In addition to better exploiting the value of natural gas and natural gas liquids, the next chapter of Bakken Shale development in North Dakota will be written about water, according to Lynn Helms, the state's chief oil/gas regulator.

In an interview with NGI's Shale Daily in his Bismarck office, Helms said what is done about water in the oil/gas industry looms as a major policy question for the state and operating question for the producers, who many think will begin ramping up with expected higher commodity prices in the months ahead.

"How can we reduce the water handling costs and risks; is there a way to move it and recycle it for hydraulic fracturing [fracking]?" That's the poignant question currently, Helms said.

Or could it be used more for cooling water in onsite energy generation, he said, adding that the biggest single cost for producers is water handling.

"We have discovered that during this recent [price decline] period as companies have shifted their focus from growth to cost reduction that number one cost is water handling," Helms said. "Getting water for fracking and then dealing with the flow-back water from the fracking are involved. There is a lot of opportunity there."

Helms said there is going to be more money invested in research to figure out ways to deal with this issue. It is part of the Bakken Optimization Study ongoing at the North Dakota Energy and Environmental Research Center (EERC), he noted.

"We don't know if our [oil industry] produced water can ever be used for something like crop irrigation, but we think it could be suitable for fracking and cooling water, and then it becomes a replacement for fresh water," Helms said. "In other states there are produced water streams that can actually be cleaned up and used to irrigate cotton fields and things like that."

He said it is doubtful that Bakken water can ever achieve that, but "we can certainly find ways to be more efficient with it, and it should be cheaper than what industry is doing with it now."

Helms said he attended meetings in Denver in mid-May to represent North Dakota in a government-industry effort involving rural water users and state agricultural officials to partner on a two-year project to research and create a legal framework to figure out how to make better use of produced water.

Separately, in a speech two days later at the Williston Basin Petroleum Conference last week, Helms said that during the price downturn it is clear operators have "learned how to frack better," referring to the so-called "super-fracks" that involve using greater amounts of sand and water. "They have increased the industry's production and the overall recovery per well by 20%," he said.

"Overall, operators have become much wiser and more efficient about fracking." In the past two years, overall costs are down about 60-30% for fracking and rig efficiency and another 30% in operating costs," Helms said.