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Operators, state agencies make moves to limit flaring in oil-rich Permian Basin

Highlights

Recent production declines trim associated gas flaring

4.1 Bcf/d of Permian takeaway capacity to come online in 2021

Denver — The crude crash price and subsequent shut-ins across the Permian Basin in the second quarter of 2020 allowed multiple producers to reduce their associated gas flaring volumes, prompting state officials in Texas and New Mexico to strike while the iron was hot and introduce rules to curb the practice permanently.

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The Texas Railroad Commission, the state agency charged with regulating oil and natural gas production, introduced a revision to Rule 32 Data Sheet intended to limit the exemptions producers use to flare volumes of associated gas. The gas is a by-product produced by operators targeting oil-rich zones in plays such as the Permian and Eagle Ford Shale. Rather than capturing, processing and sending the gas to market, it has been simpler to flare, or burn off, the fuel at the wellhead.

Changes to the rule include:

  • The period of time for which an operator may obtain an administrative exception to flare gas will be reduced by as much as 80% in some instances
  • Incentives will be provided for operators to use technologies to reduce the amount of gas flared
  • Operators must provide more specific information to justify the need to flare or vent gas in accordance with commission rules
  • Flares would be related to specific production properties to facilitate compliance with reported production
  • Tracking the new information and data points will be valuable in any future efforts to tailor policy that addresses flaring.

Public comments on the rule change are being accepted by the TRC at https://rrc.texas.gov/about-us/resource-center/forms/proposed-form-changes.

Several major producers have already started making strides to reduce the practice. EOG Resources, along with fellow Permian producers, managed to decrease flaring outputs during Q2 as output dipped.

"Our gas capture rate now exceeds 99.5%," Ken Boedeker, EOG executive vice president of exploration and production, said during an Aug. 7 earnings call. "To reduce flaring we have introduced a new technique called closed-loop gas capture. We reflow gas back into our wells when a downstream interruption occurs. It allows us to eventually bring the captured gas back to production."

"We continue to be the best in the Permian in regards to flaring at less than 1%," said Pioneer Natural Resources CEO Scott Sheffield during an earnings call. "This is based on state data from Texas and New Mexico ... Other companies are also striving to reduce flaring intensities. I am confident ... two more gas pipelines coming online next year, along with reduced activity, should help continue to reduce flaring."

Sheffield was referring to Permian Highway Pipeline and Whistler Pipeline, which will proved more than 4 Bcf/d of combined takeaway capacity.

Permian Highway will transport 2.1 Bcf/d of gas production from the Permian Wes Texas to market areas along the Texas Gulf Coast. It is expected to enter service in early 2021, pending regulatory approvals, and is fully subscribed under long-term, binding agreements. Whistler Pipeline, slated for an in-service date of summer 2021, will transport 2 Bcf/d of gas from West Texas to the Gulf Coast.

In May, only 0.5% of gas produced in Texas was flared, according to the most recent data from the TRC, compared with 3% in May 2019. Associated gas production was also considerably higher in the year-ago period, averaging 10 Bcf/d in May 2019 compared with 8.35 Bcf/d in May 2020. Total associated gas production decreased by 17%, but the amount of gas flared declined by about 80%.

New Mexico currently has two new rules regarding flaring currently up for public comment as well, including one by the New Mexico Environment Department and the other by the Oil Conservation Division of the Energy, Minerals and Natural Resources Department.