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October 26, 2015

Omar López[*]

Last March 2015, the Department of the Environment and Natural Resources (“SEMARNAT” for its Spanish acronym), through its Directorate General for Energy and Extractive Activities, published the first edition of the “Environmental Guidelines for the Exploration and Extraction of Shale Hydrocarbons” (hereinafter, the “Guidelines”). Interestingly, the publication of this document came just before the new National Agency for Industrial Safety and Environmental Protection of the Hydrocarbons Sector, also known as “Agency for Safety, Energy and the Environment” (“ASEA” for its Spanish acronym), fully assumed its legal authorities. The Guidelines systematize environmental obligations established in laws, presidential rules and related Mexican official standards, and contain recommendations resulting from the analysis and discussion of a working group composed of specialists from different areas in the fields of energy and the environment.

As it is known, at the drilling stage for the exploration and extraction of shale hydrocarbons, three core activities are conducted: vertical drilling, horizontal drilling, and hydraulic fracturing (fracking). Although this technique is still improving, less than a decade ago it had its most significant progress, giving rise to a true revolution in the production of hydrocarbons, primarily in the United States. Current developments are focused on the achievement of wells far longer in their horizontal sections (from the original 100 meters to more than 4 kilometers long), allowing to maximize the efficiency in the production of oil and natural gas.

Water is commonly used as the main component of the fracking fluid, because of its low cost, easy handling and excellent properties. By way of example, drilling a single well using the techniques described above may use between 9 and 29 million liters (29 thousand cubic meters) of water, depending on the depth, extent and permeability of the reservoir. Therefore, as part of the basic studies of their projects, petroleum operators in Mexico shall define the water supply source by referring to the availability of the resources in watersheds or aquifers, determined and published by the National Water Commission (“CONAGUA” for its Spanish acronym); if availability is insufficient or nonexistent, operators may opt for the acquisition of water rights, the use of wastewater, or importing water from neighboring basins or aquifers.

Among other areas of Mexico, in the Northeast region, which includes the states of Coahuila, Nuevo León and Tamaulipas, major shale oil and gas reserves have been identified, which are usually found in the subsoil at depths between one thousand and five thousand meters. According to the National System of Water Information, the hydrological watershed of the Rio Grande, which includes those states, presents reduced availability of water resources. In this hydrologic-administrative region, 102 aquifers have been identified, of which 18 are overexploited and 8 are under the phenomenon of salinization of soils and brackish groundwater. Additionally, in this area of the country the climate is predominantly dry, with an average temperature of 20 ºC, and rainfall is low and erratic, registering an annual average of 480 mm. (38% less than the national average).

The SEMARNAT notes in the Guidelines that to determine the existence of aquifers not identified by the CONAGUA, petroleum operators can perform 3D geophysical exploration, conduct geophysical well logs, and characterize the subsoil from the surface to the total drilling, in order to know the stratigraphy, lithology and geological structure. Geophysical exploration will define the degree of natural fracturing of the formations ranging between the shale layers and the aquifers. To avoid disputes with the authority, the SEMARNAT recommends providing the results of the geophysical exploration to the CONAGUA in order to identify the aquifers and their possible affectation risks or, where appropriate, the possibility of their exploitation for the relevant activity. Also, the document recommends petroleum operators to request the CONAGUA that the data obtained in exploration and exploratory drilling can be interpreted jointly by the project’s specialized personnel and the CONAGUA.

The SEMARNAT mandates petroleum operators to carry out preventive activities to define the original status of water aspects, among others: (i) to raise the census of wells, describing their construction characteristics and operation regime, as well as the water bodies and currents in the area, collecting data as determined by the CONAGUA; (ii) to identify, through laboratory tests, the water physicochemical characteristics, and (iii) to build and implement water monitoring wells with the features set by the CONAGUA.

If the results of the petroleum operators’ exploration programs reveal the existence of aquifers, they shall characterize the water quality within the total programmed depth. The CONAGUA will define whether it is a source of water suitable for other uses or it can be captured to feed the wells for the extraction shale hydrocarbons.

For the well’s fracturing stage, once the environmental authorization is obtained, and where applicable, forest land use has changed, and having checked the availability of water, petroleum operators will request the CONAGUA concessions on groundwater or surface volumes required for fracturing and other uses inherent to the extraction of hydrocarbons, and also permits for the construction of infrastructure such as wells for water supply.

The SEMARNAT recommends to not discharge fracturing wastewater into receiving waters, even if it has been treated. Its disposal shall be reusing it for the stimulation of extraction wells, or where applicable, depositing it in injection wells or geologically stable formations, according to the respective legislation. The authority recommends recycling up to 90% of the return fluid and reusing it for fracturing.

In addition, the SEMARNAT stated in the Guidelines that it is desirable that petroleum operators keep monitoring injection wells, as well as the water quality of the surrounding aquifers, every year for a period of up to 10 years after the closure and abandonment of the project. Also, it should not be ignored that hydraulic fracturing presents additional risks warned by scientists, for example, methane leaks and various impacts to surrounding communities.

Undoubtedly, the experience of the United States will be critical in order to adopt the best practices in horizontal drilling and hydraulic fracturing, so that Mexico may take advantage of its enormous resources in a sustainable manner.

[*] Attorney at Cacheaux, Cavazos & Newton.

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