1 

## Expectation Management for Water Use in Oil and Gas

## Texas Water

 Texas has three state agencies with jurisdiction 

### over water issues. Texas Water Development Board (TWDB) is responsible for planning and funding projects that enhance water availability. 

### The Texas Commission on Environmental Quality (TCEQ) is responsible for protecting the state’s water quality and allocating the use of surface water; groundwater is neither allocated nor 

### managed by a state agency, with a few exceptions (see the Availability section). And the Texas Parks and Wildlife Department (TPWD) 

### ensures that the state’s wildlife, including the vital fish, shrimp and oyster industries, have sustainable supplies of fresh water. 2 The state’s 89 groundwater conservation districts (GCDs, or occasionally GWCDs), some of which cover single counties and others multiple counties, were created under state laws and are governed by locally elected board members. GCDs may develop well -spacing rules, pumping permits, fees and overall pumping limits within their districts. Under Texas law, GCD enforcement of its rules is one of only two ways to limit groundwater pumping in an area; the other is a judgment in Texas courts, although the Edwards Aquifer Authority can restrict pumping within its statutory boundaries .  Separate from but overlying the GCDs are the state’s 16 groundwater management areas (GMAs) that generally encompass entire aquifers (Exhibit 14). The GMAs exist to bring the GCDs within them together to determine the region’s anticipated groundwater use, supplies and demands. TWDB then uses these estimates to aid in planning for Texas’ future water resources. 345

## Water Management Managing Public Perception and Local/State Governmental Stakeholders, While Remaining Compliant With Regulations  Understanding how water management is perceived outside of the industry 

##  Current issues related to water management  How local and state governments view 

## water management  Understanding the regulatory framework for water management 67

## Water Lifecycle

 Sourced  Wells, water bodies, municipal, re-use  Transported  Pipelines  Trucks  Storage  Pits (open / lined)  Water tanks  Use- Drill & Complete  Removal  Trucks  Pipelines  Final Disposition  Injection Wells  Treated  Reuse  Recycle 8 Source Transport

Storage

Use Removal Reuse Final Disposition

## Water Management Stakeholders



##  Industry  Federal Law Makers/Regulators 

##  State Law Makers/Regulators  Industry Trade Groups  Non Gov’t Organizations NGO’s  Competing Users  General Public  Local Government

9

## Regulatory Landscape

 Direct Influencers  Federal- EPA, BLM, DOE, etc...  State- O&G Regulatory Commissions, Health/Environmental  Elected Officials- all levels  Concerned Citizens  Local Gov’t- Counties, Water Districts, Cities 

##  Indirect Influencers ( Proactive/Reactive)  While these groups have little to no authority, their recommendations or input, if embraced, can be just as compelling and lawful as if it came from the top down . o NGO’s/Advocacy Groups o Lobbyists/ Trade Groups- TXOGA, TIPRO, TPA, etc.... o Academics o Industry o Media 10

## Regulatory Considerations

 One size (does not) fit all  Carve outs for regions  Primacy between City, County and State 

###  Balancing water management w/o hurting:  Job Creation  Tax Revenue  Economic input the industry brings  Economic Stabilization Fund 

###  Water by law is an owned property rights asset 

###  Massive migration of new residents to Texas  Texas leads nation- competing uses land/water  Views on the industry 11

## Local Considerations

 Primacy between city & state  Colorado  Denton, Flower Mound 

###  More proactive engagement in local politics  Astute electorate- involvement  Influx of new residents  Availability of information 

###  Local competition for economic development 

###  Competing land -use demands/opportunities  Local governments can purse nearly any 

### course of action that they believe, and can having a voting majority to pass, are in the best interest of the local government 12

## Water Constraints

 Drought/Scarcity  Home water rates- pass through charges  Water use restrictions 

###  Lake levels  Bad PR about water contamination  General water use concerns  Golf Course  Pools  Lawns 

###  Disposal/Induced Seismicity  Media reports 13 

### What people are exposed to daily

## What is the Future

 New TTP’s 

### (Technology, Techniques & 

### Procedures)  Drilling & Completions o Waterless o Displacing Water Use (Substitutes) o Reusing/Recycling Water  Production (Life of Well) o The geologic formation will yield water based on geology o Ability to clean, reuse and repurpose the water 

###  Regulations  Fed, State and Local laws will be introduced to manage the industry’s water use  Regulatory agencies, Fed & State, will be active to manage the industry’s water use 14

## Water Management Regulation

15 Technology/Regulation/Time 

## $

Current State Regulation 10% 20%3 0% 40% 50% Future State Regulation Goal is to reduce the water use footprint: • Initial Use • Final disposition - Discharged or Disposed

## Future Technology

 Waterless drilling  Fluid replacement  Waterless fracs 

##  LPG/Propane, Air, Other Gas, Kinetic, Sound, other 

##  Reuse/Recycling  Filtering, treating, repurpose  Storage

16

## What is the Future?

 Technology is getting there  Laws have yet to begin mandating  Demand for more restrictive uses will pressure law makers/regulators to act  State and local laws will lead the way in mandating water conservation and re-use measures. Feds to follow.  Increased rates and taxes will be levied for overly consumptive use and “perceived” destruction of water  Within the next 5 - 10 years industry will embrace more water reduction techniques and replacements that will prove economical and effective. U pward pressure on commodity prices  As economy and broader tax bases improve, elected officials and gov’t budgets will be less constrained by revenues from energy related activities  The globalization of U.S. gas (LNG) will drive an increase in production activity. This will focus attention once again on practices of the industry and coexistence of activities  Service companies and consultants lobbying to support laws mandating increased recycling . 17

## Industry



##  Conferences like this help explore the technology that is available and technologies that could be  Industry must take the lead in R&D  Capital must be applied and 

## expended  Failures and inefficiency will come 

## before success

18Inquires: Stephen Lindsey, Senior Director of Governmental, Regulatory and Public Affairs Phone: 817 -665-4934 Email: Slindsey@Qrinc.com 19 

## Quicksilver Resources 801 Cherry Street, Suite 3700, Unit 19 Fort Worth, TX 76102 Website: www.qrinc.com