Corey Paul | Odessa American
Pioneer Natural Resources wants to buy at least 3 million gallons of treated wastewater from the City of Odessa a day in a long-term deal that could provide up to $100 million for needed utility upgrades.
The Odessa City Council will revisit the proposal from the subsidiary company Pioneer Water Management LLC Tuesday, after pushing back discussion at their June 24 meeting so the city could negotiate a payment plan. The City of Midland is also working out a similar deal.
The wastewater the company wants comes from a supply of about 1.5 billion gallons a year not fit for residential uses that the city intended for sale to companies who no longer need it. Instead, the wastewater is dumped in the Monahans Draw after treatment at the Bob Derrington Water Reclamation Plant.
“It helps them to continue to do the work they perform and not be as much of a tax on good water sources,” said Tom Kerr, Odessa’s director of utilities. “And then for us, it is a good revenue stream that we can utilize to put toward new water sources as well as infrastructure.”
A Pioneer Natural Resources representative declined to comment specifically about the proposal before an agreement is reached with the city.
“The only reason we are looking at this is to reduce fresh water use,” said David Leaverton, a spokesman for the company. “That’s really what’s driving this, and it’s an important thing for the whole community.”
Water is an increasingly precious commodity in arid West Texas.
And oil and gas companies in the Permian Basin increasingly compete against each other for water along with other users such as municipalities, according to a research paper issued in February by Ceres, a sustainable investing consultancy that looked at usage from January 2011 through May 2013 and found 87 percent of oil wells in the basin are in “high or extremely high water stress areas.”
On top of that, Odessa faces an increasing demand for drinking water with its growing population — recently projected by the economist Ray Perryman of the Perryman Group to reach more than 211,000 people by 2018. That’s more than 40,000 additional residents from 2013.
But the deal to buy water from Odessa bucks that trend of companies competing against municipalities, Kerr said.
The wastewater has been available for years. The major users were Flint Hills Resources, no longer in operation, and Odessa Electric Power Partners, which gets its water from other sources.
But until now oil companies have not sought it, said city officials who suggested the resource was becoming more competitive as companies seek secure supplies.
“We just hadn’t seen the demand for water like we have recently,” said City Attorney Larry Long, who was working on the proposed financial arrangement between the city and Pioneer. “It’s been a combination of the intense activity that is going on here, coupled with the unprecedented drought. Between the two of those we are having water needs that we have never experienced before.”
It is relatively clean water, but the state does not allow mixing it with potable drinking water. That means to use the supply for something like irrigation, the city would have to build a new piping system to transport it. City Parks, which are on water wells, would not stand to benefit.
Windfall from the sale can only be used for water improvement projects.
If approved, Pioneer could receive more than a billion gallons of treated wastewater a year from the city. The company may end up purchasing up to 6 million gallons a day, according to city officials who took it as a sign of Pioneer’s long-term need and the outlook of continued oilfield production.
“This isn’t necessarily this year or next year,” Long said. “This is five, 10, 15 years down the road.”
The Midland City Council on June 17 voted to allow negotiations for a deal with Pioneer Water Management, which included a 20-year term with two 10-year term extensions and is expected to involve 10 million gallons of effluent per day.
Midland’s wastewater treatment plant, unlike Odessa’s, required renovations in order to treat the water, so Pioneer would fund those at an estimated cost range of $89 to $100 million.
IN OTHER BUSINESS THE COUNCIL WILL:
–Consider a request for single-family zoning by Real Property Resources for a nearly 38 acre tract of land east of the intersection of Cabrito Drive and East 91st Street.
–Consider a light-industrial zoning request by Apollo Perforators for a nearly 50 acre tract of land northwest of the intersection of Groening Street and Faudree Avenue.
–Consider authorizing the Odessa Police Department to accept a federal grant providing about $40,000 worth of overtime costs for officers who will focus on enforcing speed, intersection traffic control and seatbelt laws.
–Consider amending the Atmos Gas Franchise Agreement so that gross receipts include fees collected.
–Consider contracting for real estate services to rehabilitate and sell homes purchased under the State of Texas’ Neighborhood Stabilization Program.
–Consider renewing a contract for the purchase of irrigation supplies.
–Consider a wrecker service contract.
–Consider a bid award for playground equipment at Comanche Trail Park.
–Open a hearing about the approval of a request by DJK Inc. and RSP Permian about the zoning of a drill reservation on more than 7 acres of land north of the intersection of Dorado Drive and Mission Boulevard.
–Open a hearing about the request of W. Harvey Sparkman and LCA for the light-industrial zoning of nearly 10 acres southwest of West Interstate 20 and South Crane Avenue.
–Open a hearing about the request by Hospice House Foundation and the Ector County Independent School District to rezone the property at the northwest corner of North Sam Houston Avenue and West Ninth Street as multi-family residential.
–Consider separate Odessa Development Corporation grants for U.T.P.B and Odessa Colleges training facilities.
–Consider a second contract with Gulf Coast Waste Disposal Authority to continue studying industrial water in the Permian Basin.
Contact Corey Paul on Twitter @OAcrude on Facebook at OA Corey Paul or call 432-333-7768.