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Fracking at the corner of energy abundance and water scarcity

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Recycling and Reusing Becoming an Imperative

There is no greater example of the water-energy nexus than the juncture where water meets the hydraulic fracturing process, or fracking, of natural gas and oil. This nexus has created a public-private crossroads, with both sides attempting to further their goals. For legislating and rulemaking bodies, their goals revolve around protecting public safety and natural resources needed by society.

For energy firms, producing energy to meet demand in a profitable way is the target. Non-governmental organizations play a public advocacy role as well, sometimes positively and constructively and sometimes losing sight of their mission. Increasingly, the challenge is about producing energy in the most environmentally-friendly manner, using less water more efficiently and responsibly, and utilizing natural resources as if a sustainable imperative were upon us. It may well be.

Many believe that the effects of climate change will be felt through water — extremes of floods and droughts, rising sea levels, and warming oceans, to name a few challenges. Whether viewing the water-energy nexus through the lens of climate change or resource sustainability, the impact of energy development on water resources has reached an inflection point. 

At present, states have oversight of the water management issues in energy production, which includes fracking. On the federal level, the EPA plans to issue a report about hydraulic fracturing and the range of water issues in 2014. Many states will likely upgrade their rules and regulations in accordance with EPA. In a similar vein, the EPA will issue rulemaking reports on the disposal of water in coalbed methane production in 2013 and tight gas in 2014.

Droughted Texas

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Texas lacks the water supplies to meet demand in times of drought (like in the present), according to the state’s Water Plan. To break the oil and gas trapped in the shale, very large amounts of water need to be forced through the rock layers at high pressure. The Haynesville Shale requires close to 8 million gallons per well, followed by the Eagle Ford play at 5 million and the Barnett Shale at over 4 million gallons. Water use for oil and gas and mining totaled 1.6% of Texas’ total water use. However, in the Eagle Ford shale region, these activities account for 6.5% of water demand, and are projected to increase by 26% from 2010 to 2060. In April, the Texas legislature began the journey of mandating the recycling of produced and flowback water from hydraulic fracturing operations. As a Midland, Texas mayor-oilman says, cited from a New York Times article: As valuable as oil and gas are, he said, “we are worthless without water.”

Recycling is being actively included in exploration and production companies’ water management strategies in shale gas-producing areas. Water reuse is a practice catching on in areas with scarce resources in Texas, Oklahoma, Colorado and others. The practice of water reuse results from reusing water from one fracking stage to the next, potentially many times over, versus only once followed by disposal. The incentives for firms to recycle and reuse may encourage more behavior change than proposed mandates with their added costs that do not allow for innovation and creativity that firms would have otherwise initiated. According to an executive at a water treatment firm in Dallas, energy firms have incentives to recycle and reuse owing to water scarcity, drought conditions and transportation costs of trucking in water.

Marcellus Case

In Pennsylania’s Marcellus shale, the other big boy play, the costs of water transportation can be up to 25% of the average $6 million for a Marcellus well. In 2010, Range Resources disclosed using about 3.8 million gallons of water for a well. Not only is securing water expensive, but the flowback, the large amounts of water that flow back to the surface initially, has to be gathered, transported, treated and disposed of. In Texas, there were roughly 35,000 active injection and disposal wells for flowback and produced water in 2013. But in Pennsylvania, few exist. This water has to be trucked out to other states for disposal. The ultimate treatment of the volumes of this water is problematic for wastewater treatment plants, with its heavy dissolved solids content. Add to that, produced water is another water issue for the industry to deal with over the course of a well’s production lifetime of 20-30 years.

With a lack of easier disposal options, more operators in the Marcellus are switching to recycling the flowback and produced waters. While other states can use disposal wells, in Pennsylvania due to the underlying geology and regulations, it is not possible. Therefore drillers and gas companies are increasingly reusing the water in new wells. In the first six months of 2012 they achieved a reuse rate of 90 percent, says an article in Scientific American. A Morningstar analyst estimates that produced water and fracturing waste levels exceeded 1.6 billion gallons in 2012, from 600 million in 2010. He also calculates that 40% of wells recycle this water, up from 6% in 2009.

The water management market in this sector of energy is expected to grow from $11 billion in 2013 to $22 billion by 2018, according to the Morningstar analysis. As the examples of the Permian and Marcellus show, each basin has its own unique factors that impact costs, disposal and treatment options. In Texas’ Permian Basin, the oil services firm Halliburton recorded the results from using its proprietary water treatment process. In this particular case, onsite treatment led to 1,400 less truck deliveries of water, 8 million less gallons of water used, and a savings of $500,000-700,000.

Water Knowledge and Action

Oilfield services firms such as Halliburton, Schlumberger and FMC Technologies are already positioning themselves to compete in this space of water management in oil and gas development. According to the Morningstar analyst on the water-energy issue, water management costs are estimated to increase by 20% when new rules or conclusions are drawn by the EPA. However, the costs of water management to production firms will stay flat as the efficiency gains in management are expected to cancel out the costs of compliance. The larger firms are expected to provide integrated consulting services related to the management of water, state regulations, monitoring, and the entire value chain related to water management and energy development.

While this is one important aspect of water and energy combining, other pieces of the environmental story in oil and gas exploration and development are still present. As problems arise, both the public and private sector must play their respective roles to find creative solutions that solve problems: We need water and energy. We spend excessive amounts of column space and airtime ‘marveling at the problem.’ The risk arises when we simply debate facts and anecdotes but nothing gets done.

Source: The Water-Energy Nexus: A Tale of Two Shale States

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