Karen L. Henderson

April 20, 2007

On March 19, 2007, the House of Representatives unanimously passed House Bill 902, called the "More Water and More Energy Act of 2007."[1] The Bill, introduced by Representative Mark Udall of Colorado, calls for "research and development of ways that water from oil and gas production could be used for agricultural purposes and to alleviate drought conditions."[2] The Senate's Committee on Energy and Natural Resources is currently reviewing the bill.[3]

Produced water has also been called ‘formation water' because it resides in underground formations or ‘brine water' due to the high salt and mineral content of the water.[4] When oil and gas operations tap into the underground formations to extract oil or gas, water is also extracted during the operation.[5] Produced water is the largest byproduct associated with oil and gas operations.[6] "During the process of oil and gas development, approximately 924 billion gallons of water is extracted throughout the year, with most of that water being pumped back underground."[7] The legislation's goal is to spur the development, treatment, and ultimately the use of produced water instead of treating it as a waste and re-injecting it back into the ground.

Produced water is treated as a waste in the eyes of the law because it typically has high total-dissolved solid (TDS) levels, hard minerals, and other contaminants. If untreated produced water is discharged into a stream, it can raise the salinity level of the stream, damage riparian zones, and have other harmful side effects. In fact, most states require that produced water be re-injected into deep injection wells, placed in lined pits for evaporation, or other specified disposal measures to ensure the produced water does not cause environmental harm. However, not all states treat produced water as waste. For example, North Dakota has for the past forty years taken produced water from the oil and gas industry and spread it on the roads during wintry conditions as a deicer.[8] "The [North Dakota] Transportation Department claims oil well wastewater—up to 10 times saltier than sea water—is a safe, effective and cheap deicer."[9] However, the environmental consequences of this practice could potentially be devastating. Produced water should be used, but only after it is treated; unless, of course, it is used in a contained project like cooling a power plant.

In the semi-arid West, water is not a resource that can be wasted and produced water serves as a potential new source of water that should be fully-developed. House Bill 902 directs the Secretary of the Interior to "carry out a study to identify the obstacles to increasing the extent to which produced water can be used."[10] Specifically, it authorizes $5 million dollars in federal grants to help build four pilot plants; three of the plants would be built in Colorado, California, and Texas, with the fourth in Arizona, Nevada, or New Mexico.[11] These pilot plants would be used to test the feasibility of treating produced water and the effectiveness and safety of the process.[12] Ultimately, a new water source can only be utilized once it is cost-effective; but additionally, the legal process must be well-defined to make it a clear road for the oil and gas industry. Oil and gas industry officials have

pointed out that there is a lack of information on steps required to use this water and that H.R. 902 establishes a collaborative effort to identify the obstacles in the development of this water resource and to provide research and demonstration plants to show how to overcome them in the future.[13]

There are two major hurdles for produced water development: 1) treatment technology must advance and become economically viable and 2) a clear legal path needs to be in place within each state to encourage oil and gas companies to utilize this resource. I would like to focus on the second hurdle.

The Wellington Oil Company, operating in Larimer County, Colorado, reports that 98.5% of its recovery is produced water.[14] As a result, Wellington needed to find a more efficient and cost-effective way to deal with all that "waste," because their ability to dispose of waste has a direct impact on how many pumps can be online and thus how much oil they can recover. Therefore, they embarked on a five-year adventure to lay a foundational framework for treating and using produced water in Colorado.

Wellington first had to prove that the produced water was coming from a non-tributary aquifer, then they had to build a treatment plant, and finally they had to figure out which agency should issue their discharge permit. Wellington sends the produced water through a "treatment system which includes: 1) a dissolved air floatation unit, 2) a ceramic microfiltration (which removes the heavy metals), 3) activated carbon, and then it is piped 4,000 feet to the groundwater discharge site."[15] The discharge site is a "leaky ditch" or more technically, a rapid-infiltration pit that allows the treated produced water to seep into a tributary aquifer and return to the system.

One of the most problematic legal hurdles for Wellington was trying to figure out, under Colorado water law, which agency should issue the discharge permit. Eventually, the Attorney General's (AG) office decided that the Colorado Oil and Gas Conservation Commission (COGCC) should issue the permit instead of the Colorado Water Quality Control Division (CWQCD).[16] While I still question whether this was the correct decision, the point is that the decision was made, water quality standards were set, the permit was issued, and Wellington was allowed to discharge the treated water into the tributary aquifer. Therefore, if another oil or gas company comes along and wants to follow in the footsteps of Wellington, most of the groundbreaking work is already in place. In fact, the COGCC is considering whether to promulgate new rules to accommodate projects like Wellington in the future. Additionally, with Wellington's project the treated produced water is supplementing the river system instead of going to waste in a deep injection well and Wellington can increase its pumping for oil. In effect, the name of the act comes true: more water and more energy.

House Bill 902 is a very important step in changing our attitude toward produced water from a waste to a resource. However, it is not the final step. Eventually, once the pilot projects determine the efficiency and feasibility of treating produced water, we will be in a better place to gauge the feasibility of treating produced water on a large-scale. While Wellington serves as a great example of how this process works on a small scale, there are many unanswered questions regarding the feasibility of a large-scale treatment system. For example, the transportation costs of getting the produced water from each individual pump to the treatment plant could be very expensive. In addition, Congress should enact a bill that requires the applicable agency in every state to promulgate rules that deal with treating and using produced water. While there are still unanswered questions, changing large amounts of industrial waste into a useable resource has great potential. Udall believes "the bill will change an energy-industry problem into an opportunity, not just for oil and gas producers but for everyone else who would benefit from increased supplies of useable water."[17]

The potential for projects like Wellington are not only good for the environment, in that it reduces waste and increases water supplies, but it also can be a smart financial investment. Currently, oil and gas companies have to pay to dispose of produced water, either through drilling deep injection wells or building lined pits. However, if the money that is currently spent to dispose of a waste was used to treat produced water, then the oil and gas companies could potentially reap benefits for both resources coming out of their pumps. For example, Dave Stewart, of Stewart Environmental Consultants, who has overseen the Wellington project said:

The cost of this project is about $4,500 per acre-foot. If we do nothing else and just sell it as augmentation water, in Northern Colorado this augmentation water sells for about $20,000 per acre-foot—nearly five times increase in value. If we build it out with the [Reverse Osmosis] (RO) plant, then that water becomes worth about $30,000 to $40,000 per acre-foot.[18]

The ability to profit on both the resource and the "byproduct" of an oil and gas operation should encourage more companies to invest in the infrastructure and get more projects online. In an effort to encourage the oil and gas industry, House Bill 902 "establishes a collaborative effort to identify the obstacles in the development of this water resource and to provide research and demonstration plants to show how to overcome them in the future."[19] Once the House Bill 902 pilot projects and others like Wellington are operating, the process should become more streamlined and inviting for even the larger oil and gas companies. I believe that House Bill 902 is a great first step to utilizing this water resource and hope the Senate votes to pass this water bill.

[1] More Water and More Energy Act of 2007, H.R. 902, 110th Congress (2007) available at http://thomas.loc.gov/cgi-bin/bdquery/z?d110:HR00902:@@@L&summ2=m& (last visited Apr. 12, 2007).

[2] Congressman Mark Udall, House Passes Udall Water Bill: Industry, Bush Administration Support ‘More Water and More Energy Act,' http://markudall.house.gov/HoR/CO02/Newsroom/Press+Releases/2007/HOUSE+PASSES+UDALL+WATER+BILL.htm (last visited Apr. 13, 2007).

[3] More Water and More Energy Act of 2007, supra note 1.

[4] Karen L. Henderson, Produced Water Regulation in Colorado (Feb. 27, 2007) (unpublished student note, on file with author).

[5] Id.

[6] John A. Veil et. al., Argonne Nat'l Lab., A White Paper Describing Produced Water From Production of Crude Oil, Natural Gas, and Coal Bed Methane v. (2004), available at www.ead.anl.gov/pub/doc/ProducedWatersWP0401.pdf.

[7] 153 Cong. Rec. H2628-01. (Mar. 19, 2007) (statement of Rep. Steven Pearce).

[8] James MacPherson, De-icing with Oil Well Wastewater Under Fire, Bismark Tribune,

http://www.bismarcktribune.com/articles/2007/02/03/news/state/128196.txt&cid=1113284556&ei=mrfERfXPLZL2oALlipCqAw (last visited Apr. 12, 2007).

[9] Id.

[10] Udall, supra note 2.

[11] Id.; see also More Water and More Energy Act of 2007, supra note 1.

[12] Id.

[13] Id.

[14] Brad Pomeroy, The Wellington Oil Field: A Case Study of the Beneficial Use of Produced Water from an Oil Field in Colorado, Produced Water Workshop 98, 100, available at http://cwrri.colostate.edu/Produced%20Waters/Proceedings%20Final%20PDF.pdf.

[15] Karen L. Henderson, Produced Water Regulation in Colorado (Feb. 27, 2007) (unpublished student note, on file with author) (Referencing Dave Stewart, Production Water as New Water Resource? Produced Water Workshop 87, 89, available at http://cwrri.colostate.edu/Produced%20Waters/Proceedings%20Final%20PDF.pdf.) (unpublished student note, on file with author).

[16] Letter from Annette M. Quill, Assistant Attorney General, Environmental Quality Unit, Natural Resources and Environmental Section, Colorado Attorney General's Office to Glenn Porzak and Steven Bushong, Partners, Porzak, Browning & Bushong (Aug. 10, 2005).

[17] Udall, supra note 2

[18] Dave Stewart, Production Water as New Water Resource?, Produced Water Workshop 87, 89, available at http://cwrri.colostate.edu/Produced%20Waters/Proceedings%20Final%20PDF.pdf.

[19] Udall, supra note 2