Still a lot of shaking. The topic on everybody’s mind lately has been induced seismicity (earthquakes) and its impact on produced water management. This is a solvable problem, as we saw in Oklahoma, with changes to the number of wells in a specific area or well density. The problem in Texas and New Mexico—or more specifically, the Permian basin—is that the scale of the activity is far greater. In 2022, about 5 billion barrels (Bbbl) were disposed of, and since 2010, there have been more than 35 Bbbl disposed of in the Permian basin—a significantly different scale than what we observed in Oklahoma.
We also understand that well density is a factor, but well depth seems to be a more important factor, as shallow wells seem to impact seismicity far less than deeper disposal wells. Regardless, each new earthquake creates a chain reaction in your produced water management plans. And earthquake activity is increasing, and the events are getting stronger. Believe it or not, Texas now leads California in earthquake events. The current path—although slightly different in New Mexico as compared to Texas—is to reduce or completely stop deeper well disposal within seismic zones until the activity subsides. These seismic zones are created, based on earthquake activity within an area. Once the area is defined, activity within the area is controlled, based on frequency of earthquake events, with deeper wells being the primary focus.
The continuation of earthquake activity has led to a significant amount of research on the topic. Stanford University has been a leader in this area and has developed models used today to evaluate this activity, but there have also been many recent studies in the Delaware basin, or more specifically the Delaware Mountain Group (DMG). With the Midland basin being closer to population centers, you may ask, “why the Delaware basin?”
We have had one earthquake greater than 5.0 in magnitude in the Midland basin, and we have had two earthquakes greater than 5.0 in the Delaware basin. In general, the Midland basin produces one to two barrels of produced water for every barrel of oil, while the Delaware basin produces four to eight barrels of produced water for every barrel of oil. So not only are we seeing more earthquakes, but we are also seeing larger earthquakes in the Delaware basin and significantly more produced water. And as a result, there is more attention on the Delaware basin.
What about the rattle? When I say rattle, I’m referring to the verb “[to] upset, especially to the point of loss of poise and composure, [to] disturb,” as defined by the Miriam-Webster Dictionary. You see, produced water management plans are being disrupted significantly, and decisions must be made quickly to avoid curtailing drilling and completing wells or shutting in producing wells altogether.
The first line of defense has been operators going to other wells or to water midstream partners, to increase takeaway capacity—essentially moving disposal to a less-impacted area. Another option is to increase recycling activity. Increasing recycling seems like the right thing to do, but it’s more complicated than that. We produce water at a pace that is slower than we consume it during a well completion. We need to aggregate many wells and store water to accomplish that. This requires time and infrastructure.
Then, there are landowner restrictions and other logistic concerns that make this a more difficult proposition. Finally, there is the temporary or fluctuating nature of drilling and completion. You may move your drilling and completion activity around and will likely reduce this activity when oil and gas prices decline, but the water continues to flow. So now, you need mobile infrastructure or need to resign yourself to the fact that the infrastructure may have periods of low utilization, which hurts the economics. Recycling is the right thing to do, but it is not a long-term solution, though it is a solution. There has been much effort behind moving towards beneficial reuse, which has much promise, but with the environmental opposition and lack of legislative framework, it may be a while before this can be done on a scale that will be impactful.
No, let’s make it a little more complicated. A large volume of New Mexico’s produced water finds its way into Texas, and Texas has noticed this, even bringing up the possibility of restricting this volume to force New Mexico to address the issue, itself. You see, New Mexico acts more aggressively to earthquakes, and their permitting process, in general, is more difficult. So, all of this is enough to get someone pretty “rattled.”
Let’s talk about the roll. The oil and gas industry always amazes me with its resilience. It just rolls with the punches. So, let’s talk about many of the activities being considered to reduce seismicity and other things that should be considered.
Recently, a pilot project was announced, involving Chevron and New Mexico, for DMG disposal wells. This pilot proposes a new approach to disposal well permitting, providing more data and evaluation of geology and seismicity to ultimately lead to a path forward to ease the permitting burden and potentially speed up permitting of disposal wells in New Mexico. Then there is waterflooding. This is a practice in conventional wells, and it is essentially filling the void in the reservoir with water as oil is removed, to enhance oil recovery. Enhanced Oil Recovery (EOR) wells have not been implicated in earthquakes yet, and this provides a tremendous outlet for produced water.
Back in 2008, a tax credit (45Q) was established for using carbon dioxide (CO2) in waterfloods to further improve EOR. In these cases, you are not only still injecting water but also CO2. This tax credit has more than doubled since its inception and is now up to $60/ton of CO2. With the recent changes in the Inflation Reduction Act (IRA), you can get up to $130/ton of CO2 when the CO2 source is from Direct Air Capture (DAC). And Oxy is currently building one of the world’s largest DAC facilities in the Delaware basin, called STRATOS.
Typically, CO2 is sequestered in disposal wells (Class VI). Although some are planned in the Delaware basin, seismicity concerns may complicate this option, so waterflooding is a likely outlet for STRATOS and will likely lead to more waterflooding. Unfortunately, waterflooding is again used only on conventional wells, and we have been focused primarily on developing unconventional wells over the last 10 years. So, does this limit the upside for waterflooding?
Well, maybe not. There have been numerous pilots in North Dakota and some in the Permian basin, experimenting with waterflooding on unconventional wells, and the results have been positive. In these cases, you aren’t filling the depleted reservoir with water, necessarily, but rather, finding an area near the center of a group of unconventional wells to inject water and CO2 into the formation, to allow the increase in pressure, to promote more oil and gas production. Some of these projects are looking at CO2 alone, but they also have been completed in field trials with water alone, and water and CO2. If this can be done at scale, it provides another option for produced water that removes capacity from disposal wells.
I have the utmost confidence that our industry will be using a combination of these tools and options to solve our seismicity problems, and now you can see where decarbonization also helps to develop solutions. As REO Speedwagon sings, let’s continue to “roll with the changes.”
