Tax Credits Will Do Little To Curb Flaring

There’s some common ground between folks who are friendly to oil development and environmental activists who want to shut it down over legislation handing out tax credits for reductions in natural gas flaring.

As oil production in North Dakota’s oil patch has increased, so has natural gas flaring. So much so that, seen from space, sparsely-populated western North Dakota almost outshines urban areas like Minneapolis.

Clearly, flaring is an issue. The environmentalists argue that it’s air pollution, though that’s a little hard to believe with the state winning awards for air quality, but it’s certainly wasteful of a commodity that has a lot of uses in our economy.

To that end, the legislature has passed tax credits to lure oil companies into reducing flaring, but both pr
o-oil and anti-oil activists agree that the incentives aren’t likely to accomplish much:

“It’s fine to offer a carrot but you also have to have a stick to ensure something actually gets done,” Wayde Schafer, a North Dakota spokesman for the Sierra Club, said of oil companies’ practice of flaring.

The Legislature has passed a pair of bills that give tax breaks to companies if natural gas is collected and used for agricultural, industrial and railroad purposes. Projects that also convert natural gas to such things as farm fertilizer or electricity also would be given incentives. The measures that were endorsed last week by lawmakers had not reached the Dalrymple’s desk on Thursday.

Bob Harms, a former oil industry lobbyist and lawyer, said the measures amount to little more than a cosmetic attempt at curbing an increasingly unacceptable practice to North Dakotans.

“It’s window dressing,” said Harms, an outspoken critic of flaring who’s also reaping royalties from oil wells on his land in western North Dakota. “These bills will help but they do nothing to significantly reduce flaring.”

The problem with flaring isn’t that there’s not enough economic incentive to capture the gas. There is plenty of market demand for natural gas. It’s valuable, and oil companies (who we can all agree like making money) are no doubt unhappy about wasting it as well.

The problem causing flaring is that there aren’t a lot of practical ways to capture the gas and bring it to market. We need to build infrastructure to allow the gas to be captured. Pipelines, etc., and the folks standing in the way of that sort of infrastructure, ironically enough, are the very environmental activists who gripe the loudest about flaring in the first place.