A flaring tax can end this wasteful and damaging practice
When a company produces oil, natural gas often comes out of the ground with it. Because oil is so valuable, it is often cheaper to burn the gas than build the infrastructure to sell it.
But the practice — flaring — is both wasteful and environmentally harmful. In 2019, companies set fire to 810m cubic feet of gas a day in the Permian Basin alone, the US’s most prolific shale patch — enough to meet all the residential gas demand in Texas and Oklahoma. If the industry and its regulators want to have a future, they need to stop, quickly.
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Flaring rates have soared along with oil production. Burning gas is far better for climate change than venting it into the atmosphere, but it still emits carbon dioxide and local pollution. A flaring tax would sharply reduce the practice.
The surge in flaring comes as the role of natural gas in addressing climate change is increasingly being challenged. Opponents argue that leaks of methane (a potent greenhouse gas), cheaper renewables and a dwindling timeframe to meet climate targets mean we must move beyond gas as a “bridge” to a cleaner future. A growing number of US cities are proposing to ban new connections for homes to the natural gas grid. New York City just announced it would no longer approve new natural gas pipelines. Former mayor Michael Bloomberg, who previously supported gas as a bridge fuel, last week called it “not all that much better” than coal.
With natural gas already under attack, flaring is a self-inflicted black eye for the industry, as oil and gas executives acknowledged at a recent flaring workshop organised by Columbia University’s Center on Global Energy Policy and University of Texas at Austin. Scott Sheffield, chief executive of Pioneer Natural Resources, subsequently called on energy investors to divest from companies with high flaring rates.
If the industry wants to preserve a role for natural gas in the energy transition, it must act quickly to curb flaring and methane leaks, especially as sharper scrutiny is coming. Scientists will be using new satellite data to deliver much clearer views of the problem. And European lawmakers are considering regulations to favour oil and gas imports with lower carbon footprints.
Environmentalists should support this effort, even if they are opposed to fossil fuels. Natural gas produced by the US shale boom has been the key driver of reductions in American greenhouse gas emissions in the last decade, as cheap gas displaced coal. Globally, natural gas in emerging markets can help expand access to energy while curbing air pollution, as in China, where gas has been replacing the use of coalfor heat.
But low gas prices encourage flaring and stymie investment in the infrastructure needed to deliver gas to markets at home and abroad. Flaring may be necessary at times for safety, but that should be for very limited duration. At present, there is no price on the environmental harm. This is the sort of market failure that justifies government intervention. To date, regulation has been lacking. The Texas Railroad Commission, which grants permits for flaring, has not only rarely rejected a request to do so, but just issued a report seeming to minimise the problem by comparing the intensity of flaring in Texas with that of major producers such as Iran and Iraq.
As US oil production surges, the country is now the world’s fourth largest flarer of natural gas. With mounting scrutiny, more industry leaders will recognise that abandoning the wasteful and damaging practice is in their self-interest. Yet good intentions won’t be enough. Policymakers need to penalise flaring to change behaviour, and oil and gas companies should be demanding they do so — if not for the planet then for their own social licence to operate.
Read: 'A flaring tax can end this wasteful and damaging practice’ by Jason Bordoff, Director of Columbia SIPA's Center on Global Energy Policy. via the Financial Times print edition
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