TWCA Annual Convention 2020

1. CONFIDENTIAL | 1CONFIDENTIAL
Sustainable Produced Water Policy,
Regulatory Framework and
Management in the
Texas Oil and Gas Industry: 2019 and Beyond

2. CONFIDENTIAL | 2
Produced Water Defined
(Courtesy of the Society of Petroleum Engineers)
Produced water is the water extracted from the subsurface
with oil and gas production.
• Produced water may include water from the reservoir
(commonly referred to as formation water),
• Water that has been injected into the formation (through
hydraulic fracturing, also referred to as flowback water)
• Contains fluids added during the drilling, production and
treatment process.

3. CONFIDENTIAL | 3
The majority of
produced water
originates from shale
plays within the
various production
basins in Texas
The Permian Basin
accounts for 70% of
Texas crude oil
production (crude oil
and condensate) and
presently accounts for
more than 65% of the
produced water
volume in Texas

4. CONFIDENTIAL | 4
Texas Crude Oil Production 2009-2019

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Texas Permian Crude Oil Production 2009-2019

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Texas Oil Production as % of U.S. Total
Texas crude oil production now comprises
42% of US crude oil production, up from 20%
in 2009

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Permian Crude Oil Production as % of U.S. Total
Texas Permian crude oil production now
comprises 30% of US crude oil production,
up from 13% in 2009

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The Goals Of Produced Water Policy In Texas
• To significantly shift the disposition of produced water in Texas from
primarily underground injection to primarily recycle and reuse (injection
currently accounts for ~90% of produced water in the Permian Basin)
• To ensure that water/produced water issues do not become a constraint
to oil and gas development/production in Texas
• To pave the way for the development of markets for produced water, and
produced water solutions, with positive and beneficial market outcomes
• To provide oversight that adequate and nonconsequential injection
capacity exists to meet the operators' needs in Texas
• To establish and maintain the highest level of environmental and societal
stewardship

9. CONFIDENTIAL | 9
Produced Water White Paper
Sustainable Produced Water Policy, Regulatory Framework, and
Management in the Texas Oil and Gas Industry: 2019 and Beyond
(Lyons, Tintera, & Wright)
Builds off of information and sentiment in the 2014 paper, Sustainable
Water Management in the Texas Oil and Gas Industry (Lyons and
Tintera)
Published by the Texas Alliance of Energy Producers (TAEP) and the
Independent Petroleum Association of America (IPAA) on September 16,
2019
http://bit.ly/AllianceProducedWaterReport

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Alliance Produced Water White Paper
Emerging trends are driving the move to significantly
greater recycling and reuse in the future
Those trends include:
• Increasing concerns regarding injection (cost, capacity, over
pressurization and seismicity)
• Strong desire to completely offset the need for freshwater for
upstream drilling operations
• Cost of freshwater/injection is going up; cost of treatment is going
down (great news for the environment and the industry)

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Produced Water White Paper
Recognition that it is critical to continue to develop
legislative and regulatory frameworks for achieving
the goal of dramatically increasing recycle and
reuse in and ultimately beyond the oilfield

12. CONFIDENTIAL | 12
86th Session (2019) Legislative Activity
• Produced water discharge and NPDES
delegation (EPA to TCEQ) – HB 2771
(passed)
• Defining ownership of produced water as
property for recycling purposes – HB 3246
(passed)
• Produced water recycle/reuse incentives – HB
3607 and 3717, SB 1919 (did not pass)

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Produced Water White Paper
10 Policy Recommendations

14. CONFIDENTIAL | 14
The D.C. Road Show
The Alliance Takes the
White Paper to Washington, D.C.

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The D.C. Road Show
The Alliance Takes the White Paper to Washington, D.C.
• Initial meetings held October 28-29, 2019
• Met with Texas Legislative Delegation and Staff
• Met with EPA Officials
• Met with DOE Oil & Gas Section Officials
• EPA and DOE Representatives on Administration
Water “Sub-Cabinet”

16. CONFIDENTIAL | 16
The D.C. Road Show
The Alliance Takes the White Paper to Washington, D.C.
Jim Beck
Alliance Board
Chairman
John Durand
President, XRI
Holdings, LLC and
Chairman of Alliance
Water Committee
Blythe Lyons Alliance
Consultant and White
Paper Co-Author
Karr Ingham Alliance
Petroleum Economist
and EVP

17. CONFIDENTIAL | 17

18. CONFIDENTIAL | 18

19. CONFIDENTIAL | 19
Takeaways from D.C. Meetings
EPA – Ready to move on NPDES delegation to TCEQ (3Q 2020)
• Invited TAEP and IPAA to suggest and submit thoughts on future
regulations
• Two-fold mission – 1) To ease federal regulatory burden on operators
without compromising the environment and 2) Find water solutions which
could lead to widespread future beneficial use
DOE – No regulatory authority over upstream operations or oilfield water
• Charged with finding water solutions, potentially through greatly increased
treatment and recycle outside the oilfield
• Willing to fund viable pilot projects and research on produced water
treatment
• Collaborate with industry to determine a best practices water specification
for produced water

20. CONFIDENTIAL | 20
The Role of Water Midstream
Providing infrastructure for the upstream energy industry
to supply, transport, store, treat, recycle and inject water
• Water 1.0 -- Trucking
• Water 2.0 -- Transfer by temporary, above ground pipeline or
layflat hose
• Water 3.0 -- Long-term contracted buried pipeline
infrastructure
• Water 4.0 --Integrated full-cycle infrastructure incorporating
water sourcing, transmission, injection, treatment and recycle

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XRI Company Overview
• Founded in 2013
• First independent (non-operator affiliated) water midstream company
• Rooted in sustainability, with focus on providing non-potable water sources,
and reducing the energy industry’s reliance on fresh water and produced
water injection
• Focused on organic growth only (until acquiring Fountain Quail in April 2019)
• First water midstream company to fully commit to a primary focus on produced
water reuse by investing in a water treatment and recycling company
• Currently operate approximately 300 miles of large diameter underground
infrastructure throughout the Permian and Midland and Delaware sub-basins
• Presently treating and recycling 140,000 barrels of water per day with plans to
double that capacity by end of 2020
• Pioneering the industry to water midstream 4.0 and beyond

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Conserving Resources Through Responsible Water Management

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A look back as we look to the future…
Man and nature must work hand in hand. The
throwing out of balance of the resources of
nature throws out of balance mankind itself.
- President Franklin Delano Roosevelt
Message to Congress on the use of America’s natural resources
January 24, 1935

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