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.

10 Recommendations

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.