Energy

Shale Gas Boom Now Visible From Space

Oil companies at the heart of the US shale oil boom are burning off enough gas to power all the homes in Chicago and Washington combined in a practice causing growing concern about the waste of resources and damage to the environment.

The volume of unwanted gas being flared off in North Dakota, the state leading the shale revolution transforming the outlook for US energy, rose about 50 per cent last year. The surge at the state's Bakken formation is being replicated in other shale regions with the Texas state regulator issuing 1,963 permits to flare in 2012, more than six times the number of 306 in 2010.

The rapid increase has made the US one of the world's worst countries for gas flaring. The volume of gas flared in the US has tripled in just five years, according to World Bank estimates and is now fifth highest in the world, behind Russia, Nigeria, Iran and Iraq.

The flaring is a result, in large part, of the low price of natural gas in North America, which can make it uneconomic to build pipelines and tanks to handle the gas released by oil production. Flaring is often the safest way to dispose of it.

The lights of the flares burning in the Bakken and Texas' Eagle Ford shale fields can clearly be seen in night-time satellite photography.

Flaring has been attracting attention from investors and environmental campaigners because of the waste of gas and its consequences for greenhouse gas emissions, local air pollution and disturbance to nearby communities.

Flaring in North Dakota increases by about 20 per cent the greenhouse gas emissions resulting from the state's oil production, refining and transport, compared with the US average, according to Financial Times analysis of official data.

Investors managing a total of $500bn last year wrote to oil companies including ExxonMobil, Chevron, Statoil and US independents urging them to do more to cut their flaring. They warned that "excessive flaring, because of its impact on air quality and climate change, poses significant risks for the companies involved."

Since then, flaring in the US and concerns over it have only increased.

Mercy Investment Services, which manages the investments of the Sisters of Mercy order of nuns, filed a shareholder resolution this month calling on Continental Resources, the leading oil producer in the Bakken, to adopt clear goals for cutting or eliminating flaring.

Continental said it already flared proportionately less gas than the industry average, was making progress on more reductions and agreed to report on its progress in 2013.

The North Dakota legislature is considering a bill to encourage flaring reduction through tax breaks. The state is also pushing producers to use gas to power drilling rigs.