Pipeline giant Williams Cos. Inc.'s attempt to be the first party to block a flaring permit before the Texas Railroad Commission has a chance for new life, after the commission added the company's motion for rehearing to the agenda for its Oct. 22 meeting in Austin, Texas.
Williams asked the Railroad Commission to reopen the case and let its staff and an administrative law judge take a second look at the evidence and break precedent with past practice. In August, over Williams' objections, the commissioners had voted 2-1 to approve Exco Resources Inc.'s request to continue flaring natural gas from some of its Eagle Ford Shale leases in South Texas. The commission has never denied a flaring application in its history.
The case came back on appeal in an environment where Texas is in the spotlight for the quantity of gas that oil producers routinely flare from Permian Basin wells. Unlike the Eagle Ford well at issue in Exco's permit application, a large number of the oil wells do not have access to pipeline services. Operators routinely burn off the gas associated with crude production until pipeline developers can catch up.
Exco has said it should be allowed to flare away cheap gas at the wellhead so that its higher-priced crude can be sold. Williams said that unlike flaring in areas where there are no systems to take away associated gas, Exco bought the Briscoe Ranch leases knowing they were served by a gathering system. Williams said Exco is simply flaring to avoid paying for pipeline services in an era of low gas prices.
After the members of the Railroad Commission unsuccessfully tried to pin down a definition of waste, which they are charged with preventing, they agreed with Exco that withholding salable crude, rather than flaring off cheap gas, counted as waste. The commissioners worried that finding against Exco and for Williams would force the small driller into a gas gathering contract with Williams, violating their free market principles.
Williams' appeal asked the commission to ignore years of practice and reconsider the question of waste.
"The challenge is that the approach to exceptions that has evolved and has been followed for many years vitiates and effectively negates the statutory prohibition of waste," Williams told the commission in its appeal. "This is because the evolved approach to flaring exceptions effectively guarantees an exception if an operator applies for one. The result is an unfortunate contribution to the unnecessary and wasteful flaring of billions of cubic feet of natural gas."
Commission Chairman Wayne Christian, who cast the dissenting vote, did instruct the commission's staff in August to start gathering data on how many operators are flaring even when they have access to a pipeline system.
