Drilling Restrictions in the Permian? Maybe so!

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The City of Midland sought permission from the Railroad Commission of Texas (RCC) to challenge drilling permits in the Permian.  The issue is not related to drilling oil, but rather, the disposal of wastewater from oil and gas production.  Specifically, the city has challenged Pilot Water Solutions’ permits to inject wastewater near the T-Bar Ranch, where Midland gets roughly 30% of its drinking water.

The city purchased the T-Bar Ranch in Winkler County in the mid-1960s for its future water needs.  Midland also claims ownership to the groundwater under sections adjacent to the T-Bar Ranch.  After the 2011 drought conditions almost hamstrung Midland and Odessa, the city of Midland opted to tap into the 20,229-acre T-Bar Ranch for its water supply.

From June to November 2022, Pilot Water Solutions applied for permits to drill 18 disposal wells in the lands next to the T-Bar Ranch, for a combined capacity up to 567 million gallons of produced water per month.  In December 2022, Midland’s lawyers protested five of Pilot’s wells applications, which proposed to inject up to 24,900 barrels of produced water per day, per well, all within 1,000 feet of Midland’s water wells.

The desire to continue profitable oil and gas operations in the oil capital of Texas, and the need for the city to provide fresh drinking water for its citizens are clearly in conflict here.

For its part, Pilot has proposed measures beyond those that are required by the RCC to protect the groundwater, including designing wells with three strings of steel casing, each protected by cement to the surface.  Pilot also intends to install monitors at the wellhead to detect conditions and shutdown in the event of a leak. The City’s concern, of course, is that the additional measures offered by Pilot will be insufficient, accidents will happen, and ultimately, the groundwater will be contaminated.

The hearing before the Railroad Commission administrative judges is set for January 8-11th, 2024. Will the RCC limit Pilot’s disposal in favor of protecting the drinking water, or allow Pilot to inject the wastewater with the additional protections in place?

UPDATE as of 1/25/2024:

We recently wrote about a dispute between the City of Midland and Pilot Water Solutions.  Specifically, the City of Midland sought permission from the Railroad Commission to challenge drilling permits issued to Pilot Water Solutions to inject wastewater near a reservoir that provides roughly 30-35% of the City of Midland’s drinking water.

Prior to the hearing before the Railroad Commission, the City of Midland and Pilot reached settlement, which allows Pilot to inject four saltwater disposal wells further away from the reservoir with the possibility of six to eight more with the city’s oversight.  Additionally, Pilot is required to pay $400,000 for monitoring of the disposal wells, and ground water monitoring wells to check the reservoir’s water, which was the main push for the City of Midland.  Finally, Pilot has agreed to pay for and plug two older wells that were leaking.

 

Molly advises on all aspects of litigation, from risk mitigation to pre-suit investigation to trial investigation, and has extensive experience conducting depositions and handling motion practice. She represents clients in connection with commercial and industrial accident claims, construction disputes, engineering and design defect cases, contract and indemnity disputes, and general insurance defense litigation. In the oil and gas sector, Molly advises service companies, manufacturers, producers, operators, well interest owners, and others in complex matters before state and federal courts and regional governing agencies.

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