Regulatory confusion reigns…but that may turn out to be good news for a water industry looking for opportunities in the onshore energy industry, argues Amanda Brock.
One thing is clear, environmental regulations have not kept up with the explosive growth of the US onshore energy industry. The regulatory process is moving at a glacial pace and is playing catch-up with an industry where speed and efficiency translates to success. Despite the absence of clear regulatory guidelines, oil and gas operators concerned with increased stress on surface and ground water supplies, continue to evaluate alternatives to better manage water throughout the hydrocarbon production lifecycle. That means opportunities for water treatment and technology companies. However, the challenge remains: where and how can water companies build a sustainable business in this sector? The recent actions of the US Environmental Protection Agency (EPA) may provide some insights.

First a little history is needed here. Dick Cheney, who had previously headed the giant oil field service company Halliburton, is viewed as leading the charge under the Energy Policy Act of 2005 to exclude hydraulic fracturing from the Safe Drinking Water Act except where diesel fuels are concerned. The US Congress at the time also gave the oil and gas industry other exemptions from environmental regulations, including the Clean Water Act (CWA). These exemptions are sometimes referred to as the ‘Halliburton loopholes’. There is momentum building to find ways to eliminate or undermine these existing loopholes and the EPA is central to this effort.

While the EPA continues to delay its much-anticipated report on the impact of hydraulic fracturing on drinking water resources, it recently issued a series of reports and proposed rules relating to water use and the discharge of wastewater in energy production. These regulations and proposals, while designed to eliminate uncertainty, muddy the waters.

The EPA, for example, has now released proposed rules to clarify what US waters are covered by the CWA. One of the main goals of the revisions is to identify water bodies which have a significant “nexus” to waters currently covered by the CWA and to then evaluate these other waters on a case-by-case basis. The inherent uncertainty of what new waters are now covered has many accusing the EPA of dramatically expanding federal authority over state and private water rights. These rules, if promulgated, will have a definite impact on how energy companies will source surface water and site their production facilities.

The EPA has also released two reports on waste generated by oil and gas production and concludes that the federal government should encourage the development of additional and improved best practices. Produced water is the largest oil and gas production waste stream with more than 21 billion barrels generated annually in the US. However, waste from oil and gas operations falls under one of the loopholes and is currently largely exempt from federal waste regulations. This will change at some point and any changes will directly impact the treatment and disposal of produced water.

The emphasis for oil and gas operators has to be improved self-sufficiency, while efficiently managing the water life cycle using primarily either brackish water for as long as it is not further regulated, or recycled produced water. The opportunity for water companies will be in developing solutions for sourcing, managing, treating, recycling and minimising the disposal of the huge volumes of brackish and produced water needed, as cost effectively as possible.

The EPA’s website identifies all of its areas of concern such as the impact of hydraulic fracturing on drinking water, ensuring the safe disposal of related wastes, underground injection of waste disposal fluids, and use of surface ponds. The EPA concludes that recycling has “the potential to reduce discharges…minimise underground injection of wastewater and conserve water resources”. That’s about as certain as the EPA is going to get right now, but provides guidance the water industry should consider.

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