Drilling's hidden costs

Extracting oil and gas takes a toll on the land, despite pledges of environmentally sound practices

Phaedra Haywood | The New Mexican

3/2/2008 - 2/27/08

How do you drill through a drinking water aquifer and extract oil from the earth below without polluting that water with oil — and threatening public health?

That's a question Galisteo Basin residents have been asking since last fall, when Tecton Energy announced plans to drill for a million barrels of light, sweet crude in the area.

The company has pledged to use environmentally sound practices, but concerns remain about the environmental, economic and social impacts of drilling. This story — one of a series The New Mexican will publish over the year as Santa Fe County develops new oil and gas rules — addresses concerns about the impact on water, waste management and regulatory oversight.

The well

Drilling for oil is akin to sticking a straw through a layer cake to create a hole (the well bore), then inserting a smaller straw to suck out the lower layers of frosting.

The layers are earth, drinking water, shale, gas, oil and brackish, or salty, water, in that order.

State law requires drilling companies install a series of casings to line the borehole and to protect those casings with layers of cement. That seals off the fresh water zone from hydrocarbons and other fluids that flow up and down the innermost part of the well bore.

The water, mud and gels used to cool the drill bit during the drilling are held temporarily in an open pit during process.

The plastic-lined pits also hold fluids that are used in hydraulic fracturing (called "fracking"), a process that likely will be used in the Galisteo Basin if Tecton's plans to drill there go through.

Fracking involves injecting pressurized fluids into underground rock formations to create fractures that allow the mineral resources to flow out more easily. Fracking fluids are made up of a combination of water, sand and chemicals. The specific ingredients in each company's frack fluids are deemed proprietary by the industry, meaning operators aren't required to disclose what is in them.

People who live near wells where hydraulic fracturing has been performed have reported serious health problems they believe are tied to chemicals in fracking fluid.

In 2004, the Environmental Protection Agency completed a study on the process and concluded that fracturing "poses little or no threat" to drinking water. The procedure was exempted from the federal Safe Drinking Water Act in 2005.

But according to the Oil and Gas Accountability Project, the fluids contain known carcinogens and need to be better regulated. The watchdog group's Web site says its examination of the EPA study on hydraulic fracturing revealed the agency had "removed information from earlier drafts that suggested unregulated fracturing poses a threat to human health, and that the Agency did not include information that suggests fracturing fluids may pose a threat to drinking water long after drilling operations are completed."

Once the well has been drilled and in some cases fractured, the drilling rig is removed from the site. The fluid inside the pit is allowed to evaporate. Sometimes wood chips or cement are added to the pit to absorb moisture. Then the pit is closed. Current state law allows waste pits to be closed by being buried on-site and covered with dirt. But a new rule being considered would require the pit liners and remaining waste to be trucked to permitted disposal facilities.

Tecton Energy has said it will use "closed-loop" drilling practices, in which all drilling wastes are collected in tanks — eliminating the use of pits.

Next, well operators install tanks on the drilling pad to hold wastewater. In some cases, the well head is connected to a pipeline that takes the minerals away to refineries. In other cases, trucks transport the resource.

Used water

Like many topics related to hydrocarbon extraction, the amount of water needed for drilling and fracturing is heavily debated.

By some accounts, it takes millions of gallons of water to drill and fracture some types of wells.

Tecton Energy president Bill Dirks estimated his company would likely use 40,000 to 75,000 gallons of water per well.

The source of that water is currently unknown.

When the company first announced its plans to drill for oil in the Galisteo Basin, Dirks said the company was looking for a source of water it could purchase for the project.

"You get it from wherever you can," said Bob Gallagher, president of the New Mexico Oil and Gas Association, a trade organization that represents the industry. "You might drill a water well specifically for that lease. It depends.

"I don't accept the thought process that we are using too much water. Let's get real — if water is one of the products that is needed, we have a right to use water just like anybody else," Gallagher said.

Produced water

New Mexico residents are conditioned to worry about the scarcity of water. But industry insiders say "produced water" is a much bigger concern.

This brackish water, the remains of ancient oceans trapped in underground caverns, is released when the caverns are breached by drilling. As the salty water flows into the well bore, it mingles with hydrocarbons.

Produced water is the extraction industry's highest-volume waste product. About 10 barrels of produced water are brought to the surface for every one barrel of oil, according to Mark Fesmire, director of the state's Oil Conservation Division, which regulates oil and gas production. About 640 million barrels are produced in New Mexico each year, according to Fesmire.

"Waste management in general is our biggest problem," he said.

Produced water is disposed of in several ways. Some is trucked to state-certified disposal sites, where it is stored in waste pits, aerated and allowed to evaporate. Some disposal sites inject the water into wells drilled for this purpose. Some companies inject the water back into the underground compartments it came from. About 90 percent of New Mexico's produced water is re-injected, according to Fesmire.

"This is one area where Tecton disagrees strongly with (Santa Fe) county, which has been attempting to write a 'no reinjection' clause into their new code," Dirks said in a written statement. "The most environmentally conscious thing an operator can do is put the water back where it came from."

Dirks said in his statement that Tecton also is studying a desalination process that might be able to transform the produced water into potable water.

Contaminated or impacted water

The New Mexican found little consensus between sources on most aspects of hydrocarbon extraction. Nowhere is this more true than in discussions about the industry's impact on groundwater.

On the one hand, Gallagher maintains, "Not a drop of water that's been delivered to a consumer (in New Mexico) has ever been contaminated by oil and gas activities."

But Fesmire and other state employees point to 743 self-reported cases of groundwater contamination in the state.

About 400 of those, Fesmire said, can be linked to waste pits.

(Tecton has said it will use "closed-loop" drilling systems in Galisteo, in which all wastes are enclosed in tanks and hauled away, and waste pits are not created.)

How can they both be right?

First, Gallagher's statements usually contain the words delivered to a consumer. He maintains that none of 743 cases of reported groundwater contamination in the state resulted in people drinking tainted water.

He's not too sure about the state's numbers either.

"Anybody who talks to OCD will get a different number," Gallagher said. "I've heard as high as 3- or 4,000 and as low as 54. I guess 743 is the number of the week. It is absolutely not the number of waters that have been contaminated. It is the number of incidents that have been reported. And if you look at the list ... it doesn't say 'contaminated,' it says 'impacted.' "

Jodi Porter, the spokeswoman for the state Energy, Minerals and Natural Resources Department, clarified in a statement: "Every case listed exceeded the groundwater standards of New Mexico. The word 'impact' in this reference means 'contaminate.' "

Cleaning up oil and water

Cleaning up oil spills isn't like picking up a rock you dropped on the ground. It's more like cleaning up a glass of water you spilled in the sand.

Part of the disagreement over what constitutes groundwater contamination is that most reported "releases" involve toxins being spilled onto soil, not into water.

When a toxic fluid is released onto soil, the operator must clean it up by digging up the dirt.

But while there are clear, testable standards for water quality, there are not clear standards that dictate chemical load limits for soil, only guidelines and performance standards that prohibit groundwater pollution. Add to that the confusion over how long it takes spills to reach the water table, and it's hard for anyone to really know when a soil spill is sufficiently cleaned up.

Fesmire said discussions about what those limits should be are being discussed. "It's way too complicated to understand," he said. "That's one of the reasons that OCD is proposing those (soil) limits be set."

Contaminated dirt is dug up and "land farmed" (exposed to sunlight, air and insects until the contaminant is remediated), either on-site or at a permitted disposal facility.

Cleaning up contaminated water can be difficult and costly. Sometimes air is injected into a well to separate the oil from the water. Other times the contaminated water is pumped out of the well.

"It takes several months to several years to get it down to acceptable levels in usual cases," said Wayne Price, director of the Oil Conservation Division's Environmental Bureau. "We encourage pollution prevention. Once you contaminate a groundwater aquifer, it is very expensive to clean up. There are not many cases where it costs less than a million dollars."

The industry's Gallagher said drilling companies stop what they are doing and take immediate action if they broach a water well. "If we can remediate it, fine," he said. "If we cannot, we drill a fresh water supply for the user of the water well. It's pretty simple."

In 1995, a wastewater line full of produced water burst, contaminating a municipal water well in Lovington. A story in the Hobbs News-Sun said the city used 4 million gallons of water to flush the well but that "no ill effects among the public" were reported as part of the incident.

When groundwater has been contaminated, the state requires the responsible party to drill monitor wells to determine the boundaries of the contamination and track its migration.

"They monitor them and report to us," Fesmire said. "We have 60 employees. They have approximately 23,000. There is no way, given our budget, that we can look over their shoulder the whole time. If they don't tell us the truth, we need to come down on them pretty hard. It's a self-monitoring program. That's all the state can afford."

Penalties and fines

Fesmire said the fines for violating Oil Conservation Division rules are "a little anemic."

"It's the same fine structure as in the 1935 statues," he said. "You could really get compliance with a $1,000 fine in 1935. Not now."

The division issues fines for violations such as failure to plug wells, failure to file production reports, false production reports and failure to report or remediate leaks or spills.

Fesmire said if the violations are serious enough, the state can stop the operator from drilling new wells or pull its bond. "We've yet to do that, but we have the authority," he said.

Gallagher said the state has collected millions of dollars in fines from operators for violating division rules. "That's a lie, that it hasn't changed since 1935," he said. "Go ask Fesmire how much money they have collected in fines or settlements ... in the last 12 months."

According to documents provided by the Oil Conservation Division, $850,750 in fines were collected in 2007, not including settlement agreements.

The number is up considerably from previous years. For example, the division collected only $2,000 in 2001. But the documents show a steady increase in assessed penalties in the recent years — from $12,500 in 2002 to $18,000 in 2003, jumping to $135,500 in 2004.

It's grown annually since.

Price said the increase is related to an "internal ramping up" of the division's compliance program, a new compliance manager and a change in political administrations.

"When (Gov. Bill Richardson) came on board, he mandated that the environment be protected," Price said. "It's really helped. It's helped raise awareness out there. We are looking, we are taking action. And to be honest with you, in the past this agency hadn't done that."

"We're doing a better job now," said Glenn Von Gonten, a senior hydrologist at the division's Environmental Bureau. "People are starting to report more to us. "Back in the '30s and '40s, things weren't drilled to today's standards."

Gallagher agrees that part of the reason the industry is vilified today is because of the way it conducted business in the past. "We are paying for the ills of our industry 30 or 40 years ago," he said. "We were slow to realize and react to the change in people's priorities and sensitivities, and what is important to people and what is not. The world is changing, and our industry has to change with it or we are going to be regulated out of business."

Contact Phaedra Haywood at 986-3068 or phaywood@sfnewmexican.com.