State rules for frac wastewater management vary widely across the US, reflecting 'tightrope'

Lisa Rushton
Candice Castaneda
Paul Hastings LLP
Washington, DC

The energy revolution generated by hydraulic fracturing and its economic impacts over the past decade have materially shifted the US and international worldview. Positive developments in the financial and operational environment yielded by fracing have naturally been accompanied by efforts to avoid negative impacts to the physical environment. One of the primary areas of industry, public, and regulatory attention has been management of flowback and produced water from fracing, known as wastewater. Regulation of wastewater is primarily, though not exclusively, a state issue. This article focuses on some of the trends in regulation of wastewater management across the US and examines how regional variations are impacting operations.

Differing approaches

State approaches to wastewater management may be characterized as reactive, restrictive, or facilitative. There is fluidity between these perspectives, and states may apply more than one approach. However, reference to these categories is a helpful way to organize the diverse array of regulations we currently see. Moreover, this construct provides a useful tool for thinking about wastewater management by suggesting the type of regulatory regime in place and ways it may affect management decisions.

It is important to clarify what is intended by the terms. Reactive applies to states that institute or revise regulations in response to concerns identified via events or public concern. Pennsylvania and Ohio may both be classified as reactive, in whole or in part. In states with reactive regimes, we are more likely to find regulations permitting but not circumscribing activities. Restrictive states, on the other hand, ban wastewater management options or fracing altogether. Vermont is on the far extreme of restrictive, while Arkansas and Ohio present a regulatory approach somewhere on the continuum between reactive and restrictive. Lastly, facilitative states tend to incentivize or reduce costs associated with certain activities, thereby encouraging preferred wastewater management techniques. By reducing costs, such states are influencing behavior (such as recycling or conservation) by making it more attractive. To date, Texas has approached wastewater regulation through a facilitative approach.

Approaches taken by states across the country, in many respects, reflect local influences and the tightrope they walk between the positive economics that flow from shale gas development and public concerns with regard to the environment and scientific uncertainty and public misperception that continues to surround fracing operations.

Reactive examples

Pennsylvania and Ohio are states with significant experience in managing wastewater issues and competing concerns raised by both industry and the general public. And, these factors have contributed to their reactive regulatory policies.

In Pennsylvania, the use of wastewater treatment facilities has greatly been affected by regulation. Since direct discharge of wastewater from fracing operations is generally prohibited, if wastewater is not recycled or disposed through reinjection, it must be treated before being discharged. Operators typically transport wastewater to publically owned treatment works (POTWs) or private centralized waste treatment facilities (CWTs).

While the treatment and discharge of wastewater is generally regulated under the federal Clean Water Act (CWA), a comprehensive set of national standards does not exist for the disposal of wastewater discharged from natural gas extraction activities. As a result, POTWs often do not treat, or have difficulty handling, certain constituents found in wastewater, including salts, organics and heavy metals. CWTs generally do a better job of removing dissolved solids, but associated discharges often still contain certain contaminants such as bromide.

In response to the treatment difficulties noted, Pennsylvania banned the disposal of fracturing fluids at POTWs without prior pretreatment and set maximum concentration levels for total dissolved solids and chlorides released from nonexempt CWTs. This restriction on treatment has contributed to a spike in the use of recycling as an alternative for wastewater management in Pennsylvania. While less than 10% of wastewater was recycled throughout most of the US in 2013, operators in Pennsylvania reported recycling and reusing up to 85% of fracturing fluids that year, a result driven by regulation and geological factors that restrict the use of deep well injection in Pennsylvania.

Ohio, on the other hand, does not have the geological limitations seen in Pennsylvania which impact the viability of deep well injection and permits transport of wastewater into the state from other states for disposal. However, due to concerns of seismicity, Ohio recently promulgated strict regulations on the use of such injection wells. These regulations prohibit new wells from being drilled in the Precambrian basement rock formation, require operators to submit extensive geological data before drilling, and require use of certain pressure and volume monitoring devices. Together with Ohio's increasingly stringent rules on transportation of wastewater and a complete ban that Ohio passed on the use of POTWs and CWTs for wastewater treatment, Ohio may be veering towards a more restrictive than reactive approach to wastewater regulation. Such shifts will be critical areas for fracturing operators and wastewater management entities to monitor and it remains to be seen what impact these new regulations will have on reuse and recycling both in Ohio and in the surrounding states.

Restrictive approach

Vermont applies a highly restrictive approach to fracing. Vermont Act No. 152 bans treatment, disposal, and storage of fracturing fluids (as well as fracing altogether). Arkansas is less restrictive, but has gone so far as to impose a complete ban on use of wastewater disposal wells due to concern with seismic activity. With the citizens of Arkansas being among the first to file claims in court based on allegations of property damage resulting from shale gas wastewater injection and associated local seismic activity, it is not surprising that the state is adopting a more restrictive approach to regulation.

Facilitative approach

Given the direct impact that regulations have on wastewater management decisions, the regime in Texas should be described as nothing less than facilitative, geared towards encouraging recycling or conservation rather than prescribing wastewater management choices. Rather than banning injection wells or other wastewater management techniques, Texas has taken steps to lower costs associated with recycling, such as eliminating the need for a recycling permit when operators recycle fluid on their own leases or transfer fluids to another operator's lease for recycling. Texas also established a new approach for reuse of treated fluids in non-well site situations, creating five new categories of commercial recycling permits. The incentives and less stringent regulatory approach may make Texas more attractive for investors and could lead to a more cooperative or collaborative regulatory environment.

Potential implications

The differences we see in state regulatory regimes mean that any stakeholder or potential investor interested in fracturing, must closely examine how regulations in relevant jurisdictions circumscribe, prohibit, guide, or incentivize behavior. In addition, it will be of interest to regulators and stakeholders to see how reactive, restrictive, or facilitative approaches to wastewater regulation drive behavior and decisions on whether to conduct fracing in that state. With the amount of water needed for drilling and fracturing ranging from 3 to 10 million gallons of water per well and the rate of return ranging anywhere from 3% to 80% of the fluid introduced, wastewater management costs may be substantial. Finally, understanding a relevant state's regulatory perspective could help stakeholders identify further opportunities to help develop improved, more cost-effective, and balanced regulatory regimes.

Editor's Note:Reference material can be obtained by emailing the authors.

The Authors