1. “Sustainable Water Management in the Oil and Gas Industry” John Tintera PG #325 Blythe Lyons Katie Carmichael Texas Alliance of Energy Producers

2. Why do a White Paper?

3. Water Maxims Water is where you find it- not where you need it To use the water it must be treated or transported

4. Water Maxims Energy needs Water Water needs Energy We need Both

5. Five Myths about Water and Our Oil and Gas Industry in Texas True or False? Oil and gas is the largest user of water in the State. Water is free for any oil and gas company to use. Water recycling is expensive. Water recycling is unregulated. Water recycling is a better alternative than disposal. (trick question!)

6. Snapshot of Oil & Gas in Texas US Oil & Gas Production 2005 – 2012: Production increased 30% Texas Production 2004 – 2014: Increased from an average of 957,000 barrels of oil per day to averaged 2,014,480 barrels per day Production increase due to hydraulic fracturing combined with horizontal drilling

8. Hydraulic Fracturing & Water Hydraulic fracturing is the process by which a liquid solution, typically composed of water, a proppant such as sand, and a small percentage of chemicals is injected at high pressures down a wellbore to create tiny fractures in the tight rock formation, which allows the oil and natural gas to escape the rock Increase in hydraulic fracturing = Increase in water usage And Vice Versa

9. Factors Encouraging Water Recycling Public Perception Induced seismicity fears related to injection wells Population Increase Drought Cost Associated with infrastructure and transportation

10. Challenges Faced with Non- Freshwater Local conditions drive water management services Stay within RCRA exemptions, Permit by Rule (PBR) Landowners and water rights Waste-Handling Storage and Transfer

11. Recommendations 1. Voluntary Water Recycling Reporting 2. Consider Recycling Tax Incentives 3. Preserve RCRA Exemption 4. NPDES Review 5. Evaluate Permit by Rule (PBR) Model for Other States 6. Liability Review 7. Advocate for Recycling 8. Balanced Approach to Regulation of Energy Industry’s Water Use 9. Expand Oil and Gas Field Cleanup Funds to Recycling Activities

12. Voluntary Water Recycling Reporting Reporting volumes of recycled produced and flowback water (NOT overall water withdrawals and consumption data) National or statewide Help build a solid foundation for planning and policy initiatives Discussion needed: Who reports the recycled water data, to whom it is reported, and in what format

13. Consider Recycling Tax Incentives Tax policy revisions Reduction in severance tax equal to the cost of recycling on a well-by-well basis (other options?) Make good business as well as environmental sense

14. Preserve RCRA Exemption Flowback fluid and produced water are both exempt from RCRA Preserve current regulatory scheme Ensures water recycling fits into existing federal regulatory framework

15. NPDES Review National Pollutant Discharge Elimination System Typically not allowed for onshore facilities EPA’s Effluent Limitation Guidelines do not allow discharge of produced water for onshore oil and gas operations Expedite permit process for treated produced water and still ensure environmental protection Will help maximize the beneficial use of this water

16. Evaluate Permit by Rule (PBR) Model for Other States Permit by Rule (PBR) authorizes noncommercial water recycling by an oil and gas operator Refers to regulatory requirements for the oil and field activity to be listed in the rule, eliminating requirement for applicant to submit permit application PBR streamlined the regulatory process for water recycling Evaluation of PBR for possible application in other states

17. Liability Review Ownership of treated produced water Ensure liability truly reflects the risk of recycling is also a worthwhile goal Most cases, surface owners generally have private ownership of groundwater

18. Advocate for Recycling Advocate for recycling and to help the public learn about the rapidly evolving technology of the recycling industry Energy industry and water recycling industry need to support advocacy organization that can collect and disseminate fact-based information

19. Balanced Approach to Regulation of Energy Industry’s Water Use Oil and gas industry’s need for water must be balanced against the needs of others Ensure public is satisfied so they will not seek legislature and/or regulatory redress

20. Expand Oil and Gas Cleanup Funds to Recycling Activities Texas Oil Field Regulatory and Cleanup Fund be extended to include accidents at recycling facilities or orphaned recycling facilities Should also encompass the products and waste of water recycling, providing a final layer of environmental protection

21. Five Myths about Water and Our Oil and Gas Industry in Texas Oil and gas is the largest user of water in the State. FALSE Water is free for any oil and gas company to use. FALSE Water recycling is expensive. FALSE Water recycling is unregulated. FALSE Water recycling is an alternative to disposal. TRUE and FALSE