New Mexico Gov. Grisham proposes plan to turn oilfield waste into clean water supply

• New Mexico Gov. Michelle Lujan Grisham has proposed underwriting the development of a new water source.
• The plan involves purchasing treated water originating from the byproducts of oil and natural gas drilling, particularly the salty byproducts.
• Funding for the proposal would come from the state's bonding authority and financial reserves in the Severance Tax Permanent Fund.

New Mexico would underwrite development of a strategic new source of water by buying treated water that originates from the used, salty byproducts of oil and natural gas drilling, and help preserve its freshwater aquifers in the process, under a proposal from the state's Democratic governor.

The initiative from Gov. Michelle Lujan Grisham, announced Tuesday from the international climate conference at Dubai in the United Arab Emirates, would set water purification standards and purchase treated water that originates from oil fields as well as the state's vast natural underground reservoirs of brine. It requires legislative approval.

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The idea is to create a government-guaranteed market for the commodity — treated water — and attract private enterprise to build desalinization and treatment facilities, securing new sources of water for industrial applications. The administration hopes to make the water available to businesses ranging from microchip manufacturers to hydrogen fuel producers that separate the element from water in an energy-intensive process.

Lujan Grisham said she'll ask the Legislature to set aside $500 million to underwrite acquisition of treated water. The arrangement would harness the state's bonding authority and financial reserves held in its multibillion-dollar Severance Tax Permanent Fund. The trust, founded in the 1970s, is sustained by taxes on the extraction of oil, natural gas and other minerals from state land.

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"We're going to turn water — this waste, which is a problem — into a commodity," Lujan Grisham said at the conference. "We give a fixed, long-term, (let's) say 30-year contract to any number of companies that can provide the technology to identify that water, to clean that water up, and to use it in chip manufacturing, solar manufacturing."

She said the goal is avoid a reckoning on fresh-water supplies as the Rio Grande and underground fresh-water aquifers recede. The state also has extensive underground reservoirs of salty water that have been of limited use.

That brackish water is a crucial component in hydraulic fracturing, or fracking, and advanced drilling techniques that have helped turn New Mexico into the No. 2 oil production state in the U.S. The state's oil wells draw out far more water than oil, by several multiples, according to oil field regulators.

State Environment Secretary James Kenney said the goal is to move water from the "waste to the commodity side of the ledger," noting that minerals such as lithium might be recovered during water treatment for commercial purposes. He acknowledged that the environmental implications are complex and offered assurances of adequate oversight through a 2019 law regarding oil industry water uses.

"We'll have that carrot and stick approach," Kenney said "We need that carrot approach to continue to move the economic needle while preserving our freshwater resources."

Democratic state Senate Majority Leader Peter Wirth of Santa Fe signaled enthusiasm for the ideas in a social media post.

"Creating a state reserve of treated water for renewable energy projects merits serious consideration in the upcoming session," Wirth said.

New Mexico state government is navigating an unprecedented financial windfall from record setting oil production centered in the Permian Basin that extends across southeastern New Mexico and portions of western Texas. The state currently anticipates a $3.5 billion general fund surplus for the coming fiscal year — equal to roughly one-third of current annual spending commitments.

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Still, it's unclear how the water initiative will be received when the Democratic-led Legislature convenes in January.

Lawmakers within the Democratic Party have clashed in recent years over strategies for modernizing the electric grid, transportation and water infrastructure to address climate change, wary of disrupting an oil industry that is a major source of private employment and government spending.

Republican state Rep. Larry Scott of Hobbs, an oil industry engineer, expressed skepticism that the state can quickly scale up water treatment and dispose of massive amounts of salt.

"Anybody that comes to me with a project to make the desert bloom, my first question has to be, what are you going to do with salt?" he said. "It’s monumental. And unless you solve that problem, produced water will continue to be a waste product."