Locke Lord QuickStudy: Texas Commission on Environmental Quality and Oklahoma Department of Environmental Quality Seek Authority to Issue Permits for Oilfield Wastewater

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.‎