Tuesday, November 26, 2013

Water: The Achilles’ Heel of the U.S. Unconventional Energy Sector

Growing global scarcity of freshwater has made this resource more valued than oil due to an increasing world population and demand for water, pollution, and climate change. Water shortage is a colossal economic and social cost to all consumers, including the oil and gas industry, which is critically dependent on this commodity for its operations. With an expected rise in water consumption in the U.S. by an estimated 7 percent by 2030 from 2005 levels, 85 percent of which will be used by the energy sector, fuel production is likely to both increase its impact on water availability and quality and become vulnerable to potential water supply disruptions.

With the 36.5-percent increase in U.S. unconventional fuel extraction between 2005 and 2012, this energy sector faces challenges in balancing its water needs. While some reports claim that water demand amounts to nearly 5 million gallons of freshwater per shale gas and tight oil well drilling, there is conflicting information and uncertainty about the amount of water the unconventional energy sector consumes, which complicates water management in and between the states. Safe disposal and treatment of produced water from hydraulic fracturing, or fracking, are some of the pressing concerns for the industry and nearby communities. As competition for freshwater rises in areas of the U.S. where water demand for unconventional fuel production is highest, for example, in North Dakota, Texas, and Colorado, recurring severe droughts pose a risk to the long-term sustainability of water resources in energy producing states.

This complex energy-water predicament necessitates a comprehensive water management strategy and collaborative government-industry led solutions. The lack of comprehensive data and research on water supplies, the energy sector's use of this commodity, consumption levels, and wastewater from fuel extraction stands out as a main barrier to framing energy and water-related problems and developing measurable solutions. Collection of such information could help determine the future sources of water for the energy sector, the impact of the energy industry’s water use on the society, and decision-making on allocation of water.

An important step to improving data collection could be establishment of minimum standards for information-sharing on the oil and gas sector's water consumption, set by the federal government. The federal government should establish an online platform dedicated to disclosing information on the amount of water used in oil and gas production, the volume of wastewater derived from petroleum operations, and wastewater treatment, recycling, and disposal practices. Penalties should apply for failure to report. Reliance on voluntary disclosures could be ineffective due to insufficient and irregular reporting, as evidenced by the experience of FracFocus, an online registry designed for disclosure of chemicals used in fracking.

Further, due to the heavy role of state governments in regulating operations of energy companies in their jurisdictions, states could step up efforts to manage produced water from shale gas and oil drilling. Pennsylvania's requirements to recycle flowback water from shale gas production and limitations on surface wastewater disposal have increased water recycling in shale gas operations. Texas enacted new rules that encourage water reuse by eliminating recycling permits for drilling operators if they recycle fluids on their leases or transfer the water to another operator's lease for recycling. Such efforts could incentivize the industry to look for innovative solutions to treating and reducing produced water.

Extending the efforts to improve water management, state governments and the industry should also consider adopting best practices in seawater desalination in states near the sea, for example, Texas and Louisiana, to shift from freshwater use for drilling. This is particularly relevant given that the industry prefers freshwater for fracking because it is less corrosive. As part of the measures to prevent freshwater contamination, it is also imperative for the unconventional energy sector to improve well construction, casing, and leakage containment, especially in light of heightened public concern about the impact of fracking on groundwater. The U.S. Environmental Protection Agency's anticipated 2014 report on the impact of fracking on drinking water is likely to help chart the course of further policymaking toward this industry.

Lastly, the U.S. should consider expanding trading water access rights in some of the arid southwestern states, as competition for water resources is set to increase between energy, agricultural, and municipal usage. State governments should study successful water trading schemes in western U.S. and globally and adopt the best practices. An effective water trading mechanism will hinge on distinctly and uniformly established water rights, which is not the case in some of the most energy- and water-intensive states, such as Texas.

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