California Requires Oil, Gas Companies to Report Water Use

Published December 19, 2014

The California state Senate unanimously passed a bill to require oil and gas companies to report the source and amount of water they use in drilling operations. The measure was approved during a prolonged and severe statewide drought.

Law May Backfire

“Requiring oil and gas companies to report water use falls firmly within this class of useless and possibly counterproductive actions: it is most unlikely to result in a more rational allocation of water; it will almost certainly not ensure that water is put to its best and highest valued use; it will do practically nothing to incentivize cost-effective production and distribution of water; and it is unlikely even to incentivize cost-effective conservation,” said Julian Morris, vice president of research at the Los Angeles-based Reason Foundation.

Author of Senate Bill 1281, State Sen. Fran Pavley (D-Agoura Hills), claimed in 2013 enhanced oil recovery operations used more than 80 billion gallons of water in the state.

Tom Tanton, president of T 2 & Associates, a consulting firm to the energy and technology industries, said the bill will likely backfire on environmentalists because, for example, making ethanol takes about 10,000 times more water to produce a BTU, and soy biodiesel uses even more water than that.

“Furthermore, once the productivity and GDP impact of oil and gas development are more broadly recognized, the comparative advantage of water use in oil and gas operations, compared to other uses, will look like a bargain,” he said.

Morris expressed concern about the bill’s potentially counterproductive effects. “There is a chance that it will discourage investment in energy exploration and extraction, which might increase the cost of energy. Since energy is needed to pump water from places where it is more abundant but in relatively low demand to places where it is less abundant but in relatively high demand, such a requirement might therefore serve to increase water scarcity, with adverse effects for the economy and the environment,” he said.

Alyssa Carducci ([email protected]) writes from Tampa, Florida.