In a potentially substantial move for the oil and gas industry, the Texas Commission on Environmental Quality (“TCEQ”) and the Oklahoma Department of Environmental Quality (“ODEQ”) are seeking delegation from the U.S. Environmental Agency (“EPA”) to take over federal National Pollutant Discharge Elimination System (“NPDES”) primary enforcement authority, or primacy, for certain wastewater discharges within their respective states associated with the oil and gas industry, including for produced water. State primacy over these discharges would both potentially expand options for the treatment and discharge of oilfield wastewater and create a streamlined permitting process for prospective permittees who are currently limited in their ability to discharge treated wastewater and, even if more discharge options existed, are required to seek authorization from both state and federal agencies to obtain certain oil and gas wastewater discharge permits.
In Texas, Governor Abbott recently signed a bill passed by the Texas State Legislature (HB 2771), effective September 1, 2019, requiring the TCEQ to submit to EPA no later than September 1, 2021 a request for delegation of NPDES permitting authority for discharges of produced water, hydrostatic test water and gas plant effluent associated with oil and gas activities, pipelines and natural gas processing plants that are under Railroad Commission of Texas (“RRC”) jurisdiction. The bill also transfers state authority to regulate permitting for those discharges from the RRC to TCEQ, although such transfer of authority would not be effective until TCEQ obtains primacy from EPA.
Under the current regulatory landscape in Texas, RRC has state authority to permit wastewater discharges associated with oil and gas operations, but EPA has not granted it federal NPDES permitting authority to authorize such discharges. Thus, to discharge oil and gas wastewater, such as produced water, a prospective permittee would be required to obtain authorization from both RRC and EPA. EPA presently does not permit the discharge of the most traditional oil and gas related wastewaters (e.g., produced water, drilling and completion fluids, etc.) into streams, creeks, rivers or similar waterways that are waters of the United States except in very narrow instances west of the 98th meridian, where produced water can be and is in fact used for agriculture or wildlife propagation. So, as a practical matter, obtaining permits for the discharge of treated wastewaters associated with the oil and gas industry is difficult and uncommon. In contrast, TCEQ has state authority to permit wastewater discharges not associated with oil and gas operations, and EPA delegated federal NPDES permitting authority to TCEQ in 1998 for such discharges under what is known as the Texas Pollutant Discharge Elimination System (“TPDES”). Thus, to discharge non-oil and gas wastewater, such as hydrostatic test water not associated with oil and gas activities or RRC-regulated pipelines, a prospective permittee is generally only required to obtain TCEQ authorization. Texas regulators believe that suitable treatment technologies now exist making discharge of treated wastewater from the oil and gas industry more viable and adequately protective of the environment, so that assuming permit authority over such discharges makes sense. Environmental groups are more dubious, drawing attention to potential radioactivity and a wide variety of fracking chemicals that may be present in such wastewaters.
Oklahoma is similarly seeking NPDES primacy for wastewater discharges associated with oil and gas operations. In December 2018, the ODEQ applied for authorization to regulate wastewater associated with hydraulic fracturing. ODEQ is reportedly revising its application for resubmittal. The state has experienced reduced seismic activity since limiting produced water disposal via underground injection, which is a common method of disposing of the waste. State authorization of treated produced water discharges would provide operators with alternatives to manage the waste without injecting it underground, thus further mitigating the risk of seismic activity potentially associated with injection activities.
The proposed changes come at a time when EPA is itself evaluating how to best manage and regulate oilfield wastewater. In May 2019, EPA released a draft study evaluating on a nationwide basis state and local regulations regarding management of wastewater from the oil and gas industry. The study also reportedly sought to evaluate various approaches to manage oil and gas extraction wastewaters generated at onshore facilities, and better understand the need for, and concerns regarding, additional discharge options for oil and gas wastewater under the federal Clean Water Act. The public comment period for EPA’s report concluded in July 2019, and EPA is reportedly seeking to finalize the report and weigh appropriate regulatory options.
Texas and Oklahoma’s applications for NPDES primacy for certain types of oil and gas wastewater, if successful, coupled with EPA’s reevaluation of federal oil and gas wastewater regulations could mean substantial regulatory changes for the oil and gas industry in coming years. Significantly, such changes would involve each state’s environmental regulatory agency, rather than its oil and gas regulatory agency, exercising even greater reach over the industry.