# Produced(Water(Issues,(Economics,(and(Trends:( Developing(Abundant,(Affordable(Clean(Energy( October(29,(2014

Phil%Winner,%Domestic%Energy%Resources,%LLC% Robert%Sloan,%Fulbrook%Partners2! 

## • 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: D issolved! A ir! F lotation!or! I nduced! G as! F lotation.!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,!2 nd !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 

### 10000011325374961738597109121133145157169181193205217229241253265277289301313325337 

### Bakken Niobrara 

# WATER!TYPE!CURVES!

WATER(PRODUCTION( 

# Now!need!“Type!Curves”!for!water!0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%11325374961738597109121133145157169181193205217229241253265277289301313325337 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!