Oil and Gas Lawyer Blog
The drought in Texas, along with improved recyclying technology, has driven efforts to increase recycling of water used in hydraulic fracturing of wells. According to one estimate, the fracing of wells in 2011 consumed on the order of 135 billion gallons of water – about 0.3 percent of total U.S. freswater consumption. (Golf courses in the U.S. consume about 0.5 percent of all freswater used in the country.) But if you own land in the Eagle Ford field, those numbers don’t mean much. Water use in some counties is lowering the water table in the Carrizo-Wilcox aquifer, the principal source of frac water for the Eagle Ford, causing some existing wells to dry up. In West Texas, the lack of available groundwater has forced companies to look at recyclying their frac water to extend the useful life of the water they can find for fracing.
Two bills now pending in the Texas legislature – House Bills 3537 and 2992 – would require the Texas Railroad Commission to develp rules to require rthe recycling and reuse of frac water returned from wells. The Commission has recently adopted rules to make it easier for operators to recycle water. And another bill, House Bill 379, would impose a 1-cent-per-barrel fee on wastewater disposed of in commercial injection wells.
Devon Energy, a leader in recycling of frac water in the Barnett Shale, testified to Texas lawmakers that recycling is 50 to 75 percent more expensive than sending frac water to injection wells. There are now about 50,000 injection wells in Texas, and the number is growing rapidly. Recyling is much more common in the Marcellus, where injection wells are not available and water must be hauled long distances for disposal.
The talk about recyling of frac water has raised an interesting legal question: whose water is it?
Groundwater is part of the surface estate in Texas. The owner of the mineral estate has the right to use so much of the surface estate – including groundwater – as is reasonably necessary to explore for and produce the minerals. Typically, an oil and gas lease grants the lessee the right to use groundwater, just as it grants the lessee the right to use the surface of the land, to explore for and develop the oil and gas under the leased property. Unless the lease provides otherwise, the lessee has no obligation to compensate the surface owner for the groundwater used. The operator may drill a water well and use that water for drilling and fracing wells on the lease, without compensation to the surface owner.
If the owner of the mineral estate also owns the surface of the land, the lease may require the lessee to compensate the lessor for use of the surface estate. In such instances in Texas, leases now often require the lessee to pay for groundwater used, at up to 50 cents per barrell or more.
Landowners in Texas also have sometimes contracted to sell their groundwater to operators for use in fracing wells. The operator, after contracting with one surface owner to obtain a groundwater supply, may build a large holding pond to store and use water for fracing of wells located on several leases in the vicinity of the pond, piping the water to its wells.
In those instances where the groundwater is sold to the operator, the operator has title to the water and should be able to recycle and use it as it pleases. But where the operator has taken groundwater under its general right to use the surface estate pursuant to its lease, the issue is less clear. The operator has the right to use the water, but may not acquire title to the water. Until recycling technology came about, the used frac water was just a waste product of the drilling operation that had to be properly disposed of. Once water is recycled, it has an economic value, and the surface owner of the property may claim that the water still belongs to it.
This is just one of the many interesting new legal issues raised by new technology in the oil field.