A method for demulsifying a recovered drilling fluid is disclosed. A recovered drilling fluid is first combined with dilution water and a diethanolamine-based C8-C18 alkanolamide demulsifying agent. The recovered drilling fluid comprises hydrocarbons, a brine having at least 25% total dissolved solids, an emulsifier, and undissolved oil-wetted solids. In a second step, the mixture is separated, or is allowed to separate, into three distinct phases, including a clear oil phase comprising the hydrocarbons, a clear brine phase, and a water-wetted solid phase. Compositions suitable for use as demulsifiers and demulsified compositions are also disclosed. The alkanolamide demulsifying agents enable rapid, clean separation of phases and efficient recovery of 80% or more of the oil phase from the recovered drilling fluid.