Strategic Reporting and the Effects of Water Use in Hydraulic Fracturing on Local Groundwater Levels in Texas

Hydraulic fracturing activity has increased rapidly in the U.S. over the last decade and a half. During this time, operators have learned to complete wells that are more productive by increasing the amount of water, among other inputs, used in well stimulations. Since many unconventional oil and gas plays are located in relatively arid regions, the industry’s increasing water use has created concerns over its impacts on local availability. However, management of water resources in these areas is complicated, partly due to state laws that largely allow unrestricted groundwater pumping by landowners, but also because the industry’s reporting of water use is not particularly transparent. In this paper, I study two interrelated issues on water use in hydraulic fracturing. First, using a proprietary dataset of well-level completion reports in Texas, the author shows how operators’ propensity to report detailed information on water use varies depending on whether the well is located within a groundwater conservation district. Second, the author shows a causal link between water use in hydraulic fracturing and declining local groundwater levels. The findings are helpful to inform discussions about the management of groundwater resources by shedding light on the importance of precise data on both the industry’s use and on water availability. Potential policy considerations include expanding reporting requirements to include total water use per well by both source and type, and incentivizing operators to use online water sourcing methods that would enable formal accounting for water transactions.