“We don’t need to be flaring, and we can find an economic benefit to this natural gas.”
These words were spoken by Mark Fox, chairman of the Three Affiliated Tribes — a group of Native American tribes from the Dakotas that joined together during the late 19th century after suffering massive population loss due to disease.
The group recently bought land in some areas of North Dakota, including places where oil drilling has been prolific.
Since 2006, companies in the Bakken have drilled over 11,000 oil wells. Almost 40,000 miles of drilled space spiderwebs beneath the ground in the state.
According to the New York Times, if these well bores were dismantled and placed one after the other, they would circle the planet one and a half times.
But a problem with all of the oil drilling has been gas flaring, which has cost North Dakota taxpayers and royalty recipients millions of dollars over the last few years…
Not to mention the excess methane that has flooded the air.
And it’s gas flaring and potential solutions to it that have Mr. Fox making these comments.
Gas Flaring Problems
When oil companies drill for oil — fracking or not — the operators also produce methane as a byproduct.
These operators build massive storage tanks that allow them to hold some of this gas and, when possible, ship it to be sold at market value. But with drilling as expansive as it is, things haven’t quite worked out that way…
Once a drilling company has filled its storage to capacity with excess natural gas, it has to either shut down operations until it can get rid of it or burn off the gas in order to make more room.
Since pausing drilling to make room for natural gas would cripple revenues of the companies producing in the Bakken, all of them opt to burn the gas away.
Beyond wasting millions of cubic feet of gas per year, the companies that do this have been on the receiving end of much flak from property owners who want royalties, government officials who want to tax the natural gas, and environmentalists upset about more carbon filling the atmosphere.
As a result, the North Dakota Industrial Commission recently drafted rules, backed by oil companies, that require drillers to capture 85% of the gas produced by 2016. Within six more years, that increases to 90%.
As it is right now, drillers flare or leak about 30% of the gas produced.
The reason isn’t that these companies want to pollute or cheat landowners out of royalties. Rather, the problem lies with infrastructure.
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Here’s a Solution You Can Invest in
As oil drilling blossomed in the Bakken, one major development that simply couldn’t keep up was the oil and gas infrastructure needed to maintain high levels of growth.
As companies and investors realized this, work began on more projects such as refineries, pipelines, storage tankers, and gathering facilities.
Now, as I write to you, these projects are in development.
Mark Fox is currently negotiating with a large operator of natural gas pipelines and operating plants in North Dakota.
The company wants to build a pipeline that would go through Native American land in the region, and Mr. Fox has pledged to speed up the talks, which have been going on for a year.
The pipeline itself has the potential to curb natural gas flaring by more than 10% once it’s up and running.
And with producers flaring 347 million cubic feet of gas daily at last count, projects like this one stand to save a lot of wasted resources and put money in a lot of pockets.
That includes investors.
My colleague Keith Kohl is researching a company involved. He will have a new report featuring all of the details out to you in a couple of weeks.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
