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Is This Issue About to Explode for Big Oil?

I wrote recently about new regulations around hydraulic fracturing, or fracking. And how several U.S. states are moving to regulate or restrict this go-to oil production technique.

That trend has grown stronger the last few weeks. With Alaska also introducing new frack rules. And even Brazil introducing a national regulatory framework aimed specifically at fracking.

But there's another issue that's quickly becoming just as prominent. Which also threatens to make oil production more difficult in some key parts of North America.

Flare gas.

It's no secret that oil production has surged in many new parts of North America recently. Often in areas that have limited infrastructure in terms of pipelines--especially for natural gas.

That means oil producers need to flare any gas produced alongside oil output. Burning off the stuff because there simply isn't a way to get it to market.

But this month two regional governments have said that gas flaring needs to stop.

The most critical is North Dakota. Where the state Department of Mineral Resources is reportedly looking at new rules to limit flaring.

The regulator has indicated they will take concrete steps to reduce the amount of gas burned off in key oil plays like the Bakken. Possibly including limiting oil production from wells with associated gas--or imposing time limits for pumping such wells.

Given that the Bakken has been a major driver of overall U.S. oil output, this could be a critical development.

And the anti-flaring movement isn't just a North Dakota thing. Last week officials in Alberta, Canada said they will also move to limit flaring in the key oil-producing region of Peace River.

The Alberta Energy Regulator will require companies here to completely halt flaring by the end of 2015. Affecting several major producers in the area, including Shell, Husky and Murphy Oil.

We'll see what affect all of this has on oil output. And if the trend spreads to other key producing regions.

Here's to clean air,

By Dave Forest




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