Natural Gas Flaring and Venting: Opportunities to Improve Data	 
and Reduce Emissions (14-JUL-04, GAO-04-809).			 
                                                                 
Since 1995, the average price of natural gas in the United States
has almost tripled as demand has grown faster than supply.	 
Despite this increase, natural gas is regularly lost as it is	 
burned (flared) and released into the atmosphere (vented) during 
the production of oil and gas. GAO was asked to (1) describe	 
flaring and venting data and what the federal government could do
to improve them; (2) report, on the basis of available		 
information, on the extent of flaring and venting and their	 
contributions to greenhouse gases; and (3) identify opportunities
for the federal government to reduce flaring and venting.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-809 					        
    ACCNO:   A10976						        
  TITLE:     Natural Gas Flaring and Venting: Opportunities to Improve
Data and Reduce Emissions					 
     DATE:   07/14/2004 
  SUBJECT:   Air pollution					 
	     Air pollution control				 
	     Crude oil						 
	     Data collection					 
	     Data integrity					 
	     Environmental monitoring				 
	     Gas resources					 
	     International relations				 
	     Natural gas					 
	     Natural gas prices 				 
	     Natural gas supply shortages			 
	     Petroleum industry 				 
	     Reporting requirements				 
	     Greenhouse gasses					 

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GAO-04-809

United States Government Accountability Office

GAO	Report to the Honorable Jeff Bingaman, Ranking Minority Member,
Committee on

                   Energy and Natural Resources, U.S. Senate

July 2004

NATURAL GAS FLARING AND VENTING

               Opportunities to Improve Data and Reduce Emissions

                                       a

GAO-04-809

Highlights of GAO-04-809, a report to the Honorable Jeff Bingaman, Ranking
Minority Member, Committee on Energy and Natural Resources, U.S. Senate

Since 1995, the average price of natural gas in the United States has
almost tripled as demand has grown faster than supply. Despite this
increase, natural gas is regularly lost as it is burned (flared) and
released into the atmosphere (vented) during the production of oil and
gas. GAO was asked to (1) describe flaring and venting data and what the
federal government could do to improve them; (2) report, on the basis of
available information, on the extent of flaring and venting and their
contributions to greenhouse gases; and (3) identify opportunities for the
federal government to reduce flaring and venting.

GAO recommends that the Secretary of Energy consider opportunities to
improve data on flaring and venting. In addition, GAO recommends that the
Secretary of the Interior consider regulatory changes for federal leases
to reduce the most harmful emissions from flaring and venting and to
improve oversight.

In commenting on the report, the Department of Energy and the Department
of the Interior generally agreed with our findings and recommendations.

July 2004

NATURAL GAS FLARING AND VENTING

Opportunities to Improve Data and Reduce Emissions

U.S. and global data on natural gas flaring and venting are limited.
First, the Department of Energy's Energy Information Administration (EIA)
collects and reports data voluntarily provided by oil- and gas-producing
states. Because EIA has no authority to require states to report, some do
not, leading to incomplete data. Second, EIA has provided limited guidance
to states to promote consistent reporting. As a result, only about
one-fourth of the states reporting provide data that EIA considers
consistent. Third, the data EIA collects do not distinguish between flared
gas and vented gas-an important distinction since they have dramatically
different environmental impacts. Data on flaring and venting outside the
United States are also limited, since many countries report unreliable
data or none at all. To improve data on flaring and venting, EIA could use
its authority to collect data directly from oil and gas producers; to
obtain more consistent data, EIA could improve its guidelines for
reporting. From an environmental perspective, EIA, the Minerals Management
Service, and the Bureau of Land Management could require flaring and
venting data to be reported separately from each other. Globally, the
federal government could set an example by continuing to improve U.S.
data, continuing to support global efforts, and using U.S. satellite data
to detect unreported flaring.

On the basis of the limited data available, the amount of gas emitted
through flaring and venting worldwide is small compared with global
natural gas production and represents a small portion of greenhouse gas
emissions. Nevertheless, flaring and venting have adverse environmental
impacts and result in the loss of a significant amount of energy.
Annually, over 100 billion cubic meters of gas are flared or vented
worldwide-enough to meet the natural gas needs of France and Germany for a
year. While flaring and venting do occur in the United States, less than 1
percent of global production is flared and vented.

Opportunities exist in several areas to help reduce flaring and venting,
both in the United States and globally. For example, exploring ways to
address market barriers affecting associated gas could help identify
approaches to reduce global flaring and venting.

            Worldwide Flaring Identified Using Satellite Technology

www.gao.gov/cgi-bin/getrpt?GAO-04-809.

To view the full product, including the scope and methodology, click on
the link above. For more information, contact Jim Wells at (202) 512-3841
or [email protected].

Contents

  Letter

Results in Brief

Flaring and Venting Data Are Limited, but the Federal Government Has
Opportunities to Improve Them

Although the Amount of Gas Flared and Vented Is Small, It Represents a
Significant Amount of Lost Energy and Contributes to Global Greenhouse Gas
Emissions

The Federal Government Could Take a Larger Role in Reducing Flaring and
Venting

Conclusions

Recommendations for Executive Action

Agency Comments and Our Evaluation

                                      1 5

                                       8

12

18 21 23 23

Appendixes

                          Appendix I: Appendix II: Appendix III: Appendix IV:

Objectives, Scope, and Methodology
Comments from the Department of Energy
Comments from the Department of the Interior
GAO Contacts and Staff Acknowledgments

GAO Contacts Acknowledgments 26

27

29

30 30 30

Tables  Table 1: Estimated Gas Flared and Vented by Selected Countries, 
                                        2000                               16 
              Table 2: Estimated U. S. Natural Gas Produced and Flared and 
                                    Vented, 2002                           17 
Figures         Figure 1: U. S. Natural Gas Prices, 1995-2003 Figure 2:  1 
                  Worldwide Flaring Identified Using Satellite Technology, 
                                        2002                               14 
           Figure 3: Regional Flaring and Venting As a Percentage World    
                              Flaring and Venting, 2000                    16 

Contents

Abbreviations

BLM Bureau of Land Management
DOE Department of Energy
DOI Department of the Interior
EIA Energy Information Administration
EPA Environmental Protection Agency
FERC Federal Energy Regulatory Commission
GGFR Global Gas Flaring Reduction Partnership
IEA International Energy Agency
LNG Liquid Natural Gas
NOAA National Oceanic and Atmospheric Administration
mmBtu million British thermal units
MMS Mineral Management Service
USAID U.S. Agency for International Development

This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.

A

United States Government Accountability Office Washington, D.C. 20548

July 14, 2004

The Honorable Jeff Bingaman
Ranking Minority Member
Committee on Energy and Natural Resources
United States Senate

Dear Senator Bingaman:

Since 1995, the average price of natural gas in the United States has
almost
tripled as demand has grown faster than supply. Natural gas prices
increased from $1.93 per million British thermal units (mmBtu) in 1995 to
$5.15 per mmBtu in 2003-an average annual rate of increase of over 13
percent (see fig. 1).1

Figure 1: U. S. Natural Gas Prices, 1995-2003

Natural gas in dollars per mmBtu

7

6

5

4

3

2

1

0 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Source: GAO analysis of industry data. Note: Dollars are adjusted for
inflation.

1Henry Hub natural gas prices adjusted for inflation in 2002 dollars.
Henry Hub is one of the largest natural gas market centers in the United
States. Its price often serves as a benchmark for wholesale natural gas
prices across the country.

Despite this increase in its price, natural gas is regularly burned and
released into the atmosphere during the production of oil and gas. While
the exact amount of gas lost in this way is uncertain, given the vast
extent of oil and gas production throughout the world, it could be
significant. In addition to resulting in the loss of a potentially
valuable resource, the burning and release of natural gas into the
atmosphere contribute to greenhouse gas emissions, which are generally
considered to be warming the earth's atmosphere.

Although most natural gas production involves extracting gas from wells
drilled into underground gas reservoirs, some natural gas is generated as
a by-product of oil production. Gas produced during oil production is
called associated gas. During oil and gas production, it may be necessary
to burn or release natural gas for a number of operational reasons,
including lowering the pressure to ensure safety. Burning natural gas is
known as flaring, while releasing natural gas directly into the atmosphere
is called venting. In addition to the operational reasons for flaring and
venting, in areas where the primary purpose of drilling is to produce oil,
producers flare or vent associated natural gas because no local market
exists for the gas and transporting it to a market may not be economically
feasible.2 Natural gas prices are a major determinant of whether
associated gas is flared and vented or sold. Associated natural gas would
be sold if prices were high enough over a long enough period to justify
building the infrastructure-pipelines and ports-to transport the gas to a
market. In the United States, there are well-developed natural gas markets
and infrastructure to reduce the flaring and venting of associated natural
gas. However, in parts of the world like Africa and the Middle East, where
the natural gas market and infrastructure for transporting gas are not as
welldeveloped, flaring and venting are generally more prevalent. With
increases in natural gas prices, some countries have recognized the
potential of increasing exports to high-demand countries like the United
States using liquefied natural gas (LNG) technology. These countries
liquefy the natural gas and transport it in specially designed tanker
ships to the United States and other countries. When the liquefied gas
arrives at an import facility, the liquid is returned to a gaseous state
and transported to a market.

2Natural gas may sometimes be reinjected into the ground for possible
future use as an alternative to flaring or venting. Reinjection can be
more costly than flaring and venting, but in some cases it may enhance oil
recovery by increasing pressure in the reservoir.

Although gas is sometimes flared or vented because it has too little
economic value to justify its capture, flaring or venting this gas into
the atmosphere has an environmental cost. In general, flaring emits carbon
dioxide, while venting releases methane.3 These and other chemical
compounds found in the earth's atmosphere create a greenhouse effect.
Under normal conditions, when sunlight strikes the earth's surface, some
of it is reflected back towards space as infrared radiation or heat.
Greenhouse gases such as carbon dioxide and methane impede this reflection
by trapping heat in the atmosphere. Methane is 23 times more potent than
carbon dioxide in its ability to warm the atmosphere. While these gases
occur naturally on earth and are emitted into the atmosphere, the expanded
industrialization of the world over the last 150 years has increased the
amount of emissions from human activity (known as anthropogenic emissions)
beyond the level that the earth's natural processes can handle. Scientists
generally agree that these increased greenhouse gases are contributing to
global warming, which can have detrimental effects on the climate. In
general, the environmental costs of flaring and venting are not borne by
the responsible parties because there are no restrictions on greenhouse
gas emissions. However, nations have proposed international agreements to
limit greenhouse gas emissions, including those released during flaring
and venting.

Numerous federal agencies have a role in oil and gas production and its
emissions' impact on the environment. The Department of Energy's (DOE)
Energy Information Administration (EIA) is the federal agency responsible
for providing energy information to meet the needs of the public, the
federal government, industry, and the Congress for making policy,
fostering efficient markets, and improving public understanding. DOE has
also provided funding support to a World Bank public-private partnership
to reduce global gas flaring. The Environmental Protection Agency (EPA)
has responsibility for monitoring and reporting on a wide range of
environmental issues, including greenhouse gases such as carbon dioxide
and methane. The Department of the Interior's Minerals Management Service
(MMS) and Bureau of Land Management (BLM) have responsibility for
regulation and oversight of oil and gas leases for offshore federal
properties and onshore federal lands, respectively. In general, flaring
and

3Besides carbon dioxide, flaring natural gas may emit small amounts of
methane and trace amounts of other gases depending on the flare's burn
efficiency. Venting methane may also release other hydrocarbons depending
on the composition of the gas stream. In addition, due to the composition
of the gas--for example when gas contains hydrogen sulfide--flaring may be
required to control any associated air quality or human health impacts.

venting are not authorized on these properties except for standard
operational reasons. In addition, both agencies require producers to
report combined flaring and venting data for federal leases. The Federal
Energy Regulatory Commission (FERC) has responsibility for determining
public convenience and necessity for interstate transmission of natural
gas through pipelines as well as for permitting onshore liquefied natural
gas facilities. In addition, the U.S. Coast Guard plays a role in the LNG
offshore permitting process. The U.S. Agency for International Development
(USAID) supports various projects around the world, including energy
projects, in partnership with other countries. The National Oceanic and
Atmospheric Administration (NOAA), under the Department of Commerce, uses
U.S. satellite technology to, among other things, monitor gas flaring
activity around the world.

Regarding natural gas flaring and venting from oil and gas production, in
both the United States and the rest of the world, you asked us to (1)
describe the data collected and reported on natural gas flaring and
venting and what the federal government could do to improve it; (2)
report, on the basis of available information, on the extent of flaring
and venting and its contribution to greenhouse gases; and (3) identify
opportunities for the federal government to reduce such flaring and
venting.

To do this work, we obtained currently available data on natural gas
production and estimates of flaring and venting in the United States from
EIA, MMS, and BLM. We obtained international data from Cedigaz, a French
oil and gas industry association that gathers worldwide information on
natural gas; the World Bank; the International Energy Agency, an
intergovernmental energy policy body; and the United Nations. We
determined that all the data we reviewed were sufficiently reliable for
inclusion in this report after acknowledging the limitations of these
data. We also interviewed officials from EIA, EPA, MMS, BLM, NOAA, USAID,
the World Bank, the United Nations, various private corporations and
organizations, and state governments regarding data collection and
methodologies, quality of the data collected, and reporting practices. In
addition, we contacted natural gas-producing states to determine their
assessment of the reliability of data they collect and report. We also
attended the World Bank Global Gas Flaring Reduction Partnership's Second
International Gas Flaring Reduction Conference in May 2004 in Algeria with
delegates from numerous other countries concerned about gas flaring and
venting. We conducted our work from October 2003 through June 2004 in
accordance with generally accepted government auditing

standards. A detailed description of our objectives, scope, and
methodology is contained in appendix I.

Results in Brief	Overall, data collected and reported on the flaring and
venting of natural gas associated with oil and gas production are limited
in several ways. First, although the Department of Energy's EIA has
authority to require U.S. oil-and gas-producing companies to report
flaring and venting data, according to EIA officials, the agency has not
used this authority because it considers these data a relatively low
priority. Instead, EIA collects and publishes data provided voluntarily by
the states on the amount of natural gas flared and vented. Because EIA has
no authority to require states to report-and some do not-EIA data are
incomplete and must be estimated by EIA. Compounding this problem, EIA has
provided only limited guidance to states to promote consistency in the
information that they voluntarily submit. As a result, only 8 of the 32
oil-and gas-producing states that EIA reports on provide data that EIA
considers consistent, leaving the agency to estimate the amount of flaring
and venting in the other 24 states. Finally, the information available to
EIA does not distinguish between gas that is flared and gas that is
vented, an important distinction from an environmental perspective because
the methane emitted during venting is significantly more potent in its
ability to warm the atmosphere than the carbon dioxide emitted during
flaring.

Outside the United States, information on gas flared and vented is even
more limited. Generally, international reporting is also voluntary.
Moreover, there is no single organization responsible for collecting and
reporting data. The United Nations requests data as part of its work on
climate change, but few countries report meaningful data. EIA reports
worldwide as well as U.S. data, but it largely relies on estimates
developed by an oil and gas industry association that gathers information
self-reported by countries. In some cases, countries do not report the
information or report suspect numbers. For example, Russia reports no
flaring, even though satellite data analyzed by the National Oceanic and
Atmospheric Administration have confirmed significant flaring activity.
Also, as with the U.S. data, the global data do not distinguish between
the amounts flared and vented. More accurate data would provide a clearer
understanding of the extent and location of the problem, as well as a
basis for targeted actions designed to both prevent the loss of a
potentially valuable resource and reduce harmful emissions into the
atmosphere.

The federal government could consider a number of opportunities to improve
information on flaring and venting activity, if it deems better data is a
worthwhile priority. EIA could improve its guidelines to states for
collecting and reporting flaring and venting data, which could provide EIA
with more consistent data. EIA could also consider collecting data on
flaring and venting directly from the roughly 20,000 domestic oil and gas
producers. In addition, from an environmental perspective, EIA, MMS, and
BLM could require oil and gas producers to distinguish between the amount
of gas flared and the amount vented. On a worldwide basis, the government
could set an example for the world by continuing to improve U.S. data. In
addition, EIA could work with NOAA to assess the feasibility of using U.S.
satellite technology to quantify the volumes of gas flaring around the
world and identify the additional resource commitment necessary to obtain
the information each year. Finally, the federal government could continue
to support global efforts such as the World Bank's Global Gas Flaring
Reduction Partnership (GGFR), which, in part, seeks to develop better
standards for data.

On the basis of the limited data available, the amount of gas emitted
through flaring and venting is small compared with overall natural gas
production and represents a small portion of greenhouse gas emissions.
Nevertheless, flaring and venting do have adverse environmental impacts
and result in the loss of a significant amount of energy. The amount of
gas flared and vented annually is conservatively estimated by the World
Bank at over 100 billion cubic meters worldwide, or about 3 percent of all
gas marketed in the world. While this amount is small in comparison with
worldwide totals, it is enough gas to meet the natural gas needs of both
France and Germany for a year. Flaring and venting are concentrated in
certain parts of the world. According to the World Bank, eight nations
account for 60 percent of the estimated natural gas flared and vented:
Algeria, Angola, Indonesia, Iran, Mexico, Nigeria, Russia, and Venezuela.
Some countries flare and vent most of the associated natural gas they
produce. In contrast, EIA estimates that the United States flares or vents
about 0.4 percent of its production, representing only 3 percent of the
world's total amount of natural gas flared and vented. Within the United
States, most of the reported flaring and venting has occurred in the
active oil and gas production states of Alaska, Louisiana, Texas, and
Wyoming and in the Gulf of Mexico. Regarding worldwide greenhouse gas
emissions, flaring and venting is estimated to contribute, respectively,
about 4 percent of the total methane emissions and about 1 percent of the
total carbon dioxide emissions caused by human activity. Several countries
have taken steps to reduce flaring and venting emissions that have the
potential of

saving energy resources while reducing greenhouse gases. For example, some
countries have imposed requirements on oil and gas producers to eliminate
emissions of gas within the next few years.

The federal government has opportunities in several areas to help reduce
natural gas flaring and venting. First, to address flaring and venting in
the United States, MMS and BLM could consider regulatory changes that
would reduce the most harmful emissions associated with flaring and
venting and improve oversight of oil and gas production on federal lands
and offshore areas leased to producers. Specifically, from an
environmental perspective, it may be worth exploring the cost and benefit
of requiring producers to flare rather than vent when they must release
gas for standard operational purposes-for example, for safety
reasons-since flaring is less detrimental to the atmosphere. In addition,
while the identification of unauthorized flaring or venting is not
commonplace on federal lands and offshore areas leased by oil and gas
companies, unauthorized flaring and venting do occur. For example, a major
oil and gas producer recently paid a $49 million settlement for
unauthorized flaring and venting that went undetected for several years.
Requiring the use of meters to measure gas flared and vented could improve
oversight. Second, the federal government could promote programs that
identify, and help industry implement, best practices for reducing natural
gas emissions. For example, EPA sponsors the Natural Gas STAR program,
which, among other things, identifies ways to reduce the need to flare and
vent during oil and gas production operations. On a global basis, the U.S.
government could investigate market barriers and the public's perceptions
of the risks associated with new infrastructure, such as those related to
building LNG facilities, which could affect relevant markets. For example,
the permit approval process for building an LNG facility in the United
States can currently take more than a year. Finally, the federal
government could continue to work with other countries and international
corporations to reduce flaring and venting.

We are making recommendations to the Secretary of Energy to consider the
opportunities to improve data on flaring and venting. We are also making
recommendations to the Secretary of the Interior to consider regulatory
changes to reduce the most harmful emissions from flaring and venting and
to improve oversight for federal leases.

Flaring and Venting Data Are Limited, but the Federal Government Has
Opportunities to Improve Them

In the United States, DOE's EIA collects and reports data provided
voluntarily by the states on the amount of natural gas flared and vented,
but the data are incomplete, inconsistent, and not as useful as they could
be from an environmental perspective. Information on gas flared and vented
outside the United States is also limited, since international reporting
generally is voluntary and there is no single organization that is
responsible for collecting and reporting this data. EIA could improve
flaring and venting data by enhancing its guidance to states and
collecting data directly from oil and gas producers; EIA, MMS, and BLM
could also improve data by collecting and reporting data on venting
separately from data on flaring. By taking these actions, the federal
government could serve as a model for global data collection and
reporting. EIA could also investigate improvements in global data
collection and reporting by using satellite images and data to better
estimate the volume of natural gas flared in other countries and by
continuing to support international efforts to improve data.

Data Collected and Reported on Flaring and Venting Are Limited

In the United States, data collected and reported on the flaring and
venting of natural gas associated with oil and gas production are
incomplete, inconsistent, and not as useful as they could be from an
environmental perspective. Regarding the completeness of the data,
although MMS and BLM require companies that lease federal lands and
offshore areas for oil and gas production to report flaring and venting
statistics, EIA does not use its authority to require information on
flaring and venting from all other U.S. oil-and gas-producing companies.
According to EIA officials, the data on flaring and venting that EIA
collects as part of overall oil and gas production data represent a
relatively small portion of EIA's energy data reporting program. Since the
agency has limited resources, these data are a relatively low priority. As
a result, rather than requiring that the estimated 20,000 domestic oil-and
gas-producing companies provide flaring and venting data-which would
consume considerable resources-EIA collects this information from the
oil-and gas-producing states on a voluntary basis. Many states do not
provide this information, however, and EIA has no authority to require
them to do so. Consequently, EIA's flaring and venting information is
incomplete.

In addition to being incomplete, the data the states provide to EIA are
also inconsistent. Since flaring and venting data are not a high priority
for EIA, the agency has provided only limited guidelines to states to
promote consistency in the information that they voluntarily submit. As a
result,

only 8 of the 32 oil-and gas-producing states4 provide data that EIA
considers consistent, leaving EIA to estimate the amount of flaring and
venting in the other 24 states. When we asked state officials about EIA
guidelines for reporting, officials from 15 states said they were unsure
what information EIA wanted and how EIA wanted it presented. Most
officials from the states answering our questions about the guidelines
thought they needed improvement, and some officials said they would like
to participate in developing improved guidelines to ensure that the states
would be able to meet EIA's requests.

The data that EIA, MMS, and BLM collect are further limited because they
do not distinguish between gas that is flared and gas that is vented. As a
result, from an environmental perspective, the information is not as
useful as it could be. EIA, MMS, and BLM do not collect separate flaring
and venting data because their focus is on the amount of gas produced for
the market and not on the gas that is lost through flaring and venting.
EPA, on the other hand, considers flared and vented gas in the context of
the damage it could inflict on the environment: vented gas emissions
(methane), and to a lesser extent flared gas emissions (carbon dioxide),
contribute to total greenhouse gases. According to EPA officials,
differentiating data on flaring and venting could improve EPA estimates of
each gas's contribution to total greenhouse gases in the atmosphere.
Because EPA does not collect its own flaring and venting data, however, it
must rely on the combined data that these other agencies collect.

EIA believes that the data the states voluntarily provide on production-
from which the data on flaring and venting are taken-could be improved as
well. In particular, because some states do not report information at all,
EIA is considering using its authority to collect information on
production directly from natural gas well operators. Toward that end, EIA
has published for comment a proposed sample survey of monthly natural gas
production in the Federal Register. If the survey were implemented, well
operators would be required to provide EIA with production data and the
form would include a category for flaring and venting data.5 Among other
things, EIA has sought comments from well operators as to whether they can
provide reliable measures of gas flared and vented. However, even if

4EIA does not report information for a 33rd state, Missouri, which
produces a small amount of oil and gas.

569 Fed. Reg. 22109 (Apr. 23, 2004).

the proposed sample form is implemented and, as proposed, collects
information on flared and vented data, the focus will be on improving
production data and not on flaring and venting data.

Outside the United States, information on gas flared and vented is even
more limited. Generally, international reporting is also voluntary, and no
single organization is responsible for collecting and reporting flaring
and venting data. Although several organizations collect data voluntarily
provided by countries with which they have a working relationship, the
numbers countries report are sometimes questionable. For example, the
United Nations requests data as part of its work on climate change, but
few countries report meaningful data. In addition to U.S. data, EIA also
reports worldwide information largely based on estimates developed by
Cedigaz, an oil and gas industry association that gathers what is
generally recognized as the best flaring and venting information
available. A Cedigaz official told us that they rely on submissions from
countries and companies around the world to make their estimates and that
they accept the information the countries report unless Cedigaz has
knowledge of a country's operations that could be used to improve the
accuracy of the amounts reported. For example, on the basis of submissions
by Russia and China-two important petroleum-producing countries-Cedigaz
has reported that these countries do not flare or vent. World Bank
officials told us, however, it is generally known that Russia regularly
flares and vents gas. Satellite images created by NOAA have confirmed that
Russia does, in fact, participate in flaring. In addition, as in the
United States, the global data are limited from an environmental
perspective because they do not distinguish between the amounts flared and
the amounts vented. More accurate worldwide data would provide a clearer
understanding of both the extent to which flaring and venting emissions
contribute to total greenhouse gases and the countries that do the most
flaring and venting. This would provide a basis for targeting actions
designed to prevent the waste of a potentially valuable resource while at
the same time reducing harmful emissions into the atmosphere.

The Federal Government Federal agencies have a number of opportunities
available to them to Has Several Opportunities improve the information on
flaring and venting. EIA could clarify its to Improve the Information
guidelines to states for collecting and reporting flaring and venting
data.

Currently, EIA assumes that about 75 percent of the reports it receives
from

on Flaring and Venting	oil-and gas-producing states contain inconsistent
data. State officials believe that they could better meet EIA's data
needs-that is, provide EIA with more consistent data-if they had more
comprehensive guidance from

EIA on the data it wants and how to report them. Similarly, as the
reporting of greenhouse gas emissions has become more widespread globally,
the oil and gas industry has begun to recognize the need for guidance on
how emissions, such as carbon dioxide and methane, should be collected and
reported. In December 2003, three petroleum industry associations jointly
issued a report, "Petroleum Industry Guidelines for Reporting Greenhouse
Gas Emissions," to promote consistency in collecting and reporting
petroleum industry greenhouse gas emissions. EIA could consider using
these guidelines while working with industry and state officials to
improve their state guidelines for reporting emissions from flaring and
venting of natural gas.

Another opportunity for improving the data is for EIA to consider using
its general energy information collecting authority6 to collect data on
flaring and venting directly from the oil and gas producers, rather than
relying on voluntary submissions by states. (Producers with federal leases
are already required to collect and report this information to MMS and
BLM.) While EIA considers these data a relatively low priority, and while
collecting data from all 20,000 domestic producers could involve extensive
resources, there may be efficient and cost-effective methods of collecting
sample data. In addition, from an environmental perspective, the federal
government could broaden the usefulness of flaring and venting information
by distinguishing between the amounts of gas flared and the amounts
vented. Since natural gas that is vented has a more significant effect on
the atmosphere than natural gas that is flared, reporting these emissions
separately could enable EPA to better estimate methane's and carbon
dioxide's contributions to greenhouse gases.

Finally, on a worldwide basis, the federal government could improve
flaring and venting data in several ways. First, the U.S. government could
continue to improve its own data, thereby providing an example for other
countries. Second, EIA, working with NOAA, could investigate the
feasibility of supplementing the data already available by using U.S.
satellite images. For example, figure 2 (see p. 14) shows worldwide
flaring identified in 2002 using satellite technology. According to a NOAA
physical scientist, analyzing these satellite data could validate the
amount of flaring reported by countries. For example, some countries, like
Russia, report no flaring, while satellite images show substantial flaring
is actually occurring. Third, the federal government could continue to
support efforts such as the World

615 U.S.C. S: 772(b).

Bank Global Gas Flaring Reduction Partnership (GGFR)7 that, in part, seeks
to develop guidance for data collection and reporting. According to a 2004
GGFR report, such guidance could improve natural gas flaring and venting
data.

Although the Amount of Gas Flared and Vented Is Small, It Represents a
Significant Amount of Lost Energy and Contributes to Global Greenhouse Gas
Emissions

According to the limited data available, the amount of natural gas emitted
through flaring and venting is small compared with overall natural gas
production, but these emissions represent a significant amount of lost
energy. Flaring and venting are concentrated in several parts of the world
and, in the United States, in four states and the Gulf of Mexico. Although
worldwide estimates of flaring and venting constitute a small portion of
total greenhouse gas emissions, many countries have undertaken efforts to
reduce flaring and venting.

Three Percent of the World Production of Natural Gas Is Flared or Vented,
Which Represents a Significant Amount of Unused Resources

While flaring and venting represent only 3 percent of the total natural
gas production, the natural gas flared and vented-about 100 billion cubic
meters a year-is enough to meet the annual natural gas consumption of both
France and Germany. In general, the amount of flaring and venting
emissions is related to the amount of oil produced: the higher the
production, the more gas flared and vented. Since 1990, the quantity of
oil produced has increased, but because of various global reduction
initiatives, the quantity of natural gas flared and vented has remained
constant. Consequently, natural gas emissions as a percentage of oil
production have decreased.

7GGFR is a public-private partnership that in May 2004 included BP,
ChevronTexaco, ENI, ExxonMobil, NorskHydro, Royal Dutch Shell, SNH,
Statoil, TOTAL, and Sonatrach; and the governments of Angola, Canada,
Chad, Ecuador, Equatorial Guinea, Indonesia, Nigeria, Norway, and the
United States.

                    [This page is left blank intentionally.]

Figure 2: Worldwide Flaring Identified Using Satellite Technology, 2002

Source: National Oceanic and Atmospheric Administration.

Flaring and venting of natural gas are concentrated in certain parts of
the world, with Africa, the Middle East, and the former Soviet Union
contributing about two-thirds of the global emissions from flaring and
venting (see fig. 3).

Figure 3: Regional Flaring and Venting As a Percentage World Flaring and
Venting, 2000

3%

                        Europe Central and South America

Asia-Oceania

North America

Middle East Former Soviet Union

                                     Africa

                            Source: The World Bank.

Working with available data, the World Bank has estimated that three
countries-Nigeria (16%), Russia (11%), and Iran (10%)-are responsible for
over one-third of global flaring and venting (see table 1).

Table 1: Estimated Gas Flared and Vented by Selected Countries, 2000

               Country     Flared gas(bcm)a    Percentage of world total (%)b 
               Algeria                  6.8 
                Angola                  4.3                               4.0 
                 China                  3.2                               3.0 
                 Egypt                  0.9                               1.0 
             Indonesia                  4.5                               4.0 
                  Iran                 10.5                              10.0 
                Mexico                  5.6                               5.0 
               Nigeria                 17.2                              16.0 
            North Seac                  2.7                               3.0 

(Continued From Previous Page)

                  Country   Flared gas(bcm)a   Percentage of world total (%)b 
                   Russia               11.5                             11.0 
            United States                2.8 
                Venezuela                4.5 
          Other Countries               33.0                             30.0 
                    Total              107.5                           100.0% 

Source: The World Bank-which included data from Cedigaz, EIA, OPEC, IEA,
World Bank, and IHS Energy Group.

Note:

aBillion cubic meters.

bPercentages are rounded.

cNorth Sea includes only Denmark, Norway, and the United Kingdom, since
Germany and the Netherlands did not flare in 2000, according to Cedigaz.

According to World Bank estimates, in 2000 eight nations accounted for 60
percent of the natural gas flared and vented: Algeria, Angola, Indonesia,
Iran, Mexico, Nigeria, Russia, and Venezuela. In addition, some countries-
for example, Angola and Cameroon-flare and vent most of the natural gas
they produce. In contrast, EIA estimates that the United States flares or
vents about 0.4 percent of its production annually. Within the United
States, most of reported flaring and venting has occurred in the active
oil and gas production states and in the Gulf of Mexico (see table 2).

Table 2: Estimated U. S. Natural Gas Produced and Flared and Vented, 2002

                           In millions of cubic feet

                                                                   Flared and 
                              Gas                               vented gas as 
                          derived Associated         Gas flared percentage of 
                         from gas gas from oil Total gas and        total gas 
                 State      wells production   produced vented       produced 
                Alaska    194,198    3,283,239 3,477,437 7,312          0.21% 
             Louisiana  1,282,137      100,324 1,382,461 10,957          0.79 
                 Texas  4,828,188      832,816 5,661,004 27,379          0.48 
               Wyoming  1,572,728      174,748 1,747,476 12,356          0.71 
        Gulf of Mexico  3,850,708      858,332 4,709,040 20,092          0.43 
             All other                                          
                states  5,999,921      999,945 6,999,866 21,077          0.30 
                                               23,977,284                     
                 Total 17,727,880    6,248,404 99,173                   0.41%

Source: EIA.

Note: EIA reported totals may not equal sum of components due to
independent rounding.

Four states-Alaska, Louisiana, Texas, and Wyoming-plus the federal leases
in the Gulf of Mexico account for almost 80 percent of all reported U.S.
flaring and venting. None of these states flare and vent more than 0.8
percent of their total natural gas production.

Natural Gas Flaring and Venting Emissions Contribute a Small Percentage of
Global Greenhouse Gas Emissions, and Countries Have Undertaken Initiatives
to Reduce These Emissions

Worldwide flaring and venting is estimated to contribute, respectively,
about 4 percent of the total methane and about 1 percent of the total
carbon dioxide emissions caused by human activity. Despite these small
contributions, several countries have undertaken efforts to reduce flaring
and venting emissions that have the potential to reduce greenhouse gases
while saving an energy resource. Specifically, many countries have imposed
requirements on oil and gas producers to eliminate emissions of gas within
the next few years. For example, Norway no longer allows the burning of
petroleum in excess of the quantity needed for normal operational safety
without the approval of the Ministry of Petroleum and Energy, and in 2003
Canada reported having achieved, through monitoring and regulation, a 70
percent reduction in flaring and venting emissions. In addition,
corporations in several countries, in order to market their associated
natural gas, either have constructed or are planning LNG plants to liquefy
the gas for export or have developed on-site and local uses for the gas.
For example, corporations operating in Nigeria currently have six LNG
projects in development and have also begun using gas that otherwise would
have been flared or vented to operate the platform equipment as well as to
produce cement and fertilizer and gas that is usable as fuel for
automobiles. Finally, some countries are exploring the potential of
reinjecting carbon dioxide into wells instead of emitting it into the
atmosphere. According to an oil company official, carbon dioxide
reinjection in Algeria has prevented over one million tons of emissions-
the equivalent of taking 200,000 cars off the road.

The Federal Government Could Take a Larger Role in Reducing Flaring and
Venting

The federal government has opportunities in several areas to help reduce
flaring and venting both within the United States and globally. First, in
the United States, on federal lands and offshore areas leased to
producers, the federal government could consider regulatory changes to
reduce the most harmful emissions resulting from venting and improve
oversight of oil and gas production. Second, the federal government could
promote programs that identify, and help industry implement, best
practices for reducing natural gas emissions. On a global basis, exploring
ways to address market

barriers affecting associated natural gas, and continuing to work with
other countries, could help reduce flaring and venting.

Improving Federal Regulation and Oversight Could Reduce Flaring and
Venting on Federal Lands

The government has an opportunity to help reduce flaring and venting in
the United States by considering regulatory changes and improving
oversight of oil and gas production on federal lands and offshore areas
leased to producers. If MMS and BLM required producers to flare gas
(rather than allowing them to vent gas) when emitting the gas for
operational purposes, the emissions impact on the atmosphere could be
reduced. Since the impact of methane (venting) on the earth's atmosphere
is about 23 times greater than that of carbon dioxide (flaring), a small
change in the ratio of flaring to venting could cause a disproportionate
change in the impact of emissions. For example, if 90 percent of the
associated gas volume was flared and 10 percent was vented, the amount
vented would have more than twice the effect on the atmosphere as the
amount flared.

In addition, although MMS and BLM require federal lessees to self-report
estimated flaring and venting volumes, the agencies could require the use
of flare and vent meters at production facilities, which could improve
oversight by detecting how much gas is actually flared and vented.
Currently, such meters are used by some oil-and gas-producing companies.
The meters are placed in or adjacent to the stream of flared or vented gas
to measure the volume emitted. While the identification of unauthorized
flaring or venting is not commonplace on federal lands and offshore leases
in the United States, unauthorized flaring and venting do occur. A major
oil and gas producer recently paid a $49 million settlement in response to
charges of unauthorized flaring and venting in the Gulf of Mexico that
went undetected for several years. The lawsuit alleged that the company
both improperly flared and vented gas under various offshore federal
leases and failed to properly report the flared and vented gas. Improved
oversight could help prevent similar problems in the future. The
International Energy Agency has recommended such meters for accurately
monitoring emissions from production facilities, and some producers that
we interviewed said they already use these meters on many of their
offshore production facilities. According to these producers, flare and
vent meters are fairly inexpensive if installed when the facility is
initially built, but

retrofitting facilities that are already producing may not be cost
effective.8 To improve oversight, MMS and BLM, working with producers,
could consider the cost and benefit of requiring the installation of these
meters, particularly at new, major production facilities.

Promoting Best Practices Could Reduce Emissions Caused by Flaring and
Venting

The federal government could also help reduce flaring and venting by
continuing to support programs that identify, and help industry implement,
best practices for reducing natural gas emissions. EPA has sponsored the
Natural Gas STAR program, which identifies and promotes the implementation
of cost-effective technologies and practices that reduce methane
emissions. About 65 percent of the U.S. natural gas industry is
represented in this program. From 1993 through January 2004, according to
EPA officials the STAR program identified over 100 best practices and
technologies that reduce methane emissions from the oil and natural gas
industry. In addition, STAR participants have reported total emissions
reductions of more than 275 billion cubic feet worth over $825 million-
which EPA estimates is enough natural gas to heat more than 4 million
homes for 1 year or is comparable to the removal of the emissions of 24
million cars from the nation's highways for 1 year. The two largest
sources of overall oil and gas emissions identified by the STAR program
are pneumatic devices and compressors. According to EPA officials, the
STAR Program has identified 15 practices and technologies that would
reduce methane emissions from these sources.

Investigating Market Barriers Affecting Associated Gas and Continuing to
Work with Other Countries Could Help Reduce Global Flaring and Venting

The government could also have an effect on flaring and venting worldwide
by (1) addressing market barriers affecting gas produced outside the
United States that would otherwise be flared or vented and (2) continuing
to work with other countries. First, the government could identify
regulatory barriers to economically feasible infrastructure development,
such as building pipelines or LNG facilities for transporting gas that is
usually flared or vented. For example, currently, four LNG import
facilities exist in the United States-three on the East Coast and one on
the Gulf of Mexico coast-but more than 15 federal permit applications are
awaiting approval (from either FERC or the Coast Guard), which can take
more than

8For example, industry officials told us that some of the older platforms
have limited space, so to add meters would require additional
construction, which could be cost prohibitive.

a year.9 In addition, the government could investigate the public's
perceptions of the risk associated with new infrastructure. For example,
some communities have resisted LNG facilities because they are worried
about the safety and security procedures in place to protect them from an
accidental explosion or a terrorist attack. Finally, the federal
government could continue to work with other countries and corporations to
reduce flaring and venting. For example, USAID provided much of the
funding for training regulators in Kazakhstan, where improved regulation
has virtually eliminated the routine flaring of natural gas. In addition,
the United States could continue to support the work of the World Bank's
Global Gas Flaring Reduction Partnership (GGFR), which recently issued
standards on how to achieve reductions in the flaring and venting of gas
worldwide.10

Conclusions	By itself, the reduction of natural gas flaring and venting
will not solve the problem of meeting increasing natural gas demands or
eliminate all greenhouse gas emissions; however, it would be a helpful
step in that direction. Although the emissions from flaring and venting
are small in comparison with those from other sources, such as fossil fuel
combustion, reducing flaring and venting from oil and gas production would
help eliminate harmful emissions and possibly preserve an energy resource
that is currently being lost.

Although the role of the federal government in reducing flaring and
venting of natural gas during oil and gas production may be limited,
especially at the international level, opportunities exist for the
government to make worthwhile contributions in this area. Given the
immense challenges the government faces in the energy and environmental
arenas and the limited resources available, however, any actions to reduce
flaring and venting will have to be based on careful consideration of the
potential costs and benefits of such actions. Moreover, since flaring and
venting are not viewed as major problems in this country, it may be
difficult to justify devoting much attention to them. Nonetheless, the
government could consider

9Three additional facilities were recently approved but have not yet been
built. Eleven other projects are in various planning stages. According to
DOE officials, streamlined approval procedures require offshore deepwater
port terminals to be processed in less than a year by the U.S. Coast Guard
and onshore facility permitting is being streamlined by FERC through
pre-filing consultations with project proponents to minimize approval
time.

10A Voluntary Standard for Global Gas Flaring and Venting Reduction (World
Bank: May 2004).

several potentially cost-effective actions that would improve data
reporting, help reduce the most harmful effects of flaring and venting,
and improve oversight of federal leases.

Improving flaring and venting data reporting would be an important first
step because it would add information about the scope of the problem and
allow actions to be targeted to those areas where flaring and venting are
most significant. However, our review identified several limitations of
the data currently reported that hinder such targeting. First, reliance on
oiland gas-producing states to voluntarily provide flaring and venting
information has led to incomplete data, since some states do not submit
reports. Second, because of the limited guidance on what data to report,
EIA considers most of the information it receives from the states to be
inconsistent. Third, the data collected do not distinguish between flared
gas and vented gas-an important distinction, since the methane emitted
during venting is potentially much more harmful to the atmosphere than the
carbon dioxide emitted during flaring. Consequently, these combined data
are less useful than they could be in shedding light on the extent of
methane emitted into the atmosphere during venting. Finally, on a global
basis, some countries that flare and vent considerable amounts of gas
report that they do not, and others underreport their flaring and venting.
For these and other reasons, the worldwide data are considered even less
accurate than U.S. data.

In addition, for federal lands and offshore areas leased for oil or gas
production, opportunities exist to help reduce the most harmful effects of
flaring and venting and improve oversight on these leases. Specifically,
although flaring and venting are authorized only under certain
circumstances, when these circumstances occur, oil and gas producers may
choose to either flare or vent. Since the emissions released during
venting are much more harmful to the atmosphere than those associated with
flaring, this choice is an important one. Moreover, although flaring and
venting are generally not authorized, no oversight mechanism currently
exists for routinely monitoring the amount of flaring and venting that
actually takes place. As a result, MMS and BLM cannot always be assured
that companies are appropriately restricting their flaring and venting.

Overall, however, as is evident in the example of the United States, a
robust natural gas market, along with a supporting infrastructure, would
have the most significant impact on the reduction of flaring and venting.
Therefore, changes to natural gas markets, and to the transportation
infrastructure for

    moving gas to these markets, will likely be needed to offer producers an
  economic incentive to sell the associated gas rather than flare or vent it.

Recommendations for Executive Action

We are making four recommendations to the Secretary of Energy to explore
opportunities for improving data on flaring and venting and to weigh the
cost and benefit of making such improvements. Such opportunities could
include

o 	considering the use of the department's authority to collect flaring
and venting information directly from the producing companies;

o 	working with industry and state officials, and using guidance already
in existence, to enhance guidelines for reporting consistent flaring and
venting data;

o 	considering, in consultation with EPA, MMS, and BLM, how to best
collect separate statistics on flaring and venting; and

o 	considering working with the Secretary of Commerce to provide EIA
access to NOAA's analysis of satellite data to improve the accuracy of
worldwide data on flaring.

We are also making two recommendations to the Secretary of the Interior.
Specifically, for federal oil and gas leases, we are recommending that the
Secretary direct MMS and BLM to consider the cost and benefit of requiring
that companies

o 	flare the natural gas, whenever possible, when flaring or venting is
necessary and

o  use flaring and venting meters to improve oversight.

Agency Comments and 	We requested comments on a draft of this report from
the Secretaries of Energy and the Interior, as well as the Administrator
of the Environmental

Our Evaluation	Protection Agency. The Department of Energy and Department
of the Interior provided written responses, including technical and
clarifying comments, which we included in our report as appropriate.

The Administrator of the Energy Information Administration (EIA), who
responded on behalf of the Department of Energy, concurred with our
findings and recommendations while acknowledging that the implementation
of the recommendations would need to be balanced with other priorities.
EIA stated it has revised the instructions on all natural gas forms and
has committed to continue efforts to improve data quality, timeliness and
coverage of production data that states collect. Further, EIA agreed to
work with agencies with satellite technology to determine the feasibility
of improving data worldwide. EIA's comments are reprinted in appendix II.

The Assistant Secretary of Land and Minerals Management, who responded on
behalf of the MMS and BLM within the Department of the Interior, generally
agreed with our findings and recommendations. MMS and BLM agreed that
requiring operators to flare instead of vent whenever possible would
reduce greenhouse gases. Further, MMS acknowledged that this would enhance
the agency's ability to enforce existing regulations because inspectors
could easily view a flare; whereas inspectors cannot be detected venting
visually and thus they must rely on the accuracy of operators' records.
The two agencies also agreed to evaluate the cost effectiveness of
installing and maintaining flare tips. In addition, MMS agreed that
requiring flaring and venting meters would improve its oversight. MMS
acknowledged that recent incidents have shown that reliance on the
accuracy of the operators' calculations and recordkeeping may not
sufficiently or accurately capture actual flaring and venting volumes. MMS
stated that it is currently revising its Federal Outer Continental Shelf
regulations to require installation of meters. Finally, MMS agreed that
flaring and venting data should be reported separately and has taken
initial steps to update its database and reporting requirements to
accommodate this change. However, MMS stated that such a change would take
time to complete and would only minimally add to the reporting burden of
operators. The Department of the Interior's comments are reprinted in
appendix III.

EPA provided oral comments and agreed with our findings and
recommendations. In addition, EPA noted that our recommendations, if
implemented, would greatly advance flaring and venting data availability
and quality. EPA also provided technical comments, which we included in
the report, as appropriate.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the date of this letter. At that time, we will send copies of this report
to the Secretary of Energy, the Secretary of the Interior, the EPA
Administrator, and other interested parties. We also will make copies
available to others upon request. In addition, the report will be
available at no charge at GAO's Web site at http://www.gao.gov.

Questions about this report should be directed to me at (202) 512-3841.
Key contributors to this report are listed in appendix IV.

Sincerely yours,

Jim Wells Director, Natural Resources

and Environment

Appendix I

                       Objectives, Scope, and Methodology

Regarding natural gas flaring and venting from oil and gas production in
the United States and the rest of the world, you asked us to (1) describe
the data collected and reported on natural gas flaring and venting and
what the federal government could do to improve it; (2) report, on the
basis of available information, on the extent of flaring and venting and
its contribution to greenhouse gases; and (3) identify opportunities for
the federal government to reduce such flaring and venting.

To do this work, we obtained currently available data on natural gas
production and estimates of flaring and venting in the United States from
EIA, MMS, and BLM. We determined that all the data we reviewed were
sufficiently reliable for inclusion in this report after acknowledging the
limitations of these data. We also interviewed officials from EIA, EPA,
MMS, BLM, the World Bank, the United Nations, various private corporations
and organizations, and state governments regarding data collection,
quality of the data collected, and reporting practices. In addition, we
contacted natural gas-producing states to determine their assessment of
the reliability of data they collect and report. To determine what the
federal government could do to improve data collecting and reporting, we
interviewed officials from EIA, MMS, BLM, EPA, NOAA, and state officials.
In addition, we obtained international data from Cedigaz, a French oil and
gas industry association that gathers worldwide information on natural
gas; the World Bank; the International Energy Agency (IEA), an
intergovernmental energy policy body; and the United Nations. We discussed
with officials of these organizations the reliability as well as the
methods of collecting and estimating these data.

Finally, to determine what the federal government could do to help reduce
flaring and venting of natural gas, we reviewed the literature and
interviewed officials from private industry, MMS, BLM, state governments,
EPA's Natural Gas STAR program, USAID, and various world organizations,
including the World Bank, the United Nations, and IEA. In May 2004, we
also attended the World Bank Global Gas Flaring Reduction Partnership's
Second International Gas Flaring Reduction Conference in Algeria with
delegates from numerous other countries concerned about gas flaring and
venting. This conference featured speakers from countries and corporations
around the world who addressed data collection and reporting issues,
current regulations and oversight issues, and best practices within their
respective countries. We conducted our work from October 2003 through June
2004 in accordance with generally accepted government auditing standards.

                                  Appendix II

                     Comments from the Department of Energy

Appendix II
Comments from the Department of Energy

Appendix III

Comments from the Department of the Interior

Appendix IV

                     GAO Contacts and Staff Acknowledgments

GAO Contacts 	Jim Wells (202) 512-3841
Mark Gaffigan (202) 512-3168

Acknowledgments	In addition to the individuals named above, James W.
Turkett, James Rose, Carol Bray, and Nancy Crothers made key contributions
to this report.

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