THE REGULATORY FRAMEWORK SURROUNDING PRODUCED WATER IN NEW MEXICO AND IMPACTS ON POTENTIAL USE By Enid J. Sullivan Graham, Ph.D New Mexico Office of the Secretary, Energy Minerals and Natural Resources Department and Los Alamos National Laboratory, Los Alamos, New Mexico and Kwabena Addae Sarpong, Graduate Research Assistant Water Resources Research Institute New Mexico State University June 2016 New Mexico Water Resources Research Institute in cooperation with the New Mexico Energy Minerals and Natural Resources Department and Los Alamos National Laboratory The research on which this report is based on was financed in part by the New Mexico Environment Department through the New Mexico Water Resources Research Institute. 1 DISCLAIMER The purpose of the New Mexico Water Resources Research Institute (NM WRRI) technical reports is to provide a timely outlet for research results obtained on projects supported in whole or in part by the institute. Through these reports the NM WRRI promotes the free exchange of information and ideas and hopes to stimulate thoughtful discussions and actions that may lead to resolution of water problems. The NM WRRI, through peer review of draft reports, attempts to substantiate the accuracy of information contained within its reports, but the views expressed are those of the authors and do not necessarily reflect those of the NM WRRI or its reviewers. Contents of this publication do not necessarily reflect the views and policies of the Department of the Interior, nor does the mention of trade names or commercial products constitute their endorsement by the United States government. 2 Abstract We examined the US Federal and New Mexico (NM) regulatory framework surrounding produced water use both within and outside of the oil and gas industry for Lea and Eddy Counties. Previous studies identified many unanswered questions regarding jurisdiction, ownership, liability, and regulatory requirements. We describe the pertinent regulations in New Mexico within the jurisdiction of the NM Oil Conservation Division (NMOCD), the NM Office of the State Engineer (NMOSE), and the NM Environment Department (NMED). We review case studies from New Mexico, Wyoming, California, and Colorado as illustrations of how produced water has been used beneficially. Finally, we provide hypothetical scenarios in order to assist the analysis of produced water treatment and use processes, and to identify gaps in the regulatory framework. We found that the primary jurisdiction falls under the NMOCD for most uses, both before and after treatment. The NMED is responsible for spills and for permitting for certain uses, for example in agricultural applications. US Environmental Protection Agency permits (NPDES) are needed when water is discharged to navigable waters of the United States. Significantly, the NMOSE does not require a water right when produced water is put to beneficial use in New Mexico, based on 2004 legislation. Keywords: water rights, NPDES, reuse, treatment, pretreatment, agriculture, irrigation, recharge, discharge, case studies, beneficial use. 3 Contents Abstract ......................................................................................................................................................... 3 List of Abbreviations and Acronyms ............................................................................................................ 5 List of Figures ............................................................................................................................................... 6 List of Tables ................................................................................................................................................ 7 Introduction ................................................................................................................................................... 8 Source of Produced Water ............................................................................................................................ 9 Potential Beneficial Uses of Produced Water ............................................................................................. 12 Treatment Processes ................................................................................................................................ 12 Finished Water Products ......................................................................................................................... 12 Waste Products........................................................................................................................................ 12 Valuable Co-products ............................................................................................................................. 13 Federal Regulations .................................................................................................................................... 13 RCRA ...................................................................................................................................................... 13 Hazardous Waste ................................................................................................................................ 13 Waste Exemptions .............................................................................................................................. 14 Exempt E&P Wastes ........................................................................................................................... 14 Nonexempt E&P Wastes ..................................................................................................................... 15 The USEPA Clean Water Act and NPDES Permits ............................................................................... 16 Unconventional Extraction in the Oil and Gas Industry ..................................................................... 17 Coalbed Methane Extraction Industry ................................................................................................ 17 Drinking Water ....................................................................................................................................... 18 New Mexico State Regulations ................................................................................................................... 18 New Mexico Oil Conservation Division ............................................................................................. 19 New Mexico Office of the State Engineer .......................................................................................... 20 New Mexico Environment Department .............................................................................................. 22 Case Study Examples of Regulatory Framework Leading to Beneficial Uses ........................................... 24 New Mexico-Farmington Pilot Treatment Study .................................................................................... 24 New Mexico-Pecos River Recharge and HB 388 ................................................................................... 25 Wyoming ................................................................................................................................................ 26 Colorado .................................................................................................................................................. 28 Texas ....................................................................................................................................................... 29 California-Cawelo Field Example .......................................................................................................... 31 4 California-San Ardo Field Example ....................................................................................................... 32 California-Kern River Field Example ..................................................................................................... 33 California-Additional Information .......................................................................................................... 34 Discussion ................................................................................................................................................... 37 Jurisdiction .............................................................................................................................................. 37 Example Use Cases ................................................................................................................................. 38 Gap Identification ................................................................................................................................... 42 Conclusions and Recommendations ........................................................................................................... 43 References ................................................................................................................................................... 43 Appendices .................................................................................................................................................. 47 Appendix A-Detailed Information on RCRA Oil and Gas Waste Exemptions and Rules ..................... 47 Appendix B. Permit Letter for the San Juan, New Mexico Rangeland Rehabilitation Study; and NPDES Permit for the Wyoming Case Study. ....................................................................................................