Water management

New Mexico Ends Freshwater Sourcing From State Lands for Drilling and Completions

While it is one of the top producers of liquid hydrocarbons in the US, New Mexico is also among the driest. The issue has culminated in a restriction on new freshwater leases issued by the state and a push for more recycling of produced water.

Source: CDM Smith.

Officials in New Mexico will no longer grant approvals for the use of fresh groundwater sourced from state lands in oil and gas operations.

Announced this week by the New Mexico State Land Office, the order will primarily impact unconventional oil and gas producers that require several millions of gallons to drill and later hydraulically fracture each horizontal well.

The State Land Office cited water scarcity as the primary driver behind the policy shift.

Oil output in New Mexico has soared over the past 5 years, making it the third largest producer in the US. Most of the state’s 3 million B/D come from the Delaware Basin, one-half of the prolific Permian Basin that extends eastward into Texas.

The subsurface may be liquids-rich, but this arid southeastern corner of the state receives only about 13 inches of precipitation annually. The limited freshwater resources have historically only been used by farmers and municipalities, who faced with new competition, have filed lawsuits in recent years to block the industry’s access to the aquifers.

Recycling Is the Priority  

The State Land Office said it hopes the directive will spur an increase in produced-water recycling, which it points out, has been proven to be an effective base for fracturing-fluid systems.

“Rather than looking at fresh water as a commodity for sale to the highest bidder, we should look at the advancements in water recycling and produced water as our way forward,” said Stephanie Richard, the commissioner of public lands, in a statement.

She added, “If we are reliant on an economy based on getting oil out of the ground, we should be prioritizing the use of recycled or produced water to do so.”

The official statement also noted that water-use data from FracFocus show that 14.5 billion gallons of water was used by the industry in New Mexico last year, “with recycled or produced water comprising only a fraction of the total water use.”

Many of the largest operators in the Permian have been working for years to get ahead of such regulations by stepping up their recycling efforts.

One company that appears well-positioned to adapt to the new rule is Occidental Petroleum (Oxy).

Last year, Oxy reported that its Permian program (which includes activity in Texas) achieved a 90% water-recycling rate at new well locations, meaning that less than 10% of the water it used in drilling and completions was fresh water. Between 2016 and 2019, Oxy said it recycled 2.7 million bbl of produced water.

In 2019, the New Mexico legislature passed a new law called the Produced Water Act that was drafted in cooperation with oil companies operating in the state.

Regulations have allowed for produced-water recycling in the state since 2015. However, the new act was created to address impractical liability and water-ownership clauses in prior legislation that were considered roadblocks to the expansion of produced-water recycling facilities in the state.

To further aid the industry effort, New Mexico State University and the state’s environmental department have teamed up to fund a new research consortium that seeks to advance the development of affordable recycling systems.