An Inevitable Link: Oil and Gas Development in Water Stress Zones

As the U.S. experiences unprecedented growth in oil and gas development, its successes are tied inexorably to extremely high water stress and drought regions. This reality is raising the oil and gas industry’s already high profile in the public view, thus inspiring questions about how much fresh water is being used in the processes that are at the center of this flourishing energy business and forcing its players to find economical ways to adjust while continually growing.

Data Points

Large volumes of water have been central to growth in hydraulic fracturing for unconventional shale and tight oil and gas formations. Water is pulled from lakes and reservoirs as well as fresh and brackish groundwater resources, and, together with chemicals and sand under high pressure, it fractures formations to allow trapped oil or gas to reach the surface.

FracFocus data show that nearly 98 billion gallons of water were used in hydraulic fracturing processes for about 40,000 wells from January 2011 through May 2013, according to a February 2014 Ceres guidance report. Of those wells, 56% are located in drought-prone regions. In these high water stress regions, there already is high competition for water from agricultural, municipal, and industrial users. Areas that face long-term drought conditions include California and parts of Texas, Oklahoma, Louisiana, Colorado, New Mexico and Arkansas.

In Texas, the situation is especially dire, as large portions of the state face on-going drought. The Eagle Ford Shale presents some of the greatest challenges of any U.S. shale play, according to Ceres. It reports that Eagle Ford water use for hydraulic fracturing was the highest in the country at 19.2 billion gallons for the recorded period, and average water use per well was high at 4.4 million gallons.

In the Permian Basin, more than 70% of wells are in extreme water stress regions, according to the report. And although average water use per well in the Permian Basin is much lower than in Eagle Ford, there are a large number of wells under development there – 9,300 reported since the beginning of 2011.

Effect on Policy

To alleviate growing public concerns about fresh water use by oil and gas developers in drought regions, industry members and regulators have been focusing attention on conservation practices.

Consensus among industry operators at a Water Conservation and Recycling Symposium in Austin in May was that Texas Railroad Commission amendments made in March 2013 have made it possible to enhance water recycling efforts economically. The amendments included elimination of recycling permits for operators recycling fluids on their own leases or transferring their fluids to other leases for recycling.

There are, however, some people who think more extreme measures are necessary to find a path to preserving water in a way that is not cost prohibitive to the energy industry.

In September, Steve Brown, Democratic nominee for Texas Railroad Commissioner, released his proposed plan to protect the state’s water resources by completely eliminating fresh water use for hydraulic fracturing by 2020. The plan also calls for a reduction in permits for disposal wells and allocation of $50 million in research and development grants for advanced water use technologies.

Brown’s opponent, Republican nominee Ryan Sitton, released his own position paper on Oct. 7 that outlined his views of how the oil and gas industry fits into the broader discussion of water usage in Texas.

Sitton emphasized in the paper the industry’s realistic position in the overall water usage statistics across stakeholder groups. Though the numbers vary by study, he said, there is a consensus that the statewide average usage by the oil and gas industry is less than 1% of total annual water usage. Irrigation accounted for the greatest water usage, followed by municipal (non-landscaping), manufacturing, and lawns/landscaping.

Sitton noted that while the total amount of water use in oil and gas development has increased in recent years, the proportion of fresh water has decreased, and the ratio of reused water and brackish water to fresh water has changed in favor of reuse. Over three years, operators increased non-fresh water usage by 600%.

He suggested that requiring only reuse for the industry and regulating use of fresh water to zero would create untenable economics for producers and force smaller producers out of business or to sell to larger producers.

“It will also drive up the price of oil and gas as substantial costs are layered into production costs,” he said, adding that this policy approach represents “a classic lack of vision and understanding of industry operation and actual relative water usage and rates of return.”

Innovation in Real Time

While regulators work through the debate about water at a high level, operators and service providers make their own progress in understanding the economics of water and how to make conservation work, while advancing innovation across operations. They are advancing recycling systems and their availability and finding creative ways to access alternatives to fresh water, such as wastewater, brackish water and seawater.

Pioneer Natural Resources has turned to a city in Texas to access wastewater for its operations.

On July 22, the Odessa City Council approved an agreement with Pioneer Natural Resources (PNR) that gives PNR access to treated wastewater from the city’s Bob Derrington Water Reclamation Plant. The plant treats about 6 million gallons of raw sewage per day, and some of that treated water is used for irrigation of golf courses, city parks and ponds. PNR will purchase between 4 million and 5 million gallons of treated wastewater for use in its recovery operations in the Permian Basin.

Water management service providers STW Resources Holding Corp. struck a deal that will open up brackish water resources to about 40 drilling rigs in the Midland, Texas, region.

The company signed an agreement on Aug. 21 with a family in Upton, Texas, to lease brackish water rights and build, own, and operate a hybrid reverse osmosis water processing system capable of processing about 30,000 barrels of brackish water per day. The company will process the water and sell it to oil and gas producers at between $.80 and $1.10 per barrel for use in drilling and well completion.

STW also has introduced new technology to Texas capable of processing and reclaiming several variations of contaminated water chemistries ranging from effluent reject from reverse osmosis and water from a salt water disposal well site that has oil and gas produced and flowback water.

On Sept. 2, the company announced that operations commenced on the Salttech zero liquid discharge technology demonstration at a Ft. Stockton, Texas, water reclamation facility. STW anticipates that the technology will benefit progress in desalination of seawater by recovering more than 95% of fresh water from seawater with no discharge. Current reverse osmosis systems recover about 50% of fresh water from seawater, with a highly concentrated saltwater discharge.

In addition, STW has stretched its services to the industry with the purchase of Midland-based Black Pearl Energy, a provider of liners and covers for fresh water ponds for the oil industry. The companies signed an agreement on Sept. 9 in which STW would pay $2 million for 100% ownership of Black Pearl.

The floating evaporation covers and liners that Black Pearl developed eliminate all of the evaporation from these ponds. Many of the ponds used in the oil and gas completion stages of production can be anywhere from 15 acres to 20 acres in size, according to Lee Maddox, owner of Black Pearl.

“With the contributing factors of evaporation being low humidity, high temperatures, and high wind velocities, particularly in West Texas, it is a perfect environment for evaporation,” said Maddox. “The cost of water to be able to complete these wells with hydraulic fracturing has become a significant part of the cost to operators, and they were having a significant amount of water evaporating due to the environment here.”

One of Black Pearl’s customers conducted a test to see if water was precipitating through the cover, Maddox said. They set up testing equipment to measure the volumes of the pond, put a lock out tag on the pond, disconnected inlets and outlets, and staged the test for 30 days.

“We were experiencing 110-degree-temperatures in the area with about 30-mile-per-hour winds,” he said. “On the fourteenth day of the test, they called and said they stopped the test because the water in the pond had not moved at all. Meanwhile, they were losing about 3,000 barrels a day on an identical pond.”

At Halliburton, one of the industry’s Big Three service providers, innovation has been occurring at a regular pace over the past 10 years as the company has helped its customers respond to the challenge of looking for alternative water sources.

The company’s H2OForward^SM service campaign, introduced in 2011, is the marketing name it uses as an umbrella for water management solutions.

“When we talk about H2OForward service, we’re talking about water management practices that incorporate any of our tools and any third party tools,” said James Welch, global business development manager for water solutions, Halliburton. “Under this umbrella, we might use our CleanWave^®, CleanStream^® or UniStim^TM systems, or we might be helping an operator or service company in designing a system to reuse water.”

Halliburton regularly works with water management equipment manufacturers or uses their equipment in certain systems.

“We are constantly being introduced to new technologies, innovations, and companies that are coming forward to say, ‘We have a new solution that we think works in the oil field,’” Welch said. “We know that innovation is happening, and we are driving a lot of it. That’s what H2OForward is about.”

As Halliburton progressed in its process for making fluids for hydraulic fracturing over the past 10 years, it has challenged the conventional approach by changing the chemistry of fluid systems or using a mechanical method to recondition water. It has reached the point at which it does not matter what type of water they are using at the start of the process.

“We’ve been able to take produced water that comes out of the ground, that can be very high in salt concentration, and make fluid systems out of it under the formulation we call UniStim,” Welch said.

Halliburton has a broad toolkit of components that it can use in designing fluid systems.

“We’ve come up with the right combination of ingredients so that we can formulate our fluid systems to complete wells using UniStim,” Welch said. “As we’ve done that, the mechanical requirements for processing water have been less, the cost for reusing produced water has come down, and we have more and more economic opportunities in which the recycle and reuse of water is justified and warranted.”

Halliburton’s CleanStream solution uses ultraviolet (UV) light to sterilize water used for well completion.

“The public sentiment has challenged the industry to come up with less toxic fluid systems, and Halliburton’s response to this is to use UV light,” Welch said. “Right now this is one of our best performing product lines, and we have a very high acceptance from the industry.”

The company’s CleanWavesolution is based on the process of electrocoagulation, which precipitates heavy metals that may be in water and can negatively affect the performance of fluid systems.

“EC does a lot in one process, and that is why other companies have adopted it,” Welch said. “I would say it’s one of the most prevalent methods for conditioning produced water and flowback – it helps break emulsions and settle suspended solids, it causes metals to precipitate, and it provides some disinfection into the water.” Welch added, however, that Halliburton has recognized that, over the past five years, its UniStim solution has innovated past what the electrocoagulation of CleanWavecan do.

Ultimately, Halliburton’s goal is not to purify water for discharge into public surface areas but to take water that is produced on site and typically viewed as waste and reuse it as part of the supply chain as a raw material in well completion.

“If we take something out of the water, we have to manage that at the surface,” Welch said. “To provide the justification for our services, we’re very mindful of the waste that we’re creating and we minimize that waste.

The way we see it is, we are putting just enough energy into the management of that fluid so that it can be reused.”