Texas Regulator Readies First Flaring Report Amid Backlash

(Bloomberg) -- A Republican defending his seat on Texas’s all-powerful energy regulator is preparing a first-of-its-kind report on natural gas flaring, a practice that’s come under fire from environmental groups and even some producers.

The report will showcase flaring trends, its proportion to surging oil production and potentially a list of the best and worst operators, said Ryan Sitton, a member of the Texas Railroad Commission, which actually oversees the oil and gas industry in the state despite its name. His office has been working for the last six months to aggregate data reported by oil and gas operators and aims to release something to the public within the next week or so.

“My point is to put the information out there and then we can start to talk policy,” Sitton said Thursday in an interview in Houston.

Flaring has come to the fore as one of the worst side effects of the shale boom in Texas as vast amounts of gas from oil wells in the Permian Basin are being burnt off for lack of pipelines to ship it away. While pressure mounts to curb the practice, a supply glut, depressed U.S. gas prices and the distance from key markets for the heating fuel means the byproduct of crude production has little value for explorers in the state.

When a well is drilled, Texas allows producers to flare for the first 10 days without seeking special permission. Anything after that, however, requires approval by the Railroad Commission.

In 2019, the commission granted 6,972 permits allowing companies to flare or vent natural gas, a 40-fold increase from the start of the shale boom a decade ago. Texas crude output, meanwhile, increased fivefold over that period.

“Previously, if a member of the public wanted to look at RRC flaring data, they had to pay to get operator production reports, which were in an outdated and difficult-to-manipulate data format,” said Colin Leyden, senior manager of regulatory and legislative affairs at the Environmental Defense Fund in Texas. “While the RRC has recently made these reports free, they are still very difficult to analyze. Texans shouldn’t need advanced computer degrees to understand how much gas is being wasted and which operators are responsible.”

In addition to being central to the campaigns of Democrats trying to unseat Sitton, the current scale of flaring in the Permian has even attracted criticism from the oil and gas industry.

On Wednesday, a Royal Dutch Shell Plc executive used an industry conference to call on regulators to craft better policies to reduce flaring in the Permian.

“A lot of that has to do with infrastructure, but I believe a bigger part is to do with robust, fit-for-purpose policies and regulatory requirements to incentivize reduction in flaring,” Amir Gerges, vice president of Shell’s operations in the basin, said at the Argus Americas Crude Summit conference in Houston.

Click here for more on the Permian gas glut

Weeks earlier, the co-founder of Houston-based investment bank Tudor Pickering Holt & Co., which advises oil and gas companies, said the state could do more to limit flaring.

“It’s not an easy, black-and-white, ‘Well-why-don’t-you-just-tell-them-to-stop?’ kind of problem,” Bobby Tudor said on the sidelines of an event by the Greater Houston Partnership. “But I think in general, a much firmer stand from the Railroad Commission and leadership from the most active companies can make a difference.”

Sitton said he agrees that flaring needs to be reduced, but when asked whether that should be done via regulatory actions, he deferred to the coming report. There’s no question, though, that the problem can no longer be ignored.

“Everybody’s been an influence,” Sitton said. “It’s banks. It’s ourselves. It’s me going to Midland and talking to people out there who say, ‘Yeah, man, this seems like this is a lot.’”

To contact the reporters on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net;Kevin Crowley in Houston at kcrowley1@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Reg Gale

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