Source: Flickr/TimJKeegan.

Water scarcity is forcing big shifts in behavior for farmers in Southwest, but lack of water could also have a profound effect on the America's oil and natural gas boom. A recent report from Ceres estimates that around 47% hydraulically fractured wells in the U.S. were located in high water stress areas, or areas where 80% of available surface water is already needed for agriculture, municipal, or industrial use. Securing water for unconventional drilling already can cost up to 10% of total well costs and prices continue to climb. 

The oil and gas industry needs to make choices. Devon Energy (NYSE:DVN) handles rising costs by recycling waste-water internally, while service providers are starting to specialize in taking care of water recycling issues for the industry.

Three stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, The Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

This segment is from Wednesday's edition of "Digging for Value," in which sector analysts Joel South and Taylor Muckerman discuss energy and materials news with host Alison Southwick. The twice-weekly show can be viewed on Tuesdays and Thursdays. It can also be found on Twitter, along with our extended coverage of the energy and materials sectors @TMFEnergy.

Joel South has no position in any stocks mentioned. Taylor Muckerman owns shares of Halliburton. The Motley Fool recommends and owns shares of Devon Energy and Nuverra Environmental Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.