Fracking Operations are Firing Up Oil Companies for a Big Comeback

HOUSTON, TX -- Officials from Houston-based Apache Corp are hoping to quell public concerns in the West Texas town of Balmorhea that the local water supply will not be contaminated through hydraulic fracturing operations from the company's recently discovered Alpine High oilfield.

Apache announced the Permian Basin discovery last week, which the company said they expect to find more than 15 billion barrels of oil and gas under its 350,000 acres in the prairie north of the Davis Mountains.

What is problematic is that the massive find is that it’s not far from Balmorhea State Park that is centered around a 3.5 million-gallon pool filled and fed by the San Solomon Springs.

The pool stays a cool 72 to 76 degrees even during the heat of a Texas summer.

Knowing this, park visitors are concerned drilling and fracking could spoil the spring, contaminate the water, or just use it all up.

Although it doesn’t happen often, oil operations have ruined or depleted water supplies in some communities.

However, the massive amount of water needed for hydraulic fracturing is also concerning for the Balmorhea community.

During the fracking process, millions of gallons of water is needed to flood the wells, which then seep out of cracks created by the fracking process, and flow to the surface, which creates millions of barrels of waste-water.

Most often the wastewater is pumped back underground, which makes spring-lovers nervous.

The company realized early that tapping that source would send the wrong message to the community, and Apache public affairs vice president Castlen Kennedy said there were other, easier and cheaper water sources they’d consider.

For instance, Apache has already discovered underground salt water reservoirs nearby, and many of the ranchers and farmers whose land Apache has leased have their own wells with water they are willing to sell.

While the Balmorhea community is beginning their process, other companies are buying into the vast potential expected out of the famed Permian Basin.

Last month, PDC Energy purchased bought 57,000 acres from New York-based private equity asset manager Kimmeridge Energy for $1.5 billion.

“Things are definitely getting hotter in the Permian Basin right now,”WoodMac analyst Ben Shattuck told Fuel Fix. “You’ve got a substantial asset base that you can drill at today’s prices and still make money on.”

In June, Irving’s Pioneer Natural Resources bought 28,000 acres from Oklahoma City-based Devon Energy for $435 million, and a few days later, Denver’s QEP Resources bought 9,000 acres for $600 million from an undisclosed seller.

Over the next two months, investors bought 131,000 acres of land for roughly $4.3 billion.

About three-quarters of the Permian deals in recent years have been in the region’s northern and eastern area, called the Midland Basin, but this year investors have zeroed in on the Permian’s western half, known as the Delaware Basin.

Houston-based Silver Run Acquisition, run by former EOG chief executive and renowned shale driller Mark Papa is one of those investors who bought 38,000 acres there in July.

In a statement released by his company, Papa said the resources within the Delaware Basin are “significantly underappreciated” and that this recent deal would provide a great starting point for Silver Run.

“I look forward to replicating the culture and philosophy that made EOG Resources such a success during my time there,” Papa said, “and using the Centennial assets as a platform to build something truly special.”

Image: Tim Evanson via Flickr