Today’s piece is from Ben Samuels.
Running in parallel to the history of human existence has been our reliance on water, which is essential in practically every facet of life: agriculture, transportation, health and wellness, power, mining, livestock, and more... the list goes on and on. Although water is one of Earth’s most plentiful resources, both globally and domestically, there are significant challenges regarding access to the proper amount of the appropriate type of water in the right places when demand and necessity dictate. The requisite competition among water users, including industry, agriculture and livestock, municipalities, recreational users, and conservationists can be quite complex when crafting and negotiating equitable policy, compacts, infrastructure development plans, beneficial reuse applications, and other collaborative mandates. There are a litany of local, regional, state, and federal agencies that are tasked with the management of allocation, conservation, and development of water resources; each with their own mandates and objectives.
From a macro perspective, water law in the United States governs water use rights and the corresponding restrictions and regulations regarding pollution, water quality, and water discharge. Historically, surface water and groundwater have been treated as separate systems, except for New Mexico and a few other examples, and have been governed and regulated separately as well, but this does not seem to couple with our reality 'on the ground'. While the originating water source is important in context of conservation and allocation, groundwater from aquifers, cisterns, and rainfall and surface waters, such as rivers, lakes, and ponds require a comprehensive, collective management approach in order to develop a cohesive plan for resource utilization and deployment across the spectrum.
As many in the oil and gas industry know, freshwater management has become increasingly important as we have seen the industry’s need for water in extractive operations increase exponentially (approximately three to eight million gallons of water are used to frac a single well, with thousands of wells drilled annually). Nationally, we withdraw ~361,000 acre-feet of water per year, 87% of which is freshwater (the remaining balance is brackish/saltwater). Due to the regional water imbalance and the persistent push towards operational footprint reduction and resource conservation, New Mexico recently outlawed freshwater sales for use in oil and gas operations. In contrast to just years ago, when there were preventative measures in place to mitigate flood risks, the region has recently been struggling with dangerously low reservoir water levels, low snowmelt and runoff, and increasing baseline temperatures. The Rio Grande region average temperature has increased ~400% more quickly, over the last 50 years, in comparison to global averages. One relevant example of the severity of the issue can be found at the nearby Elephant Butte Reservoir. In September 2018, the reservoir held 58,906 acre-feet of water, with a total capacity of nearly thirty-four times that amount.
Every State is charged with crafting its own water use policies, many of which have not changed in decades, and this further adds to the complexity when balancing the differing water management doctrines: rule of capture (Ex.: Texas), riparian rights (all states East of Texas, except Mississippi, and Hawaii), prior appropriation (most of the Western United States), reasonable use, correlative rights, etc. The Eastern United States, for example, is substantively more fertile than the Western region, necessitating certain diversion and gathering techniques aimed at creating a more equitable water balance on a national scale. We will revisit the domestic groundwater and surface water law framework in future content, but let’s zoom in on a unique and timely dispute between two major oil and gas-centric states, Texas and New Mexico.
In 1949, the Pecos River Compact, between Texas and New Mexico, was consummated to manage the equitable division of water from the Pecos River, which takes a 900-mile journey beginning in the Sangre de Cristo Mountains, near Santa Fe, New Mexico, before reaching the Rio Grande River near Del Rio, Texas. The pact governs water allocation and dispute resolution procedures, especially due to the associated differences in management caused by Texas’ rule of capture approach in contrast with New Mexico’s water management laws. After nearly four decades of consistent disagreement, the Supreme Court filed an amended decree, in 1988, stating New Mexico was not honoring its obligation to provide Texas unfettered access to its’ water allocation. The decree also effectively appointed a River Master, Neil S. Grigg (who still holds that position), to enforce the Compact and to calculate and maintain records of New Mexico’s delivery obligations and any associated overage or shortfall of the mandated flows into Texas.
In 2014, after Tropical Storm Odile, the Red Bluff Reservoir, which is on the Pecos River in southern New Mexico and Loving/Reeves Counties, Texas was in danger of flooding. In response, Texas’ Pecos River Commissioner emailed a request for water storage to the New Mexico State Engineer. Texas asked New Mexico to hold some of their allotment in the federally owned and operated Brantley Reservoir (New Mexico) to prevent flooding. New Mexico granted the request and held Texas’ water for approximately nine months, from November 2014 to August 2015, before releasing the water back into the Pecos River which flowed into Texas along the route mentioned above. Notably, in the initial granting of Texas’ request, New Mexico’s State Engineer, John D’Antonio, reminded Texas that the water at issue belonged to Texas and evaporation loss should and would be borne by Texas.
During these nine months, approx. 21,000 acre-feet (~ 6.842 billion gallons) of Texas’ water evaporated. In response, Texas took the stance that they were owed the entire water balance, irrespective of evaporation. New Mexico disagreed, as this specific scenario is addressed in the River Master’s Manual instructing that water held back, at the request of Texas, is not the responsibility of New Mexico where evaporation is considered:
“If a quantity of the Texas allocation is stored in facilities constructed in New Mexico at the request of Texas, then . . . this quantity will be reduced by the amount of reservoir losses attributable to its storage, and, when re- leased for delivery to Texas, the quantity released less channel losses is to be delivered by New Mexico at the New Mexico-Texas state line.” App. to Texas’s Motion for Review 37a (emphasis added).”
For the next four years, the States attempted to reach an amicable resolution. Unable to do so by 2018, New Mexico asked the River Master to step in and establish a ruling. The River Master sided with New Mexico based on his rejection of Texas’ claim that New Mexico had surpassed the deadline set for filing a motion for delivery credit and confirmation that the evaporation loss is not to be borne by New Mexico, according to the 1988 Manual. Notably, however, Justice Alito dissented in part to the otherwise unanimous decision by pointing out that the Brantley Reservoir is a federally owned and operated asset, and the determination had been made to restrict these flows for flood prevention and would not have been under the purview of the Pecos River Compact since Texas was not involved in any agreement for storage and New Mexico may not have had the requisite standing to agree to hold these waters at Texas’ election. This argument does not seem to jive with many of the facts of the case, but the dissent is noteworthy nonetheless.
While the facts of this specific case are simply anecdotal, the intention and utility of the water management processes underlying the case are much more intriguing and important. As water scarcity and conservation has become an increasingly important national conversation, local, state, and federal agencies and governments have begun to create a framework for the aforementioned comprehensive approach to water management across all markets and uses. The remediation and repurposing of oilfield produced water is of special interest as, “the rise in the number of oil and gas wells has also led to the generation of large volumes of produced water. As an example, in 2017, oil and natural gas production in New Mexico produced 37.8 billion gallons of produced water according to the New Mexico Energy, Minerals and Natural Resources Department,” according to an EPA report in May 2020, Summary of Input on Oil and Gas Extraction Wastewater Management Practices Under the Clean Water Act.
While industries and municipalities have continued to increase water usage and demand, our country has been in a net-negative regenerative water cycle for years now, and while this dynamic is traditionally cyclical, there are concerns that the warming climate may exacerbate these issues to a degree that intervention is required rather than elective. The EPA report mentioned above and the various interest groups involved in this conversation have begun to focus intently on beneficial reuse applications and have begun to explore a myriad of ways to reintroduce these waters into the ecological landscape to reverse some of these negative trends. As our nation’s population continues to grow and we continue to prosper at unprecedented historical levels, our unrestricted access to water for sustenance, innovation and enjoyment will continue to be inextricably linked to our existence. With collaborative planning and fact-based policy creation, we can align all interested parties in pursuit of an equitable water balance and focus on reuse and elimination of wasted resources. The oil and gas industry can and should be an integral part of this conversation; note: there will be some fantastic investment opportunities along the way as this niche expands and ‘earns a seat at the table’.