Strategies and Methods for Centralized Water Management Facilities in the Piceance Basin
Authors: Lobato Joseph J. , Zolnosky LLC Gary 
Published: June 2014

WPX Energy owns and operates state of the art water treatment facilities in the Piceance Basin, located in Western Colorado. Recycling and reusing water is key to the company's success in unconventional tight gas development. Natural gas drilling and production in the Piceance Basin is a long-term play expected to continue for another 20 years or more. Given this extended time horizon, WPX implemented permanent and centralized water management infrastructure to control costs and improve profitability.

The role of the Centralized Water Management Facility (CWMF) is to treat water produced from natural gas wells, recover oil and condensate, operate within federal, state and county regulations, and consistently provide high quality treated water for hydraulic fracturing operations and disposal. The CWMF generates a revenue stream by capturing the oil and condensate that remains in the water after wellhead separation.

Produced water is unique and specific to the oil and gas reservoir from which it came, therefore, a complete characterization of the produced water to be treated is essential. What works in one basin may not work in others, effective facility design and treatment processes must be customized on an individual level and automated to ensure proper process control and safety. The state regulates volatile organic compound (VOC) emissions for ponds used to store treated water. The challenge is developing a process that removes dissolved and suspended hydrocarbons for compliance with state VOC emission limits for treated water stored in ponds. Processes within the CWMF generate waste streams such as sludge and separated chemicals from production operations. The CWMF must be able to process, clean and recycle these waste streams.

WPX centralized water management facilities have a proven track record of supporting production operations needs and consistently providing clean water for hydraulic fracturing operations. These water management strategies have lowered operating costs allowing the Piceance Basin to lead the way in company profitability during times of low gas prices. An outstanding environmental and safety track record has fostered strong community relations and led to awards of recognition from government agencies including the BLM and COGCC (Colorado Oil and Gas Conservation Commission).

Natural gas development in the Piceance Basin began to increase in the mid 1990s. Operators moving into the basin were focused on drilling to hold leases and defining the boundaries of the producing zones. Most water movements during the ramp-up were accomplished by water haulers operating in the challenging mountainous and hilly terrain. The daily water volumes from producing wells grew in lock step with the rising natural gas production. Strong demand for trucking services drove higher trucking costs. By 2005 the boundaries of the natural gas producing zones were well established and operators started to transition into an optimization phase by drilling and completing multi-well pads to reduce costs and maximize production. In 2005, water hauling costs made up 25% of the total cost for completing a well in unconventional tight gas development and water haul cost up to $3.50/bbl for moving water around the field were common. Clearly, water moving strategies needed to be challenged. Controlling these costs is a key factor contributing to lease holder and mineral owner profitability and can often be the driving factor determining whether an asset development remains viable, especially in times of low gas prices. Properly designed, implemented and operated water management facilities (WMFs) provide the means for controlling these costs.

WMFs also allow for predictable operations and provide a consistent high quality water product, on demand for hydraulic fracturing. Three types of water management facilities will be discussed in this paper, and can be either permanent or temporary.

Centralized pumping stations for water transfer Pipelines Centralized water treatment facilities

Once it is determined that a facility is needed, the decision to build a permanent or temporary facility is primarily driven by economics. The operator needs to complete an economic analysis comparing the total cost of building a permanent facility versus using contract services and rented equipment to accommodate the business need. As a simple example of economic analysis, let's evaluate the need for a permanent or temporary water transfer facility. In this example, water from producing wells is gathered at a central tank facility. From the central tank facility, water can be pumped, via pipeline, for reuse in a nearby hydraulic fracture operation or pumped to a larger water storage pit. The operator could use contract water pumping services and rented equipment or they could design and build a permanent water transfer facility including automation and plan to operate the new facility with company personnel. Table 1 details a simple cost breakdown used for the economic analysis.

Note: Economic analysis examples presented in this paper have been simplified and are intended to illistrate a point. Examples to do not include full project or operations detail and tax considerations are not included. Each new project is unique, costs and service rates will vary from basin to basin. Operators need to determine economic justification on a projet by project basis.

Table 1 Economic analysis comparing costs of renting/contracting services and building a permanent water transfer facility

In this example, the cost of the permanent facility is paid out in less than 94 days and the cost for running the facility goes from $3,870/day using contract services and rented equipment to $1,760/day using company personnel. It makes sense to build a permanent facility if it is expected to be used for more than 94 days. This is, of course, a simplified example. Each new project will be unique and require using different project cost variables for comparison, but a similar economic analysis approach would be used for larger more complex facilities. For permanent water facilities projects in the Piceance Basin, the average payout is one to two years, and it makes sense to build a permanent facility if the facility is expected to be used beyond that time frame.