OPINION: Energy Waste Management and the Carbon Agenda

Opinion By Gabriel Rio, Milestone Environmental Services

Despite the supply and demand cycles of our industry, and advances in the development of alternative energy sources, oil and gas remains – without question – the world’s most effective source of energy with unparalleled cost and reliability advantages.

Supply models predict that fossil fuels will remain a major part of the global energy mix for decades to come, and when strong demand is coupled with concerns about climate change and other environmental impacts, it becomes all the more important that our industry continues to adapt and improve on its environmental performance.

Over the past couple of years, most E&P companies have committed to net-zero or other measurable decarbonization goals. Most of the focus has been placed on reducing greenhouse gas (GHG) emissions downstream of the drilling rig, and while this work is to be applauded, the environmental impact of energy waste remains conspicuously absent from the carbon agenda.

Compliance Is Not Enough

The uncomfortable fact is that, in some states, regulation of energy waste is outdated and unaltered for the modern era of decarbonization. In Texas, for example, due to a ruling last revised in the 1980s, operators still routinely dispose of oilfield waste in earthen pits or spread it out on ranchland, even when environmentally responsible cost-effective alternatives exist. In this case, basic regulatory compliance is no longer enough to satisfy stakeholders and regain the social license our industry needs to continue operating long term. and petroleum hydrocarbons and other compounds either evaporate as volatile organic compounds (VOCs) or interact with organisms in the soil, which are eventually expelled as carbon dioxide (CO2).

Clearly, these methods pose tangible environmental risks, as well as potential reputation risk to the operator and industry as a whole. Onsite disposal applies waste to the soil, assuring soil contamination and risking groundwater contamination from leachate, even with a liner present. Unlike professional disposal sites, neither reserve pits nor land application require longterm groundwater monitoring of the surrounding area.

By design, onsite methods vent VOCs and CO2 to the atmosphere. And don’t forget that liability for pollution remains with the waste generator forever, unless it is transferred to professional disposal sites that carry pollution liability.

In Support of Business as Usual

The conventional argument in support of onsite disposal is the perception that it is the cheapest possible option. Indeed, this may have been the case when the alternative was too remote from location to be feasible. However, in recent years there has been prolific investment in disposal infrastructure, making it more accessible and affordable than ever before.

Nowadays, in the Permian Basin, virtually every active lease is within a 30-minute drive of one or more professional disposal facilities. In most cases, this makes the cost of offsite disposal comparable with the cost of building and closing a reserve pit on location. Recent studies also show that if a premium does exist, it is negligible in the overall context of the well cost (less than 1% of the AFE).

To better illustrate the problem, building a reserve pit involves excavating a hole about 12 feet deep and half the size of a football field at the drill site. Sometimes this has a plastic liner, although this is not always required by Texas regulation, and the pit is filled with oilfield waste as the well is drilled and completed. The waste is then buried with dirt sometime after, creating what has been coined a “waste burrito.” Spreading waste on ranchland—also known as landfarming—is no better. Drilling fluids and cuttings are tilled into the soil on the lease,

The other most common claim about dumping in reserve pits or landfarming is that the waste is only water-based and therefore harmless. The reality is, once used in a well, even water-based drilling fluids and cuttings generally include petroleum hydrocarbons, heavy metals, benzene and other contaminants which, although present in nature, are found in much higher concentrations in oilfield waste.

Absent its exemption from the Resource Conservation and Recovery Act (RCRA), it is likely that some of this waste would be considered hazardous.

The Better Alternative

Our industry already has a solution for this and operators do have a better option for handling oilfield waste. The solution is using professional offsite disposal methods like slurry injection and E&P landfills—methods that have been successfully applied and supported by regulation in other states for decades.

Slurry injection is the most cost-efficient and environmentally secure way to sequester oily or solids-laden liquid waste. With slurry injection, liquid waste is injected into carefully selected geological strata thousands of feet below the Earth's surface. These permeable strata are capped by massive impermeable layers of rock and shale, blocking any possible migration up into vital water resources. Slurry injection is specifically designed to process oily dirty liquids at volumes and pressures far lower than associated with commercial saltwater disposal.

E&P landfills, on the other hand, are designed for long-term containment of solid waste streams. Cuttings, contaminated soil and non-injectable liquids such as cement or frac gels are contained in designated holding cells, each of which have multiple physical layers of protection and a leachate collection system that returns fluid from the landfill cell which is sent for injection.

Both methods are heavily regulated and monitored to ensure environmental safeguards and protect E&P operators, landowners and communities from the longterm effects and liabilities of pollution. Slurry injection in particular helps operators avoid the VOC and GHG emissions associated with onsite disposal methods, and permanently sequester the carbon content of the waste.

Scrutiny from the investment community and the public is at an all-time high, and the pressure is on to meet our ESG objectives while maximizing shareholder value. The good news is there is low-hanging fruit when it comes to cost-effectively improving the environmental footprint of energy waste management. A solution exists that is good for operators, landowners, investors and the community at large.

Those responsible for determining regulation, developing E&P best practices, and ensuring implementation in the field, all have significant roles to play in making positive change a reality. The risk is that prevailing rules of thumb and business as usual get in the way of making better business decisions. With the right decisions, however, we can all be winners in this high-stakes game.

Gabriel Rio

Gabriel Rio is President & CEO of Milestone Environmental Services, which he founded in partnership with Intervale Capital in 2014. Prior to Milestone, Gabriel was a private equity investor at both Intervale and TCR, and EVP of Strategy and Business Development for R360 Environmental Solutions. Gabriel is an elected member of the Energy Workforce & Technology Council Advisory Board and the TXOGA Board of Directors.