Produced(Water(Issues,(Economics,(and(Trends:(

Developing(Abundant,(Affordable(Clean(Energy(

October(29,(2014

Phil%Winner,%Domestic%Energy%Resources,%LLC%

Robert%Sloan,%Fulbrook%Partners
2!

• Our(Clients(

• Ken(Carlson,(Colorado(State(University((Colorado(Energy(Water(Consortium)(

• George(Kast,(Produced(Water(Solutions(

• Zane(Meekins,(Cawley(Gillespie(and(Associates(

• Jeanie(Oudin,(Wood(Mackenzie(

• Jim(Raney,(Anadarko(

• John(Seidle,(MHA(Petroleum(Consultants(

ACKNOWLEDGMENTS!
3!

• Overview(

• Understanding(The(Need(

• Technologies(

• Plays((Markets)(

• Economics(

AGENDA!
Finance 

Plant 

Construction 

HR

Sustainability!

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground!Stabilization!

IT 

Pipeline!Rehabilitation!

4!

And(so(these(men(of(Hindustan(

Disputed(loud(and(long,(

Each(in(his(own(opinion(

Exceeding(stiff(and(strong,(

Though(each(was(partly(in(the(right(

And(all(were(in(the(wrong(

OVERVIEW!
5!

Finance 

Plant 

Construction 

HR

Sustainability!

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground!Stabilization!

IT 

Pipeline!Rehabilitation!

5!

Unconventional%plays%

October(2012(

October(2014(

Droughts:!Not!if,!but!when...!

Major!influences:!

• Operations!

• Public!perceptions!

• Public!policy!

Unconventional%plays%

OVERVIEW!
Finance 

Plant 

Construction 

HR

Sustainability!

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground!Stabilization!

IT 

Pipeline!Rehabilitation!

6!

• Requires(focus(on(full%cycle%economics%of(water.((“Cradle(to(grave.”(

• Goals:((Add(value(in(two(ways...(

• Tangible:(Cost(saving(adds(monetary(value(

• Intangible:(Increase(sustainability,(become(“operator(of(choice”,(maintain(public(

trust.((

• Trends(in(controlling(water(costs:(

• Increased(interest(in(fracing(with(formation((produced)(water.(

• Lowers(initial(cost,(lowers(treatment(cost,(minimizes(formation(damage.(

• Ability(to(cross]link(relatively(high]salinity(brines.(

• Logistics(optimization:(Reduces(trucking(and(local(impact.(

OVERVIEW!
OVERVIEW!

7!

Courtesy(of(Jim(Raney,(Anadarko(Director,(Engineering((

Global(Engineering(&(Technology,(with(permission.(

Chairman,(API(Committee(for(the(Standardization(of(Oilfield(Equipment(and(Materials((CSOEM)(

Transfer%

Treatment%

Focus(of(this(

conference(

(Size%of%arrow%proportional%to%volume)%
INTEGRATED!SOLUTIONS!

8!

SOURCING((

• Hydrology!and!new!wells!

• Collector!wells!

• Recycled!water!
INTEGRATED!SOLUTIONS!

9!

TRANSFER((

• Temporary:!Rapid!deployment!flat!

hose,!high!volume,!low!impact!

• Permanent:!Buried!steel!or!poly!pipe!
INTEGRATED!SOLUTIONS!

10!

• TREATMENT((

• Mobile(and(scalable(

• Oil/water(separation(

• Filtration(

• Chemical(treatment,(biocides(

• Distillation,(evaporation(
1

1

. 

Distillation:!The!treatment%of%high%TDS%water!to!potable!or!near!potable!water,!with!

concentrated!reject!stream,!or!even!to!salt!slurries.!!!Includes!evaporation!ponds,!evaporators,!

and!mechanical!vapor!recompression!(MVR).!

Reverse(Osmosis:((Freshen%produced%water!with!TDS!levels!less!than!50,000!to!potable!water,!

plus!concentrated!reject!stream!(brine).!!

Forward(Osmosis:!The!treatment%of%produced%water%to%potable%or%near%potable%water,!with!a!

clean,!concentrated!reject!stream!(brine),!may!require!chemical!softening!depending!on!hardness!

levels.!

TECHNOLOGIES:!Reduce!TDS!
1

2

. 

Ceramic(and(polymer(membranes:!New!coating!processes!by!several!companies!have!reduced!the!

organic!fouling!tendency,!recovering!entrained!hydrocarbons.!

DAF(or(IGF: Dissolved!Air!Flotation!or!Induced!Gas!Flotation.!Primary!function!is!to!reduce%free%oil%

content!in!the!fluid,!typically!down!to!25!ppm!or!below.!Limited!for!TSS!contamination!levels.!

Ion(exchange:!Primarily!acidic!(cation)!or!a!strong!base!(anion)!resin!to!reduce%hardness.!!New!ion!

exchange!treatment!to!remove!metals,!sulfate,!barium!or!selenium,!with!95%!water!recovery.!Bya

product!stream!with!potential!commercial!value.!Operates!at!ambient!temperature!and!pressure.!

Chemical(precipitation:!Primary!treatment!to!reduce%calcium%(hardness)%%to%prevent%scaling%.!

Oxidation:(Chlorine!dioxide,!mixed!oxidants!&!ozone!considered!“green”!treatments!for!fresh!and!

produced!water!to!kill%bacteria.!Also!treats!iron!and!low!levels!of!H2S.!!

Electro]coagulation:!While!also!producing!an!oxidation!treatment,!primary!function!of!the!

sacrificial!plates!is!to!reduce%TSS%levels%by%flocculating%fine%particles.!

Settling(ponds:!Quiet!ponds!or!tanks!to!allow!settling!of!particulates.!

Filtration:!Physical!filers,!bag!and!disk.!

TECHNOLOGIES:!Reduce!TSS!
1

3

. 

Frac!water!still!mainly!sourced!from!fresh!water!wells,!and!some!surface!water.!

Very!little!recycling!due!to!easy!access!to!water!supply,!cost,!and!availability!of!

SWD!wells,!as!well!as!low!volume!of!flowback!water!(less!than!15%).!

However,!fresh!water!is!in!very!tight!supply,!and!small!communities!are!having!

issues!with!their!water!wells.!!

A!supplemental!water!!source!is!being!considered!which!would!be!piped!in!from!

other!outlying!counties.!

A!comprehensive!water!management!plan!is!greatly!needed!in!order!to:!

!!!!!!!!!!!!!!a!Manage!fresh!water!usage!and!reduce!dependence!

!!!!!!!!!!!!!!a!Look!to!salt!water!aquifers!as!source!water!(i.e.!lower!Wilcox)!

!!!!!!!!!!!!!!a!Increase!recycling!efforts!to!clean!produced!and!flowback!waters!

PLAY!SUMMARY:!Eagle!Ford!
1

4

. 

SW!Pennsylvania!has!ample!fresh!water!sources!and!there!are!few!restrictions!

regarding!how!it!is!pulled.!!

In!the!NE!region,!however,!there!are!limited!locations!to!draw!from!as!well!as!

restricted!volumes!of!water!allowed!at!one!time.!

There!are!some!applications!for!chemical!precipitation!to!soften!the!water,!

although!they!are!limited!and!very!few!operators!are!requiring!it.!!

The!most!common!treatment!is!reducing!the!TSS!with!settling!or!filtration,!

sometimes!coupled!with!iron!removal!or!reduction,!to!produce!a!clean!brine.!

PLAY!SUMMARY:!Marcellus!
1

5

. 

TDS!ranges!vary!from!50,000a200,000!depending!on!operating!area,!with!many!

operators!choosing!to!simply!dilute!the!produced!water!with!fresh!water,!using!

little!or!no!treatment.!

Because!of!limited!sources!of!SWD,!dilution!or!trucking!to!Ohio!is!the!most!

common!form!of!dealing!with!the!issues,!so!there!is!little!incentive!for!recycling.!

AMD!water!is!being!studied!to!clean!out!sulfates,!but!at!this!time,!it!is!still!

considered!impaired!water.!

A!technology!driver!would!be!to!be!able!to!get!the!produced!water!in!compliance!

with!discharge!requirements!at!an!affordable!price!(i.e.,!distillation).!

PLAY!SUMMARY:!Marcellus!
1

6

. 

Water!is!in!very!short!supply,!with!low!volume!fresh!water!wells!as!one!of!the!factors!

contributing!to!this!situation.!

Salt!water!aquifers!(Santa!Rosa!formation)!currently!being!used!as!source!water.!Finding!

aquifer!locations!and!low!rates!are!still!important!issues!that!the!region!is!facing.!

Recycling!produced!water!is!gaining!momentum.!One!of!the!main!methods!has!been!

through!oxidation,!although!some!distillation,!chemical!softening!and!electroa!

coagulation!has!also!been!used.!

Driven!by!cost,!recycling!competes!with!fresh!or!saline!water!sources!due!the!

implications!of!trucking,!storage,!surface!transfer,!distances!and!other!factors!involved.!

There!are!ample!SWD’s!for!disposal!of!produced!water!at!relatively!low!costs,!which!

results!in!no!incentive!to!recycle.!

PLAY!SUMMARY:!Permian!
1

7

. 

Over!the!last!2!years,!due!to!the!large!quantity!of!snow!and!rainfall,!surface!water!

was!made!vastly!available.!This!surplus!could!end!at!any!time!and!that!would!

change!the!water!needs!in!the!future.!Contingency!plans!should!be!in!place.!

The!Corp!of!Engineers!controls!a!large!portion!of!the!water!sources!in!the!area.!

Currently!there!are!restrictions!in!place!for!new!water!well!permits.!Existing!water!

wells!and!ponds!are!providing!sufficient!fresh!water!sources!at!the!moment.!

There!is!not!much!effort!in!the!way!of!recycling.!Flowback!volumes!are!quite!high,!

in!the!40%!plus!range.!Due!to!high!TDS,!the!incentive!to!recycle!is!very!low.!

Most!produced!and!flowback!waters!are!sent!to!SWD’s!for!disposal.!

PLAY!SUMMARY:!Bakken!
ECONOMICS!

18!

Rockies:!Home!to!two!major!unconventional!oil!plays:!

• Bakken!

• Niobrara!

Integrated!water!management:!What!is!the!“size!of!the!prize?”!

Source:!Used!with!permission!from!J.Oudin,!Wood!

Mackenzie,!Water!Management!for!Shale!Plays!

Bakken(and(Niobrara:(Major(“headline”(

plays(in(the(rockies
BAKKEN!EXAMPLE!

19!

Source:!with!permission!from!J.!Seidle,!MHA!Petroleum!consultants,!2012:!Economics!of!Selected!US!Shales!

http://copascolorado.org/assets/files/education/ED12TEandP.pdf!

Typical!economic!analysis!based!primarily!on!oil!and!

gas!forecasts!or!“Type!Curves”...!
20!

Bbls!water/month!

Months(

Approach:%apply%decline%curve%economic%analysis%to%evaluate%water%cost%savings.%%%

Production!data!sources:!NDIC!(Bakken),!K.!Carlson,!CSU,!2nd!Water!Management!for!Shale!Plays,!Assessing!specific!shale!playsTNiobrara!

Frac!volume!sources:!J.!Oudin,!Wood!Mackenzie!Bakken!Shale!Water!Management!for!Shale!Plays,!Niobrara:!Western!Resource!Advocates!.!!

Water!forecasts!by!Cawley,!Gillespie,!Associates.!!

Typical(Volumes,(Mbw Bakken Niobrara

!!!Frac!water!in !!!!!!!!!!!71 24!/!120

!!!Produced!water!out !!!!!!!!!!!70 40

Produced(water(

About(30(years...(

1

10

100

1000

10000

100000

1

1325374961738597

109121133145157169181193205217229241253265277289301313325337

Bakken

Niobrara

WATER!TYPE!CURVES!

WATER(PRODUCTION(

Now!need!“Type!Curves”!for!water!
0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1

1325374961738597

109121133145157169181193205217229241253265277289301313325337

Bakken

Niobrara

CUM(WATER(PRODUCTION(

Over!time,!large!change!in!water!production!has!an!impact!on:!

• NPV!of!!operating!expenses!

• Facility!requirements!

• Supplemental!source!requirements!

21!

Months(

Niobrara!!forecast!to!dewater!faster!than!Bakken!

• 50%!of!flowback!water!recovered!in!first!2!years!

• 70%!of!flowback!water!recovered!in!first!5!years!

WATER!TYPE!CURVES!
22! 22!

Source:!Produced!Water!Solutions,!George!Kast

Water/frac)(Bbls/stage) )))))))))))))2,400

Average)#)of)frac)stages)in)2012: 30

Total)frac)water)(Bbls) )))))))))))72,000

Bbls/truck )))))))))))))))))110

Truck)loads/well )))))))))))))))))655

Average)truck)trip)(hrs): ))))))))))))))))))))))3

Average)truck)cost)($/hr): $)))))))))110.00

Estimated)water)trucking)cost: $))))))216,000

Source'transport'cost'($/Bbl) $'''''''''''''3.00

Bakken)Source)Cost)(Transport)only)

Source:!http://www.spe.org/ogf/print/archives/2012/02/02_12_10_Feat_Water_Hydraulic.pdf!

Source:!Used!with!permission!from!J.Oudin,!Wood!

Mackenzie,!Water!Management!for!Shale!Plays!

Cost%($/Bbl) Current Recycle

Water&disposal&&&trans.&cost 1.5043.00 $&&&&4

Estimated&treatment&cost $&&&&&&&&&&4 $&&0.75

Niobrara

Source:!Halliburton,!N.!Colorado!Bus.!Report!10/19/12!

Range&of&Full&Cycle&Bakken&Costs

Acquisition& Cost&($/Bbl) %&of&total

!!!Raw!water $0.25!-!$1.75 12%!-!10%

!!!Transportation $0.63!-!$5.00 31%-29%

Total&Acquisition $0.88&@&$6.75 NM

Disposal Cost&($/Bbl)

!!!Transportation $0.63!-!$9.00 31%!-!51%

!!!Injection $0.50!-!$1.75 25%!-!10%

Total&Disposal $1.13&@&$10.75 NM

Full&Cycle&costs $2.01&@&$17.50 100%

Cost%($/Bbl) Current %%of%total Recycle Current %%of%total Recycle

Frac/Fresh)water)acq.)cost $))))0.80 10% $))))4 $))0.38 10% $))))4

Frac/Fresh)water)transport)cost $))))3.00 36% $))))4 $))1.25 34% $))))4

Total)Acc.)Cost $))))3.80 46% NM $))1.63 45% NM

Produced)water)disposal)fee $))))1.50 18% $))))4 $))0.75 21% $))))4

Produced)water)transport)cost $))))3.00 36% $))1.50 $))1.25 34% $))0.50

Estimated)treatment)cost $))))))4 NM $))3.00 $))))4 NM $))2.25

Total)disposal)cost $))))4.50 54% $))4.50 $))2.00 55% $))2.75

Total $+++ 8.30 100% $+ 4.50 $+ 3.63 100% $+ 2.75

Savings+ $+ 3.80 $+ 0.88

Cost%reduction 46% 24%

Bakken Niobrara

WATER!COST!STRUCTURE!
COMPARISON!OF!COST!STRUCTURES!

!$#!!!!

!$0.50!!

!$1.00!!

!$1.50!!

!$2.00!!

!$2.50!!

!$3.00!!

!$3.50!!

Produced!water!transport! Prod!Water!disposal!Fee! Frac!water!transport!costs! Frac!Water!Acquisi=on!

costs!

Comparison!of!Water!Costs!

Niobrara! Bakken!

Biggest(impacts(

related(to(

transportation(

$/Bbl
!$#

!$50,000

!$100,000

!$150,000

!$200,000

!$250,000

!$300,000

!$350,000

!$400,000

!$450,000

!$500,000

!$1.00 !$2.00 !$3.00

!$#

!$50,000

!$100,000

!$150,000

!$200,000

!$250,000

!$300,000

!$350,000

!$400,000

!$450,000

!$500,000

!$1.00 !$2.00 !$3.00

Bakken%savings%per%well% NPV(of(total(

savings(

Expense((“LOE”)(Reduction(($/Bbl)(

NPV(of(total(

savings(

Expense((“LOE”)(Reduction(($/Bbl)(

0%(savings(on(frac(water(cost(=($272,000((

50%(savings(on(frac(water((cost(=($136,000)(

0%(savings(on(frac(water((cost(=($163,000()(

50%(savings(on(frac(water((cost(=($81,500)(

100%(savings(on(frac(water((cost(=($0)(

Niobrara%savings%per%well%

Assumes%base%case%frac%water%

cost%of%$1.63/Bbl%for%100%Mbw%=%

$163,000%

Assumes%base%case%frac%water%

cost%of%$3.80/Bbl%for%71.5%Mbw%=%%

$272,000%

• Every!10!%!cost!reduction!in!frac!water!

adds!$27,000!of!value!

• Every!$1.00/bbl!of!water!handling!

savings!adds!$50,000!of!value!

• Every!10!%!reduction!in!frac!water!costs!

adds!$16,000!of!value!

• Every!$1.00/bbl!of!water!handling!

savings!adds!$30,000!of!value! 24!

ECONOMIC!SENSITIVITY!

100%(savings(on(frac(water((cost(=($0)(
!$#

!$20,000,000

!$40,000,000

!$60,000,000

!$80,000,000

!$100,000,000

!$120,000,000

!$140,000,000

!$1.00 !$2.00 !$3.00

!$#

!$100,000,000

!$200,000,000

!$300,000,000

!$400,000,000

!$500,000,000

!$600,000,000

!$700,000,000

!$800,000,000

!$900,000,000

!$1.00 !$2.00 !$3.00

Annual%Bakken%savings%%

(1,700%wells*)%

NPV(of(total(

savings(

Expense(Reduction(($/Bbl)(

NPV(of(total(

savings(

Expense(Reduction(($/Bbl)(

0%(savings(on(frac(water((cost(=($272,000)(

50%(savings(on(frac(water((cost(=($136,000)(

100%(savings(on(frac(water((cost(=($0)(

Frac(water(cost(=($163,000((0%(savings)(

Frac(water(cost(=($81,500((50%(savings)(

Frac(water(cost(=($0((100%(savings)(

Annual%Niobrara%savings%%

(500%wells)%

*Source:!Used!with!permission!from!J.Oudin,!Wood!Mackenzie,!Water!Management!for!Shale!Plays!

• Every!10!%!cost!reduction!in!frac!water!

adds!$47.5!MM!of!value!

• Every!$1.00!/bbl!of!water!handling!

savings!adds!$100!MM!of!value!

• Every!10!%!cost!reduction!in!frac!water!

adds!$8!MM!of!value!

• Every!$1.00!/bbl!of!water!handling!

savings!adds!$12!MM!of!value!25!

ECONOMIC!SENSITIVITY!
Finance 

Plant 

Construction 

HR

Sustainability!

Safety 

Diamond Core 

Drilling 

Legal 

Marketing Ground!Stabilization!

IT 

Pipeline!Rehabilitation!

26!

• Each(play(and(project(is(different:(no(single(solution,(standards(still(evolving.(

• Most%consistent%theme:%reduce%trucking.%

• Water(lines(increasingly(buried(with(gathering(systems.(

• Significant(value(created(by(reducing(water(management(costs.(

• Bakken:($200(MM(–($300(MM(in(gross,(un]risked(annual(savings.(

• Niobrara:($40]$50(MM(in(gross,(un]risked(annual(savings.(

• Integration(has(best(potential(to(provide(lowest(cost(solution.(

• Greatest(economic(benefit(comes(from(reducing(capital(for(frac(water.(

• Well(over(half(of(total(water(handling(cost(is(in(transportation.(

• Puts(premium(on(logistics.(

• Safety/sustainability(essential(to(earn(public(trust(and(ensure(continued(operations.(

SUMMARY!AND!CONCLUSIONS!
THANK!YOU!

27!

Transfer!

Treatment!

Sourcing!