Flaring Concerns? Ignore the Facts; Don't Fight The Trend; Opportunities Abound

This is a pretty good story, even though it comes from Motley Fool.

All things being equal, there will be more flaring in the Bakken in 2013 than there was in 2012 (raw numbers, not necessarily on a percentage basis). That's just the facts (at least from the little I know, and I could be way, way off). But I think I'm right. [A percentage of this produced natural gas is flared.]

Armchair analysts and activists (AAA) across the nation (notably in Washington, New York, Washington State, Oregon, and Dickinson, etc) are calling for an end to this flaring. And that means more money could be poured into companies who can assist. And that's where the linked article comes into play.

Looking from an investment angle, my first choice in the Bakken was railroads. I was long in BNI ... and then Warren bought it. Replaced it with Union Pacific.

My second choice for Bakken investments: crude oil pipelines. My favorite is ENB.

My third choice for Bakken investments: independent oil companies with prospects in both the Bakken and the Eagle Ford. My favorite is EOG.

My fourth choice for Bakken investments: I can't think of a fourth.

Until now. ONEOK surprised me, probably surprised others, when it saw the potential for natural gas in an oil field outside it's core operating area.

So, these are the tea leaves (blogged about earlier, may provide links later):

• pipelines will be the story of 2013
• increasing pressure to reduce flaring in North Dakota
• increased well density will naturally lead to more natural gas pipelines
• pipeline easements already in place, I assume, almost everywhere in the Bakken

And, now this Motley Fool article at the link. Companies mentioned:

• Enbridge Energy
• ONEOK
• Plains All American
• Energy Transfer Partners -- perhaps the most interesting of all, with opportunity to transport by rail either crude oil or natural gas

By the way, the North Dakota state legislature is mulling an idea to make laying natural gas pipeline more attractive. Don sent me the story some days ago; I never posted it; it was a "what-if" story -- but now might be the time to post it. From The Bismarck Tribune:

Legislators heard testimony Tuesday on a bill that would provide tax incentives and exemptions for the oil and gas industry to reduce natural gas flaring.

Members of the House Finance and Taxation Committee heard from state officials on House Bill 1134, which would allow natural gas to be flared for up to one year after production begins from a well.

The bill says that within one year, a well must either be capped, connected to a gas-gathering line or equipped with a generator that consumes at least 75 percent of the gas. A well also could be equipped with a system that gathers at least 75 percent of natural gas liquids for such uses as conversion to liquid fuels and production of petrochemicals or fertilizer.

A well that is connected to a gathering system from the first day of production would be eligible for an additional two-year oil exemption from state gross production taxes.

The key to reducing flaring: connecting the well to "a gathering system from the first day of production."

Think about this: the wind industry took off with a 2.2 cents/kwh tax credit (or whatever it was). A tax incentive for the natural gas industry in the Bakken, an oil field, starting to produce staggering amounts of natural gas, could do something similar. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on what you read here. This particular post is entirely idle chatter. I have no plans to act on anything I might be implying or that the reader might be inferring. I am a long term investor and do no "trading" (as a general rule; I assume there are exceptions, but I really can't remember any examples). I won't be making any changes to my investment portfolio during the next couple of weeks.

But wow, there are a lot of opportunities out there. Good luck to all.