Oil and gas production in the U.S. Southwest’s Permian Basin generates wastewater  at a pace that would fill 1,000 Olympic-size swimming pools every day, presenting socially conscious investors interested in more environmentally friendly water management with a lucrative opportunity.

Current water management for the oil and gas industry in the area is dominated by local mom-and-pop  companies, which largely rely on trucks to move the liquid. Each tends to focus on one aspect of disposal, which includes water transfer, treatment, and storage. The fractured way that wastewater is handled means that the costs of U.S. land oilfield water management may reach $41 billion in 2022, an IHS Markit report estimates.

“You have a very chaotic method to manage that water,” Dustin Brownlow, CEO of Austin, Texas-based Antelope Water Management, said in an interview with Karma. “There’s really no one out there that owns that entire value chain.”  

That is starting to change. Private investments in water management will reach $2 billion in 2019, quadrupled from 2018, Brownlow said. In February, Blackstone invested $500 million in Waterfield Midstream, a full-circle water management company that recently scored a 15-year contract with oil producer Guidon Energy. In May, Singapore sovereign-wealth fund GIC bought a 20% interest in WaterBridge Resources from investment firm Five Point Energy at a purchase price valuing the Houston-based company at $2.8 billion.  

Integrated water management companies including Waterfield Midstream and Five Point Energy  say they can cut costs for the oil and gas industry by providing full-circle services that include identifying sustainable water sources to building and operating integrated infrastructure to working with local landowners on recycling wastewater and preserving fresh water. For example, Five Point CEO David Capobianco told the Wall Street Journal that his company will reduce the cost of water transfer from $2 a barrel by truck to as low as 60 cents by pipe.

ESG investors also have started to pay more attention to water-related risks, said Christina Copeland, who leads the water security program in the U.S. for CDP, a non-profit that runs a global disclosure system that helps potential investors to evaluate the environmental impact of companies, cities, regions and states.

Investors find that companies’ self-disclosures are not enough, she said in an exclusive interview with Karma.

Brownlow said that managing the Permian wastewater efficiently can help the environment. “If you are more thoughtful on development, you can have less impact on the surface of that land and on the ground water supplies below that land,” he said.

His Antelope Water is collaborating with Columbia University on advancing water-treatment technology. The research team reports that its developed a more efficient and scalable desalination approach, which will largely reduce energy consumption and “radically improve the sustainability in the treatment of produced water.”
With proper desalination, wastewater could be reused in oil production, or even for agricultural and municipal purposes. Using recycled wastewater and brackish groundwater put less pressure on freshwater resources. Apache Corp., one of the Permian’s largest oil producers, said that using recycled water enabled it to limited freshwater withdrawals to 2% in 2017.