Regulatory Developments, Special Topics in Environmental Management

Use of Produced Water Faces Federal and State Regulations

As we reported this summer, the EPA has embarked on a study to find alternatives to the common practice of disposing of produced water from oil and natural gas (O&G) development into underground injection wells. Since then, there have been two developments linked to the study.
Oil rig-fracking
The first, in October 2018, there was a public hearing in which the Agency presented the reasons for the study and received comments from stakeholders. The second is a draft white paper issued November 9, 2018, in which the EPA and the state of New Mexico explore the “opportunities, benefits, cost, and risks of making further use of wastewater from O&G operations in the state.” The draft study is particularly relevant to future activities because it describes the federal and state regulatory structures that govern reuses of produced water in New Mexico and what steps will need to be taken to remove or mitigate the most troublesome obstacles to that re-use. The draft may assist stakeholders in other states who wish to compare their statutory and regulatory obligations to those in New Mexico.

Produced Onshore

Produced water is defined by the EPA and New Mexico as “the fluid brought up from the hydrocarbon bearing strata during the extraction of oil and natural gas, and includes, where present, formation water [water occurring naturally in the underground formation], injection water [water added by the O&G operator to facilitate O&G production], and any chemicals added downhole or constituents released from the formation.” According to the Colorado School of Mines, approximately 21 billion barrels of produced water are generated each year in the United States from about 900,000 wells (1 barrel = 42 U.S. gallons). Almost all produced water in the United States is from onshore O&G operation, and the volume is expected to increase. Offshore produced water is treated and returned to the offshore water bodies.

Some produced water is relatively clean, but most has a high saline content (up to 15 times saltier than seawater); other common impurities include naturally occurring radioactive materials, waxes, greases, sand, scales, carbon dioxide, hydrogen sulfide, and metals. Water used for hydraulic fracturing returns to the surface with chemicals intended to expedite fracking.  Because of the generally high level of contamination, the most common destination for produced water is back underground. The Produced Water Society reports that in 2012 about 91 percent of produced water was injected underground, including water injected for both enhanced recovery and disposal. Slightly less than half the injected produced water was sent to disposal wells. Once produced water is disposed of in these very deep wells (called Class II wells), which can be over 5,000 feet deep, it is no longer available for reuse.

Water Scarcity

In introducing its study, the EPA notes that some states and stakeholders have been asking whether it makes sense to continue to waste this water, particularly in water-scarce areas of the country, and what steps would be necessary to treat and renew it for other purposes. These are issues of importance in New Mexico. According to the draft white paper, New Mexico tends to rank as the fifth driest state in the nation, receiving just under 15 inches of rainfall per year. The spring of 2018 marked one of the lowest runoff seasons along the Rio Grande and Pecos Rivers in decades. Government water managers had to broker agreements to maintain river flow through central New Mexico while stretches in the south had gone dry. About 95 percent of New Mexico is currently in a drought compared to 11.4 percent a year ago.

Federal Law

At the public hearing, the EPA emphasized that any reuse of produced water outside the O&G facilities where it was produced is subject to federal environmental statutes and regulations. Primarily, under the Clean Water Act (CWA), discharges to surface water from O&G facilities are subject to permitting under the National Pollutant Discharge Elimination System (NPDES). NPDES permits contain technology‐based effluent limitations (TBELs) and may also contain water quality‐based effluent limitations (WQBELs). To meet the conditions of a permit, a produced water may need to be treated before it can be fed into a drought-starved water body. Depending on the constituents, treatment can range from basic sedimentation to a more complex treatment due to the addition of chemicals. Other treatment technologies are on the market (see, for example, http://www.oil-gasportal.com/produced-water-treatment). Not all uses of produced water are subject to CWA permitting. As noted above, produced water that is reused at the production site is not an EPA-permitted activity. Also, untreated produced water that is used for agricultural irrigation is not commonly subject to NPDES permitting provided it is not first discharged to surface water. Such usage may, however, constitute a discharge to groundwater, which requires another type of permit in New Mexico and most likely in other states as well.

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Stakeholder Concerns

As part of its presentation at the public hearing, the EPA summarized some of the views stakeholders have on the reuse of O&G produced water. For example:

States and Affiliated Organizations

Some states support additional discharge options for treated produced water. These states believe these options can add water to the hydrologic cycle and can help meet downstream water allocations/water compacts. Additional discharge also increases available water, which can reduce demand for freshwater for O&G activities. Reuse can help alleviate disposal well capacity issues.

Other states were opposed. These states noted, for example, that discharges can impact water quality, and treatment creates a new set of management requirements for residuals. In addition, states reported lacking technical expertise in permitting discharges and said the EPA would need to provide this expertise. There were also concerns about NPDES permits. Most permit writing is undertaken by the states, and standards and criteria do not exist for many constituents in produced water.

Industry

Industry generally favors having options beyond injection to manage produced water. Companies note, for example, that the availability of Class II wells is beginning to decrease. This is a problem that is expected to grow as O&G activity continues to expand, and one that can be alleviated with more opportunities for reuse and discharge. There are also economic opportunities associated with treatment; for example, recovered salts can be marketed. While industry may see the EPA bending with regard to federal regulations that currently constrain reuse and discharge, the more difficult obstacle may be presented by layers of state regulation that constrain these practices.

Nongovernmental Organizations

Environmental groups have raised many concerns about the discharge and reuse of produced water. Among these are the absence of reliable information about the chemicals and other constituents in produced water. For example, companies protect as proprietary the identity or mixtures of chemicals used in hydraulic fracturing, a technology that results in produced water. Related concerns include the constantly changing chemistry of new chemical formulations that enter the market; unknown transformation of chemical constituents into other chemical compounds; absence of analytical methods for many compounds; limited treatment technology performance data for many compounds; and the absence of water quality criteria for constituents.

New Mexico

In addition to its location in the driest region of the country, New Mexico is the third largest oil-producing state, two factors that make new/expanded options for produced water desirable. One of the major objectives of the white paper was to determine if the state’s statutory and regulatory framework would promote or discourage new approaches. The paper describes the state structure for overseeing produced water in considerable detail. There are three New Mexico agencies that bear the primary responsibility for implementing regulations governing produced water, treated produced water, and water more generally.

  • The New Mexico Oil Conservation Commission (OCC) has developed regulations that govern the use of produced water pits, closed loop systems, below grade tanks and sumps; recycling facilities; and surface waste management facilities. In addition, the OCC’s sister agency, the Oil Conservation Division (OCD), regulates the underground injection of fluids, including produced water, in a manner consistent with state law and the state’s primacy agreement with the EPA under the federal Safe Drinking Water Act (SDWA).
  • The New Mexico Environment Department (NMED) bears responsibility for the quality of groundwater and surface water throughout the state. The NMED administers several programs that may be relevant to the management and treatment of produced water as well as the prospective uses of treated produced water. These include protection and delivery of drinking water under the SDWA and state regulations; the administration of groundwater quality standards; establishment of surface-water quality standards; and the issuance of NPDES permits.
  • The New Mexico Office of the State Engineer (OSE) administers the state’s water resources and has authority over the supervision, measurement, appropriation, and distribution of both surface and groundwater in the state. In other words, O&G companies that wish to appropriate and divert surface water for production must obtain a permit from the OSE. No permit from the OSE is required for the disposition of produced water.

Scenarios

The draft white paper contains scenarios that describe variations on the steps, permit applications, and other requirements O&G companies must complete or meet to manage produced water outside the drilling operation. For example, one option is to use produced water to irrigate agriculture. The white paper states:

“In this scenario, produced water is managed in storage vessels and piped or trucked to either a treatment plant or a UIC Class II injection well. The OCD regulates produced water at this stage, as there is no discharge to surface water. Upon disposition by use to the treatment plant, the OCD regulation of the produced water ends and the NMED regulation begins. Produced water entering the treatment plant undergoes the necessary treatment to ensure the quality of the effluent is sufficient for the desired use or application. In this case, the water is treated for an agricultural use. As with industrial use/commercial sales outside the oil and natural gas industry, the quality of the water may be dictated by industry standards and/or a federal or state agency other than the EPA or the NMED. The quality of the treated water may also be regulated by a Ground Water Discharge Permit if used for irrigation or another agricultural use that could affect groundwater quality. Use of the treated produced water does not require a permit from the OSE. However, a permit to appropriate treated produced water that has been returned to the public waters would require a permit from the OSE.”

That’s a lot of work that may cause an energy company to resort to Class II disposal, and the situation is likely similar in other states where O&G development is growing. According to the draft white paper, there are several approaches to simplification. For example, the OCD could establish a permit-by-rule system—that is, requirements for outside use of produced water would be listed in the regulations; when the requirements are met, the use is approved. Other measures that would expedite use include improved characterization of the constituents of produced water; development of the expertise needed to allow the conversion of produced water to potable water; and clarification of the sometimes-overlapping responsibilities of the state agencies and the EPA.