An apparatus for separating water from oil-based drilling fluid includes an separation tank, a chemical treatment apparatus having one or more de-oiling polymer preparation tanks, and a dissolved air flotation unit. Slop mud is directed into the separation tank where surfactant is added to separate the drilling fluid from oily water. The drilling fluid is drained for further processing. The oily water is removed by an outlet arrangement from the separation tank and directed to an initial treatment line. One or more de-oiling polymers are added to the oily water in the initial treatment line and mixed therewith. The mixture may then be directed to the dissolved air flotation unit where dissolved air is released into the bottom of the mixture. The dissolved air adheres to suspended solids in the mixture and lifts them to the top surface as a froth. The froth is skimmed from the top surface of the mixture and collected. The de-frothed water is reused or directed to a filtration system where it is prepared for discharge. A clarifying tank may be included after the de-oiling polymers are added to further separate the oil and water. The oil is removed from the top surface by a weir while the water is directed to the filtration system and discharged.