In America’s busiest oil field, roughly $1 million worth of natural gas goes to waste each day.
Shale drillers in the Permian Basin of Texas and New Mexico say they have no way to move the gas—a byproduct of oil drilling—to market because there aren’t enough natural-gas pipelines. Instead, they are getting rid of the excess gas by setting it on fire, a practice known as flaring.
Companies flare about 3% of the gas they extract in the Permian. But production in the basin is so high that the volume of gas burned every day would be large enough to supply the daily needs of states such as Montana or New Hampshire, by some estimates. The flaring also produces greenhouse gas emissions equivalent to 2 million cars.
Shale drillers are flaring with the consent of state regulators. Until more natural-gas pipelines and storage facilities are added, the only alternative to burning gas would be to reduce some of the area’s lucrative oil production, which has supercharged the region’s economy and boosted overall U.S. crude output to a record of around 11 million barrels a day.
Texas officials say they expect the issue to resolve itself eventually once the necessary infrastructure is built.
“There’s nothing for us to do,” said Ryan Sitton, a member of the Texas Railroad Commission, which regulates oil and gas operations. “If gas becomes a waste product, people will flare it.”
The Wall Street Journal reviewed data on the more than 20,000 permit requests that companies submitted to the Texas Railroad Commission to flare gas over the past five years. None was denied as of early August, the data show. Officials confirmed the figures were accurate.
A similar problem surfaced in another shale drilling hot spot, North Dakota, earlier this decade, prompting the state to tighten regulations.
The flaring is poised to worsen in coming years as companies rush in to pump more oil from the Permian. While oil fetches about $69 a barrel, natural gas currently sells for less than $3 a million British thermal units and has become a largely unwanted side effect of the region’s oil boom.
Permian daily production has soared to 3.3 million barrels of oil and nearly 11 billion cubic feet of natural gas in June, according to the Energy Information Administration.
With it, so has flaring, which topped 320 million cubic feet a day in the second quarter, according to an analysis of public data compiled by Rystad Energy, an energy consulting and research firm. The data combine the gas that was burned or released directly into the atmosphere—a practice known as venting, which is worse for the environment than flaring.
But flaring still produces carbon dioxide, a greenhouse gas, and causes air pollution. The resulting greenhouse gas emissions from burning that much gas in the Permian are equivalent to the exhaust from about 2 million cars, according to estimates from the World Bank and Environmental Protection Agency. An analysis of demand data from the EIA also shows that the gas burned in the Permian every day exceeds the daily consumption of many small states.
As Permian oil output continues to grow, Rystad Energy projects flaring will more than double in the next year, and won’t substantially drop until at least late 2019, when new gas pipelines are set to start operating.
In Texas, officials have thus far responded by permitting companies to flare as much as they want. New Mexico regulators, who in 2015 began requiring companies to spell out how much they are flaring, also have allowed companies to continue burning the gas. New Mexico officials didn’t respond to questions about the recent uptick in flaring.
Without stricter regulations, “the economic driver to do something with it is not strong,” said Martyn Howells, a consultant for the World Bank’s Global Gas Flaring Reduction Partnership, an effort to curb flaring world-wide.
Royal Dutch Shell RDS.A +0.52% PLC, which is a member of the World Bank’s initiative and has pledged to eliminate “routine” flaring by 2030, flared at among the highest rates of large Permian gas producers in the first half of the year. The company burned about 7% of the gas it produced in the basin during the second quarter, down from 9% during the first quarter, according to Rystad Energy.
Amir Gerges, Shell’s general manager for the Permian, said production had outpaced the construction of smaller pipelines that transport gas away from wells. Recent infrastructure investments, among other operational changes, helped lower the company’s flaring rate to 2.5% in July, he said.
Reducing flaring is “not just good for the environment. It’s also extremely good business,” Mr. Gerges said.
WPX Energy Inc., WPX +1.24% an Oklahoma-based driller, flared 10% of the Permian gas it produced in the first quarter, a rate spokesman Kelly Swan called “unacceptable.”
“That’s not the way we want to operate,” he said, attributing the flaring to insufficient infrastructure near wells to capture the gas. The company, whose rate of flaring dropped to 6% in the second quarter, has been building a facility to capture gas from nearby operations. The processing plant is set to begin operating this month and connects to pipelines leaving the Permian, Mr. Swan said.
Flares light up the sky in southwest Texas’ Reeves County, flames visible for miles as operators there burn more gas than anywhere else in the Permian. Venetta Seals, mayor of the town of Pecos, which depends heavily on oil and gas economically, said she views the combustion as inevitable.
“What other options are there?” she asked. “Without the infrastructure being here, the only other solution is what, they stop drilling? That would certainly turn things upside down out here if that were to stop happening.”
