Lights Out in the Bakken: A Review and Analysis of Flaring Regulation and Its Potential Effect on North Dakota Shale Oil Production

The prolific escalation of activity in the Bakken is due to the relatively recent technological combination of horizontal drilling and hydraulic fracturing, coupled with high commodity prices. This requisite combination of technology and price permits economic hydrocarbon production of shale reservoirs. The resulting ramp up in shale production has propelled the United States to the top position as the world’s largest producer of oil and natural gas. But with this increase in production is a corresponding increase in environmental concerns. Foremost among these concerns is the rise in greenhouse gas (“GHG”) and volatile organic compound (“VOC”) emissions. The majority of these petroleum-related air emissions occur through flaring—a technique by which operators combust excess natural gas from oil and gas wells. Often used when midstream connections are not available, flaring is common practice in the oil and gas industry. But currently, North Dakota flares nearly 30 percent of its total monthly gas production. By comparison, Texas, the country’s largest producer of crude oil and natural gas, flares less than one percent, and the global average is three percent. Moreover, North Dakota’s status as the country’s second largest producer of crude oil means the failure to meet new state flaring regulations, which could result in agency-ordered production curtailment, may jeopardize domestic petroleum supplies and market prices. In July 2014, the North Dakota Industrial Commission, through its Department of Mineral Resources, Oil and Gas Division—adopted a rigorous set of regulations requiring Bakken operators to drastically reduce gas flaring. The response to increased flaring regulation is divided. Industry groups argue that the regulations impose burdens on the oil and natural gas sector, which provides the country with secure supplies and economic benefits. Conversely, environmental groups argue that without such oversight the industry would have little motivation to adopt emission-limiting technologies, and the failure to control carbon dioxide and methane emissions will almost certainly have dangerous atmospheric and biologic ramifications. This Article examines the possible effects on North Dakota production from recent regulations prohibiting or limiting flaring in oil and gas operations. Part II provides an overview of the oil and gas exploration and production sector in North Dakota, in addition to discussing flaring in the Bakken. Part III reviews the new Environmental Protection Agency and North Dakota Industrial Commission flaring rules and the Bureau of Land Management’s consideration of flaring rules on public lands. Part IV discusses the challenges faced by North Dakota operators with regards to the new regulations and possible solutions. Part V provides the Author’s conclusions. This Article examines only flaring in the upstream sector and therefore does not discuss flaring as it relates to transportation or processing. While this Article discusses North Dakota production, its focus is on shale oil production from the Bakken. Finally, this Article examines Bakken flaring in an American context and does not consider international issues or global flaring policy.