Flaring seen from space. Photo Credit: Flickr/NASA Earth Observatory 

It's estimated that $100 million goes up in smoke each month in North Dakota. Thanks to NASA we have an out-of-this-world glimpse of these flames. That shocking picture (shown to the right) appears to be just a large city in North Dakota, however, the fact of the matter is that very few people live in that part of the country.

The casualty of the boom
What's happening is that the oil boom in North Dakota is producing an enormous amount of associated natural gas as a byproduct. Overall, about a billion cubic feet of gas is produced each day in the state. However, because it's less valuable than oil and the industry doesn't have enough infrastructure in place, it's flaring off a massive amount of natural gas.

As much as 36% of the state's natural gas is currently being flared off each month. That's gas that could have been used to heat homes, make higher valued products or even used as a transportation fuel. Instead, it's being burned off because that's actually much more environmentally friendly than simply venting the gas into the atmosphere. However, we're still talking about 13 billion pounds of carbon dioxide per year, which is wasted emissions as this is enough gas to offset three coal-fired power plants.

Coming to the rescue
The problem of flaring isn't lost on anyone. The industry is working on solutions to reduce the amount of gas that's flared. In fact, about 100 Bakken Shale wells were shut-in earlier this year to reduce flaring as the industry awaited the start-up of an expanded natural gas processing plant. Just last week Hess (HES 0.67%) announced that the newly expanded natural gas processing plant would soon start up. The plant has been shut down since late last year as Hess finished the expansion, which has been delayed several weeks due to severe weather. Once the plant is fully operational it will be able to handle about 250 million cubic feet of gas, which was twice the original design.

The expansion of the Hess plant is a step in the right direction. However, it isn't the only step the industry is taking to reduce flaring. A more unique solution is under way as General Electric (GE 0.68%) is working with Norway's Statoil (EQNR -0.57%) on a low-cost prototype to compress and store natural gas. GE calls this C.N.G in a box, and it was originally designed to be used as a mobile natural gas filling station for cars, trucks and buses.

Statoil rig in the Bakken. Photo credit: Ole Jørgen Bratland - Statoil ASA

In the case of the Statoil project, the plan is to use the GE boxes to fuel drilling rigs that are being converted to run on natural gas. Statoil believes that if all the Bakken rigs were converted to run partially on natural gas the industry would use more than 60 million cubic feet of natural gas per day. That's about 20% of the flared volume that would be used to offset some of the diesel fuel used by the industry, which would lower emissions as well as potentially lower costs for producers.

Investor takeaway
The industry really needs to reduce flaring in North Dakota. It might be the most environmentally friendly way to deal with the excess gas, but it's far from the industry's only viable option. By processing and using more gas the industry will only improve the already exceptional economics of the region. Further, using field gas to offset the emissions from diesel used in drilling rigs is a real win-win solution for producers as it would take gas the industry is wasting and put it to much better use.

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