Onshore disposal is fracking’s
Brandon Barnes, Vincent G Piazza, Cheryl Wilson
Bloomberg Intelligence analysts
Fracking’s next legal battle may center on wastewater disposal
Low prices aside, the next big challenge for domestic oil and
natural gas production may be wastewater disposal. For years,
fracking has been a moving target for environmentalist lawsuits.
At first, plaintiffs cried foul over water contamination. Then class
actions claimed harm from emissions exposure. Others tried to
stop water withdrawals, or pass local zoning ordinances banning
well stimulation. None of those theories stuck. Wastewater
injection may be the wedge opponents have been seeking.
Waste may be next frontier for challenging shale development
Fracking opponents may have hit upon a winning strategy to curb
the drilling technique by targeting how wastewater is disposed of.
Challenging wastewater treatment carries with it the opportunity
for requiring federal oversight over what is generally a state-
Disposal as a portion of total drilling costs can reach 19%, so
regulatory changes could materially impact well economics. The
specter of earthquakes linked to fracking activities also carries
Oil, gas waste disposal depends on geography, cost of treatment
Disposal options for wastewater from fracking oil and gas wells vary
by state, and on-site recycling options can depend on local geology.
In the Marcellus region, naturally occurring radioactive materials
may be present in the flowback from wells, requiring special
treatment. State rules may incentivize certain disposal methods. In
Pennsylvania, deepwell injection isn’t an option. In the Permian where
drought conditions can exist, flowback and wastewater recycling is
encouraged through fast-track permitting.
E&Ps finding ways to deal with water-handling pressures out west
Water use and conservation, especially in the typically warmer climate
of the western U.S., is a growing concern as municipalities and user
groups debate the ever-increasing demands placed on this scare
Along with recycling efforts, E&Ps have implemented various steps
to mitigate the environmental impact and rein in costs related to
disposing waste water from wells. For example, Concho is focused
on transporting waste water by pipeline rather than by truck, which
reduces costs and is more efficient.
Fracking litigation: Drilling and production stage
Concerns about mass litigation involving groundwater contamination
from fracking that were prevalent a decade ago have largely failed
to materialize, though new litigation claiming disaster looms large.
Lawsuits alleging fracking waste re-injected into waste wells causes
earthquakes may be the next major threat, either by spurring state
regulators to limit waste disposal options or through findings of legal
liability. Groups are suing the EPA to change how waste is classified,
which may increase operational costs.
Regulatory costs could cut into already slim margins. New wells, as of
May 12, are regulated at a $640 million cost, while existing wells are
likely the next target.
Costs would jump if oil & gas waste is regulated as hazardous
The true impact of the lawsuit against the EPA is on the industry,
which could shoulder a cost burden associated with a regulatory
push away from Class II disposal wells. For operations outside of
Pennsylvania, disposal via Class II wells are a low-cost option. Class
I disposal wells, for hazardous wastes, have stricter permitting and
monitoring requirements, more restrictive siting conditions, and thus
are typically more expensive than Class II wells. Current disposal
costs are estimated at 5%-19% a well.
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