Oil and Gas Lawyer Blog

Texas is in the middle of one of the most severe droughts in recorded history. The population of the state is growing rapidly, and projections are that such growth will continue. Much of Texas is arid semi-desert, with limited rainfall in normal years. Will water become the limiting factor in Texas' growth?

With water so much on everyone's minds, I thought it would be a good idea to review some basic facts about water. The following information is from a presentation made by Tom Mason, former General Manager of the Lower Colorado River Authority, who is now a shareholder at my firm, Graves Dougherty Hearon & Moody.

Water on earth:

-- 97% is in the oceans

-- 3% is fresh water

-- 69% of fresh water is ice - glaciers and icecaps

-- 30% of fresh water is groundwater

-- .3% (three tenths of one percent) of the world's fresh water is contained in rivers and lakes

Last month, Texas' water planning agency, the Texas Water Development Board, published Texas' 2012 Water Plan. This plan was developed through a complex planning process involving 16 regional planning groups. The plan lists 562 recommended water supply projects and strategies to meet the State's expected water demands for the next 50 years. Estimated costs of those projects: $53 billion.

Most significant aspects of the Texas Water Plan:

Conservation. Twenty-five percent of the "new water" proposed by the plan is by conserving existing supplies. About 2/3 of that conservation is from agriculture, most of the rest municipal. Conservation is possible: San Antonio has reduced per capita water consumption by more than 40% over the last 26 years  -- in part because a federal court ordered the city to limit withdrawals from the Edwards Aquifer due to environmental concerns. San Antonio engaged in educaton compaigns, new water pricing (the more you use the higher your rate), low flow toilets, repairs of leaky pipes, outdoor water restrictions. Farmers conserve by laser leveling of fields, changes in crops, more efficient irrigation equipment.

New Reservoirs. Texas' water plan proposes that 17% of "new water" supplies will come from new reservoirs. But there are not many good reservoir sites left in Texas. New dams are very expensive, hard to permit, and few federal dollars are available for such projects. Landowners resist use of eminent domain for reservoirs. Most of the new reservoirs proposed are "off-channel" reservoirs, which will capture heavy flood flows in very large ponds and release them when needed.

Groundwater. 9% of new water supplies are projected to come from development of groundwater resources. About 60% of all water use in Texas now comes from groundwater. Regulation of groundwater development in Texas is handled by groundwater districts. There are now some 96 such districts, and each has its local governing board and sets its own rules. Many districts are underfunded and understaffed. There is now great uncertainty over the powers and limits of groundwater regulation that these districts can impose. With such decentralized management and legal uncertainty, it is difficult to predict how groundwater will meet Texas' future water supply needs.

Water Reuse. The water plan derives 10% of its "new water" for Texas' future from reusing treated sewage effluent. Again, the increased use of treated effluent has caused legal uncertainty: who owns water once it has been treated for reuse?

Desalination. 3.5% of "new water" in the Texas Water Plan is from desalination. The cost of water from desalination is now 2 to 7 times more than river water or groundwater.

Water is a big energy user. The State of California uses almost 20% of its total energy production to treat and move water. The City of Austin's water utility is the single largest customer of the City's electric utility. Energy production is also one of the largest water users, although much of the water used for electric generation is returned to rivers and streams after use.

Water and energy remain two of the biggest challenges for Texas, our nation and the world.

The Wall Street Journal published a front-page article in its December 6 edition, "Oil's Growing Thirst for Water," that highlights issues with the oil and gas industry's demand for water in the Eagle Ford and other shale plays. The article quotes Darrell Brownlow, a hydrologist and geochemist and a landowner in South Texas about whom I have written previously. The WSJ article highlights the coming conflict between the oil and gas industry's demand for water and the growing demands on groundwater in Texas.

According to Dr. Brownlow, it makes simple economic sense to use groundwater as a resource for oil and gas exploration: The WSJ says: "Mr. Brownlow ... says it takes 407 million gallons to irrigate 640 acres (one square mile) and grow abaout $200,000 worth of corn on the arid land. The same amount of water, he says, could be used to frack enough wells to generate $2.5 billion worth of oil. 'No water, no frack, no wealth,' says Mr. Brownlow, who has leased his cattle ranch for oil exploration."

Most of the Eagle Ford lies above the Carrizo aquifer, which stretches from Webb County on the Rio Grande River up through Fayette County. Dr. Brownlow, a hydrologist, concludes that there is plenty of water in the Carrizo, in most places, to meet the demands for frac water. His estimates:

• There are about 6 million acres in the Eagle Ford play, and a possible 20,000 oil and gas wells (one well per 300 acres).
• An average frac job uses 15 acre-feet of water (4,887,765 gallons, or 115,375.5 42-gallon barrels).
• So, the frac jobs on those 20,000 wells would use about 300,000 acre-feet of water over the life of the play.
• Current withdrawals from the Carrizo Aquifer are about 275,000 acre-feet per year; so the entire demand for frac water from Eagle Ford wells would equal about one year's withdrawal of water from the aquifer.  At a rate of withdrawal of 275,000 acre-feet per year, groundwater management studies estimate that the Carrizo water table will drop an average of 30 to 35 feet by 2060.

Dr. Brownlow says that, if a successful Eagle Ford well makes 300,000 to 400,000 barrels of oil at $80/bbl, the return to the landowner would be $520,000 per acre-foot ($1.60 per gallon). In contrast, the return to a farmer using  the same acre-foot of water to irrigate corn, peanuts or coastal hay would be $500 to $1,000 per acre, or about $250 per acre-foot of irrigation water. "The point here is that using groundwater from the Carrizo for hydraulic fracturing in the Eagle Ford Shale has enormous economic potential for landowners, oil production companies and the entire region. Moreover, from a geologic and water planning perspective, additional impact on the aquifer appears minimal," says Dr. Brownlow.

Below is an analysis of data from the Texas Water Development Board, done by the WSJ:

The oil and gas industry uses only 1.6% of the water consumed in the state. But this use is concentrated in areas where drilling activity is located, often in arid portions of the state, and the use is growing rapidly. As can be seen from the above graph of one water well, if your well is the one affected, it is an important issue. And the water used for fracing in the Eagle Ford is not returned to the ecosystem; it either remains in the formation, or if it returns to the surface, is it reinjected into licensed disposal wells.

In Texas, the oil and gas industry is exempted from regulation by local underground water districts, which have authority to permit and regulate withdrawals from underground aquifers. Those water districts are now in the middle of establishing "desired future conditions" for the aquifers within their jurisdiction and rules to assure that withdrawals are regulated so that those desired future conditions are met. Because those water districts have no authority to regulate wells used for oil and gas exploration, they cannot predict or control the effect of industry uses on their future supplies of water.

The issues raised by industry use of groundwater just go to prove the old Texas saying, "Whiskey's for drinkin', water's for fightin'."

 

Darell T. Brownlow, Ph.D, has published an article giving his analysis and opinion of the ability of the Carrizo Aquifer to supply water demands caused by fracing of wells in the Eagle Ford play.  The article was published in the newsletter of the Texas Ground Water Association, Fountainhead, and can be found here: Brownlow Article.pdf

Dr. Brownlow, a hydrologist, concludes that there is plenty of water in the Carrizo, in most places, to meet the demands for frac water. His estimates:

• There are about 6 million acres in the Eagle Ford play, and a possible 20,000 oil and gas wells (one well per 300 acres).
• An average frac job uses 15 acre-feet of water (4,887,765 gallons, or 115,375.5 42-gallon barrels).
• So, the frac jobs on those 20,000 wells would use about 300,000 acre-feet of water over the life of the play.
• Current withdrawals from the Carrizo Aquifer are about 275,000 acre-feet per year; so the entire demand for frac water from Eagle Ford wells would equal about one year's withdrawal of water from the aquifer.  At a rate of withdrawal of 275,000 acre-feet per year, groundwater management studies estimate that the Carrizo water table will drop an average of 30 to 35 feet by 2060.

Dr. Brownlow says that, if a successful Eagle Ford well makes 300,000 to 400,000 barrels of oil at $80/bbl, the return to the landowner would be $520,000 per acre-foot ($1.60 per gallon). In contrast, the return to a farmer using  the same acre-foot of water to irrigate corn, peanuts or coastal hay would be $500 to $1,000 per acre, or about $250 per acre-foot of irrigation water. "The point here is that using groundwater from the Carrizo for hydraulic fracturing in the Eagle Ford Shale has enormous economic potential for landowners, oil production companies and the entire region. Moreover, from a geologic and water planning perspective, additional impact on the aquifer appears minimal."

Dr. Brownlow is a resident of Wilson County, a cattle rancher in LaSalle County, serves on the South Central Texas Regional Water Planning Group (Region L), and was the governor's appointee to the Evergreen Underground Water Conservation District from 2000-2010.

The Dallas Office of the Environmental Protection Agency issued the following press release today:

The U.S. Environmental Protection Agency (EPA) has ordered a natural gas company in Forth Worth Texas to take immediate action to protect homeowners living near one of their drilling operations who have complained about flammable and bubbling drinking water coming out of their tap. EPA testing has confirmed that extremely high levels of methane in their water pose an imminent and substantial risk of explosion or fire. EPA has also found other contaminants including benzene, which can cause cancer, in their drinking water.

EPA has determined that natural gas drilling near the homes by Range Resources in Parker County, Texas has caused or contributed to the contamination of at least two residential drinking water wells. Therefore, today, EPA has ordered the company to step in immediately to stop the contamination, provide drinking water and provide methane gas monitors to the homeowners. EPA has issued an imminent and substantial endangerment order under Section 1431 of the Safe Drinking Water Act. Parker County is located west of Fort Worth, Texas.

In late August, EPA received a citizen's complaint regarding concerns with a private drinking water well. During the inspector's follow-up inquiry, EPA learned that the homeowner had previously complained to the Texas Railroad Commission as well as the company, but their concerns were not adequately addressed by the State or the company. EPA then conducted an on-site inspection of the private drinking water well with the homeowner and a neighboring residence, and returned to collect both water and gas samples. These samples were sent to an EPA certified laboratory for analysis. The data was received in late November 2010 and was carefully reviewed by EPA scientists. The EPA scientists have conducted isotopic fingerprint analysis and concluded the source of the drinking water well contamination to closely match that from Range Resources' natural gas production well.

EPA has asked the company to conduct a full scale investigation. EPA is requiring Range Resources under this order to:

• Immediately deliver potable water to the two residences;
  
• Immediately sample soil gas around the residences;
  
• Immediately sample all nearby drinking water wells to determine the extent of aquifer contamination; and
  
• Provide methane gas monitors to alert homeowners of dangerous conditions in their houses.
  
• Develop a plan to remediate areas of the aquifer that have been contaminated.
  
• And, to investigate the structural integrity of its nearby natural gas well to determine if it is the source of contamination.

EPA has data showing the presence of natural gas at two wells. EPA is ordering Range to investigate other nearby properties to determine if their drinking water is at risk. EPA has been in contact with a rural water system operator approximately 1 mile away, and they are taking steps to test their water for natural gas constituents. Residents of other homes are advised to contact EPA immediately if their wells seize up or if their water begins to effervesce. EPA will contact nearby private well home owners to advise them of our actions and to let them know that we've required the company to test their wells.

The uncontrolled release of natural gas can be dangerous since it is odorless and flammable and it escapes facilities. Uncontrolled release of natural gas inside a building or home can cause a fire or explosion. Drinking water contaminated with natural gas impurities such as benzene is unhealthy.

EPA believes that natural gas plays a key role in our nation's clean energy future and the process known as hydraulic fracturing is one way of accessing that vital resource. However, we want to make sure natural gas development is safe. As we announced earlier this year, we are in the process of conducting a comprehensive study on the potential impact of hydraulic fracturing on drinking water.

In the meantime, EPA has made energy extraction sector compliance with environmental laws one of EPA's National Enforcement Initiatives for 2011 to 2013. The initiative focuses on areas of the country where energy extraction activities such as hydraulic fracturing are concentrated, and EPA's enforcement activities will vary with the type of activity and pollution problem presented.

To my knowledge, this is the first time the EPA has directly intervened in response to a complaint by landowners of groundwater contamination from horizontal shale wells. The EPA's press release emphasizes that the Texas Railroad Commission did "not adequately address" the landowners' complaints.

The EPA's letter to Plains Resources may be found here:  http://www.epa.gov/region6/6xa/pdf/range_letter.pdf 

The EPA's emergency order may be found here: http://www.epa.gov/region6/6xa/pdf/range_order.pdf 

The two Range wells are the Butler Unit 1H and the Teal Unit 1H, both Barnett Shale wells drilled in 2009. The owner of one water well first noticed gas in his water in late December 2009, about four months after the Range wells began producing.  One of the water wells lies about 120 feet in horizontal distance from the track of the Butler well bore, and the other about 470 feet from the Butler well bore.  The EPA did a chemical analysis of the gas found in one domestic water well and found that it was substantially likely that it came from one of the Range wells.

The EPA order says that it consulted with the Railroad Commission and shared its findings with the Commission, and that "appropriate State and local authorities have not taken sufficient action to address the endagerment described herein and do not intend to take such action at this time."  The EPA ordered Range to (1) provide replacement potable water supplies for the owners of the affected water wells, (2) install meters in the landowners' dwellings to detect gas, (3) provide EPA a list of all private water wells within 3,000 feet of the two Range wells along with a plan to sample the water in those wells, (4) submit a plan to conduct testing of soils and indoor air around the dwellings served by the water wells, and (5) submit a plan to identify the gas flow pathways to the aquifer, eliminate such flows, and remediate areas of the aquifer impacted by the gas flows into the aquifer.

Update:  Range Resources has denied that its wells have contaminated groundwater in Parker County.  "The investigation has revealed that methane in the water aquifer existed long before our activity and likely is naturally occurring migration from several shallow zones immediately below the water aquifer," the company said. Two producing Range natural gas wells in the area "are completed in the Barnett Shale formation, which is over a mile below the water zone." The Texas Railroad Commission has scheduled a hearing on the matter for January 10.  http://www.star-telegram.com/2010/12/08/2690723/range-resources-denies-epa-allegation.html 

 

T. Boone Pickens has filed a lawsuit to protect his water rights in Hemphill County, a suit that highlights the problems with Texas' attempt to regulate pumping from aquifers in the State. The suit, Mesa Water, L.P. and G&J Ranch, Inc. v. Texas Water Development Board, was filed in Travis County in April.  Water is a little outside the scope of my blog, but this fight concerns the Ogallala Aquifer in the Texas Panhandle, where I was born and grew up, and so is of special interest to me.

To understand the litigation, it is necessary to know something about the Ogallala and about Texas' efforts to regulate underground water resources.

Continue reading "Water Fight in the Texas Panhandle" »

A major issue in shale plays is the use of underground supplies of fresh water to fracture-stimulate the well. Horizontal shale wells are fracture-treated with fresh water to which various chemicals are added, and huge volumes of fresh water are needed. A 5,000-foot lateral horizontal well will use up to seven million gallons of fresh water. Depending on the availability of underground water at the lease, the operator's use of that resource could have a substantial adverse impact on the landowner's subsurface water supply.

 

The impact of fracing in the Barnett Shale was a subject of study by the Texas Water Development Board in 2007. The TWDB concluded that 89% of the water supply for the region of the Barnett Shale field was supplied by surface water sources, and that groundwater used for Barnett Shale development accounted for only 3 percent of all groundwater used in the study area. In East Texas, underground water is more plentiful and using it to frac wells may not place a strain on aquifers. But the Eagle Ford Shale is generally in a more arid part of the state where surface water supplies are more scarce and underground water is a more precious resource. Where the mineral owner also owns the surface estate, attention needs to be paid to the impact of mineral development on underground water supplies.

Companies have developed recycling methods to re-use frac water, which have been tested on an experimental basis. Devon has reported that it has been able to recycle a small percentage of the frac water used in its Barnett Shale wells and in the last three years has recycled nearly 4 million gallons. One obstacle is cost. It was reported that it costs about 40 percent more to recycle the water than to dispose of it by underground injection. Devon has said that its cost of recycling water in Barnett Shale wells is $4.43 per barrel, vs. $2 to $2.50 per barrel for typical water disposal into an injection well. Devon said that less than 5% of Devon's revenue goes toward the cost of handling flow-back water. For a good article on recycling frac water, go to this link.

Continue reading "Use of Fresh Water for Fracture Treatment of Horizontal Wells in Shale Plays" »

Gasland is a film documentary about the dangers caused by hydraulic fracturing of gas wells being drilled in shale plays across the U.S. It won a Special Jury Prize at the Sundance Film Festival this year. It was filmed by Josh Fox, whose family owns land in Pennsylvania that is in the Marcellus Shale Play. Gasland is now being screened across the country.

Josh Fox was recently interviewed about his film on the PBS program NOW. The film asserts that frac'ing of wells has caused underground aquifers to be charged with methane in Pennsylvania and Colorado and poses severe risks of contamination to the water supply. Josh Fox notes that hydraulic fracturing is exempt from federal regulation, and he advocates for passage of the FRAC Act now before Congress that would give the EPA jurisdiction over hydraulic fracturing.

The comments about the NOW story posted on its website evidence the growing controversy over frac'ing.

 

Continue reading "Movie 'Gasland' Stirs More Controversy About Hydraulic Fracturing" »

Until fairly recently, there has been little governmental regulation of the drilling of and production of groundwater in Texas. Texas historically followed the common-law "rule of capture," which holds that, unless the groundwater rights have been severed from the surface, the surface owner is the owner of all groundwater he/she can produce from a well located on his/her land and has no liability to adjacent owners whose groundwater might be damaged by such production.  But the rule of capture is quickly changing. Groundwater rights are now being placed under the control of Groundwater Conservation Districts, which have authority to regulate the drilling of and production from water wells within their jurisdiction. What follows is a brief summary of what is now happening - the development of a plan to regulate the production of groundwater from all of the major aquifers in Texas.  Landowners should be aware of these happenings.

Continue reading "What Landowners Should Know About Groundwater Rights in Texas" »