Download Conventional Oil and Gas Industry Water Management in PA

Conventional Oil and Gas Industry
Water Management in PA - Call to Action
Pennsylvania’s conventional oil and natural gas producers must have access to cost effective water management and
disposal options to survive the oil and gas industry’s downturn. Yet the water management companies serving the
conventional industry in the Commonwealth are now threatened due to declining volumes as a result of the dramatic
reduction of drilling and production by the industry, and a regulatory landscape made more stringent with development
of shale. It is time to reset the policies governing central treatment facilities to provide conventional operators a muchneeded treatment option while other water treatment and disposal alternatives, such as disposal wells, continue to
develop to address the conventional industry’s future needs.
PA Legislature Recognized the Need to
Address Conventional Industry Survival:
The conventional oil and gas industry has been part
of the region’s industrial fabric since the mid-1800s,
providing jobs and associated economic activity in our
local communities. Differences in the regulation of
conventional and unconventional oil and gas operations
were recognized and delineated legislatively in July
2016 with the enactment of Act 52, which prevented the
Department of Environmental Protection (DEP) from
imposing unreasonable and expensive new requirements
on conventional wells.
The same cannot be said for central, commercial produced
water treatment facilities specifically catering to the
conventional industry, which are facing the prospect
of having to add new and costly treatment technology
to reduce levels of total dissolved solids. If required to
upgrade to meet new standards, these central facilities
must raise new capital. However, the current low
production volumes and regulatory uncertainty around
disposal wells, the future of road spreading, and public
wastewater treatment facilities prevent these central
facilities from reaching a reasonable cost/benefit threshold
for this investment, making capital expense financing
unavailable. Even if financing became available, the
resulting investment and price increase required to meet
new standards will make water disposal service unviable
for conventional producers.
Recent Company Closure Prompts Urgency
to Address Conventional Water Management
Industry Survival: In late October 2016, the industry
learned that Waste Treatment Corporation (WTC) would
be closing its facility in Warren, Pennsylvania. WTC has
been servicing the conventional industry in Pennsylvania
and New York for decades and its shuttering is likely
symptomatic of additional closures, creating ever fewer
local options for water management.
With lower volumes of water being produced by
operators, facilities like WTC with fixed costs can face
revenue shortfalls that exceed those fixed operating costs.
Challenges for such central facilities being asked to comply
with stringent regulatory requirements and make capital
investment in technology are also exacerbated by an
increased use of very low cost options for water disposal,
including road spreading, diversion to publicly owned
treatment works and recycle or reuse of produced water
by unconventional producers in the area. While all these
cost-effective options are required for the conventional
industry, these services are seasonal and unreliable on
daily basis. Only centralized facilities offer a year-round
water disposal service, and due to reduction in production,
they cannot spend excessive capital investment in unviable
technology.
Conventional Industry-Wide Economic
Impacts of New Permitting Requirements:
Centralized treatment facilities for produced water from
conventional wells play an essential role in the interdependent structure of Pennsylvania’s oil and natural gas
industry. They need reasonable and justified discharge
limits to be able to provide that treatment at a cost that
conventional producers can afford, especially when prices
are depressed and water disposal options are limited.
These facilities have the real potential of following the
example of WTC and closing their doors, impacting the
viability of the entire industry as well as natural gas service
to the customers of western Pennsylvania public utilities
that depend on conventional production to serve them.
A rational and cost-effective solution is available to the state Department of Environmental Protection to allow
these treatment facilities to continue serving the conventional industry: maintain their existing permits and recognize
the need for treatment requirements separate from those imposed on the unconventional industry, similar to the
establishment of separate Chapter 78 and 78a regulations. These treatment facilities and conventional energy producers
deserve the chance to continue as a critical segment of Pennsylvania’s economy and the thousands of jobs they provide.