A pipeline company is challenging Texas’ practice of allowing drillers to set unwanted natural gas on fire, in a case that could test state limits for how much of the fuel can legally go to waste.
Now, shale producer Exco Resources Inc. is seeking to flare nearly all of the gas produced by a group of South Texas wells, even though its operations are already connected to a network of pipelines. Williams Cos., the operator of the pipelines, is challenging the request, in what is believed to be the first such dispute on record.
Williams attorney John Hays Jr. told commissioners in a hearing last month that granting Exco’s request would open the door to wasting gas any time doing so is more profitable than transporting it.
The Texas Railroad Commission has received more than 27,000 requests for flaring permits in the past seven years and has not denied any of them, records show.
The case underscores the tensions surfacing in Texas as the state grapples with booming oil production and its side effects. It also exposes a growing rift between frackers and pipeline companies as the natural-gas glut is set to worsen.
Natural-gas pipeline construction in Texas, home to America’s hottest oil field, the Permian Basin, has lagged far behind production growth, in part because producers have been reluctant to commit to long-term contracts. The state’s gas output is expected to increase about 30% over the next five years, according to consulting firm RBN Energy.
In the region’s two largest oil basins, the Permian Basin and Eagle Ford, operators flared or vented—where gas is released without being burned—into the atmosphere an average of about 740 million cubic feet of gas a day during the first quarter, according to public data compiled by energy analytics firm Rystad Energy. That gas would be worth about $1.8 million a day at current prices and produced greenhouse gas emissions equivalent to that of nearly five million cars driving for a day, according to estimates from the World Bank and the Environmental Protection Agency.