S 2818 Introduced – FLARE Act

Earlier this month Sen Markey (D,MA) introduced S 2818, the Fuel Loss Abatement and Royalty Enhancement (FLARE) Act. The bill would require the Department of the Interior to establish regulations to control the venting and flaring of gas “in oil and gas production operations on Federal land”.

The Regulations

Section 2 of the bill requires the DOI to issue regulations within 180 days “to ban the venting and flaring of gas in oil and gas production operations on Federal land onshore and offshore in the United States” {§2(a)(1)}. Exceptions would be required for:

• De minimis venting and flaring; and

• Venting and flaring that the Secretary determines is required for safety.

As a carrot to support the ban the regulations would also be designed to “promote the capture and beneficial use or reinjection of gas in the operations” {§2(a)(2)}. And as an additional ‘incentive’ the regulations would be required to “include provisions that treat gas that is flared or vented in operations under a lease under this Act as production for which royalty is required to be paid to the United States” {§2(b)}.

The bill would also require those regulations to include definitions (to be determined by DOI) for the terms:

• Vent;

• Venting;

• Flare; and

• Flaring

Report to Congress

The bill would also require the Government Accounting Office to “assess the venting and flaring of gas in oil and gas production operations on Federal land onshore and offshore in the United States” {§3(1)}. A report to Congress on that assessment would include “an estimate of the volume of gas that is vented or flared in such operations each year” {§3(2)}.

Moving Forward

Markey is not a member of the Senate Energy and Natural Resources Committee to which this bill was assigned for consideration. This means that it is unlikely that he has enough influence in that Committee to see the Bill considered. If the bill were considered, I would expect to see significant opposition from Republican members of the Committee because of the increased regulations that this bill would require.

Commentary

Presumably Markey is trying to address the climate effects caused by the release of methane gas, a large portion of most of the gas emissions from oil and gas production facilities. Methane is a ‘stronger’ greenhouse gas than CO2 and for most of the history of oil production in the United States it has been routinely vented to the atmosphere as a waste product as the economies of collecting the gas for processing and sale were poor at best. That has changed in recent years as more and more oil field production has been focused on collecting and selling natural gas.

Still, methane venting/flaring is still rather common, especially in older production areas where the gas production volume is lower and the costs of collection and transportation are still high.

Markey has taken an interesting approach to the issue with providing minimal guidance on the required regulations. While requiring a ban he does allow for the Secretary to determine what venting/flaring is required for safety. This is a major concern.

Most oil field collection tanks are ‘atmospheric tanks’. That means that they are not designed as pressure vessels. As liquid is fed into those tanks the displaced air in the tanks and any gasses in the liquid stream are automatically vented to the atmosphere to avoid rupturing the tank due to increased pressure as the gasses are compressed in the headspace of the tank. When flammable gasses are expected to be included in that venting in significant quantities an ignition device is include at the outlet of the vent to burn off the flammable gasses so that they cannot collect in the area around the tank and form a flammable vapor cloud; a very dangerous potential circumstance.

In fields where high concentrations of natural gas exist, the effort is made to collect that gas in pressurized tanks. Those tanks still have venting requirements to prevent over-pressuring the tank. Unfortunately, the installation, maintenance and collection of gas from those tanks is costly and is financially justified only when there is a commercial amount of natural gas being produced.

If Markey is, in fact, trying to prevent the release of a potent greenhouse gas this bill should be trying to reduce venting not flaring. Flaring converts the flammable gases to CO2 and water, but that CO2 would be produced if the gas were collected for commercial use. This means that flaring does not have any significant effect on CO2 production.

Markey’s inclusion of royalties’ provision in the bill would seem to be reasonable at first-glance. The gasses being flared are being ‘removed’ from federal lands after all. On closer examination, what this provision will do is to raise the price of oil extraction, especially from older fields, as gas flow measurement instruments are added to vent/flare lines. That would also require a data collection system that would also increase the cost associated with this requirement.

It is hard to tell exactly what Markey’s intentions are with this bill. On one hand it looks like he is trying to increase the costs of oil and gas extraction as ‘green’ effort to reduce that extraction. On the other hand, the total freedom given to DOI in crafting the regulation, including the ability to define all of the key terms, could mean that this is an honest effort to increase the safety and reduce he environmental footprint of this key energy production effort.

Well, we will probably never get to know; this bill is unlikely to go anywhere.