DALLAS — Pioneer Natural Resources is offering to pay the city of Midland, Texas $100 million to reuse wastewater in hydraulic fracturing operations, officials said.
In turn, the city would use the income to upgrade its wastewater treatment facilities. Specifics of the public-private partnership are still subject to negotiation, but the Midland council has agreed to the general terms.
A similar arrangement is up for discussion by the city council of the neighboring city of Odessa. Midland-Odessa represents the geographic and financial heart of the Permian Basin oil producing region of Texas.
The plan is designed to save groundwater in the arid region while providing millions of gallons of water needed to produce oil and gas from hydraulic fracturing, or "fracking" of tight shale formations.
The plan also would reduce truck traffic as the recycled water will be transported underground rather than on trucks that congest area roads and highways, said Holly Rosas, interim director of utilities for Midland, in a video interview broadcast June 17 on Local Big 2 News.
"They're going to put in a distribution system throughout Midland so that the water can be transported underground as opposed to having more trucks, and trucks, and traffic on the roads," Rosas said.
Midland's 20-year deal would include exclusive sale of 10 million gallons of treated wastewater per day to Pioneer. Dallas-based Pioneer could also spend $250 million on pipelines to move the treated wastewater through the city, according to news reports.
After severe water shortages in recent years, Midland began piping fresh groundwater from wells on the Bar-T Ranch 67 miles away in December. Midland has owned the rights to the water in Winkler County for more than 50 years.
To build the pipeline, a new credit known as Midland County Freshwater Supply District No. 1 was created in 2012. The district issued $200 million that year to finance the pipeline. The district carried ratings of AA-plus from Standard & Poor's and Aa3 from Moody's Investors Service.
Midland Mayor Jerry Morales said the wells could supply the city for about 40 years.
In September 2012, Moody's Investors Service downgraded to Aa3 from Aa2 the revenue rating on Midland's water and sewer system, citing its leveraged debt profile, decreased water supply, depressed financial performance in fiscal 2012 as a result of limited water supply and use restrictions on the customer base.
