A state study explores the issues and economics of pore-space storage
GRAND FORKS—A recent study, state-sponsored and conducted by the Energy and Environmental Research Center at the University of North Dakota, has pointed to a potential method for flaring reduction in the Bakken Shale. The state’s Industrial Commission solicited and funded the analysis.
The solution—injecting gas produced from the Bakken’s crude-oil supplies into underground formations and withdrawing it later, as needed—depends upon overcoming several regulatory and economic hurdles. But overcoming those hurdles could open the door to increased oil production and help meet state-mandated goals for capturing gas.
Lynn Helms, director of North Dakota’s Department of Mineral Resources, acknowledged that the economics of such an approach to gas storage “aren’t great,” but that it can be done economically “under the right circumstance.” He pointed to a number of regulatory, tax and royalty issues that come with gas storage.
For example, according to the EERC report, one regulatory issue requiring clarification is whether landowners should be paid for the temporary use of pore space—that is, the underground cavities and voids into which the gas would be injected and temporarily stored. Over the last two decades, a series of court cases have determined that ownership of that underground space belongs to the surface owner, not the mineral owner; in addition, surface owners may charge a wide range of fees for mineral-owner access to that space. Helms pointed out that once pore-space costs are added into the overall costs associated with gas storage, the process might be financially challenging for some operators.
John Harju, the EERC’s vice president for strategic partnerships, noted that gas storage is simply another option to consider when it is not possible or feasible to transport gas supplies via pipeline to a gas processing plant.
And multiple options are important, especially when the alternative is flaring. According to the report, North Dakota operators flared 20 percent and 21 percent of their production in the two most recent months for which data is available, or about 527 million cubic fee per day, due to lack of infrastructure. Current state goals call for no more than 12 percent flared.
The proposal would aim to reduce flaring over the next several years to allow time for the building of midstream processing plants, pipelines and other infrastructure.