oil and gas industry is investing more than $3 billion in infrastructure to capture the natural gas. Several of these new natural gas processing facilities and pipelines will begin operating later this year.
These plants will create hundreds of skilled and high-wage jobs in rural communities.
The flaring of natural gas is taken seriously by industry and policymakers alike. The oil industry is putting forth an unprecedented effort to get the infrastructure in place to gather, process and sell as much of the natural gas as possible.
In North Dakota, we take pride in doing it right. Doing it right means building the systems to capture the natural gas produced in the Bakken. This is exactly what we are doing and will continue to do.
ADVERTISEMENT
Ness is president of the North Dakota Petroleum Council.
