October 2019

Executive Viewpoint

Alliance takes on oilfield water issues in Texas
Karr Ingham / Texas Alliance of Energy Producers

In Texas, an estimated 1.27 Bbbl of oil were produced in 2017. Concurrently, about 8.5 Bbbl of water were extracted alongside that crude oil. That’s a ratio of over 6.5 bbl of water produced for each bbl of crude oil. Those numbers were bigger in 2018. Crude oil output ballooned to over 1.6 Bbbl and, by that same ratio, the produced water volume in 2018 was over 10.5 Bbbl. Production is going to be higher, yet again, in 2019; the rate of oil production growth is slowing, but still stands to be at least 10% higher, which would swell the volume of oilfield produced water to over 11.6 Bbbl.

So, it’s almost like Texas energy producers are more in the business of extracting produced water, and a little bit of crude oil just happens to come with it. This is not true, of course, because it is the crude oil (and/or natural gas) that has value, and the petroleum is very obviously the reason for drilling the hole in the first place. However, the water must be managed to gain the value of the petroleum production, and as water volumes have risen, and done so dramatically, oilfield water management has become more difficult. The need for potential solutions is becoming more immediate with each additional barrel of production.

  1. The seemingly ideal solution is easy to identify, and exponentially more difficult to achieve. That solution would be to treat the water and convert it for surface discharge or for beneficial reuse. In other words, use that water as a new source of freshwater in a state—and in regions of the state—that could certainly use it, either for household use (even as drinking water!) or agricultural use. As one can imagine, the obstacles between current practice and the beneficial reuse by households, including personal consumption, are many and high.

On Sept. 16 in Austin, the Texas Alliance of Energy Producers (TAEP) released a white paper titled, Sustainable Produced Water Policy, Regulatory Framework, and Management in the Texas Oil and Natural Gas Industry: 2019 and Beyond. The paper, authored by TAEP President John Tintera, Blythe Lyons, and Kylie Wright, represents the culmination of a year-long effort to put oilfield water into context, identify the scope of the issue(s), and suggest a legislative and regulatory framework for moving forward at state and federal levels.

The 2019 paper builds on a 2014 white paper, titled Sustainable Water Management in the Texas Oil and Gas Industry, authored by Tintera and Lyons, and published by the Atlantic Council. It was written in recognition of the heightened oilfield water issues, due to rapid growth in domestic U.S. (led by Texas) oil and gas production in the five years leading up to that paper’s publication.

Factors at work. Next month’s issue of World Oil will feature an in-depth breakdown of the 2019 paper. The study 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. One of the paper’s key objectives is to identify policy recommendations at regulatory and legislative levels that will pave the way for the advancement of sustainable use of oilfield produced water. Next month’s article will lay out these recommendations and discuss them in detail.

Oil and gas operators in Texas, and beyond, have already made great strides with oilfield water issues, including usage for oil and gas operations and produced water management. Increasingly, produced water is used in E&P for hydraulic fracturing and other upstream functions, dramatically lowering the need to use freshwater (which, contextually, has always represented a less-than-1% share of total freshwater usage). However, even if produced water should comprise 100% of water used in E&P, that would be a small share of total oilfield water production. Other solutions are, therefore, paramount.

There’s a long way to go. Over 90% of produced water is returned to the ground via injection in saltwater disposal wells. While disposal wells will always be a sizable part of the produced water management portfolio, developing limitations in disposal capacity will soon necessitate other practices capable of dealing with high volumes of produced water.

Developing and implementing these practices and strategies—which is well underway—requires developing a legislative and regulatory framework that accommodates a new way of thinking about produced water. This clearly means considering oilfield produced water as an asset, rather than as waste—an expensive nuisance for operators. It means thinking about produced water in the midstream sense, rather than simply upstream, and developing a flourishing midstream water services industry.

The importance of addressing these issues on behalf of all operators is easy to define. The clear objective, broadly speaking, is to establish and maintain an environment in which a wide range of produced water management options may develop, including establishment of active markets for treated produced water. Simply put, the Alliance’s desire is to get and stay ahead of the game, so that water issues do not constrain Texas E&P activity.

Significant, rapid progress on these issues requires not only continued technological advancement (particularly high-volume solutions), but also going through the process in such a way that public perception allows for implementation of solutions. Stay tuned for next month’s article! 

About the Authors
Karr Ingham
Texas Alliance of Energy Producers
Karr Ingham KARR INGHAM is an Amarillo, Texas-based economist, and owner and President of InghamEcon, LLC, an economic analysis and research firm. Since 2003, he has served as Consulting Petroleum Economist for the Texas Alliance of Energy Producers (TAEP) and was recently named the association’s Executive V.P. Mr. Ingham created TAEP’s Texas Petro Index, a tool for tracking Texas E&P activity. He holds a BBA degree in economics from West Texas A&M University and is a member of several industry/economic associations.
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