North Dakota mineral owners have started filing class action lawsuits (10 to date) against oil and gas companies that are flaring gas produced from their property.
Roughly 30% or 300 mmcfd of the natural gas produced in North Dakota is flared.
Mineral owners, and the lawyers working for them, hope to force operators to pay them based on the market value of the flared gas. Even though I consider many estimates for losses high because they assume Henry Hub or a similar benchmark natural gas price, there are millions in lost royalties each month.
No matter how you look at it, operators will be more highly scrutinized and might have a bigger financial incentive to decrease flaring. This could be the straw that forces operators to build necessary infrastructure that will minimize flaring. Now that most acreage is held by production in the region, operators can be more deliberate in their development drilling.
One result might be that operators allocate resources in central locations that have access to necessary infrastructure.
The companies named in the suits include:
- Continental Resources
- ConocoPhillips
- Crescent Point Energy
- ExxonMobil (XTO Energy)
- HRC Operating
- Marathon Oil
- Samson Resources
- SM Energy
- Statoil
- WPX Energy
The industry will be forced to address this issue in the courts, but watch for operators to accelerate plans to reduce flaring on all fronts. Coincidentally, the ND Petroleum Council announced a new task force dedicated to flaring the day before the law suits became public.