Via Wyoming News Exchange
CASPER – As persistently high natural gas prices renew a dispute between environmental and industry groups over conservation practices at oil and gas wells, there remains little overlap on how losses of methane, a potent greenhouse gas, should be regulated.
Wells that produce often also produce some natural gas. In the weeks after a well is drilled, before operators are equipped to capture that gas and transport it to buyers, that natural gas – a highly flammable fuel composed mostly of methane – is often released or burned off. The same may happen even after the necessary infrastructure is in place if excess gas becomes a safety risk.
Lacking substantive federal standards, states have imposed a patchwork of regulations designed to protect air quality and minimize the noise and visibility of flaring. Environmental groups are advocating for stricter federal standards.
“When gas is flared, it is not taxed, and there’s no value collected from that gas, because it’s considered to be just a product that is basically wasted,” said Shannon Anderson, staff attorney for the Powder River Basin Resource Council.
Taxpayers for Common Sense, a Washington-based budget watchdog, said in an August report that over the last decade, wells that were drilled on federal lands or tapped federal minerals failed to capture 300 billion cubic feet of natural gas. That is an estimated loss of $949 million.
The group suspects those numbers, which do not account for leaking equipment or abandoned wells, should actually be much higher. It wants the federal government to require more comprehensive reporting standards, lower the cap on allowable methane emissions and impose a tax on methane that is still released.
“This is gas that’s not getting to market to benefit consumers, and it’s largely not charged a royalty, either,” said Autumn Hanna, vice president of Taxpayers for Common Sense. “We have outdated rules that oversee the definition of what wasted gas is, and we have self-reported industry data that we’re relying on. So we just have layers of problems.”
Wyoming regulators retain more responsibility to oversee flaring and venting at oil and gas wells than the federal government. Agencies are developing rules that would apply nationally.
The Bureau of Land Management has yet to propose a methane rule under President Joe Biden.
But the Environmental Protection Agency’s proposed rule, released in November, was quickly applauded by environmental groups and criticized by some oil and gas industry representatives.
In a written statement at the time, Wayne Lax, a Powder River Basin Resource Council board member, said the proposed rule contained “reasonable steps to protect the public health of people living and working near oil and gas wells and associated infrastructure.”
The Western Energy Alliance said complying “would be extremely costly and therefore would shut in American production prematurely.”
The Wyoming Oil and Gas Conservation Commission updated its rules for oil and gas wells several years ago, amid pressure from environmental groups, including the Powder River Basin Resource Council.
The state agency currently restricts both venting and flaring, particularly for producing wells that are at least six months old, though it does grant exemptions to qualifying operators. And it has the support of the oil and gas industry.
“Wyoming’s doing it better than anyone,” said Ryan McConnaughey, vice president of the Petroleum Association of Wyoming. “Companies are already doing everything they can to capture and utilize methane as quickly as possible.”
From the industry’s perspective, he said, the state’s regulations strike “a good balance of making sure that we capture those resources and make sure that the state of Wyoming is receiving the benefit it is owed, but also not being over-burdensome in ways that would make it impossible to produce here in Wyoming.”
McConnaughey believes the eventual federal methane rules should resemble Wyoming’s approach.
Anderson said enforcement – including decisions about when to give operators more leeway – has been “a little hit or miss” since the state tightened its standards.
“I think it could be better, but overall, it’s definitely a step in the right direction in terms of making sure that industry at least has to put forward a justification for flaring, and that they have to explain the timeline and circumstances of limiting that flaring going forward,” she said. She’d still prefer to see stricter standards instituted uniformly across the country.
Almost half of federal mineral royalties generated in Wyoming are returned to the state. Efforts to tax flared gas have gained little traction here.
“A lot of operations in Wyoming depend on flaring,” said Rob Godby, an economics professor at the University of Wyoming.
Wells drilled unconventionally, or fracked, often see their output decline rapidly during the first few years, Godby said. By the time operators are required to start capturing natural gas, the volume may be much lower than it was right after drilling.
“That so much flaring potentially happened in Wyoming was of real concern, not only to the feds, who have heard about it for decades,” he said. “In a time where there were issues with state revenues and concerns of how that might go, the idea that we’re allowing companies in Wyoming to flare that gas – it’s kind of an indirect subsidy.”
Nearly half of Wyoming lands and closer to 70% of the state’s minerals are federally owned.
Wyoming is the No. 1 producer of natural gas on federal lands: In 2020, it was responsible for just over 41%.
Operators in Wyoming reported venting and flaring up to $77 million worth of natural gas over the last 10 years, Hanna said.
Environmental groups are hopeful – and the oil and gas industry is worried – forthcoming federal rules, paired with the recently enacted Inflation Reduction Act, which contains penalties for high methane emissions along with incentives to reduce them, could override Wyoming’s resistance to taxing venting and flaring.
Implications for Wyoming’s oil and gas companies, the state economy and the climate will depend on how federal agencies choose to proceed.