Introduction: What’s at Stake
In recent years, the United States (US) has achieved historic global oil and gas production and has largely accomplished the goal of becoming energy independent. Texas has firmly established itself as the national leader in both crude oil and natural gas production and petroleum energy supply growth. Energy and water are inextricably bonded in achieving this feat. To assure US energy production dominance, it will be imperative for the Texas oil and gas industry as the national leader to continue to use water wisely and sustainably.
The white paper – Sustainable Produced Water Policy, Regulatory Framework, and Management in the Texas Oil and Gas Industry: 2019 and Beyond – provides facts and analysis that can be used by decision-makers, legislators, and voters. This information will help these groups determine where we are today, where we might be going, what we are doing right in Texas, and what we can do better with the ever-increasing volumes of produced water associated with such landmark energy production. The paper highlights produced water management trends, provides examples of recycle and reuse, explores the evolving regulatory and policy framework in Texas, and provides a fact-based analysis of the impediments to improving produced water management.
Water Demand and Produced Water Supplies Increase
Texas must simultaneously source large amounts of water for fracturing operations in water stressed areas, while at the same time managing millions of gallons of produced water from onshore unconventional operations. Water demand for fracturing operations will continue to increase due to the growing numbers of wells drilled and completed coupled with the concurrent increase in fracturing fluid proppant intensity, well lateral lengths and well design improvements. Given this large volume of water, it is important to recall the context; the estimated statewide water use by the entire mining/oil and gas sector remains less than 1 percent of all water used annually in Texas.
The white paper discusses concerns regarding economical and sustainable management of the projected increases in produced water volumes. B3 Insight estimates that in 2017 the total statewide volume of produced water was more than 8.5 billion barrels of water. Sourcewater, Inc. projects that by 2023, over 15 billion barrels per year of produced water will be produced statewide in Texas.
Changing Water Management Strategies
Horizontal drilling has encouraged operators to adapt their water management strategies, in some cases leading to outsourced water management. The tight formations where many Texas operators are currently producing oil and gas are not well suited to accept waterflooding, which is one of the most feasible options for produced water use in other formations. As a result, the move towards hydraulic fracturing in unconventional shale plays has resulted in an increased need for treatment to support recycle, reuse and disposal of produced water. Going forward, operators will have a choice to keep water management in house or contract with a commercial water company.
The scales may be tipped toward midstream water management by the dual advantages that the operator does not have to invest in infrastructure and the treated water may be less expensive than purchased fresh or brackish water. The midstream industry is ripe for consolidation, facilitated by private equity-based companies targeting companies with large continuous acreage and pipeline miles. The report describes different management strategies pursued by Pioneer, University Lands, and Matador as well as the midstream services by XRI, Solaris, H2O, and WaterBridge Resources.
Increased Recycle and Reuse of Produced Water
Produced water management strategies have evolved dramatically over the past five years with increasing, albeit low, levels of treatment. Not only does produced water recycle and reuse offset the need for fresh water for fracturing operations, treated produced water works better than fresh water. As treatment costs have come down and freshwater prices have gone up, operators have been able to reduce operating costs. Even if the cost between fresh and produced water were on a par, using produced water rather than fresh reduces truck traffic and decreases associated environmental and infrastructure impacts. Concerns remain regarding the longevity of disposal well capacity, changing state requirements for seepage/evaporation ponds, and reduced ability to reuse the treated water in basins where drilling and completion activities decline.
Data on current produced water treatment and recycle and reuse volumes in Texas are variable and difficult to certify. Interviews revealed some operators are currently using over 80 percent produced water to fracture new wells, while others have made it a priority to reuse 100 percent produced water. Other information sources indicate that recycle and reuse comprises such a small portion of the Texas water management market (less than one percent to five percent) as to be negligible in the grand scheme of water handling. The 2019 GWPC report estimated reuse exceeds 10 percent in the Permian Basin, but is negligible in the Haynesville Basin and is slightly over one percent in the Eagle Ford Basin.
Regardless of the exact percentage, the data point to consistent and growing uses of treated produced water in oil and gas operations. Produced water recycle and reuse is likely to increase as the midstream industry matures and injection capacity is unable to keep pace with production.
Current as well as existing and emerging tertiary treatment technologies reviewed in the report can support cost-effective recycle and reuse in the oil and gas field. However, none are “silver bullet” technologies that will lower costs to a degree that disposal wells would be obsolete. Disposal options must be considered and maintained. Going forward, disposal capacity may become limited, which will require more support from produced water treatment for recycling and reuse. Future advancements in desalination technology may lead to an economically competitive solution for the growing wave of produced water in Texas (and could allow for more beneficial reuse outside the oilfields.)
Drivers and Headwinds
The paper addresses “drivers” or major factors that influence operators’ produced water management strategies. These drivers include increasing fracturing water demands, increasing freshwater and trucking costs, decreasing treatment costs, local climate and geologic realities, company culture, and increasing volumes of produced water.
Next it reviews important “headwinds,” including public perception, regulatory, and political issues that are hard to put a price tag on, but nonetheless factor into water managers’ decisions. While it’s not easy to assign a dollar cost, the environmental, community, political, and regulatory issues factor into whether operators opt for treatment over direct disposal.
Leading the Way on its Regulatory and Legal Framework
Texas’s well-developed regulatory and legal framework demonstrates its past leadership on water issues. Texas has continued making legislative and regulatory strides to ensure authority keeps pace with the rapidly evolving business models of oil and gas production and produced water. There was significant legislative activity in the 86th session. While eminent domain and recycle incentive initiatives did not pass, the Legislature clarified produced water ownership terms and funded programs to alleviate impacts on local communities. Legislators expressed a need to see additional studies on economic impacts. Discussions and possible hearings over the next two years are possible as the issue is studied by legislators.
A key objective of the 2019 white paper is to make recommendations for the sustainable use of produced water. The goal is to offer suggestions that could improve the handling of produced water and encourage changes to Texas’s policy and regulatory framework that will encourage the safe and economic use of treated produced water outside the oil and gas fields in the coming years. It offers the 10 following recommendations:
- Delegate National Pollutant Discharge Elimination System authority to Texas,
- Eliminate 98th meridian policy,
- Preserve Resource Conservation and Recovery Act exemption,
- Maintain Texas jurisdiction over pipelines,
- Increase interstate and associations coordination on policy,
- Revise produced water statutes and regulations,
- Institutionalize Texas and federal agency cooperation,
- Prepare a roadmap for beneficial reuse outside oil and gas industry,
- Develop incentive mechanisms to lower produced water treatment costs, and
- Collect and provide public access to better produced water data.
Texas took an early lead in recognizing the potential value of recycling and began updating its regulatory framework in 2013. It is now time for the next generation of innovation to further improve the regulatory framework, with careful consideration of incentives for recycling, infrastructure improvements, pilot projects to study potential impacts of produced water reuse, improved data availability and updated metrics, and federal delegation of key statutory authorities. Produced water reuse and recycling in Texas will be poised to expand with the right statutes, regulatory framework, civil law, and economic incentives.
Concluding Thoughts: Moving the Needle to Beneficial Reuse
Five years ago, the question was whether produced water was “an asset or a waste.” Today we know produced water is both. The question remains: what is needed for produced water to become a valuable commodity with beneficial use outside the oil and gas industry?
To “move the needle” on beneficial reuse, proper research on environmental concerns, supporting legislative and regulatory frameworks, and a continued effort from the oil and gas industry to sustainably manage water are needed. These factors will ensure that beneficial reuse is a viable option one day soon. Will we be able to embrace the technology and craft the regulatory framework that allows us to take advantage of the opportunities that produced water may provide? The answer lies before us.
Authors: John Tintera, Texas Alliance of Energy Producers; Kylie Wright, GAI Consultants; Blythe Lyons, Alliance Consultant