By Ernest Scheyder
WATFORD CITY, North Dakota May 20 In towns
across North Dakota, the wellhead of the North American energy
boom, the locals have taken to quoting the adage: "Whiskey is
for drinking, and water is for fighting."
It's not that they lack water, like Texas and California.
They are swimming in it, and it is free for the taking. Yet as
the state's Bakken shale fields have grown, so has the fight
over who has the right to tap into the multimillion-dollar
market to supply water to the energy sector.
North Dakota now accounts for over 10 percent of U.S. energy
output, and production could double over the next decade. The
state draws water from the Missouri River and aquifers for its
hydraulic fracturing, the process also known as fracking and the
key that has unlocked America's abundant shale deposits. The
process is water-intensive and requires more than 2 million
gallons of water per well, equal to baths for some 40,000
As in all booms, new players race in to meet the outsized
demand. At the heart of this battle is a scrappy
government-backed cooperative, conceived to ensure fresh water
in an area where its drinkability is compromised.
The co-op has decided to sell 20 percent of its water to
frackers to help keep prices low and pay back state loans. That
has not gone down well with the Independent Water Providers, a
loose confederation of ranchers, farmers and small businesses
that for years has supplied fracking water.
Since opening in January, the co-op has tried to limit the
power of the confederation with an aggressive legal and lobbying
strategy. The Independent Water Providers have fought back,
arguing that the co-op shouldn't be selling fracking water at
all. The state legislature stepped in with a law last month
designed to quell the tension and nurture competition, but
industry observers expect the acrimony to continue.
"When all of us had nothing (before the oil boom), there was
nothing to fight about," said Dan Kalil, a longtime commissioner
in Williams County, home to many oil and natural gas wells.
"Now, so many friendships have been destroyed because of water
Jeanie Oudin, an analyst with energy consultancy Wood
Mackenzie, predicts the competition could push down North Dakota
fracking water prices at least 10 percent in the next few years,
or roughly $170,000 per well. That's a sizeable savings in a
state where fracking costs are the highest in the country
(remoteness meant there was little infrastructure in place). The
water accounts for 20 percent of the roughly $8.5 million it
costs to drill a North Dakota oil well.
"Regardless of where operators get their water from, the
growth in active water depots should increase the availability
of raw water for hydraulic fracturing and ultimately bring down
costs," Oudin said. The depots are where energy companies buy
most of their fracking water.
The North Dakota Petroleum Council, a trade group for
Statoil, Hess, Exxon Mobil, Marathon
Oil and other large energy companies, declined to
comment on the fight or to forecast how much water prices could
fall. The council acknowledged that it would prefer multiple
sources for the state's 8,300 wells.
Energy companies get most of their water in the state by
trucking it from depots to oil and natural gas wells. Some wells
require more than 650 truckloads to frack. Companies such as EOG
Resources Inc and Halliburton Co are
experimenting with ways to reduce their dependence on water.
Fracking water depots, which cost roughly $200,000 to build
and can gross more than $700,000 per year, are typically small
metal buildings on concrete slabs filled with pumps and small
tanks connected to the Missouri River or local aquifers. They
can have two to six hookups and fill water trucks with as much
as 7,800 gallons of water per visit.
The government-backed co-op has nine water depots to hold
the fresh water that is piped from the treatment plant in
Williston, about 45 miles north of Watford. It plans to build
four more depots throughout the Bakken and hugely expand its
pipeline system to bring fresh water to more homes. Small lines
from the new pipelines will connect directly to some oil wells.
On the other side, Independent Water Providers member JMAC
Resources will build more water depots in the region and a
massive pipeline just south of the Missouri River to supply oil
wells. Other members of the group have also applied for depot
North Dakota water suppliers do not pay for water, and the
state legislature rejected a proposed water tax earlier this
year. Each side's plans will rapidly increase the options that
energy companies have to access water, further depressing
DANGEROUS TO DRINK
The co-op, officially known as the Western Area Water Supply
Project, was designed to boost the quality of the water reaching
western North Dakota homes. State studies for years had
identified high levels of sodium, sulfates and magnesium in the
In Watford City, a dust-caked community of 2,000 dotted with
oil-workers' run-down RVs, the sodium level of the drinking
water had been 18 times higher than the level recommended by the
U.S. Environmental Protection Agency. "You would drink (it) and
get high blood pressure," said Mayor Brent Sanford.
The high chemical content convinced Watford City officials
in 2010 to support the co-op as it was being organized, Sanford
By selling 20 percent of its water to frackers, the
government-backed co-op hoped to keep water prices for homes low
and generate enough revenue to pay back $110 million in state
loans for the project. The co-op sells water to frackers at
roughly 84 cents a barrel, compared to 21 cents a barrel for
homes. (One barrel equals 31.5 gallons, about 119 liters.)
Denton Zubke, the co-op board's chairman and a credit union
president, has defended the co-op's right to sell water to
frackers as the independent ranchers and farmers decry what they
see as government overreach into a private industry.
"Free enterprise was never going to bring potable water
supply to rural parts of North Dakota," said Zubke, who also
operates a private water depot. "The only way we foresaw putting
these water pipes in the ground was to pay for them with
industrial (fracking) water sales."
More than 230 million gallons of water flow every day past
the Williston plant, and the co-op itself doesn't expect water
demand from homes to exceed capacity until at least 2032,
calming any shorter-term concern about fracking's taking water
away from human uses.
CLOSEST IS BEST
Steve Mortenson, the Independent Water Providers' chairman,
says he supports the co-op's clean-water mission but believes
private industry is best equipped to provide fracking water.
"We don't feel we should have state-backed competition," he
said. "We never expected they would use the leverage of
government to oppose private business."
Confederation members can chose at what price to sell their
water; most sell at 50 cents to 75 cents per barrel. Mortenson
sells at 65 cents per barrel at his depot in Trenton, a bedroom
community on the state's western edge.
Mortenson, a soft-spoken rancher, offers washers, dryers,
showers and free snacks at his depot as a gesture to the truck
drivers who bring him business. Energy companies typically
choose water depots closest to well sites to save on fuel costs,
even if the price is higher than rival sites farther away. That
has driven the building of even more water depots around the
Zubke disputes the Water Providers' claim to be any better
at selling fracking water. He fears expansion by the
independents could jeopardize the co-op's ability to pay off its
debt. Using a complex Depression-era federal law known as
1926(b), he and other co-op officials have been sending
cease-and-desist letters to some confederation members
throughout North Dakota. They've also lobbied state officials -
so far, unsuccessfully - to deny water permits to some
Despite the contentiousness - call it fracktion - the
Independent Water Providers and the co-op are sticking with
"We don't want to profit from the water," JMAC owner Jon
McCreary said. "We want to profit by selling the infrastructure
to deliver the water."