Last week, Gulfport Energy's (NASDAQ:GPOR) request to purchase 38 million gallons of water from the Piedmont Reservoir in Ohio was approved. While that district's governing body is now looking into whether it will approve water sales from six more of its reservoirs, it is also tightening its policy on short-term water sales. The use of fresh water in fracking is drawing the concern of many local grassroots groups which is why a new study has been ordered to determine how much water should be withdrawn for fracking.
One of the more interesting comments came from Sean Logan who is the district's chief of conservation. He said, "It has never been the intent nor the goal of the MWCD that its surface-water lakes serve as the sole or a primary source of water for the entire oil and gas industry in Eastern Ohio." While I'm sure everyone would agree with that statement, the issue over using the freshwater for fracking isn't going to go away soon.
In fact, it could become more of an issue in Ohio as more wells are drilled. For example, for top producer Chesapeake Energy (NYSE:CHK), the average well in the Utica uses about 5.5 million gallons of water. As you can see in the chart below, the Utica is among the thirstiest plays in the country:
The good news is that Chesapeake has been a leader in combating the water problem through its Aqua Renew program. In fact, the program has been so successful for the company that it's been able to filter and reuse 89% of the wastewater produced in the Utica.
Another important company in the process is Nuverra Environmental Solutions (NASDAQOTH:NESC). The company has developed a full-cycle solution dedicated to the removal, treatment, recycling, transportation, and disposal of frack water. The important piece here is the treatment and recycling portion of its business, which ensures that less freshwater will be required to drill future wells. The company has built up an impressive asset base dedicated to treating and recycling wastewater.
Finally, top oil-field services company Halliburton (NYSE:HAL) remains among the most dedicated to solving freshwater issues. The company is making great strides with its CleanWave system as well was its H20ForwardSM service. These technologies, according to Halliburton's global strategic business manager, Walter Dale, enable its customers to use "produced water on conventional wells with no loss of well productivity at a net economic benefit while minimizing the overall environmental impact." Further, Dale sees this as a "paradigm shift that negates the use of fresh water."
While water usage in the Utica might be a concern today, Halliburton and Nuverra are working hard to mitigate that problem for the future. The treatment and recycle solutions they can provide to drillers like Chesapeake and Gulfport creates an opportunity save Ohio millions of gallons of water as the Utica is developed. That's important because the Utica isn't going away anytime soon.