WATER SCHEMES ACROSS THE SHALE PLAYS: THE BAKKEN EXPERIENCE
| Jurisdiction | United States |
(May 2014)
WATER SCHEMES ACROSS THE SHALE PLAYS: THE BAKKEN EXPERIENCE
Partner
Crowley Fleck PLLP
Bismarck, North Dakota
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CRAIG C. SMITH is a partner in the Energy, Environment and Natural Resources Department of Crowley Fleck PLLP in Bismarck, North Dakota. He joined the firm in 2009 after practicing with Fleck, Mather & Strutz, Ltd. in Bismarck since 1988. He has extensive experience in the preparation of drilling title opinions, division order title opinions, and acquisition title opinions in North Dakota, Montana, and Wyoming. He has appeared before the North Dakota Industrial Commissions, Oil and Gas Division, and the Montana Board of Oil and Gas concerning numerous administrative and regulatory oil and gas matters. Mr. Smith is the current Chairman of the North Dakota Petroleum Council and has served on its Board of Directors since 1998. Mr. Smith is a member of the American Association of Petroleum Landmen, Landman's Association of North Dakota, the Real Property and Probate Section of the North Dakota State Bar Association, and the American Bar Association (Natural Resources Section). He is a contributing author representing the states of North Dakota and Montana to the Oil and Gas Law, Comparison of Laws on Leasing, Exploration and Production publications sponsored by the AAPL. He has also participated as a speaker at the 2001 and 2010 AAPL Annual Meetings and at several local Landman seminars.
Table of Contents
1. INTRODUCTION
1.1 The Bakken Shale Formation
1.2 Water Challenges Generally
2. WATER RIGHTS AND WATER WITHDRAWAL REGULATION
2.1 The Prior Appropriation Doctrine versus Riparian Common law and Riparian Regulated Regimes
2.2 North Dakota's Prior Appropriation Statutes
2.3 Application for Conditional Water Permit
2.4 Modification of Water Permits and Temporary Water Permits
2.5 Federal Permits (United States Army Corps of Engineers)
2.6 Western Area Water Supply Authority
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2.7 Enforcement of Water Permits--Violations and Penalties
3. PRODUCED WASTER WATER AND FLOWBACK WATER
3.1 Waste water challenges generally
3.2 Regulation of flowback water and produced salt water
3.3 Underground Injection Control--Class II waste water disposal wells
3.4 Transportation of Waste Water
3.5 Disposal of Filter Socks
4. RECYCLING AND TREATMENT OF WASTEWATER
5. SUMMARY
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1. INTRODUCTION
1.1 The Bakken Shale Formation
The Bakken shale in North Dakota has emerged as a tremendous oil resource currently producing nearly one million barrels of oil per day and with recoverable reserves estimated to be anywhere from 7 to 24 billion barrels.2 Exploration targeting the Bakken formation is nothing new in North Dakota and it has been known for decades that the formation is a tremendous source rock containing vast amounts of oil in place.3 However, the Bakken, like other shale formations, has very low porosity and permeability severely limiting the amount of oil that can be recovered by traditional drilling and completion methods.
The Bakken formation consists of three separate members. The upper and lower members are dark, black, organic rich shales recognized as the source rocks. The middle member is composed of silt stones and sandstone and is the primary oil producing member. The middle member also has very low porosity and permeability. At its thickest area the formation is about 150 feet, but generally thins towards the margins of the Williston Basin. Underlying the Bakken formation is the Three Forks formation. The Three Forks consists of shales and siltstones, but also dolostones and anhydrites. In certain areas of the Williston Basin the Three Forks may be as thick as 250 feet.
From 2006 to 2011, most production was obtained from the middle Bakken member. More recently, operators are drilling horizontal wells in multiple "benches" within the Bakken and Three Fork formations. For regulatory and other purposes, whether production is obtained from a member of the Bakken formation or the Three Forks formation, it is considered production from the "Bakken pool".
Advancements in horizontal drilling technology and the continued refinements to hydraulic fracturing and well completion techniques have successfully tapped the Bakken and turned what was the "unknown" State of North Dakota with a declining population into a state with a robust economy quickly propelling it to the second largest oil producing state in the nation, only behind Texas. This rapid success, of course, has not come without challenges.
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1.2 Water Challenges Generally
Among the challenges, the Bakken Shale, like other shale plays is thirsty. The fresh water requirements for hydraulic fracturing alone range from two million to four million gallons per well.4 As of March 2014, 6,935 horizontal Bakken wells have been drilled and completed in North Dakota.5 The North Dakota Department of Mineral Resources estimates that another 2000 to 3000 wells will be drilled per year over the next 15-25 years requiring up to 20-30 million gallons of fresh water per day, or 22,000 to 33,000 acre-feet per year.6 While the oil industry's water needs are significant, for perspective, in 2012 the entire oil industry's water use was approximately 4% of the appropriated water used in North Dakota with irrigation (55%) and municipalities (21%) representing the two largest demands.7
Fracing is not the only production operation for which significant volumes of fresh water are required or will be required long term. The Bakken formation also produces significant amounts of saltwater along with oil and gas in many areas of the field. As part of the long term routine well maintenance, fresh water is needed to "de-brine" the well shafts to prevent clogging and corrosion due to high concentrations of salts. The North Dakota State Water Commission estimates that currently 900 to 1,400 acre-feet per year of fresh water is needed for well maintenance, but should 40,000 or more wells ultimately be drilled as predicted by the Department of Mineral Resources, an additional 18,000 to 30,000 acre-feet of fresh water may be required for production maintenance operations in future years.8
Western North Dakota, while considered semi-arid and prone to occasional drought cycles, does have a large source of water supply from a combination of multiple sources to fuel the development of the Bakken shale and to provide for municipal, irrigation, and other private and public uses. Among the water sources, in 2012 surface water sources including the Missouri River (upstream of Lake Sakakawea), the Yellowstone River, and a combination of streams, ponds and sloughs accounted for 32% of the water source for Bakken, 47% from groundwater aquifers, and 29% from Lake Sakakawea.9 Preliminarily, it appears 2013 statistics will be
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substantially similar but with groundwater aquifer declining slightly and Lake Sakakawea water supply increasing as a result of the expansion of the Western Area Water Supply Authority ("WAWSA").10
As to water wells and groundwater aquifers, the entire Bakken field in North Dakota underlies the Fox Hills aquifer. The Fox Hills aquifer has seen pressure declines in recent years and the State Water Commission has long term concerns regarding the Fox Hills and other aquifers being able to sustain current supplies for both industrial and agricultural use. While permits are still being considered for the Fox Hills aquifer, permits for withdrawal from other aquifers for industrial purposes have been discontinued. Further, the smaller surface water sources consisting of ponds, small streams and sloughs are not reliable sources for the long term particularly in years of drier climate conditions. The third and by far largest water source is from the Missouri River and Lake Sakakawea.
Lake Sakakawea was formed by the federal government's construction of Garrison Dam from 1946 to 1954 and is one of six major dams on the Missouri River system. Lake Sakakawea is the third largest man-made lake in the United States11 and extends approximately 178 miles in length from the dam structure covering approximately 364,000 acres.12 The Lake is uniquely positioned in the center of the Bakken field. A one inch depth of the Lake contains approximately 10 billion gallons of water, enough to supply the Bakken for one year, and which is replenished annually by the natural river flows of the Missouri and Yellowstone Rivers.13 Despite this great water source, however, obtaining additional access to the Lake is challenging with the Lake's management being subject to various federal regulations administered by the U.S. Army Corps of Engineers and other federal agencies.
Presently, most oil producers purchase water directly from privately owned water depots, municipalities with excess capacity, or from the State funded WAWSA who all own or have access to owners of existing water permits. Water is principally transported by truck from the distribution centers although operators are increasing their use of temporary pipelines to transport water from a nearby water depot directly to a well site location. The pipelines, where practical, reduce transportation costs and truck traffic.
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The fracing process in the Bakken, as with other shale plays, results in flowback water. The amount of flowback recovered in the first few weeks is relatively small, 17% to 41%.14 The flowback typically has very high concentrations of total dissolved solids ("TDS") with levels measuring 220,000 mg/L or more which is significantly higher than other shale plays.15 The North Dakota Industrial Commission, Department of Mineral Resources, does not allow flowback or saltwater to be contained in earthen pits or open receptacles.16 Flowback water is contained in tanks and transported for injection in approved waste water injection wells as discussed...
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