The Nickel Report

On January 22, 2020, the Texas Senate Committees on Natural Resources and Economic Development and Water and Rural Affairs (Senate Committees) held a joint hearing to consider Lt. Governor Dan Patrick’s 2019 interim legislative charge related to one of the most pressing matters facing the state—future water supply issues. This interim charge requires that these legislative committees make recommendations to promote the state’s water supply, including the development of new sources. The recommendations made will be the subject of consideration when the Texas Legislature reconvenes in 2021 and will inform future legislative initiatives. While a broad range of water supply topics was discussed during the hearing, notably, the subject of produced water, including opportunities for reuse within and outside the oil field, continues to be a focal point under review by state policymakers.

The Senate Committees received testimony with respect to the reuse of produced water by oil and gas producers on state lands. Specifically, representatives of the General Land Office, the agency that manages state lands in various parts of the state, and University Lands, the land and mineral management organization that manages the surface and mineral interests of 2.1 million acres of land in West Texas, provided testimony regarding produced water management options currently used on state lands. It was noted that, while disposal of produced water in disposal wells continues to be a viable option for produced water, the reuse of produced water in the oil field is on the rise. The witnesses also identified the following trends: (i) there has been significant growth in the water midstream sector; (ii) larger companies are becoming more prevalent; and (iii) more capital appears to be available for investment in water midstream companies.

With regard to produced water management generally including reuse outside the oil field, representatives of the Texas Commission on Environmental Quality (TCEQ) and Railroad Commission (RRC) provided testimony. A RRC representative reported that a significant percentage of produced water is currently being beneficially reused in some manner. Challenges to growth in beneficial reuse were identified as those related to the need for: (i) treatment technologies for produced water to take into account that not all produced water may be the same; (ii) the reliability of treatment methods to be met particularly where volumes and characteristics of produced water may be subject to change over time; and (iii) the acquisition and development of infrastructure (e.g., land, impoundments, pipelines). Tackling those challenges should pave the way for additional growth in beneficial reuse. TCEQ representatives noted that, while EPA’s Draft Study of Oil and Gas Extraction Wastewater Management under the Clean Water Act includes a review of whether potential future federal regulations may allow for broader discharge of treated produced water to surface waters, this study has not yet been finalized, and EPA has not yet adopted any recommendations for regulatory action. It was also noted that some stakeholders support a reconsideration of existing regulatory barriers to surface water discharge east of the 98^th Meridian. TCEQ representatives noted that, in any case, discharges to surface water authorized by TCEQ would be expected to meet applicable surface water quality standards.

With significant inter-agency collaboration among the TCEQ, the RRC and EPA, steady progress has been made with respect to implementation of House Bill (HB) 2771, adopted during the past legislative session relating to the authority of the TCEQ to issue permits for the surface water discharge of produced water. TCEQ currently expects that its application to EPA for National Pollutant Discharge Elimination System (NPDES) delegation of oil and gas wastewater discharges (including produced water) will be submitted before the September 1, 2021, deadline set forth in HB 2771. Two rulemaking proceedings to implement this legislative measure are currently underway. The first, which is in the proposal stage and open for public comment until February 11, 2020, would adopt, by reference, two relevant federal effluent limitation guidelines: the oil and gas extraction point source category (40 CFR Part 435) and the centralized waste treatment category (40 CFR Part 437).[i] The second, which was approved for proposal on February 12, 2019, with an anticipated public comment period ending March 30, 2020, would include proposed changes to the Memorandum of Understanding between the RRC and the TCEQ regarding the transfer of responsibility for oil and gas discharges (including produced water) from the RRC to the TCEQ upon EPA delegation of the federal NPDES permitting program for such discharges.[ii] Once fully implemented, HB 2771 would simplify the permitting process such that only one permit would need to be obtained from TCEQ rather than from both the RRC and EPA. Opportunities for stakeholder input on HB 2771 implementation are available through the HB 2771 stakeholder group established by TCEQ. For additional information, see TCEQ’s website.

[i] See 45 Tex.Reg. 275-277 (January 10, 2020) and information available at TCEQ’s website at https://www.tceq.texas.gov/rules/prop.html.

[ii] See TCEQ Agenda for February 12, 2020 available at TCEQ’s website at https://www.tceq.texas.gov/agency/decisions/agendas/comm/comm_agendas.html.