Oil and Gas Lawyer Blog
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.
Concerns have also been raised about potential environmental hazards of the chemicals used in frac water. A bill has been introduced in Congress, the FRAC Act, to impose federal regulatory requirements on companies using frac water, requiring reporting of the chemicals used and possible federal regulation of fracing under the Safe Drinking Water Act. The EPA has announced a new study of the risks frac water poses to underground water supplies. For more about the FRAC Act, see this link.
In Texas, the owner of the mineral estate has the right to use so much of the surface estate as is reasonably necessary to explore for and produce the minerals. This includes the right to use underground water, which is owned by the owner of the surface estate. Therefore the lessee under an oil and gas lease has the right to use subsurface water for drilling and fracing operations, except to the extent that the lease restricts such right. If the lessor is also the surface owner, the lessor should carefully consider what restrictions on rights to use subsurface water should be included in the lease. Before the development of fracing techniques and horizontal wells, a typical oil and gas lease allowed the lessee to use subsurface water, except from the surface owner’s wells and tanks, usually without compensation. Where water resources are scarce, some leases, especially in West Texas, are now providing that the lessee may not use subsurface water without the surface owner’s consent. Some landowners are requiring that the lessee purchase the water from the surface owner. In some areas of the Eagle Ford Shale there may not be sufficient subsurface water to supply the needs of operators. In other areas, underlain by the Carrizo fresh-water sand, the large volumes of water needed for development of the Eagle Ford may have a substantial adverse impact on the Carrizo aquifer.
Although aquifers are becoming increasingly regulated by the growing number of underground water districts in Texas, Texas law specifically exempts from district regulation water wells drilled for the purpose of supplying water for oil and gas exploration. If oil and gas exploration places a large demand on aquifer supplies, the resulting aquifer depletion may frustrate efforts of underground water districts to regulate and preserve their aquifers for human consumption, farming and other non-industry purposes.
Large ranch owners should consider consulting with a hydrologist before entering into an oil and gas lease, to be sure they understand the extent and limits of their underground water supplies and the possible impact of the demand placed on those supplies by fracing of wells. Possible alternative water supplies and the possibilities of recycling frac water should be discussed with the lessee. The ranch owner should also obtain good base-line data of the level of the aquifer under his property and the quality of his groundwater before any drilling begins, so that the effects of the lessee’s activities can be accurately determined. The oil and gas lease could require the lessee, at its expense, to test the depth and quality of water in each of the lessor’s wells prior to commencing operations, and could require the lessee to deepen or replace any wells becoming dry as a result of the lessee’s withdrawals.
The operators’ practice where possible is to construct one large earthen tank to hold frac water for multiple wells and to drill one or more water wells to fill the tank. If the lessor under and oil and gas lease is the surface owner, the lease should address where such a tank will be placed and what will happen to the tank and wells when the drilling operations are completed.