Can flaring in the Bakken promote methanol?
Perhaps nothing has enhanced America’s energy independence more over the last five years than the development of the Bakken shale.
Gushing forth a million barrels of oil a day with the prospect climbing to 2 million, not to mention another additional billion cubic feet of natural gas, the Bakken has played a principal role in reducing our oil imports — although Americans are still getting hit in the pocketbooks by high gasoline prices.
But it’s that natural gas that’s the problem. Located far from pipelines and other infrastructure, the drilling sites have simply been flaring the associated gas and natural gas liquids into the atmosphere in the manner reminiscent of the early days of oil development. Only 1 percent of America’s gas is flared today and less than 3 percent worldwide. But last December the Bakken sent a dismaying 36 percent of its gas up in flame, accounting for 27 percent of all American flared gas. That’s a billion cubic feet a day or approximately $1 billion worth of fuel each year. “Unfortunately, the oil coming out of the Bakken is now worth 30 times as much as the natural gas,” said Chad Wocken, senior research manager at the Energy and Environment Research Center (EERC) at the University of North Dakota. “With that kind of spread, it makes sense to grab the oil and forget about the gas.”
But that answer will no longer satisfy environmentalists, who are worried about global warming. Nor does it satisfy leaseholders, who figure it’s their gas that is going up in flames. Nor will it satisfy the North Dakota state government, which is becoming embarrassed about satellite photos showing nighttime flares from the Bakken creating as much illumination as neighboring Minneapolis.
The first people who tried to do something about it were the property owners, who filed suit in federal court last year, claiming a loss of royalties. That didn’t get very far. Last month federal district judge Daniel Hovland dismissed the class action on the grounds that the plaintiffs had not exhausted their administrative remedies with the North Dakota Industrial Commission, which issues flaring exemptions. The plaintiffs are now appealing.
Nonetheless, two weeks later, Republican Governor Jack Dalrymple announced at the annual Williston Basin Petroleum Conference (WBPC) that beginning this month drillers will be required to set forth a plan to reduce flaring to 10 percent of current rates by 2020. A complete set of rules was to be forthcoming a summit held this week at Bismarck State College’s National Energy Center for Excellence.
Until now oil companies have been granted a one-year exemption from paying taxes or royalties on flared gas. Extensions are then routinely granted and so far no companies have been forced to address the problem. “Those days are over,” the governor told the WBPC gathering. “We have been easy on companies up to this time. We’re not gonna do that anymore.”
So will this slow further development of the Bakken, even bringing it to a halt as some have suggested? A lot hangs in the balance. Any effort to replace domestic oil for imports in our gas tanks — or develop substitute fuels from natural gas — will depend heavily on maintaining Bakken production. Harold Hamm, whose Continental Resources is the largest leaseholder in the Bakken, believes the Williston is good for 2 million barrels of oil per day plus another billion cubic feet of gas. “I don’t think that’s over the top, folks,” Hamm told the gathering of 4,000 industry representatives at the Williston conference. Although Hamm has become an industry superstar, appearing on the covers of Forbes and National Review, many believe he is being overoptimistic as far as the Bakken is concerned. In any case, future development may hinge on finding a solution to the flaring problem.
In studying the situation for the WBPC, Wocken found that that only 270 of the several thousand wells in North Dakota are responsible for 60 percent of the flaring. That might seem to narrow down the problem except that it is not always the same wells. “The amount of gas coming out of any individual well can shift dramatically over the course of the well’s life,” said Wocken. He asserts there is no “silver bullet” and recommends infrastructure and pipeline construction.
As often happens, it is the larger companies are better prepared to deal with the situation. Whiting and Oasis, two of the larger leaseholders in the state, each claim to be capturing at least 90 percent of their gas. Whiting has two processing plants and is planning an expansion. Oasis has partnered with Whiting. Hess Oil, a major player, has a network of pipelines and is spending $325 million to double the capacity at its Tioga processing plant. Continental says it has reduced flaring to 11 percent and plans further reductions. ONEOK Partners, Inc. of Tulsa has spent $6 million in equipment to capture gas at wellheads.
The real problem is the hundreds of wildcatters and independent operators scattered throughout the state. Usually they don’t have the capital to deal with the problem. Connecting them all by pipelines stretching across the 200,000 square miles of the Bakken formation is almost out of the question.
One obvious solution is to collect gas on-site to substitute for diesel fuel in running the drilling equipment. North Dakota LNG is building a plant in Tioga that will do just that. CEO Pat Hughes predicts that within the next 12 months 50 percent of the drilling rigs in the state will be running on LNG. Sixty to 70 rigs in the Williston already run on LNG, typically consuming 1,700 gallons per day. North Dakota LNG is building a 16,000-gallon storage tank and hopes to process 66,000 gallons per day by next year.
But converting gas to liquid fuel may not be completely practical until it can be performed on-site. The obvious candidate here is methanol, the alcohol form of methane. Methanol is liquid at room temperature and easily fits into our current infrastructure. The market is already well established, with 90 production plants around the world generating 33 billion gallons, mainly for industrial use. Methanol can also be legally substituted in gas tanks at an 85-15 mix with gasoline.
Several companies are working on such devices, using a variety of chemical or catalytic processes. Gas Technologies, a Michigan company, has developed a conversion apparatus that sits on the back of a trailer and can be hauled from well to well.
“We have a patented process that reduces capital costs up to 70 percent,” says CEO Walter Breidenstein. “If we’re using free flare gas, we can reduce the cost of producing methanol another 40-50 percent.” Chart Industries, which makes small liquefication equipment, is also making progress in the area.
Methanol, along with ethanol, is one of the most promising technologies for providing choices to consumers trying to diversify away from the near-monopoly of gasoline over our transportation system. The 100 billion cubic feet of natural gas that is being flared in North Dakota could make a dent in this market. Transportable methanol conversion devices, if successfully introduced, could do two things at once — resolve wasteful flaring plus expand consumer choice in reducing the one-third of our transport still dependent on foreign fuels.