September 14, 2020
The Honorable Dustin Burrows The Honorable Chris Paddie Texas House of Representatives Texas House of Representatives P.O Box 2910 P.O. Box 2910 Austin, Texas 78768 Austin, Texas 78768
Dear Representative Burrows & Representative Paddie:
The Texas Oil & Gas Association (TXOGA) is a statewide trade association representing every facet of the Texas oil and gas industry including small independents and major producers. Collectively, the membership of TXOGA produces in excess of 80 percent of Texas’ crude oil and natural gas, operates over 80 percent of the state’s refining capacity, and is responsible for the vast majority of the state’s pipelines. In fiscal year 2019, the oil and natural gas industry supported more than 428,000 direct jobs and paid more than $16 billion in state and local taxes and state royalties – the highest total in Texas history – funding our state’s schools, roads and first responders.
TXOGA appreciates the opportunity to submit comments regarding the joint interim charge to the House Ways & Means Committee and the House Energy Resources Committee to: Evaluate the status of water recycling and reuse efforts in the oil and gas industry in Texas and elsewhere. Evaluate options for tax credits, deductions, or discounts to encourage recycling, treatment, or reuse of produced water from oil and gas production activities. Make recommendations on statutory or regulatory changes needed to promote recycling and reuse strategies for produced water.
Recycling produced water is becoming more common thanks to the oil and natural gas industry’s commitment to innovation and technological advances. As technology improves, we anticipate that oil and natural gas produced water will be recycled and treated into new drought-proof sources of water for beneficial purposes beyond the oil patch.
While the recycling of produced water for use outside the oilfield is the main focus of our comments, we would like to take a moment to emphasize that over the last decade the industry has substantially reduced freshwater usage through increased use of highly brackish groundwater, reuse of wastewater, as well as reuse of produced water within operations. Utilizing alternatives to freshwater has required significant investment in research, technology, and infrastructure. This is important work that goes beyond the direct sustainability benefits of the oil and natural gas industry’s water solutions, these innovations can be applied to water challenges across Texas and around the world. So, these investments pay dividends far beyond the wellhead and are helping to keep energy operations and our environment sustainable for future generations.
While the commitment and investment of the oil and natural gas industry has been critical to advancement in produced water reuse, the role of the State of Texas cannot be overlooked. Texas has embraced policies to encourage water reuse and recycling while avoiding a one-size-fits-all approach:
In 2013, the Legislature passed HB 2676 that transferred the ownership of fluid oil and natural gas waste to a person who took the waste fluid for the purpose of treating it for subsequent use and considers it to be that person’s property until it transfers to another person for disposal or beneficial use; and the bill clarified liability relating to the waste fluid.
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The Legislature in 2019 passed HB 3246 clarifying that fluid oil and gas waste becomes the property of the water hauler during transport to the recycler or the operator who takes possession of the waste for the purpose of sending it to the recycler or recycling it himself.
Last Session, HB 2771 also passed, giving regulatory authority for produced water discharge to the Texas Commission on Environmental Quality (TCEQ). The bill also directed TCEQ to seek delegation authority from the Environmental Protection Agency (EPA) to issue National Pollution Discharge Elimination System (NPDES) permits for oil and gas activities. HB 2771 stipulated that TCEQ seek this delegation by September 1, 2021, however, TCEQ is expected to submit the request this Fall. Having this program at TCEQ will give Texas authority over discharges into state water and will lead to efficient permitting that meets federal water quality standards.
The Railroad Commission of Texas (RRC) also encourages produced water reuse in its regulations. In 2013, the RRC streamlined Statewide Rule 8 relating to fluid recycling. The revised rule eliminated the need for a Commission recycling permit if operators are recycling fluid on their own leases or transferring their fluids to another operator’s lease for recycling. The rule revision also established a tiered approach for the reuse of treated fluid, including both authorized reuse of treated fluids in oil and gas operations and provisions for reusing the fluid for other non-oilfield related uses.
Since Texas has embraced policies to encourage water reuse while avoiding a one-size-fits-all approach, many oil and natural gas companies are voluntarily leading the way to develop and deploy innovative technologies that are expanding produced water reuse. In a report by the Groundwater Protection Council (GWPC) – GWPC Produced Water Report: Regulations, Current Practices, and Research Needs http://www.gwpc.org/producedwater - it is estimated that in the Permian Basin an average of 45% of produced water is reused for enhanced oil recovery and 10% is used for other operations such as hydraulic fracturing. Little produced water is returned during production operations in the Eagle Ford Shale and GWPC estimates that an average of 1% of produced water is reused.
In 2013, Cimarex Energy Co. started to look at the treatment needed to use produced water for stimulation treatment. In 2019, 63% of needed stimulation water was produced water and the company looks to maintain the same percentage in 2020. When starting to source water Cimarex's first choice if not contractually obligated to purchase non-produced water is to use produced water, then look for brackish water and finally the use of freshwater.
Another company reported significant reductions in the use of freshwater over the last 3 years going from 13.5% usage in 2016 to less than one percent in 2019 including 29% reuse of produced water and 70% brackish groundwater. The company also reported a planned pilot project to use 100% of produced water.
To preserve freshwater resources in the Permian Basin, Fasken began recycling produced water in 2013 and using it in its well drilling and cementing processes. By 2014, Fasken was processing 12,000 barrels (barrels per day) of recycled water for use. This process allowed Fasken to discontinue use of fresh water from the Ogallala Aquifer for drilling operations. By the end of June 2014, Fasken completely discontinued using fresh water for drilling and well completion operations conserving approximately 2.7 million gallons of fresh water that otherwise would have been used for every well drilled. Fasken continued this practice until the current downturn when drilling and recycling operations ceased.
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Over the past decade, another company has been actively evaluating technologies for the treatment of produced waters for reuse within the oil & gas industry. Currently, in the Permian region, they are recycling/reusing produced water in two distinct end uses, enhanced oil recovery (EOR), and oil & gas well completion activities (fraccing). In 2019, 73% of water sourcing requirements (completions) were derived from the recycling of produced water, with a forecast of 90% by 2024.
The GWPC Produced Water Report referenced above is an excellent resource. The GWPC brought together scientists, regulatory officials, members of academia, the oil and gas industry, and environmental groups to explore roles produced water might play in developing greater water certainty. The report consists of three focused modules: Module 1: Current Legal, Regulatory & Operational Frameworks; Module 2: Produced Water Reuse in Unconventional Oil & Gas Operations; and Module 3: Produced Water Reuse and Research Needs Outside Oil & Gas Operations.
The GWPC report is several hundred pages so we will not recap the entire report but here are a few key points that may inform the discussion on produced water recycling outside the oil and gas industry:
• Logistical and transportation costs may limit the potential reuse of produced water. Considerations include the availability of treatment facilities and costs of transporting water to the facilities as well as to the point of end use. • The economic attractiveness of beneficial reuse depends on whether the supply of produced water is predictable, if it can be delivered reliably to the point of use, and how the cost compares to other available sources of water after factoring in the costs of its treatment and transportation as well as the disposal of treatment residuals. • Realizing the promise of increased beneficial reuse of produced water will not be a simple matter. It will require addressing substantial economic, technical, regulatory, and environmental challenges. • Produced water is a subject on which research is rapidly advancing, including the development of knowledge and tools for produced water characterization, treatment, risk assessment, and feasibility for reuse. Yet many knowledge gaps remain to be tackled. • The most purposeful and actionable research and development strategy will be to identify and focus on specific reuse options where circumstances align to make reuse a potential need or opportunity in the near future, in specific regions, taking into account the volume and quality of produced water potentially available and the needs of nearby water users. • With research and development advancements, it is possible that future economics could support large- scale reuse outside oil and gas operations where the water quality and environmental challenges can be met by advanced treatment technologies. This research and development may also take into consideration economic opportunities and co-benefits potentially associated with advanced treatment of produced water, such as recovery of saleable products like salt, heavy brine, iodine, or lithium. • The decision-making and risk assessment process should be based on the understanding that produced water from oil and gas operations is a complex mixture with a composition that may be difficult to precisely characterize, though adequate fit-for-purpose characterization should ultimately be achievable.
TXOGA appreciates the committees' understanding that produced water reuse activities are costly and are unlikely to be undertaken in large scale if the economics are insurmountable. However, we are encouraged by recent developments in technology and in business practices that are moving these activities toward economic feasibility. TXOGA does not oppose state economic incentives to encourage water recycling and reuse but recognizes that the state is, as is industry, currently facing very difficult fiscal conditions. TXOGA believes that allowing market-driven forces to advance the technology and business of water recycling and reuse is the best way forward in the current environment.
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Water is one of our state’s most precious resources and it takes creative thinking and cooperation between the public and private sectors to address our water needs. The oil and natural gas industry will continue to work with state regulators to pursue their mutual goals of encouraging water recycling and reuse.
Sincerely yours,
Todd Staples