“Whiskey is for drinking and water is for fighting” is a sentiment often attributed to Mark Twain.
As far back as the earliest human settlements, the availability of water has determined the location of civilization, and water is essential to municipal, agricultural, and industrial development.
Many areas of the United States (including Texas) face a notable challenge in providing sufficient fresh water supplies to meet the needs of growing populations and economies. Since the historic drought of the 1950s, Texas has been planning and investing in needed infrastructure to increase available supplies. From the 1960s through the early 1980s, most of the state’s reservoirs were constructed; since that time, the focus has shifted to alternatives such as conservation, brush control, and recycling.
Even with this commitment to planning for water needs, a dry year can bring on shortages, particularly in the arid regions of the western half of the state. At the best of times, supplies are tight in many areas. Against this backdrop, the use of water in the process of oil and gas exploration and development (including fracking) is highly visible, even though the industry uses only one to two percent of water in Texas. To compound the problem, many production areas (such as the Permian Basin and parts of south Texas) are drought prone, exacerbating the problem.
From the perspective of an oil or gas company, water represents a significant expense. Water acquisition and management can be about ten percent of the cost of drilling and dealing with the water that accompanies oil can devour up to two-thirds of monthly operating costs once the well is producing. First, companies must acquire clean water to use in the fracking process and other aspects of drilling. Second, they must dispose of water that flows back during the completion process as well as what’s generated along with the oil. All in all, water management can cost millions of dollars over the lifetime of a well.
With drought and water shortages, companies have developed ways to use brackish water for fracking rather than fresh. Many companies are becoming much more adept at reusing water, and methods for recycling water are improving. State regulations have also made the use of recycled water more feasible since 2013, and operators are now allowed to recycle water for fracking uses and transfer fluids for recycling between leases without a permit.
Another option is to purchase treated wastewater from municipalities. Recycled wastewater from Odessa is now ready for use (as of January 2016) after completion of an enhancement to the city’s water treatment facilities undertaken as a public-private partnership effort involving Pioneer Natural Resources, a large firm operating in the area. A similar project has been considered for the City of Midland, though is now on hold with low oil prices. Public-private partnerships such as these are an excellent way to obtain a win-win, with cities obtaining additional revenue and oil companies getting the water they need.
Oil companies must also dispose of flowback water (which occurs during completion of the well) and produced water (which is water produced as part of the production of the well). The amount of produced water varies significantly by well and location, and ten barrels for each barrel of oil produced is not an uncommon ratio, with some cases as high as 50 to one. Options for water disposal include injecting into a disposal well, various methods of recycling and reusing, and transporting to a centralized water treatment facility.
Water injected into a disposal well is permanently removed from the hydrological cycle, which is a clear downside in dry areas. Water treatment at a centralized facility is an option that is also growing, but the significant capital investment required has thus far limited such facilities to the largest producers. There have been calls for industry initiatives to develop the infrastructure for more use of centralized treatment facilities, which are more likely to occur in the future after prices rebound.
Beyond these explicit costs, there are other considerations. One of these is community perceptions. Oil and gas companies typically spend substantial time and money to enhance their image in the areas where they operate. They may endow scholarships or donate items to local high schools, participate in community activities by sponsoring golf tournaments or other events, and allow employees time off for volunteer activities. In deciding how to manage water, one consideration is how area residents will see the oil company action. For example, it may be worth spending a little more money to recycle water because area residents (and others) view that as a preferable option and as a commitment to the community.
Another consideration in the water decision is risk avoidance. Fines for rule violations under the Texas Natural Resources Code (which includes provisions to protect water) are steep, and the Environmental Protection Agency can also levy large fines. If a problem occurs, litigation and cleanup is yet another expensive possibility. In short, companies may commit additional funds for water management in the near term in order to reduce the chances of expensive consequences down the road.
While the pressure is off for now due to lower crude prices and reduced drilling activity, it is only a matter of time before the problem resurfaces. As drilling activity rebounds in the future, the need for water by the industry will also rise. Improvements in recycling methods and other initiatives to reclaim water are crucial elements of a long-term solution.