Texas will look into policies to “drastically reduce” natural gas flaring from the state’s shale patch as investors become increasingly sensitive to climate change concerns.
The call to action from the head of the Texas Railroad Commission, which oversees oil and gas production in the state, marks a stark tone shift for an agency that’s been criticized for its laissez-faire attitude toward one of the industry’s most harmful environmental practices.
After hearing on Tuesday from environmental groups, industry organizations and shale producers on ways the state’s flaring problem should be addressed, Wayne Christian, the commission’s chairman, said he directed staff to consider whether measures could be implemented this fall.
“I am very concerned by the rate of flaring in Texas,” Christian said during the webcast meeting. “We cannot continue to waste this much natural gas and allow the practice of flaring to tarnish the reputation of our state’s thriving energy sector to the general public and investors on Wall Street.”
Investors’ growing reluctance to put money into polluting industries adds insult to injury for a shale patch that has fallen from grace on Wall Street after years burning through borrowed cash without giving shareholders the returns they sought. Many explorers were already struggling to stay afloat even before the COVID-19 pandemic pushed the oil market into its worst-ever crash.
Flaring is commonplace in Texas oilfields, where natural gas is extracted alongside more valuable crude. A lack of pipeline capacity leaves drillers with too much gas on their hands. To avoid shutting in oil output, producers frequently resort to flaring, which burns off methane but still releases carbon dioxide and other particulate matter into the air.
Christian said he’s been told that Wall Street is less willing to invest in oil and gas companies because of the volumes of natural gas that they’re flaring. He said he wants Wall Street and “the market” to understand that the industry is working toward addressing the problem.
A variety of proposals were raised during Tuesday’s meeting. Latigo Petroleum, a privately held producer in West Texas, said the agency should set “allowables” to prevent companies without a market for their gas to continue pumping. Listed producers including Occidental Petroleum Corp. and Parsley Energy Inc. highlighted existing practices they have in place that they said show the industry is taking active steps toward reducing flaring. The Environmental Defense Fund called on the Railroad Commission to set a firm goal for an end to routine flaring by 2025.
“Flaring waste runs counter to Texas values,” EDF said in a press release after the meeting.
Commissioner Ryan Sitton said on Twitter that environmental groups are urging the agency to “weigh economics,” while the companies themselves say the Railroad Commission should “ignore economics.”
His comment is an apparent dig at the long list of oil and gas producers that argued in April the commission shouldn’t impose oil quotas in a bid to bolster prices, a proposal Sitton had spearheaded. He later called the initiative “dead” after it was clear that his fellow commissioners had deep reservations about instituting production caps.
© 2020 Bloomberg L.P.