Managing produced water in unconventional oil and gas (UOG) industry is a growing environmental challenge as shale development expands globally. This study evaluates the operational and economic impacts of restricting produced water disposal in southwestern Pennsylvania, where concerns over injection wells and evaporation ponds are rising. We develop a regional mixed-integer programming model calibrated using data from 11,217 wells between 2015 and 2022. The model evaluates regional UOG production response to three policy scenarios, including prohibition of evaporation ponds, injection wells, and both. Results show that these restrictions lead to some adjustments in operational strategies but do not significantly reduce gas production. Producers respond by changing the mix and timing of wells to be completed based on site specific characteristics. Across scenarios, cumulative shale gas production declines by at most 3.2%, and net revenues fall by up to 5.6%. Produced water recycling increases by up to 6.4%, while freshwater use decreases by up to 0.3%. These findings suggest that targeted produced water management regulations can support environmental protection without severely compromising shale gas production or regional profitability.