Greed is good? Lawsuits over mineral rights royalties could help minimize natural gas flaring

natural gas flare photo

It's not that it emits as much carbon dioxide into the atmosphere as 77 million cars, or that it once killed 7,500 migratory birds, or that it wastes 5% of global production, or that it so destructive it can be seen from space, or that it every day wastes enough to heat half a million homes.

No, what's possibly the best legal case against natural gas flaring is that people aren't getting paid for all the gas being intentionally wasted. In other words, greed may be a good tool in helping clean up the environment.

Clifford Krauss at The New York Times reports that 10 class-action lawsuits have been filed by North Dakota mineral owners against the oil companies that are drilling for oil on their land.

While they are already receiving royalties for the oil and gas that is produced and brought to market, the mineral rights holders challenge that the oil companies are wasting their gas by flaring it and should be paid millions of dollars in lost royalties for that gas, as well.

Krauss has a good explanation on how flaring works and why this challenge is so clever.

Roughly 1,500 fires burn above western North Dakota because of the deliberate burning of natural gas by companies rushing to drill for oil without having sufficient pipelines to transport their production. With cheap gas bubbling to the top with expensive oil, the companies do not have an economic incentive to build the necessary gas pipelines, so they flare the excess gas instead.

Flared gas has nearly tripled in the last two years in North Dakota, with almost 30 percent of the output in the state burned at wells, producing emissions equivalent to more than two medium-size coal-fired power plants.

The value of flared gas in the state is roughly $100 million a month, leading property owners who lease their lands to the oil companies to believe they are losing money even though they are earning increasing royalties from the fast expansion of oil production in North Dakota. Oil output has risen by 100,000 barrels a day since May alone.

“The lawsuits seek to force operators to comply with state law and pay royalties to mineral owners on the value of flared gas,” according to a statement released on Wednesday by one of five law firms that filed the suits, “and by so doing create a compelling economic incentive for producers to reduce and eliminate the wasteful practice of flaring.”

Natural gas flaring is easily one of the most wasteful practices in the oil and gas industry, however, until now oil companies have just seen it as the cost of doing business. And despite the reality that, as the many links above show, it exacerbates global warming and is harmful to the environment, reducing this waste has not been seen as worth the investment.

So, if oil companies are forced to pay royalties on all the gas they release from the ground, whether it is flared or brought to market, it is safe to assume they will be doing what they can to reduce the amount that is flared so they can at least be making back some money by capturing it and bringing it to market. This won't solve the bigger issue problem of burning fossil fuels generally, but it could serve as an important step in reducing the flaring that has grown to become such a major contributor to CO2 emissions.

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