1 Coalbed Methane State Phone Calls

EPA and ERG participated in calls with state water permitting representatives to discuss the current status of CBM.

Date: 12/15/11

Contact Name: Tom Reed

Affiliation: Montana Department of Environmental Quality Call Participants: Ahmar Siddiqui, EPA

Lori Weiss, ERG

TOPICS DISCUSSED AND ACTION TAKEN

1. Current Status of Industry

Mr. Reed stated the industry is in decline and suggested we contact the Montana Oil and Gas C ommission for the
latest information. He stated that d evelopment stopped during the development of the Environmental Impact Statement ( EIS ) . He thinks the number of lawsuits over discharge permits and the declining natural gas price played a part in reducing development

.

[Note from ERG: In 2003, the Bureau of Land Management (BLM) and the State of Montana prepared the Montana Final Statewide Oil and Gas Environmental Impact Statement and Proposed Amendment of the Powder River and Billings Resource Management Plans . As a re sult of lawsuits, BLM was required to prepare a Supplemental Environmental Impact Statement (SEIS) which included an evaluation of a phased development alternative for CBM production. In 2008 , BLM prepared a Final SEIS which address ed topics identified by the U.S. District Court. The purpose of the EIS was to analyze impacts from oil and gas activity. Information on the Montana EIS can be found

at: http://deq.mt.gov/coalbedmethane/finaleis.mcpx ]

2. CBM Permits

Montana has issued p ermits to three operators: Fidelity; OW Ranch; and Pinnacle (now Summit). Only Fidelity is operating. Pinnacle constructed a plant but then removed it. They are not discharging but may be doing some exploration work.

[ Not e from ERG: EPA visited Fidelity and OW Ranch in 2007 as part of the CBM detailed study data collection and
outreach . Fidelity used the EMIT/Higgins Loop to treat water prior to discharge to the Tongue River . At the time of
the visit to OW Ranch in 2007 th ere was no CBM development. ]

3. CBM Treatment/Decision to Treat

Mr. Reed gave an approximate history of the issues but did not know exact details. He will send EPA copies of the permits

.

Montana issued t he f irst permits in approximately 2000 and used water

- quality based limits . Treatment was not required to meet the limits. M ontana started a process of developing water

- quality based standard s for electrical conductivity ( EC ) and sodium adsorption ratio ( SAR ) which were approved by EPA. W yoming then sue d EPA over the
standards. The standard s were fairly restrictive so operators would have had to use treatment to meet them and
looked to ion exchange

.

The Fidelity permit numbers are listed below:

MT0030457

– O riginal 2000 permit , no water treatment2 MT00 30724

– C urrent Fidelity permit, uses EMIT/Higgins loop

[Note from ERG: EMIT was bought by Exterran. ]

4. Impacts from CBM Produced Water

The m ain opponent to CBM development has been the Tongue River Water Users Association who claims there is damage to soil from CBM produced water . USGS and BLM monitoring sites along river do not show a big change in total dissolved solids ( TDS ) and SAR.

There have been s ome flow related problems. During the M ontana dry cycle, there are some spikes i n concentration that could be due to CBM produced water but it is hard to pinpoint the cause of the spike . Some tributaries of Tongue have relatively high SAR naturally ( 10

- 15 )

.

[Note from ERG: EPA has not obtained the USGS or BLM monitoring data as part of the CBM ELG work.]

5. Downhole Gas Water Separators (DGWS)

Mr. Reed is n ot aware of DGWS used in the basin because th e technology does not present a discharge issue. He suggested we check with the state oil and gas commission

.

6. Miscellaneous

**•** Operators in Montana set up the infrastructure to move produced water to a centr alized treatment system or to underground injection

.

**•** M ontana struggled with the i ssue of bypass. Operators can not treat 100% of the water due to costs so industry ‘blends’ prior to di scharge. M ontana talked to EPA HQ about this issue and ultimately Montana
decided to allow the blending.

Date: 12/15/11

Contact Name: Bill Dirienzo

Affiliation: Wyoming Department of Environmental Quality Call Participants: Ahmar Siddiqui, EPA

Lori Weiss, ERG

1. Current Status of Industry

According to Mr. Dirienzo, n ew development has been sta gnant and Wyoming is not seeing new applications for discharge permits

. He believes that the declining gas price s and operators ‘over

- permitted’ during the peak production period are the primary causes. O perators proactively obtained permits for planned development during the peak production period but the permits were never active

. There has been a decline in production in some
fields.

Mr. DiRienzo is se eing larger companies selling their operations to smaller and smaller companies a s the production
declines

. He stated that the decline in production has been seen throughout the Powder River Basin . New interest is
in the Pinedale Anticline and Jonah fields (tight and conventional gas)

.3 2. CBM Permits

Wyoming has approximately 750 active WYPDES permits and 5 ,000

- 6,000 outfalls. The s tate is mostly working on permit renewals. However, t he v olume of produced water is declining in the Wyoming coal basins . In the east end of the basin where development first started, CBM wells are produc ing very little water.

Operators use a variety of disposal options. The Tongue River has highest quality

– direct discharge into the Tong u e is not permitted

. In the Bell e Fou r che and Cheyenne R iver watersheds , t he produced water quality is high, so there

are no issue s with the quality required for discharge. In the Powder River area, operators use a combination of irrigation, injection, and direct discharge with and without tre atment.

Wyoming establishes permit limits for SAR through their assimilative capacity program which is similar to a total maximum daily load (TMDL). Wyoming calculated how much salt and sodium could be added to the river each
month and allocated the disch arge among operators to stay below the standard.

Wyoming will provide EPA with CBM discharge monitoring report (DMR) data.

[Note from ERG: Wyoming provided DMR data for 2008 and 2010.]

3. Treatment

Treatment is used to reduce salinity and salt. Ion exchange is the most common form of treatment used in Wyoming

. Operators may need to use ion exchange to treat water to the levels required for irrigation or to meet the discharge limits established by the assimilative capacity program. The EMIT/Higgins Lo op process has been the most common treatment technology used in the area. PetroCanada built a reverse osmosis (RO) plant that is still being run (now operated by Noble). JM Huber obtained a permit for a RO unit to treat water prior to discharge to the

Ton gue but the plant was never built and JM Huber never discharged water under the permit.

4. Downhole Gas Water Separators (DGWS)

Mr. Dirienzo was n ot familiar with DGWS and whether it was being used in Wyoming

.

5. Miscellaneous

Mr. Dirienzo stated that EPA may need to consider specific water quality issues in developing a national ELG. If high quality CBM produced water is discharged into small streams, the water discharged can leach salts from the soil and degrade the water quality even if there are not high levels of salt in the discharged produced water . In some areas the background water quality is poor and the produced water is already of higher quality than background.

Date: 1/9/12

Contact Name: Jonathan Hall

Affiliation: Alabama Department of E nvironmental Management Call Participants: Ahmar Siddiqui, EPA

Lori Weiss, ERG

1. Changes in Industry

According to Mr. Hall, CBM p rojects in Alabama are still operating but there have not been many new wells. Bigger companies have been buying out the smaller operators.4 2. CBM Permits

In EPA’s meetings with industry representatives, o perators have noted that the Alabama permit approval and renewal process has been slow and there have been delays in receiving new permits. Mr. Hall provided an overview
of the current status of CBM permitting :

**•** NPDES permitting was divided into two different divisions : the W ater D ivision was responsible for general industry permits, industrial permits, and municipal permits and t he Field Operatio ns Division was responsible for construction and development stormwater, and industrial permits for mining

.

**•** Around 2008, all permitting was consolidated in the W ater D ivision.

**•** Alabama sent new CBM permits to Region 4 for review. Region 4 did not like the wh ole effluent toxicity ( WET ) part of the permit (dilution calculations).

**•** Around 2008/2009

, CBM permitting came to a halt due to concerns with the permits that had already been issued, particularly the in

- stream waste calculations. Alabama began working on a new approach to write scientifically based, environmental ly protective permits. Alabama developed a framework for the new approach and industry conducted stream modeling for the state to review. This process will result in a template for new permits

.

**•** The r evised permitting process is ongoing. The permit issue date will depend on the results of industry’s modeling.

**•** Currently, CBM operators in Alabama monitor and report :

o Flow and pH (daily)

o Iron, manganese, biochemical oxygen demand (BOD), chlorides, oil and grease, instream chlorides
and conductivity u p and downstream from discharge (weekly)

**•** Alabama has issued a pproximately 26 permit s for CBM facilities, about half have already expired and the other half will expire in 2012/early 2013.

3. Documented Impacts

Mr. Hall is not aware of any documented impacts from CBM produced water discharges . There was a minor fish kill
in the Black Warrior River but that could not be attributed to CBM . EPA measurements in the river were within the water quality standars

. [Note from ERG: We do not have information on the parameters monitored after the fish kill.] There are no streams in Alabama on EPA’s 303 d list for chlorides and conductivity that receive CBM discharges

. The current permits have WET testing upstream and downstre am of the discharge location and industry data shows they are being protective.

There are many different types of discharges going into the Black Warrior R iver. Birmingham is in the watershe d and discharges include wastewater from steel production, oil p roduction , municipal wastewater, and coal mining.

4. Current M anagement P ractices

Mr. Hall stated o perators typically use sedimentation basins, usually a two or three cell lagoon with aeration. Operators may add chemicals to control the pH. Operators do not typically use flocculation chemicals because the water is of fairly high quality and pollutants are mainly salts. The c hloride valu es will vary by location. The chronic
chloride value is 230 m g/L and some operators are below this all the time while some have >10,000 mg/L chlorides. Operators may mix water from different wells to equalize the chloride concentration or discharge this water to a larger stream. One or two sites may use underground injection but only a few sites can do this because of the geology of Alabama.5 5. Miscellaneous

Mr. Hall stated that w ater constituents will differ by location. Alabama may remove oil and grease and BOD from the

CBM permits based on their current data because these pollutants are not found in CBM produced water . Iron is high naturally in Alabama.

Wyoming Call

– January 10, 2012

Date: 1/10/12

Contact Name: Bill Dirienzo

Affiliation: Wyoming Department of Environmental Quality Call Participants: Ahmar Siddiqui, EPA

Lori Weiss, ERG

Dan

- Tam Nguyen, ERG

The p urpose of this call was to discuss the DM R data that Wyoming can provide and the data fields that will be
included in the file.

**•** Each record characterizes the flow and pollutant concentrations of the produced water at the discharge of
the permitted outfall . The record has a data field that specifies the type of discharge at the outfall

. Types of discharge included in Wyoming permits:

o Discharge to reservoir. These reservoirs are designed for full containment of produced water during a 50 y ea r, 24 h ou r storm event (1A_HWR and 1B_HWR codes in Wyoming DMR data).

o Discharge to enclosed basin. The basin is a natural enclosed basin with no connection to downstream waters (1B_Playa code ).

o Discharge to on

- channel reservoirs. These ponds are designed for full containment during dry operating condit ions so the re is normally no discharge. These may discharge if there is a storm event
bu t this discharge must stop within 48 hours (2

- OCR code).

o Direct discharge . This discharge is directly to a drainage channel or to an on

- channel reservoir with no containment requirement (2_DD code in DMRs).

Notes on Assimilative Capacity Program :

**•** Wyomin g c alculated the total TDS and sodium capacity of the Powder River for each month and allotted monthly discharge credits for all CBM operators in the Powder River Basin based on the operator’s share of
the mineral lease. The assimilative capacity of the r iver is based on the monthly average background water quality of the Powder River at the gauging station in Moorhead, MT

.

**•** During August and September (low flows), operators may have fewer credits to discharge water because the assimilative capacity of the the Powder River is lower

. Operators may store water in reservoirs during these months and discharge when the assimilativ e capacity of the river is higher (for example, in the winter) or purchase credits from other operators to be able to discharge

. There is no assimilative capacity for sodium during these months. The assimilative capacity program is only applicable on the Powder River. The Tongue River is very high quality so there are no active Wyoming permits that discharge to the Tongue River

. Two ope rators with treatment units prior to discharge are permitted to discharge to the river, but these permits have not been used and no discharges have occurred on the Tongue River.6 Date: 2/16/12

Contact Name: Bill Dirienzo

Affiliation: Wyoming Department of Environmental Quality Call Participants: Ahmar Siddiqui, EPA

Tom Born, EPA

Lori Weiss, ERG

Dan

- Tam Nguyen, ERG

The p urpose of this call was to clarify data fields in the Wyoming DMR data.

1. Direct Discharge outfalls are noted in the file with the “2_DD” designation. These outfalls have the capability to discharge to a stream that connects to the Powder River. Discharge from “2_DD” outfalls may flow through a
reservoir but the reservoir is n ot required to contain the discharge and therefore, the discharge may ultimately
reach surface water . There may be reservoirs on the drainage but the permit limits were established without taking the reservoirs into consideration

. The discharged water may also infiltrate or evaporate. Only a small amount of the produced water discharged would get to surface water ; however, the actual volume discharge to
the Powder River is not measured.

2. Anadarko and Williams are probably the only operators that have larg e volumes of produced water discharged
to the Powder River. The volume of water discharged by these operators are large enough so that the entire volume discharged at the outfall is not infiltrated or evaporated before it gets to the Powder River. These operators also have outfalls that are close to the river.

3. Produced water that is discharged to the Belle Fourche and Cheyenne watersheds typically does not reach the
main stem of the Powder River.

4. A USGS study of flows in the Powder R iver is currently under peer review (Melanie Clark is contact). The study evaluates the volume of water discharged into the Powder River in Wyoming. Downstream users in Montana
are concerned that they are not receiving t heir water (water rights issue).

5. The type of permit discharge option 2_OCR (on

- channel reservoir) allows discharge from the containment

reservoir during storm events, but the discharge must stop within 48 hours of the runoff event. This flow is from the overtopping of the reservoirs by s tormwater runoff. Wyoming may allow discharges from OCR outfalls in some circumstances. Operators must apply for authorization, sample the water in the reservoir, and Wyoming can authorize a controlled release. Wyoming tracks these releases and this would count against the operator ’ s allocation of credits under the assimilative capacity program. This does not happen very frequently.

6. Wyoming is moving away from end

- of

- pipe chemistry for permit requirements and is looking at water management requirements. M ost environmental issues are not due to the chemistry of the water but due to flooding, creation of wetlands, elevation of groundwater levels , etc . Permits may have more emphasis on field monitoring in drainages.7 Date: 6/11/12

Contact Name: Amy Steinmetz

Affiliation: Montana Department of Environmental Quality Call Participants: Lori Weiss, ERG

The purpose of this call was to discuss the current issues surrounding CBM discharges from Wyoming flowing into

Montana rivers.

1. Ms. Steinmetz stated t he m ain concern about CBM discharges from Wyoming has been raised by the irrigators using water from the Tongue River.

2. Monitoring on the Tongue River has shown that there is an increase in salinity but the reason for the increase has not been determined. The Tongue River has a higher natural water quality than the Powder River.

3. Montana has not studied any effects of infi ltration of produced water from ponds on ground or surface water quality.

4. Montana established conductivity (EC) and sodium adsorption ration (SAR) water quality standards which EPA approved. Wyoming sued Montana over the standards and Montana submitted r evised standards to EPA last summer. These revised standards have not yet been approved.

[Note from ERG: Information on Montana’s rationale for EC and SAR standards can be found on Montana’s EIS

website http://deq.mt.gov/coalbedmethane/finalEIS.mcpx .]

5. M ontana and Wyoming representatives participate in monthly calls regarding CBM issues. Wyoming is trying to work to meet Montana’s proposed water quality standards in their permits. Montana is reviewing Wyoming permits during the public comment period

. Ms. Steinmetz did not know when Montana began reviewing the Wyoming permits. Ms. Steinmetz stated t hey are seeing many permit renewals but not many new permits. Many of the larger CBM operators are selling their operations to smaller operators.

[Note from ERG : The notification of the public comment period for Wyoming permits can be found at: http://deq.state.wy.us/wqd/events/index.asp . The Montana CBM website contains a link to a Memorandum of Coorperat ion between Montana and Wyoming dated 2001, Montana and Wyoming Powder River Interim Water Quality Criteria Memorandum of Coorperation, which can be found at: http://deq.mt.gov/coalbedmethane/interstate_issues.mcpx ]

6. Montana currently has three discharge p ermits but only one is active (Fidelity permit that requires EMIT system).