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Industry Water Impacts Grow in Importance

Water impacts of industries, particularly energy, may take on the same importance that carbon footprints have, according to a report released last Thursday by Ceres, a coalition of investment, environmental and public interest groups. It rates 100 publicly held companies in eight industries on their level of disclosure surrounding water use and risks.

"In many ways water is the new carbon," according to Brooke Barton, Ceres senior manager for water programs and the author of the benchmarking study of 100 companies, "Murky Waters? Corporate Reporting on Water Risk." The report included both the electric generation and oil and gas sectors in its assessment, rating 13 companies in each sector. "It is a resource that for a long time was viewed as essentially free, and it is now seen potentially as having value and it has the potential to affect the financial health of a lot of companies. I think the electric power sector is very dependent on water for cooling [generation plants], Barton told NGI.

Forty percent of all the water withdrawn for use annually is in the electric power sector, the report said. The rankings in the report are not reflective of individual companies' operational water impact, but rather their level of disclosure on water's role on the bottom lines.

"The report shows that many companies are not including water risks and performance data in their financial filings, nor are they providing local-level water data, particularly in the context of facilities in water-stressed regions," said a Ceres spokesperson. Barton said this is likely to change in the future, particularly when a similar rating report on carbon disclosure is completed later this year.

Ceres plans to follow-up on the latest report in the future, and Barton said the separate "carbon disclosure survey" done by another organization will release a survey of about 300 companies in the spring, including the electric generation and oil and gas sectors. "That information will be correlated with ours and made available to investors in the coming years," she said.

Barton indicated that none of the 100 companies surveyed provide "comprehensive water data" on their supply chains, something Ceres has labeled as a "glaring omission," given that the vast majority of the corporations' water footprints are in the supply chain.

In deciding to focus on eight industrial sectors (beverage, chemicals, electric power, food, home building, mining, oil/gas, and semiconductors) Ceres said it focused on business sectors where what it called "water security concerns" are most likely to have a material impact on business. Companies were rated based on five key categories of disclosure levels: water accounting, risk assessment, direct operations, supply chain and stakeholder engagement.

In the electric sector, Pinnacle West's Arizona Public Service was given the highest ranking for water disclosure, followed by American Electric Power. In oil and gas, BP topped the list, followed by Suncor Energy Inc.

In the energy sector there is a growing recognition of a tie between water and energy efficiencies, Barton said. "To the extent that companies are able to drive better energy efficiency among their customers, they will be better able to deal with water issues as well," she said. In oil and gas certain sub sectors are "significantly impacted" by the growing water issue risks -- shale gas and oilsands, for example.

"The oilsands in Alberta has the Athabasca River as the core source of water for the extraction that is going on and is very water intensive," she said. "And while the companies are making big investments in recycling, there are also the long-term trends that the river itself is experiencing decreased flows, so projections of climate change are pointing to significant decreases in water availability around there. Then looking at natural gas, there are increasingly regulatory pressures on the shale fracturing technologies that have potential future impact on the availability of water resources."

In related news, natural gas midstream operator Energy Transfer Partners LP (ETP) last week announced it would partner with Heckmann Corp., a company that treats produced water to develop transportation and treatment solutions for discharged waters generated by hydraulic fracturing used to stimulate natural gas wells in the Marcellus and Haynesville shale plays.

The 50-50 joint venture (JV) would exploit the parties' combined expertise in developing pipeline infrastructure and corresponding treatment facilities and would provide supply, drilling, flow-back and produced water solutions, the companies said.

CEO Richard J. Heckmann said his company would work with ETP "to deliver solutions for the over five billion gallons of produced water per year and demand for over 12 billion gallons per year of frac [fractionation] fluids in the Northeast, as well as the areas in which we now operate."

California-based Heckmann last month the company completed a 50-mile water disposal pipeline in the Haynesville Shale to treat and dispose of up to 100,000 b/d of water. The company owns a network of eight disposal wells with four additional wells available for expansion. Heckmann also has bottling operations in China.

Up to now ETP has been focused on its extensive midstream systems, which include natural gas gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas (see related story). It currently has more than 17,500 miles of pipeline in service and has a 50% interest in JVs that have about 500 miles of interstate pipeline in service.

Several potential projects have been identified by Heckmann and ETP, and they said they have begun engineering and preliminary permitting necessary to begin constructing water pipelines, treatment and other related facilities. No additional details were provided.

Many of the gas shale producers that use frac techniques on their wells either use internal systems to treat the processed water or they contract with a third party to take care of the wastewater generated. For example, in 2008 Newfield Exploration Co. contracted with Ecosphere Technologies Inc. to recycle wastewater at the producer's Woodford Shale operations in Oklahoma (see NGI, Dec. 1, 2008). Ecosphere also has recycled frac water produced in the Barnett Shale for Devon Energy Corp. and Williams Cos.

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