New Texas Law Encourages Recycling of Wastewater From Oil and Gas Operations by Clarifying Ownership and Limiting Tort Liability

By Jillian Marullo

House Bill 2767, which took effect on September 1, 2013, was enacted to encourage recycling of the wastewater produced in hydraulic fracturing (or “fracking”) and other oil and gas operations.

A hotly contested issue is the consumption of water by fracking activities. Fracking involves the injection of several millions of gallons of water, combined with sand and small amounts of chemicals, into underground formations to fracture the rock in order to release deposits of oil and gas trapped in the rock. On average, over 83,000 barrels (or 3.5 million gallons) of water is required to frack one horizontal well, many of which are fracked multiple times. Much of this water returns to the surface as wastewater, along with underground saltwater known as produced water. In addition, for every barrel of oil or gas produced by a well, it is estimated that 7-9 barrels of wastewater are generated.

The wastewater produced in fracking operations is considered unusable because it contains chemicals, salt, leached minerals and other oil and gas wastes. Thus, instead of being reused in a subsequent frack job, it is most commonly disposed of deep underground by injection into disposal wells. In 2011, 3.5 billion barrels of wastewater were disposed of in Texas injection wells. When fracking wastewater is disposed of in injection wells, it is permanently lost to the water cycle. HB 2767 was intended to lessen this burden on water resources in Texas.

According to the bill’s author, Rep. Phil King, one obstacle to recycling fracking wastewater is the legal ambiguity about the ownership of oil and gas waste transferred for treatment. HB 2767 adds Chapter 122 to the Natural Resources Code to remove this barrier so that fracking wastewater may be more easily recycled and reused in subsequent operations.

The bill shifts ownership from the producer of the wastewater (i.e., the driller) to the company engaged to treat it for subsequent reuse (a “recycler”). Specifically, the bill provides that, unless otherwise provided by contract, ownership of the wastewater will be determined by possession and the purpose of the transfer. When the wastewater is transferred to a recycler “for the purpose of treating the waste for a subsequent beneficial use,” it becomes the property of the recycler and remains so until the recycler transfers the wastewater to another person “for disposal or use.” When the recycler transfers the treated wastewater or any byproduct to another person “for the purpose of subsequent disposal or beneficial use,” the transferred product or byproduct becomes the property of the person to whom it is transferred.

HB 2767 also limits the tort liability of recyclers who take possession of wastewater and produce from it “a treated product . . . suitable for use in connection with the drilling for or production of oil or gas.” Once the recycler transfers the treated product to another person who agrees to use the product in oil and gas activities, the recycler is immune from liability for any “consequence of the subsequent use of that treated product” by the transferee or any other person, except for personal injury, death or property damage resulting from exposure to the initial waste or treated product.

The bill requires the Railroad Commission of Texas to adopt rules to govern the treatment and beneficial use of oil and gas waste. 

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