A natural gas flare from an offshore oil drilling rig is seen in Cook Inlet in an undated photo. (Photo by Paul Souders/Getty Images)
During last week’s State of the State address, Gov. Mike Dunleavy incorrectly said that Alaska’s oil and gas producers are banned from releasing gas into the atmosphere and burning it, a process known as flaring.
“We don’t flare our gas, and never have, and we don’t have to be told not to by the federal government,” he said.
It’s not true.
While the state has strictly limited gas flaring since the 1970s, the state allows producers to flare gas for safety reasons, during maintenance periods, and in order to test new oil and gas wells.
In November, for example, the Alaska Oil and Gas Conservation Commission, which is charged (among other duties) with overseeing and limiting flaring, approved a special permit that allows a producer to flare gas for at least three months — and possibly as many as nine — from a new well near the Dalton Highway.
For oil producers testing new wells, flaring makes economic sense: They don’t have to worry about where to put the gas that’s produced as a side effect of oil drilling. During ordinary production on the North Slope producers compress it and reinject it below ground, using costly equipment to do so.
But the state doesn’t generally require reinjection during test drilling. And while the state taxes gas production, there’s no tax on gas burned in flares that stay below limits imposed by the AOGCC, according to the Alaska Department of Revenue. That amounts to a state subsidy for test wells and the flaring that results.
In 2021, Alaska producers flared 6 billion cubic feet of natural gas. By comparison, Chugach Electric used about 13.4 billion cubic feet in 2022, based on an average of 36.8 million cubic feet per day.
That was a particularly good year for flaring by historic standards. In 2012, the state flared almost twice that amount, and in 1993, the state flared between three and four times as much.
State regulations require producers to “take action in accordance with good oil field engineering practices and conservation purposes to minimize the volume of gas released, burned, or permitted to escape into the air.”
That regulation isn’t for environmental reasons. It’s because Alaska’s subsurface oil and gas are owned by the state and managed collectively on behalf of all Alaskans, and state law requires efforts to avoid waste.
Only about 0.17% of the state’s gas production was flared in 2021. Texas, which like Alaska is a major oil and gas producer, flared almost 1% of its gas, or 102 billion cubic feet. California flared almost 1.1%, Wyoming about 4.75% and North Dakota a whopping 7% of all gas produced.
In 2022, Alaska flared about 0.27% of all gas produced here, according to reports submitted to the AOGCC; figures for other states haven’t been published yet.
State seeks investment
The governor’s wrong statement in the State of the State may have been a simple misstatement, but the governor’s office didn’t answer a question seeking clarification about what it was based on.
One of the key points of Dunleavy’s speech was a request for $5 million to market Alaska as a “leader in responsible resource development.”
The stakes are high for that advertising campaign.
Banks and other firms are instituting policies that prohibit investment in Arctic oil and gas, emphasizing non-economic considerations under environmental and social governance rules (also known as ESG), the Dunleavy administration has been trying to market Alaska oil and gas as an environmentally cleaner alternative to the same stuff from the developing world or Russia.
“We know we’ve been doing ESG since before ESG was the latest fashionable thing on Wall Street or in Washington,” Dunleavy said last week.
The administration has flown officials, including former Senate President Peter Micciche, R-Soldotna, to New York City to speak directly to investment officials, but problems for the oil and gas industry have persisted.
In a presentation to the Senate Resources Committee on Monday, Department of Natural Resources Commissioner-designee John Boyle said an impending natural gas shortage in Cook Inlet may be partially attributable to drillers being unable to find financing because of the new restrictions.
“We’re going to tell this story, our story, the real story, and it’s not the story the extremists want everyone to believe,” Dunleavy said in last week’s speech. “Through multiple media channels and targeted industry outreach, we’ll promote our unmatched opportunities for investment and development.”
Burnishing the state’s record on flaring, a major source of greenhouse gas pollution globally, would help the state make its case.
Economics, not state rules, have limited flaring
That has risks. Alaska’s limits on flaring are based on what defines waste, and what defines waste is determined by economics, not environmentalism. If the economics of flaring change, the state’s sterling reputation could as well.
Flaring right now is at a low ebb, but history shows that pattern can change quickly. In 1993, flaring spiked to 0.8% of all gas produced in the state, according to figures from the Energy Information Administration. That was lower than other states but far more than the state flared before and after.
And while the state is eager to advertise itself as a leader in responsible development, it’s been slow to back that advertising with regulatory action.
Dunleavy has said he doesn’t believe greenhouse gas emissions contribute to climate change, the Legislature has declined to pass climate legislation and the state courts have been unwilling to define existing laws to encompass climate change.
The state’s newly proposed carbon sequestration program remains hypothetical and wouldn’t directly change the environmental effects of oil and gas drilling.
That leaves the state to market existing efforts that aren’t intended to benefit the environment as being environmentally friendly.
“The world is going to want oil and gas for decades and decades to come,” Dunleavy said on public radio on Tuesday, “And it’s my position that Alaska does it better, as opposed to sending it overseas to places like Russia, or Africa or South America. So the premise should be that we want to produce as much oil and gas here. It helps Alaskans across the board.”
Oil-spill regulations imposed after the Exxon Valdez oil spill have left Alaska with some of the toughest spill reporting requirements in the country. During a news conference last year, Dunleavy compared those requirements to pictures of crude oil flowing through canals and channels in Russia.
Using gas flaring as a similar example could be misleading. Oil companies here are extremely careful about spilling oil in part because they’re required to. Flaring isn’t done more widely here because it doesn’t usually make economic sense, not because the state forbids it.
Commission allows gas flaring for oil field testing
In August, Great Bear Pantheon, an Anchorage-based subsidiary of a London firm, requested permission to flare gas from a prospective oil well for nine months in order to test the production of a possible oil field.
Pat Galvin, husband of Rep. Alyse Galvin, I-Anchorage, and an official at Great Bear, said the planned gas release is limited and helps the company determine the extent of its oil find. If proved and developed, that find could generate millions in revenue for the state. If testing turns into production, future gas would be captured, he said.
The AOGCC noted that the length of the flare was unusual, but it ultimately approved the request, noting that it was “necessary to determine if Great Bear has made an economic discovery and to be able to design production facilities for a full field development.”
Environmental groups have focused on the flaring of natural gas in oil work because of its effect on the atmosphere. They’re also concerned about venting, the release of gas to the open air without burning.
One of the main components of natural gas is methane, and over a 20-year period, methane released into the atmosphere will create 80 times as much global warming as a comparable amount of carbon dioxide.
The Biden administration is also interested in limiting the practices; the Bureau of Land Management has proposed new restrictions on flaring and venting from oil and gas production on federal land.
The rules on state land here in Alaska, as in Great Bear’s case, are different. Economics, not environmentalism, is the guiding principle.
Trustees for Alaska, an environmental organization, petitioned AOGCC to reject Great Bear’s flaring request, citing the impact on the atmosphere, but the commission didn’t address that issue in its final determination.
The commission has traditionally ignored environmental issues as outside its purview. In 2018, Juneau resident Kate Troll and 46 other people petitioned the AOGCC to ban all non-emergency flaring and venting to limit global warming and climate change.
The commission rejected that petition the following year after a public hearing, concluding that petitioners “acknowledged, and the AOGCC reiterated at the hearing, that while the AOGCC regulates to prevent waste, it has no authority to act regarding that subject matter.”
Similarly, the commission declined in 2022 to fine oil and gas producer Hilcorp for a leaky gas pipeline in Cook Inlet, largely because the state had already been paid for the gas that leaked.
Millions of cubic feet of gas escaped into the atmosphere during the four-month leak, but the AOGCC concluded that the problem — and the resulting impact on the atmosphere — was beyond its jurisdiction because it was no longer the state’s gas.
“The primary purpose behind the prohibition against ‘waste’ is to maximize ultimate resource recovery,” commissioners concluded.
For now, economics and environmental concerns are aligned. Alaska doesn’t ban flaring entirely, but the drive to eliminate waste means Alaska has one of the lowest rates of flaring in the nation.
In other parts of the United States, environmental concerns are driving states to catch and pass Alaska in the race to reduce emissions. In 2019, Colorado approved a law directing its oil and gas commission to pass environmentally centered regulations that ban flaring in most cases and restrict emissions when it does take place.
As a result, Colorado in 2021 flared less than one-tenth of 1% of its produced gas, by far the lowest rate in the nation according to federal statistics, and the state is marketing itself as the capital of “responsibly sourced” oil and gas, the same target Alaska has set.
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