Investor engagement on fracking: Water use and quality

An abundant and continuous supply of water is essential to reducing the risks to operational production and a company’s reputation.

Where a company is operating in a water-stressed region, the impacts of freshwater use are particularly high if not managed appropriately. Therefore a company needs to understand the catchment within which it operates to assess water availability and the impact on local resources. In addition to engaging with other water users in the area, the company should conduct a baseline water assessment and monitor this periodically.

Apart from water availability, water quality and pollution from fracking operations need to be mitigated and minimised. Water is used in numerous parts of the fracking process:

It is required for the fracking fluid, which contains various chemicals and a proppant (usually sand) to create fissures in the rock. Freshwater is often used to prevent introducing other debris and components. Some of the chemicals used in the fluid are toxic so reducing the use of or eliminating harmful chemicals is encouraged.
The nature of the process requires a wellbore to be drilled through shale rock thousands of metres into the ground. The construction and integrity of the well is fundamental to isolating it from groundwater sources to avoid contamination by the chemicals used in the fracturing fluid.
A combination of natural gas, chemicals from the fracking fluid and water naturally found in the rock formation flows up the well and is stored on site in tanks or lined pits. This wastewater is transported to be treated, recycled or disposed of by the company. There is risk of surface spills and leaks if the company does not manage it correctly during these processes, risking contamination to the hydrological cycle in the region.

Engagement questions

1. Does the company report on water used?

Basic expectation

The company publicly commits to and details efforts to reduce freshwater use such as setting quantitative targets and providing a qualitative explanation of their recycling, reuse or treatment practices

Follow up questions

What percentage of fracking operations are in water-stressed regions?
Has the company assessed its water requirements for fracking operations in water stressed regions now and in the future? What are the financial implications, including on Capex and revenue?
Does the company disclose a water efficiency metric? This may be a water use efficiency metric or a combination of data on water consumption, withdrawals, recycling and discharge?
What is the impact of the company’s frackingrelated water extraction on access to water? Has the company conducted a third party verified baseline of water availability by area?
Does the company participate in regional or cumulative efforts to address local water availability?

2. What is the company’s approach to toxic chemicals use?

Basic expectation

The company reports the chemicals used in fracking operations on registries such as FracFocus.

Follow up questions

Does the company pursue benign alternative chemicals and processes?
Are the most harmful additives such as diesel being eliminated from the processes?
Has the company set time-bound targets to eliminate harmful additives?

3. How does the company ensure well integrity?

Basic expectation

The company publicly commits to implementing well integrity standards to avoid the leakage of chemicals, liquids and gas.

Follow up questions

Do the well integrity standards go beyond regulatory requirements? Note that regulatory standards can vary between regions.
Does the company report on well integrity practices? For example, does the company conduct pressure testing and casing and cement evaluations?

4. How does the company manage water flowback or produced water?

Basic expectation

The company adopts recycling of flowback water to reduce the requirement of freshwater use, wastewater disposal and the associated costs.

Follow up questions

Does the company report flowback recycling as a quantitative metric? How does the company store flowback water? It is best practice to use closed tanks instead of open pits in certain situations.
Does the company disclose flowback treatment practices?