Image: Texas drought
Mike Grazcyk  /  AP
The nation's soutwestern region has received less than 2 inches of rainfall since Oct. 1.
updated 6/18/2011 10:41:04 AM ET 2011-06-18T14:41:04

Bruce Frasier sweats in the 106-degree heat at his Carrizo Springs, Texas, farm while stacking 42-pound boxes of cantaloupes bound for Kroger supermarkets and Wal-Mart Stores. But he's turning away all offers for his most prized commodity: water. Texas's worst drought since record-keeping began in 1895 is fueling a rally in water prices as energy prospectors from ExxonMobil to Korea National Oil expand the use of a drilling technique known as hydraulic fracturing, or fracking, that uses up to 13 million gallons in a single well.

Frasier, whose Dixondale Farms is the state's largest cantaloupe grower, has been offered as much as 70 cents per 42-gallon barrel of water he pumps from an aquifer beneath his land. That same water fetched no price at all as recently as three years ago, before oil exploration boomed in Texas's Eagle Ford Shale rock formation. So far, Frasier is standing firm. "I've got to have that water for my farming operation," he explains.

Bloomberg Businessweek: Fracking: The great shale gas rush

With the region having received less than 2 inches of rainfall since Oct. 1, oil producers are buying water from anyone willing to sell. "It's pretty dry down here and a lot of oil companies are looking for water," says Robert Mace, a deputy executive administrator at the Texas Water Development Board.

The water crisis in Texas, the biggest oil- and gas-producing state in the United States, highlights a continuing debate in North America and Europe over fracking's impact on water supplies. Environmentalists say the method poses a contamination threat, while farmers face growing competition for scarce water.

Bloomberg Businessweek: Talisman says chemicals in fracking should be disclosed

Fracking is a 60-year-old method of shattering rocks to unleash oil and natural gas with high-pressure jets of sand- and chemical-infused water. In the past decade, the technique has been refined and coupled with new ways of drilling sideways through oil-rich shale formations, spurring an onshore exploration boom, says Robert Ineson, senior director of global gas at researcher IHS CERA.

The Eagle Ford's peculiar geology means each well fracked requires an amount of water equivalent to that used by 240 adults in an entire year for cooking, washing and drinking. A study by the Texas Water Development Board and the University of Texas at Austin's Bureau of Economic Geology estimates fracking-water demand in the area will jump tenfold by 2020 and double again by 2030. "This is not the drilling your grandparents knew in West Texas," says Sharon Wilson, an organizer for Earthworks' Oil & Gas Accountability Project, which lobbies for tougher regulation of oil drillers. "It's a heavy industrial activity with massive amounts of water and chemicals."

Bloomberg Businessweek: GE launches device to recycle fracking water

For now, local water departments, farmers and oil drillers near Laredo are relying on water from two reservoirs and underground aquifers filled by last summer's tropical storm season. But that won't last forever.

The bottom line: A record drought in Texas is boosting water prices and competition between agricultural and energy interests over the commodity.

Copyright © 2012 Bloomberg L.P.All rights reserved.

Video: Brown and barren, Texas fights drought

  1. Closed captioning of: Brown and barren, Texas fights drought

    >>> well, we just saw ron mott in memphis with water rising behind. it seems especially cruel with all this news of flooding in the medwest that the next story is about a drought, a bad one making life hard in a place where they could really use water about now. janet shamly is in cedar creek , texas , tonight.

    >> this is the sound of a this thirsty texas . so brown and barren that ranchers are having to provide feed for their cattle at great expense because there's simply nothing to graze on.

    >> we have been in business since 1971 , and we have never had an april like this, never. and may is starting off the same way.

    >> reporter: mare than a quarter of the state is in what's called exceptional drought, the most severe category, and it's grown worse over the last six weeks. the red and dark red showing the hardest hit areas, not just in texas but throughout the region. the lone star state is the epicenter, feeling parched and bone dry. tommy works for the department of agriculture .

    >> it's crunchb below our feet. you can look right here, these cracks in the ground, we shouldn't have these. this is our wet season.

    >> these fields will yield no corn and will be plowed next week to be used for feed.

    >> we have to plant it in the next two to three weeks for the insurance purposes. and then if it doesn't rain, it will be -- you know, it will be a total loss . rrt financial losses are heart to predict. they're expected to be in the hundreds of millions of dollars.

    >> it's extraordinarily dry right now, the crop losses are going to be tremendous, and we probably won't see a trend in the pattern. it's unlikely that much changes into summer.

    >> reporter: with no sign of desperately needed storms, droughts continue. and if the impact on agriculture and livestock isn't bad enough, these conditions are the perfect tinder for the wildfires that have been ravaging the state. they have claimed something like 200,000 acres so far.

    >> janet, it's tough to watch.


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