Bloomberg News

Parched Texans Impose Water-Use Limits for Fracking Gas Wells

October 06, 2011

Sept. 30 (Bloomberg) -- An intensifying drought in Texas is prompting limits on water consumption that for the first time target oil and natural gas producers.

Local water districts, which have authority to allocate water from subterranean aquifers, are adding a water-intensive production method called hydraulic fracturing, or fracking, to some of the pumping restrictions they’re imposing on farmers and small towns.

The city of Grand Prairie in the Barnett Shale in North Texas in August became the first municipality to ban the use of city water for fracking. Water officials for the Ogallala Aquifer in part of the Permian Basin included fracking when they approved the district’s first-ever restrictions on water use in July.

Even before the drought, water was a sensitive issue for gas producers, who now use fracking to develop about 85 percent of the wells drilled in Texas, according to state regulators.

“The rumblings have definitely started in the last six months,” said Chris Faulkner, chief executive officer of Breitling Oil and Gas Corp., a closely held producer in Irving, Texas. “It used to be, ‘Are you going to contaminate my water;’ now the concern is, ‘You’re going to use up all my water.’”

The U.S. Environmental Protection Agency is studying whether fracking leads to contamination of water supplies, and local officials in some U.S. drilling areas are considering tighter regulation of the practice, in which 3 to 10 million gallons of water mixed with chemicals and sand are pumped into a well to crack the rock and release oil and gas.

Policy Shift

The Texas restrictions represent a policy shift in a state that produces about one-fifth of the crude and one-third of the gas in the U.S., and is known for industry-friendly government. Landowners historically have been allowed to pump as much water as they want, and the energy industry has been exempt from many water conservation rules, said Ben Sebree, vice president for government affairs of the Texas Oil & Gas Association.

“We’re really entering a new era of water management and water policy in the state,” Sebree said.

The new rules so far haven’t shut down any oil and gas drilling, and some companies have turned to alternative sources of water to keep operating.

Breitling recently trucked 3.5 million gallons of water 50 miles to a drilling site in North Texas’s Hemphill County to avoid having to obtain water locally. The $68,000 it paid was a fraction of the $3.5 million it cost for fracking the well, Faulkner said.

Permit Violation

Chesapeake Energy Corp. ran into trouble when it trucked water from a drilling site in one city to another in the Barnett Shale field. Arlington, Texas, cited Chesapeake for a permit violation in August when the company used Arlington water to frack a well in Grand Prairie, which has banned water for fracking, said Jim Parajon, Arlington’s planning director.

The violation carries a fine up to $2,000, he said. Arlington doesn’t limit the use of water for fracking, but its gas drilling ordinance doesn’t allow companies to take city water from an individual drill site. A Chesapeake spokesman said the company has apologized to city officials

Pioneer Natural Resources Co., based in Irving, Texas, is tapping water from salty, non-drinkable aquifers to develop its 900,000 acres in the Permian Basin.

Devon Energy Corp. has been using portable distilling plants since about 2007 to recycle water in the Barnett Shale and has a goal of recycling a third of the water it uses in the Granite Wash field in North Texas, said Tony Thornton, a spokesman for Oklahoma City-based Devon.

Rising Water Use

“We can tell, more and more, water use is going to be an issue,” Thornton said in a telephone interview.

Fracking has led to a drilling revival in Texas. Active rigs drilling in the state more than doubled to 903 in late August from 376 in September 2009, according to Baker Hughes’ data.

In the Eagle Ford Shale formation in South Texas, oil and gas companies are forecast to increase water consumption to 44,800 acre-feet of water in 2020, up from 5,800 in 2010, according to a study by the University of Texas’ Bureau of Economic Geology. An acre-foot is about 325,000 gallons, enough to supply three average households for a year.

Water use in the Barnett Shale is projected to increase to 40,300 acre-feet from 27,900 during the same period, the study said.

Record Drought

The drought, which caused the state’s driest year since record keeping began in 1895, is expected to continue into 2012, said John Nielsen-Gammon, the state climatologist.

In the High Plains Underground Water Conservation District No. 1, which is based in Lubbock and covers an area bigger than Massachusetts, new water restrictions begin kicking in for landowners next year.

Though the state water code exempts oil and gas drilling from some rules enacted by groundwater districts, fracking is a process separate from drilling and will be subject to the new water limits, said Jim Conkwright, general manager of the High Plains district.

The Evergreen Underground Water Conservation District, which controls pumping from four counties in South Texas, made the same decision when fracking took off in the Eagle Ford Shale in about 2008. The district already had rules restricting pumping to 2 acre-feet annually per acre, and decided to apply them to hydraulic fracturing, general manager Mike Mahoney said.

Janet Guthrie, general manager of the Hemphill County Underground Water Conservation District in North Texas, said she may need to impose water limits for fracking if the water table drops too low.

At that point, “The question is, how quick do you want to go dry?” she said.

--Editors: Susan Warren, Joe Winski

-0- Oct/06/2011 14:08 GMT

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net CHK US <Equity> DVN US <Equity> PXD US <Equity> 3503158Z US <Equity>


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