The Nickel Report

On May 15, 2019, EPA released its draft Study of Oil and Gas Extraction Wastewater Management under the Clean Water Act (Draft Study). The Draft Study addresses the results of an extensive review initiated last year to evaluate the management of oil and gas wastewaters generated at onshore facilities and to assess the need for additional discharge options for onshore oil and gas wastewater under the Clean Water Act (CWA).^[1] Although EPA has not yet adopted any recommendations for regulatory action, it is evident that EPA is continuing to take a hard look at the merits of authorizing broader discharges of produced water to surface waters than those currently allowed for onshore discharges under the CWA effluent guidelines (and generally referred to as the zero discharge standard).^[2] See 40 CFR Part 435, Subpart C. EPA is now requesting additional public comment on the Draft Study by July 1 of this year with the goal of finalizing it and determining next steps this summer.

In particular, EPA is seeking input from stakeholders on four issues of concern:

• Identification of non-regulatory steps that EPA might take to encourage produced water reuse and recycling;
• Perspectives regarding whether, considering the cost of transporting and treating produced water, a revision of federal regulations to allow for broader discharge of produced water would shift the manner in which produced water is currently handled;
• Appropriateness of the current regulatory framework that distinguishes between discharges from onshore oil and gas facilities located East and West of the 98th meridian vs. the establishment of a national policy that would apply regardless of geographic location; and
• Other steps that EPA might take to incentivize produced water reuse both within and outside of the oilfield.

While disparate viewpoints exist, many states and stakeholders have indicated their support for increased options for discharging produced water to surface waters. Supporters highlight that expanded discharge options would achieve various positive outcomes, including addressing water scarcity concerns and disposal well limitations. In addition, recent improvements in treatment technologies would allow produced water to be adequately treated prior to discharge, and truck transport of produced water (with its attendant effects on roads, potential for spills and air quality) might be reduced if produced water could be discharged closer to where it was generated.

Even so, supporters have also noted that if EPA were to expand discharge options for produced water, certain implementation challenges will require attention. For example, permitting timeframes would need to be expedited and the availability of a general permit would need to be considered to allow more flexibility where the producer’s need to discharge might be periodic or of limited duration. Water quality limitations for produced water discharges would need to be developed. This process may not be straightforward since standards and criteria do not currently exist for many produced water constituents. In addition, a number of states do not currently have experience with or delegation for all or the part of the NPDES program associated with oil and gas wastewaters.

In the meantime, oil patch states are moving forward to address what has become a critical logistical issue for the oil and gas industry. In Texas, for example, a legislative measure, House Bill (HB) 2771, is pending which, once enacted, would transfer certain responsibilities over oil and gas wastewater discharges from the Railroad Commission of Texas (RRC) to the Texas Commission on Environmental Quality (TCEQ) and provide for TCEQ to seek delegation for such discharges.^[3] The enactment of this legislation would allow Texas to simplify the permitting process for pollutant discharges and more readily implement any changes made at the federal level. Other measures currently before the Texas legislature, such as HB 2545, would provide tax incentives for entities treating produced water.^[4] With the Texas legislative session now in its final days, the fate of these measures will be established in the near term. Thus, while the Draft Study and future actions by EPA will not be finalized until later this year, the regulatory landscape for produced water regulation at the state level continues to evolve and take shape.

[1] For further background on the study, please see Spotlight on Produced Water Management Options Intensifies, Law 360, November 17, 2018, available at https://www.law360.com/articles/1110301/spotlight-on-produced-water-management-options-intensifies

[2] In limited circumstances, onshore discharges of produced water are allowed. See e.g., 40 CFR 435, Subparts E, F and H and 40 CFR Part 437.

[3] See HB 2771 (relating to the authority of the Texas Commission on Environmental Quality to issue permits for the discharge into water in this state of produced water, hydrostatic test water and gas plant effluent resulting from certain oil and gas activities).

[4] See HB 2545 (relating to franchise tax, oil production tax, and gas production tax incentives for certain desalination facility operations).