Texas Drought Slows Fracking
Drought Threatens Texas Oil Boom
By Joe Carroll - Jun 12, 2011 10:59 PM MT
Worst Drought in More Than a Century Threatens Oil Boom
The shortage is forcing oil companies to go farther afield to buy water from farmers. Source: Occidental Petroleum Corp. via Bloomberg
The worst Texas drought since record-keeping began 116 years ago may crimp an oil and natural- gas drilling boom as government officials ration water supplies crucial to energy exploration.
In the hardest-hit areas, water-management districts are warning residents and businesses to curtail usage from rivers, lakes and aquifers. The shortage is forcing oil companies to go farther afield to buy water from farmers, irrigation districts and municipalities, said Erasmo Yarrito Jr., the state’s overseer of water supplies from the Rio Grande River.
Concern over water usage is especially acute in southern Texas’s Eagle Ford Shale area because drilling there is more water-intensive than other regions, said Robert Mace, a deputy executive administrator of the Texas Water Development Board.
“It’s pretty dry down here and a lot of oil companies are looking for water,” Mace said.
The water crisis in Texas, the biggest oil- and gas- producing state in the U.S., highlights a continuing debate in North America and Europe over the impact on water supplies of an oil and gas production technique called hydraulic fracturing. Environmental groups are concerned the so-called fracking method may pose a contamination threat, while farmers in arid regions like south Texas face growing competition for scarce water.
In fracking, drillers shoot high-pressure jets of sand- and chemical-infused water into the ground to crack rock and release trapped deposits of crude oil and gas. The technique has spurred a new onshore drilling boom from British Columbia to Poland as prospectors revisit geologic formations previously passed over, said Robert Ineson, senior director of global gas at IHS Inc. (IHS)’s Cambridge Energy Research Associates.
Along the Rio Grande River, where border towns such as Laredo supply workers and equipment for the drilling boom, most areas have received less than 2 inches (5 centimeters) of rain since Oct. 1, the National Weather Service said.
To compensate, Exxon Mobil Corp. (XOM) is recycling fracking fluids to reduce the amount of water needed for future drilling. Anadarko Petroleum Corp. (APC) is replacing dirt roads leading to its wells with limestone to preserve water that otherwise would be used to keep down the dust.
Farmers, landowners, environmental activists and state oil industry regulators gathered on June 10 at the University of Texas Health Center in Laredo to discuss the potential impact of fracking on water, air and public health, one of several such meetings that have been held across the state this year.
13 Million Gallons
The Eagle Ford’s peculiar geology means it takes three to four times as much water to fracture as the Barnett Shale near Fort Worth, said Mace, of the state water board. Fracking a single Eagle Ford well requires as much as 13 million gallons of water, enough to supply the cooking, washing and drinking needs of 40 adults for an entire year, he said.
“This is not the drilling your grandparents knew in west Texas,” said Sharon Wilson, an organizer for Earthworks’ Oil and Gas Accountability Project, which lobbies for tougher government regulation of oil drillers. “It’s a heavy industrial activity with massive amounts of water and chemicals.”
About 94 percent of Texas was in a state of severe, extreme or exceptional drought as of June 7, according to the U.S. Drought Monitor compiled by the U.S. Agriculture Department and the National Drought Mitigation Center. The October-through-May period was the state’s driest since record-keeping began in 1895, said Texas State Climatologist John Nielsen-Gammon.
Waiting For Rain
Municipal water departments, farmers, ranchers and oil drillers near Laredo are relying on water from two reservoirs and underground aquifers filled by last summer’s tropical storm season, said Yarrito, whose job title is Rio Grande Watermaster.
Unless storms bring more rain soon, “we’ll be in trouble,” said Sonny Hinojosa, general manager of Hidalgo Irrigation District No. 2 in San Juan, Texas. The drought has decimated crops, with about 79 percent of the state’s winter wheat, 72 percent of its oats and 36 percent of its corn classified as poor or very poor as of June 6, according to the Agriculture Department in Washington.
The Edwards Aquifer Authority, which oversees underground water supplies around San Antonio and along the northern edge of the Eagle Ford Shale, on June 2 declared a Stage 2 emergency requiring a 30 percent cut in water usage. Other water districts have imposed similar restrictions.
Water Demand Gusher
Water consumption by Eagle Ford Shale drillers is forecast to explode during the next 25 years, Mace said. A study to be released later this summer by the Texas Water Development Board and the University of Texas’s Bureau of Economic Geology estimates fracking-water demand in the area will jump 10-fold by 2020, and double again by 2030, he said.
Since Petrohawk Energy Corp. (HK) drilled the first discovery in the Eagle Ford Shale in 2008, oil explorers have sought to gain footholds in the 20,000 square-mile (51,800 square-kilometer) formation. Exxon spent $34.9 billion last year to buy XTO Energy Inc. to capture fracking expertise and U.S. assets including Eagle Ford leases. Marathon Oil Corp. (MRO) agreed on June 1 to pay KKR & Co.-based Hilcorp Resources Holding LP $3.5 billion for assets in the area.
Anadarko Petroleum Corp. and Houston-based Swift Energy Co. (SFY) are among the companies buying water for fracking from Hidalgo Irrigation District No. 2, which also supplies water to 400,000 acres of sugar cane, cotton, peppers and cantaloupe, Hinojosa said. If rain doesn’t arrive in the next four months to replenish the reservoirs, Hinojosa said he’ll have to reconsider whether to continue selling to the oil companies.
Anadarko, based in The Woodlands, Texas, near Houston, said it’s also buying water from the Wintergarden Groundwater Conservation District, which regulates the aquifer beneath three counties in the heart of the Eagle Ford Shale. The company has 10 rigs operating in the Eagle Ford and plans to drill 200 wells this year, R. Douglas Lawler, vice president of operations, said at a UBS Securities LLC energy conference on May 25.
Anadarko’s Eagle Ford wells were producing the equivalent of 40,000 barrels of crude a day last month, Lawler said. The company is installing meters to monitor and help manage water usage on its wells, Brian Cain, an Anadarko spokesman, said.
Bruce Frasier, a farmer and rancher in Carrizo Springs, Texas, about 40 miles northeast of the Rio Grande, has lost more than half his cotton crop this year and reduced his cattle herd to 300 from 1,000 because it’s too dry for grass to grow.
Frasier, whose family has been farming and ranching in south Texas for 98 years, has refused to sell water to oil companies that are offering 40 cents to 70 cents a barrel, equivalent to 42 gallons. In 2008 before the first Eagle Ford well was drilled, there was no market for a farmer’s water in the area.
“I’ve got to have that water for my farming operation,” said Frasier, whose Dixondale Farms is the largest cantaloupe grower in Texas.
Floods elsewhere are slowing production.
Here are some recent headlines from the past few weeks:
Mississippi-River Flooding Threatens Louisiana Oil, Natural-Gas Production
Heavy rains, mud hamper Bakken exploration, production: state agency
Wyoming's Rig Count Stuck in the Mud From Heavy Rains
Will Oil & Water Mix in Texas?
"Meanwhile, in South Texas, where an oil and gas boom is fueling economic activity, energy companies may find themselves competing for water with local farmers. Because of the geological nature of the Eagle Ford formation, fracking there requires three or four times as much water as needed in other parts of the state, according to Bloomberg News. Energy companies are using recycled fracking fluids and laying down limestone roads to cut down on dust from the normal dirt roads used in the fields. But demand is expected to rise tenfold in the next decade, according to the Texas Water Development Board, and without a recharge to the area reservoirs, oilmen may find themselves competing for water with farmers of sugar cane, melon, pepper and cotton.
In the past, Texas has done a "reasonable" job of water-resources planning, using a series of 50-year plans. But the shale formations that are attracting new oil discoveries do pose unique challenges, Perryman says. They generate enormous economic benefits, but the hydraulic fracturing techniques are water-intensive and have not been factored into long-range plans and are not reflected in historical usage data, Perryman adds. "The combination of that incremental demand with the extreme drought condition is posing some notable challenges that will require careful management, particularly if the drought persists.""
Staggering Texas Drought Facts
by Chris Dolce, Meteorologist
Texas drought monitor. Widespread exceptional drought (highest category) in dark red shadings. (Image credit: NOAA/USDA/NDMC)
Month after month, the headlines in Texas have revolved around an intensifying drought situation, wildfires and extreme heat.
The darkest red shading on the map to the right shows that 78 percent of the state is in exceptional drought, the worst category possible. John Nielsen-Gammon, the Texas State Climatologist, has declared this the worst one-year drought in the history of the state.
First up below are some staggering facts compiled by the National Weather Service (NWS) illustrating the severity of this drought on the agricultural industry.
Following the agricultural impacts are some facts on the dwindling water supply and the critical wildfire situation that remains in place.
More: See what people are saying about the weather in Austin, Dallas, and Houston, Texas.
Severe Agricultural Impacts (Source: NWS)
A sprinkler stands in the middle of an abandoned corn circle at Stallwitz Farms in Dumas, Texas, Saturday, Aug. 13, 2011. Darren Stallwitz, the owner of the farm, abandoned 16 percent of his corn. (AP Photo/Jae C. Hong)
94 percent of pasture and rangeland is rated as poor or very poor and nearly all of the hay supply is being brought in from other states.
With a limited water supply, ranchers are having to reduce the size of their herds. Some ranchers have had to resort to a complete liquidation. Ranchers have relocated cattle as far away as Wyoming!
Only 8 percent of the corn crop is in good condition.
Most of the cotton planted in the state has been abandoned. The total losses of the cotton crop are estimated to be $2 billion.
Statewide agricultural losses in 2011 could be double the record of $4.1 billion in 2006.
Water Supply Worries (Source: NWS, LCRA)
A puddle of water is seen on the dried bed of Lake Colorado City near Colorado City, Texas, Thursday, Aug. 11, 2011. (AP Photo/Jae C. Hong)
Aquifers provide approximately 60 percent of the water supply for Texas. These are replenished by rainwater slowly seeping through the soil. Water supplies in the aquifers have been falling rapidly during the drought.
Parts of the Trinity Aquifer, located west of Ft. Worth, have fallen as much as 80 feet! This is the greatest loss since records were first kept in the 1950s drought.
According to the Lower Colorado River Authority (LCRA), Lake Travis, located west of Austin, is just over 29 feet below its average August level!
Much of the state is experiencing different levels of mandatory and voluntary water restrictions.
Wildfire Danger (Source: NWS, AP)
In this Friday, Aug. 5, 2011 photo, a wildfire blazes near Texarkana, Texas. (AP Photo/ The Texarkana Gazette, Christena Dowsett)
Only 6 of the 254 counties in Texas have no burn ban of any kind in place.
According to the Associated Press, nearly 3.5 million acres have been burned across the state since November.
In the midst of the driest 10 month period on record, the fire danger remains critically high across the Lone Star State.
Water Is the New Texas Liquid Gold
Oil companies that need water for "fracking" wells compete for H2O
Bruce Frasier sweats in the 106F heat at his Carrizo Springs, Tex., farm while stacking 42-pound boxes of cantaloupes bound for Kroger (KR) supermarkets and Wal-Mart Stores (WMT). But he's turning away all offers for his most prized commodity: water. Texas's worst drought since record-keeping began in 1895 is fueling a rally in water prices as energy prospectors from ExxonMobil (XOM) to Korea National Oil expand the use of a drilling technique known as hydraulic fracturing, or fracking, that uses up to 13 million gallons in a single well.
Frasier, whose Dixondale Farms is the state's largest cantaloupe grower, has been offered as much as 70¢ per 42-gallon barrel of water he pumps from an aquifer beneath his land. That same water fetched no price at all as recently as three years ago, before oil exploration boomed in Texas's Eagle Ford Shale rock formation. So far, Frasier is standing firm. "I've got to have that water for my farming operation," he explains.
With the region having received less than 2 inches of rainfall since Oct. 1, oil producers are buying water from anyone willing to sell. "It's pretty dry down here and a lot of oil companies are looking for water," says Robert Mace, a deputy executive administrator at the Texas Water Development Board.
The water crisis in Texas, the biggest oil- and gas-producing state in the U.S., highlights a continuing debate in North America and Europe over fracking's impact on water supplies. Environmentalists say the method poses a contamination threat, while farmers face growing competition for scarce water.
Fracking is a 60-year-old method of shattering rocks to unleash oil and natural gas with high-pressure jets of sand- and chemical-infused water. In the past decade, the technique has been refined and coupled with new ways of drilling sideways through oil-rich shale formations, spurring an onshore exploration boom, says Robert Ineson, senior director of global gas at researcher IHS CERA.
The Eagle Ford's peculiar geology means each well fracked requires an amount of water equivalent to that used by 240 adults in an entire year for cooking, washing, and drinking. A study by the Texas Water Development Board and the University of Texas at Austin's Bureau of Economic Geology estimates fracking-water demand in the area will jump tenfold by 2020 and double again by 2030. "This is not the drilling your grandparents knew in West Texas," says Sharon Wilson, an organizer for Earthworks' Oil & Gas Accountability Project, which lobbies for tougher regulation of oil drillers. "It's a heavy industrial activity with massive amounts of water and chemicals."
For now, local water departments, farmers, and oil drillers near Laredo are relying on water from two reservoirs and underground aquifers filled by last summer's tropical storm season. But that won't last forever.
The bottom line: A record drought in Texas is boosting water prices and competition between agricultural and energy interests over the commodity.
Various public water systems (PWS) in 18 of the 24 Eagle Ford shale counties
are limiting water use to avoid shortages, according to a Sept. 28 update by
the Texas Commission of Environmental Quality. Texas is experiencing a
historic drought that is expected to continue into the near future. Though oil
and gas production volumes in the state have been unaffected so far, Eagle
Ford oil and gas operations are at higher risk than other producing areas in
Texas due to high water needs for hydraulic fracturing. Four of the 18 Eagle
Ford counties - Bee, Brazos, Dimmit, and Live Oak - are under "watch" for a
possible water shortage with only voluntary restrictions. Production from these
counties totals 230 MMcf/d combined. PWS's in another 12 counties in the
Maintenance Takes Production Lower as Demand Continues Softening
shale have issued mild to moderate restrictions. BENTEK flow data shows
production volumes for seven of these 12, with a combined total of 1.0 Bcf/d.
If the dought actually did slow drilling will drilling activity increase once it ends?
Texas Drought Is Once in 500 or 1,000 Years -- Basically Off the Charts
From October of 2010 through this September 2011, Texas saw its driest year on record, according to the National Oceanic and Atmospheric Administration.
But these historic dry conditions stretch back even further than that.
After examining tree-ring data going back to 1550, researchers at Columbia University found that this year’s drought was only rivaled once in the last 461 years. According to the Palmer Drought Severity Index, a system for measuring wet and dry conditions, the last time Texas experienced a drought this bad was in 1789.
The state’s climatologist, John Nielsen-Gammon, explained the historical significance of the ongoing drought in an interview with CBS:
“This is basically off the charts. Based on past history, you wouldn’t expect to see this happening in maybe 500 or 1,000 years. One more year and we’re already talking about a drought more severe than anything we’ve ever had. And this will become for them, the drought of record.”
A Railroad Commission of Texas task force has concluded there is enough
water in South Texas to continue supporting Eagle Ford shale development
activities. A severe drought in Texas has prompted concerns about water
usage for drilling and one or two counties have restricted usage, though not in
Eagle Ford shale counties. According to the Jan. 26 press release, Eagle Ford
drilling and completion account for approximately 6% of water demand in
South Texas, compared with 64% for irrigation and 17% for municipal use.
Industry experts told the task force that about 2,600 to 2,800 new wells are
expected to be completed annually in the Eagle Ford during peak demand,
equivalent to 30,000 acre-feet of water requirements per year. In 2008, the
Carrizo Wilcox Aquifer, where Eagle Ford draws water from, was estimated to
contain 540,000 acre-feet of water, the report said. There is still concern about
impacts to local water availability due to pumping. Some companies are
looking into using brackish water instead of fresh water for hydraulic fracturing
and well completion and other methods for minimizing water usage. The task
force reports water usage per well completion at 11 acre-feet currently, down
from 15 acre-feet previously. The La Niña effect in 2011 contributed to Texas
experiencing its worst drought ever.