- May 3, 2013
Executive Summary
A key question investors should be asking is whether water management planning is getting sufficient attention from both industry and regulators.
This Ceres research paper analyzes water use in hydraulic fracturing operations across the United States and the extent to which this activity is taking place in water stressed regions. It provides an overview of efforts underway, such as the use of recycled water and non-freshwater resources, to mitigate these impacts and suggests key questions that industry, water managers and investors should be asking. The research is based on well data available at FracFocus.org and water stress indicator maps developed by the World Resources Institute.
FracFocus data was collected for more than 25,000 tight oil (sometimes referred to as shale oil) and shale gas wells in operation from January 2011 through September 2012. The research shows that 65.8 billion gallons of water was used, representing the water use of 2.5 million Americans for a year. Nearly half (47 percent) of the wells were developed in water basins with high or extremely high water stress. In Colorado, 92 percent of the 3,862 wells were in extremely high water stress areas. In Texas, which accounts for nearly half of the total number of wells analyzed, 5,891 of its 11,634 wells (51 percent) were in high or extremely high water stress areas. Extremely high water stress means over 80 percent of available water is already being withdrawn for municipal, industrial and agricultural uses.
The research paper provides valuable insights about potential water use/water supply conflicts and risks, especially in basins with intense hydraulic fracturing activity and water supply constraints (due to water stress and/or drought). Given projected sharp increases in production in the coming years and the potentially intense nature of local water demands, competition and conflicts over water should be a growing concern for companies, policymakers and investors. Prolonged drought conditions in many parts of Texas and Colorado last summer created increased competition and conflict between farmers, communities and energy developers, which is only likely to continue. 1 In areas such as Colorado and North Dakota, industry has been able to secure water supplies by paying a higher premium for water than other users or by getting temporary permits. Neither of these practices can be guaranteed to work in the future, however. Even in wetter regions of the northeast United States, dozens of water permits granted to operators had to be withdrawn last summer due to low levels in environmentally vulnerable headwater streams. 2
The bottom line: shale energy development cannot grow without water, but in order to do so the industry’s water needs and impacts need to be better understood, measured and managed. A key question investors should be asking is whether water management planning is getting sufficient attention from both industry and regulators.
Research Background
FRACFOCUS
FracFocus.org was launched in 2011 to serve as a voluntary national hydraulic fracturing chemical registry and is managed by the Groundwater Protection Council and the Interstate Oil and Gas Compact Commission to provide the public with access to information about the chemicals used for hydraulic fracturing. The database provides the location of each well that was “fracked,” the date it was fracked and the chemical additives and total volume of water injected down the well. However, information on the source and type of water used (e.g. freshwater, recycled, saline etc.) for each well is not disclosed and there are some structural issues with the database such as trade secret exemptions being claimed in supplying chemical information to the site. 3 Since being launched, 10 states and two Canadian provinces have opted to use FracFocus for regulatory reporting.
Since disclosure to FracFocus is often still voluntary, the number of wells and volume of water injected/used is underreported. Bloomberg estimated that FracFocus captured data on about 60 percent of wells fracked through the end of 2011, but disclosure is likely now even higher. 4 The data in Ceres’ analysis represents wells drilled from Jan. 1, 2011 through Sept. 30, 2012 and captures information on 25,450 wells. It includes both oil and gas and horizontal and vertical wells that have been hydraulically fractured. PacWest Consulting Partners helped organize and interpret the data. 5
WRI AQUEDUCT WATER RISK ATLAS
The World Resources Institute’s (WRI) recently launched Aqueduct Water Risk Atlas (Aqueduct) provides companies, investors and governments with a comprehensive, high-resolution picture of water-related risks worldwide. The Aqueduct includes 12 global water indicators grouped into three categories: physical water quantity risk; physical water quality risk; and regulatory and reputational risk. 6 Our analysis focused on the baseline water stress indicator, which is indicative of the level of competition in a given region and measures total annual water withdrawals (municipal, industrial and agricultural) expressed as a percentage of water available. 7
LINKING THE DATA
By linking the two datasets together through matching latitude and longitude coordinates, Ceres was able to study well locations and water volumes being injected against geographic water quantity indicators provided by the WRI maps. This allows us to study the extent and distribution of well locations in regions with water-sourcing challenges. By aggregating the total volume of water used in any region, we gain valuable insights into the water demand for hydraulic fracturing against water supply constraints such as drought severity and water stress. These indicators speak to the growing competitive pressure for water.
