Water Shortage Limitations on California's 'New Gold Rush'

Nov. 3, 2014
California is experiencing one of its worst water shortages in history and has the highest cost in the nation for both supply water and disposal of wastewater. However, the state has a potential savior in the Monterey Play oil shale. Given the persistent drought conditions and competing demands for what little amount of water there is, oil and energy companies must work together to conserve and manage water without putting a substantial burden on available water resources.

By David Kujawski

One can hardly pick up a current newspaper on any given day without noticing substantial coverage of the relationship of energy costs to the overall U.S. economy. In the last few years, there have been dramatic advancements in the production of fossil fuel alternative resources in the U.S., particularly natural gas recovered from shale gas. The capture of this vast resource is projected to end U.S. reliance on Middle East crude oil and is already stimulating the economy to a degree that is a major factor in ending the recent recession.

Perhaps the most visible example has occurred in Western Pennsylvania. Presently, the rate of natural gas production is ahead of the capability to process it into usable products. The large number of construction projects in the petrochemical industry today will soon alleviate some of this surplus problem. In the future, when additional usable finished product manufacturing is perfected, especially for transportation fuels usage or refining, the economy should improve steadily.

There continues to be increasing publicity about the concurrent development of shale oil resources in the U.S. (see Table 1) and a similar resource in Canada known as tar sands. These two types of reserves provide similar fossil fuel alternative benefits as shale gas does, and the U.S. and Canada hold vast deposits of these resources. In fact, recent research has determined that the California Monterey Reserve holds 64 percent of U.S. shale oil deposits (see Fig. 1).

Unlike shale gas, produced shale oil has an immediate use in finished product transportation fuel manufacturing, as it can be used as feedstock in U.S. oil refineries. Although some refineries require a few relatively small manufacturing modifications for using shale oil and tar sands feedstocks, the return on investment is ultimately very attractive. An example of these modifications is compensating for fluid catalytic cracking (FCC) difficulties arising from the higher levels of iron, alkali metals, nickel, and vanadium present in shale oil crude feedstocks. Left unchecked, these higher levels can affect the zeolite, dehydrogenation and catalyst mechanisms in the FCC process.

U.S. oil refineries have encountered a number of problems in recent years that have forced their operations to run lean, resulting in high costs to the consumer at the gas pump. The high cost of crude oil is, of course, a well-documented factor. Right behind that is the steadily increasing cost of environmental compliance. One of the major consequences of these factors has been a virtual moratorium on capital projects and improvements. Only in the last year has there finally been some marginal breakout from these restrictions. This situation has been a double-edged sword for these refineries, in that increased profitability is subject to efficient operation, which in turn is influenced by their ability to maintain ongoing capital improvements.

The Role of Water in the Quest for Energy Resources

In recent years, much discussion among scientists has focused on the future water needs of the planet and the disturbing trends that project substantial shortages of supply. Concurrently, much discussion among economists has suggested that water is a commodity that presently lacks a trading platform. Both groups project that, ultimately, water will likely be traded as a commodity, with different grades being tendered at various technical specifications based on supply, treatment, reuse, or disposal requirements.

Figure 2. California's Major Water Storage and Distribution Lines

The ability to capture shale gas has been made possible by the advancement of hydraulic fracturing drilling techniques (fracking). The ability to capture shale oil also depends on fracking techniques as well as advanced mining and refining procedures. Both fracking and mining methodologies require substantial volumes of water, and there is much debate surrounding available supply sources, environmental impact and disposal guidelines.

More than 35 states now suffer from supply water shortages, but no state struggles more than California. This drought-ridden state currently has the highest cost in the nation for both supply water and disposal of wastewater. The largest industrial user in California, for example, the Central California agricultural industry, cannot acquire enough water to operate at full production output, thus impacting the state's fragile economic foundation.

Now enter the enormous economic potential represented by the Monterey Oil Shale Play, which requires massive quantities of supply water for production and will generate vast quantities of potentially hazardous wastewater for disposal.

The following statistics help illustrate the volume of water involved in this process:

  • On average, fracking operations require around 5 million gallons of water per well drilled. This is equivalent to the daily supply for 40,000 people. It is estimated that there are currently around 7,200 actively fracked wells in California, and major production of shale oil in the Monterey Play is only just beginning.
  • Frack water usage earns $15,000 more revenue via energy return per gallon of frack water used than revenue received from the equivalent irrigation water usage for agricultural crop production.
  • Southern California currently has 14 oil refineries discharging an estimated total volume of over 50 million gallons per day (MGD) of wastewater to the County of Los Angeles Regional Wastewater Treatment Plant, incurring cumulative surcharges in excess of $300,000 per day.
  • In some parts of California, the cost of industrial supply water is in excess of $4 per 1,000 gallons.1

Fourteen of the 15 Southern California oil refineries are no longer able to discharge their wastewater directly to surface waters and therefore must send it to the L.A. County Regional Treatment Plant, incurring massive surcharge costs in the process. These same refineries overwhelmingly have the highest cost of supply water for all refineries in the U.S. A refinery typically requires 1.5 to 3 gallons of supply water for every gallon of crude oil processed. These 14 refineries process approximately 1.2 million barrels of crude oil per day (one barrel equals 42 gallons).

These refineries could deploy new technology to reuse a significant amount of water, thus dramatically reducing costs of both supply water and wastewater disposal. Further, these refineries could partner with the fracking operators to drastically improve statewide water management. For example, the 14 refineries that discharge 50 MGD of wastewater to Los Angeles County Sanitation District (LACSD) are essentially sending dissolved air flotation (DAF) effluent to the district. This wastewater contains around 4,000 ppm of chlorides, which fracking operators would deem a very attractive frack water source, as it would prevent adding potassium chloride to freshwater for improving its ability to penetrate rock.

In short, this refinery wastewater -- the disposal of which comes with heavy surcharges from LACSD -- could be an ideal source of frack water supply. And, there are currently three existing pipelines between Wilmington and Bakersfield that could accommodate the transfer of wastewater to supply water. This could be a game changer for both refiners and frackers.

California Conditions

Much has been written on the very difficult economic conditions that have plagued California for close to a decade and continue to worsen. At the same time, the state is experiencing one of its worst water shortages in history. For reference, Figure 2 illustrates California's major water storage and distribution lines. The battle for small available water resources is nothing new and has been going on for more than 20 years. Neighboring states as well as various industries within California continue this fight on a daily basis,2 and at the heart of the fight are the struggling Central California Farmers.3

California is the most populous state in the country and overwhelmingly has more automobiles than any other state.4 Further, California has the highest gasoline prices in the U.S., by far.5 Only within the last year did the state know whether the use of hydraulic fracturing techniques would be permitted in the future. This determination opened the door for California to tap the vast resources of the Monterey Play.6

Oil Shale Mining Technology Advancements

Given California's economic woes, can the state's massive shale oil resources be converted into a solution? Historically, the cost of oil shale mining was considered too expensive to efficiently fit into the gasoline production business model. Oil shale mining techniques are illustrated in Figure 3.

Historically, the need for heat within these processes made gasoline production too expensive. In recent years, however, Royal Dutch Shell has perfected an in-situ process that can now produce oil refinery crude feedstock at around $30 per barrel.7 The solution features a few potentially game-changing benefits:

  • It has the ability to reach an available oil shale with wells versus surface mining.
  • Its reach is greatly improved by combining an in-situ heating process with hydraulic fracturing and especially with new abilities to move horizontally.
  • The greatly reduced heat input in this process drops the operating cost dramatically, making refinery crude slate supply economically feasible.


The most populous U.S. state with the worst economic conditions has a potential savior in the Monterey Play oil shale. But given the persistent drought conditions and competing demands for what little amount of water there is, oil and energy companies must work together to conserve and manage water without putting a substantial new burden on available water resources.

About the Author: David Kujawski is vice president of Refinery Water Engineering and Associates (Nederland, Texas). He has 32 years of experience in water and waste treatment in over 200 industrial plants and 46 oil refineries. Kujawski holds degrees in environmental engineering, chemistry and marketing.


1. California Department of Water Resources, California Water Plan Update 2005, 2005, Strategic Plan Volume 1, Sacramento, CA: Publications and Paperwork Management Office, chapter 4, page 33.
2. "Legal Battles Over California Water Supplies Set to Escalate With Final Bay-Delta Plan," Bloomberg BNA, March 13, 2013, http://www.bna.com/legal-battles-california-n17179872776/.
3. Harry Cline, "Water crisis growing on California's Central Coast," Western Farm Press, January 6, 2012, http://westernfarmpress.com/irrigation/water-crisis-growing-californias-central-coast.
4. U.S. Department of Transportation, Federal Highway Administration, State Motor-Vehicle Registrations – 2006, 2007, Highway Statistics 2006, Office of Highway Policy Information, section II, table MV-1.
5. Map Gas Prices, GasBuddy.com, accessed September 23, 2014, http://www.gasbuddy.com/GB_Map_Gas_Prices.aspx.
6. "Green California Gives Its OK To Fracking As Safe," Investors.com, October 12, 2013, http://news.investors.com/ibd-editorials/102113-675997-california-governor-signs-bill-allowing-fracking.htm.
7. "Shell Oil Shale Extraction Technology Economically Viable," FuturePundit, September 5, 2005, http://www.futurepundit.com/archives/002981.html.

More Industrial WaterWorld Articles
Past IWW Issues

Sponsored Recommendations

Meet the future of MV switchgear

SureSeT new-generation metal-clad. Smarter. Smaller. Stronger.

A digital circuit breaker built for the future

EvoPacT medium voltage digital vacuum circuit breaker

The New Generation of Intelligent MV Switchgear

Step into the future of electrical infrastructure with Intelligent MV Switchgear - where traditional equipment becomes smart, providing real-time data on critical components like...

Switchgear goes digital with SureSeT

Discover what you can do with Square D natively digital MV metal-clad switchgear.