FRAMEWORK OF SURFACE WATER AND GROUNDWATER LEGAL SYSTEMS AND PERMITTING

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GABRIEL E. ECKSTEIN is Professor of Law at Texas A&M University where he focuses on water, natural resources, and environmental law and policy issues at the local, national, and international levels. He regularly teaches Water Law, Oil & Gas Law, Law & Science, and Property Law, as well as other related courses. He also serves as a faculty member of the Graduate Faculties of the Texas A&M Water Management & Hydrological Science program and of the Texas A&M Energy Institute. In addition, Professor Eckstein: has served as an expert advisor and consultant for various UN agencies, nongovernmental organizations, and other groups on U.S. and international environmental and water law issues; serves as an Associate Editor for Brill Research Perspectives: International Water Law and on the Editorial Board of the Journal of Water Law; is an executive board member of the International Association for Water Law; serves as Of Counsel with the law firm of Sullivan & Worcester; and directs the Internet-based International Water Law Project (www.InternationalWaterLaw.org). Professor Eckstein was recently appointed to chair the International Scientific Committee of the XVIth World Water Congress, which will be held in Cancun, Mexico, in May 2017. Prior to joining Texas A&M University, Professor Eckstein held the George W. McCleskey Chair in Water Law at Texas Tech University where he also directed the Texas Tech Center for Water Law & Policy. Before entering academia, he served as senior counsel for Crop Life America working on agrichemical regulation and legislative matters, and as a litigator in private practice.

Framework of Surface and Ground Water in Oklahoma and Texas: Perspectives for Oil and Gas Development

I. Importance of Water Law for Oil and Gas Development

Advancements in drilling techniques have broadened possibilities for producing hydrocarbons; but the innovations of unconventional drilling have exacerbated existing threats that the oil and gas industry have posed to water resources while creating new challenges. In today's industry, conventional methods of drilling for free-flowing crude oil are playing a secondary role to unconventional oil and gas production capable of bringing hydrocarbons trapped in tight or previously inaccessible geologic formations.¹ Compared to conventional production, unconventional methods use much greater amounts of water in chemical-laden processes that can impact the availability and purity of freshwater resources in concentrated localities where those mineral reserves are clustered.²

A. Water use in conventional production

Water is part of conventional oil extraction primarily in two ways: during secondary recovery, in which operators inject or flood water into oil reservoirs to push out more hydrocarbons, or when water emerges alongside oil as "produced water." Commonly used secondary and enhanced recovery methods utilize about 62 gallons per 1 million Btu (MMBtu).³ Likewise, conventional natural gas wells employ very little water in the drilling phase.⁴ But over a well's lifetime, each barrel of oil produced yields an average of 10 gallons of produced water containing some of the natural chemical compounds found in the mineral reservoir, including hydrocarbons and naturally occurring radioactive materials.⁵ Untreated, this produced water is typically stored as industrial waste, either in evaporation pits or in underground disposal wells.⁶

B. Water for fracking

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Unconventional methods like hydraulic fracturing ("tracking") are much more water-intense, using millions of gallons of water each time they are performed on a well.⁷ The picture of actual water usage related to fracking is affected by other factors. First, most of the water consumed in the process is used during the first few days of well completion.⁸ Second, wells use 1--5 million gallons of freshwater per frack, but multiple fracks are usually required for each well.⁹ And third, fracking activities are concentrated over certain hydrocarbon plays, so when averaged into state water usage totals, the impact on those localities is underrepresented.¹⁰

Despite the challenges and the current industry downturn, hydraulic fracturing will probably continue to feature significantly in the future of oil- and gas-producing states like Texas and Oklahoma, where many hydrocarbon formations are stacked vertically in one location but are accessible only through fracking. For example, Texas' Permian Basin features 6 such stacked shale plays, enabling operators to produce from multiple vertical formations by drilling a single well bore. In Oklahoma, the recent exploitation of the "STACK" play in the Anadarko Basin comprises several stacked formations that, although difficult to drill, contain highly valuable natural gas liquids, making the fracking process economical and attractive.¹¹

C. Waste water disposal

Most oil and gas production utilizes primarily freshwater, rather than recycled water, because it is more ideally suited to the process.¹² When water is withdrawn and "removed from the immediate water environment" through processes like evaporation, transpiration, or taken in by plants, animals, and humans, its use is considered consumptive.¹³ Fracking and secondary or enhanced recovery procedures also can result in the permanent consumption of the freshwater used in the process if drillers decide not to treat or recycle produced water (wastewater resulting from the fracking process) and have no alternative but to store it permanently in deep underground formations. Because the chemical fluids, salts, and other contaminants found in produced water make that water unsuitable for plant, animal, or human consumption, produced water cannot be discharged into surface waters without extensive treatment.¹⁴ However, once placed in permanent storage, that water is no longer a part of the hydrological cycle.¹⁵

D. Water shortages & needs for oil and gas production

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Although conventional drilling still dominates in Oklahoma, the state's 2012 Comprehensive Water Plan forecasted that the amount of water used by horizontal fracturing would surpass that used in conventional production by 2060, using ten times more than in 2012.¹⁶ The 2012 Plan further projected that water usage by the entire oil and gas sector would double from 2010 to 2060--but by 2013 it had already more than doubled 2010 levels.¹⁷ The state has seen an increase in new permits for the oil and gas sector, the number of horizontal gas and oil wells, and the quantities of water withdrawn. Oklahoma's real vulnerability is that the areas that have recently suffered worst from drought are the same areas experiencing a boom in oil and gas drilling. In addition to endangering the state's water supply, insufficient supplies of water for oil and gas production could have an adverse impact on the state economy. The oil and gas industry is the single largest tax revenue source in Oklahoma, contributing $1.96 billion in direct taxes in 2012--more than 22% of all taxes statewide.¹⁸

In response to these water supply challenges, Oklahoma passed its Water 2060 Act, becoming the first state to set a goal of using no more freshwater in 2060 than it used in 2012.¹⁹ The legislation's stated conservation goals targeted alternatives to freshwater supplies, such as wastewater, brackish water, and other non-potable supplies.²⁰ Guided by those goals, Water 2060 provides grants to fund innovative pilot projects and educational programs.²¹

Meanwhile, by 2060, the state of Texas expects its population to increase 82%, predicts water demand will increase by 22%, and projects a decline in water availability of about 10%.²² While the available supply of surface water is expected to increase by 6%, ground water supplies appear likely to drop by 30%.²³ Severe drought conditions would confront the state with an immediate water deficit of 3.6 million acre-feet each year the drought continued--86% of that deficit would be borne by irrigated agriculture while 9% would be associated with municipal water uses.²⁴

In 2012, the Texas Oil & Gas Association reported that the boom in tracking dramatically increased the statewide oil and gas industry's water usage, but that a trend to use brackish water in lieu of freshwater appeared strong.²⁵ The report found that fracking used approximately 81,500 of

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the total 102,500 acre-feet of water used by the industry in Texas in 2011, up from 36,000 acre-feet of water for fracking in 2008.²⁶ Texas's 2012 State Water Plan projected that municipal water use would overtake irrigation as the state's greatest water need, with demand expected to rise from 4.9 million acre-feet a year in 2010 to 8.4 million acre-feet by 2060. Alongside urban and rural municipalities, manufacturing, steam-electric power generation, and livestock are also expected to demand greater water.²⁷

II. Water Law in the American Southwest 101

A. Surface Water

1. Predominantly prior appropriation

Water rights in the western United States are predominately determined by the prior appropriation doctrine.²⁸ This regime operates on the principle of "first in time, first in right," establishing that the first user to divert water from its course and timely apply it to a beneficial use (domestic, agricultural, energy, and industrial purposes often qualify) is deemed the senior user and enjoys priority over later (junior) users of the same source.²⁹ When the available water is insufficient to satisfy all of the users' rights, junior users must stop withdrawing their allocation, in order of their junior status, until the senior users receive their full amount.³⁰...