Squeezing water out of oil

Excavating oil and gas has a little-known byproduct that costs the energy industry billions of dollars annually in removal--smelly sludge water.

A New Mexico start-up is trying to deal with the problem. Privately held Altela has developed a hydrothermal system that aims to turn the ancient groundwater extracted in oil or gas production into clean drinking water. The company calls its system "clean technology" because it can produce potable water with less energy than other desalinization methods, such as carbon filtration, without the use of pumps. Its technology can also be considered more energy efficient than hiring 18-wheel trucks to port the water away for burial in specialized wells, according to company CEO Ned Godshall.

"There's a great need for cleaning up this water rather than putting it back three miles underground, which is what's happening," Godshall said in an interview with CNET News.com.

So-called produced water is the oil and gas industry's dirty big secret. In the United States, an average of 9 out of every 10 gallons of liquid extracted in oil or gas production is salty, mineralized water that's thought to be between 30 million and 60 million years old. (In the Middle East, the ratio is more like three to one.) In 1993, for example, the energy industry generated 1.09 trillion gallons of produced water--enough to flow over Niagara Falls for nine days, according to the scientific group Produced Water Society.

After production, the onus is on the energy companies to separate the water from oil, and treat the water before it can be reused, or otherwise truck it away for disposal "down hole." That's because it typically contains oil and metals that can be harmful to the environment. Offshore oil rigs, for example, must ensure that they dilute produced water to 29 parts per million, or something like the equivalent of an eyedropper of oil (produced water) in a five-gallon bucket, before it can put it back into the Gulf of Mexico. Anything higher will cause a sheen on the ocean.

For that reason, the energy industry must invest in equipment like reverse osmosis systems to clean the water. Reverse osmosis separates silt or salt from freshwater by moving it through a semipermeable membrane with applied pressure, but it can be expensive because of the energy needed to produce large amounts of pressure. At land excavation sites, energy companies will also spend as much as $63 a barrel to truck away the water for removal, according to Altela's estimations.

"It's kind of a black magic industry," said Brad Tinder, president of Maverick Energy Services, an oil and gas consultant who's on the board of the Produced Water Society. "There are so many different technologies that aid in the removal of oil from water. And all have professed over the years to do it the best. But it is a million-dollar piece of equipment that does not produce the energy industry any money."

That's where Altela hopes to be of some use. The three-year-old company, which first unveiled its technology in March 2007, said it can take 90 percent of produced water and turn it into clean water.

The standard system, which is about the size of a residential water heater, includes boilers, holding tanks, water treatment towers, and a satellite-based communications system for remote monitoring. The device can treat about 4,000 gallons of produced water per day.

Unlike reverse osmosis or other filtration methods, Altela's system uses virtually no energy to drive pumps or pressurized systems to clean the water. Rather, Altela uses waste energy like methane released in the industrial process to power its own thermal distillation system, Godshall said.

"Every gas and oil well produces some amount of waste energy in the form of gas or energy that can't be sold," Godshall said. "We turn that into our driver."

"Our system goes out to a well site, and instead of it venting methane into the atmosphere, we use it to make steam, and that steam is what drives our process of desalinization."

Beyond that detail, Godshall wouldn't divulge how the patent-pending technology works. But he said key to Altela's system is that it's made with a low-cost plastic. It's light enough to be ported to excavation sites in shipping containers.

What's unclear is exactly how much the system costs, and how it differs from the cost of other technologies. Godshall said that he doesn't sell or lease his system. Rather, Altela charges the energy company per gallon to convert produced water into reusable water. Without disclosing the per-gallon conversion fee, he said it's as much as "120 times less money than trucking away the water." And it's less environmentally damaging.

"The liability of produced water is converted into an asset of clean water," Godshall said.

What happens to that water? Godshall said the company deals with the clean water in one of two ways for its four current customers, which include New Mexico-based Yates Petroleum. (It has seven systems installed in areas around New Mexico, Colorado, and Canada.) One is to give away the water to local ranchers to feed cattle or green their land.

The other is to reuse the water for so-called frac jobs, short for fracturing. Fracturing is a process in which energy companies use huge amounts of clean water to exert energy on a rock underground in order to release new gas and oil.

It's a fairly new and growing method of finding natural resources. Tinder said, for example, that his company has worked with Siemans Water Technology in Arkansas and in the Black Hills of Wyoming on recovery of produced water for frac jobs. He said the industry often takes freshwater from lakes, rivers, and streams for frac jobs, but because water is such a precious commodity, it's trying to reuse produced water several times over.

"We're using carbon filtration, but that takes a lot of power because you're running pumps and filters," said Tinder, who wasn't familiar with Altela's technology.

Still, the technology helps out in a high-need field. Tinder said Shell, for example, was sending 30 trucks in each day to an excavation site in Wyoming to haul out 3,000 gallons of produced water per truck, 300 miles away for disposal. With desalinization technology, it cut down the process to three trucks per day, Tinder said.

For its part, Altela is in talks with investors to raise $26 million in a series B round of funding to expand its manufacturing facility in Albuquerque. It has already raised about $10 million from venture capitalists, including EnerTech Ventures in Philadelphia.

After oil and gas, Altela hopes to tackle the treatment of industrial wastewater, such as the semiconductor industry or the food and beverage business.

"The industry has huge needs to get rid of and reuse dirty water," Godshall said.