## Meeting Summary

T opic : Conference Call with North Star Disposal, Inc Regarding Underground

Injection Operations in Ohio

Meeting D ate : 2 July 201 2

Participants : Lisa Biddle , Erik Helm ( EPA/EAD )

Betsy Bicknell, Meghan Camp, Brent Ruminski , Lori Weiss (ERG) Bill Hays, Dave Jenkins

, Terry Smerks ( North Star )

On 2 July 201 2

, the U.S. Environmental Protection Agency (EPA ) held a conference call

with North Star Disposal , Inc. ( North S tar ) to discuss their underground injection well operation s near Youngstown, Ohio

. Discussion topics included:

 Company Background ;

 Underground Injection Industry Background ;

 Well Development Process and Permitting ; and

 Technical and Cost Information

.

Attachment 1 lists the meeting participants

.

Company Background

North S tar is a drilling and operating company that owns seven underground injection

wells in eastern Ohio with approximately 50 employees

. Currently, only two of these wells are in operation while the other five have been drilled and are awaiting permit approval to begin

op e ration

. North Star is permitted to inject any oil and gas wastewater for disposal but almost exclusively accepts Marcellus and Utica shale gas wastewater.

Figure 1 shows the North S tar underground injection wells and all Marcellus and Utica

s hale gas wells located in Ohio, West Virginia, New York, and Pennsylvania using ArcGIS mapping and coordinates from DrillingInfo, Inc’s HPDI database and Pennsylvania Department of Environmental Protection’s (PA DEP) oil and gas database

. 1 Figure 1 also shows a 90 mile

radius around North Star and indicates the Pennsylvania Marcellus wells from which wastewater was hauled to North Star (yellow) according to PA DEP

. Attachment 2 provides wastewater

volumes by Pennsylvania Marc ellus operators that hauled wastewater to North Star in 2011

.

1 HPDI database last updated in December 2011. PA DEP database last updated January 2012.Meeting Summary Page 2 of 7

Source s : Generated using ArcGIS and coordiantes from HPDI and PA DEP ’s oil and gas database s.

Figure 1

. North Star Underground Injection Wells (green), Marcellus and Utica

Shale Gas Wells (red), and Pennsylvania Marcellus Shale Gas Wells that H auled

Wastewater to North Star in 2011 (yellow).

Injection Industry Background

Underground injection wells are classified into five classes. Class II injection wells inject fluid associated with oil and gas production. This includes brine disposal, hydrocarbon storage, and enhanced recovery. According to North Star , there are currently189 active underground injection wells in Ohio. According to the Ohio Departmen t of Natural Resources (OH DNR), 98 percent of oil and gas wastewater generated in Ohio is disposed of via class II injection wells. 2

North Star commented that demand for underground injection h as decreased in the past year due to low gas prices , which pro mpted shale gas operators to increase reuse of wastewater in hydraulic fracturing. North Star also noted that a few larger oil and gas operators operate their own class II underground injection wells.

2 Available online at: http://www.ohiodnr.com/mineral/injection/tabid/10374/Default.aspxMeeting Summary Page 3 of 7

Well Development Process and Permitting

The Ohio D epartment of N atural R esources (OH DNR) regulates class II underground injection wells in Ohio

. North Star mentioned that a pending Senate Bill will bring new requirements to the underground injection well industry , but did not provide any details about th e new requirements

. North Star provided general information on the underground injection well development permitting process

. According to North Star , the timeframe for obtain ing a lease

, drill ing the well, and get ting final permit approval to operate is approximately six to eight

months

. In general, the requirements to drill an underground injection well are similar to oil and gas extraction well requirements except that underground injection wells do not have spacing requirements like oil and gas wel ls. In general, the well development process includes the following steps.

1. Obtain a lease

— When obtaining a lease, operators tend to look near i nterstate highways to accommodate trucking traffic to and from the injection well site

.

2. Obtain a drilling perm it

— After the operator obtains a lease, OH DNR requires operators to obtain a drilling permit. North Star estimated it takes two to three weeks to obtain a permit.

3. Drill the well

— North Star drills vertical wells with open hole completion for underground injection.

4. Conduct p ressure test ing

— After the well is drilled, the operator must conduct pressure injection tests to determine the capacity of the well.

5. Final OH DNR Approval

— After the pressure test is complete, North Star submits

the results to the OH DNR who studies the results to determine the final operating specifications that will go in the permit , including the maximum injection rate with respect to the injection pressure.

Technical and Cost Informatio n

North Star provided technical and cost in formation on underground injection. Table 1 provides a summary of cost information.

Wastewater Trucking and Storage

North Star does not provide trucking for operators . Most operators hire a third party trucking company to transport the wastewater from the extraction well site to the underground injection well. Trucking companies charge SGE operators between $95 and $105 per hour. A typical truck is capable of hauling 1 30 barrels of fresh water and only 100 barrels of wastewater due to weight limitations.Meeting Summary Page 4 of 7

Drilling

Underground injection operators can drill new wells or convert existing oil and gas

extraction wells into underground injection wells. Operators may convert e xisting extraction

wells to und erground injection wells when th ey reach the end of their productive life or if the

well did not produce economically after completion

. According to OH DNR’s 2011 annual oil and gas summary, Ohio operators drilled seven new underground injection wells and converted twelve existing production wells into underground injection wells. 3 T he approximate cost to convert an existing we ll is $300,000 to $400,000. To drill a new underground injection well costs $700,000 to $1,000,000 f or shallow wells and up to $3,500,000 for deep wells.

Well Completion and Formation

North Star drills and completes their underground injection wells in the Rose Run and

Clinton

- Med ina sandstone formations. In eastern Ohio, these formations have high poros ity and permeability, which are good qualities for underground injection. North S tar completes their

wells in these formations using open hole completion techniques. This means the re is no well casing across the target formation interval. Figure 2 provides a diagram of an open hole completion.

Figure 2 . Open Hole Completion

Injection rates

The injection rate (i.e., barrels per day) is inversely proportional to the injection pressure. The required injection pressure varies with the wastewater density, formation porosity, formation permeability, and the ultimate capacity of the formation. As t hese properties decrease , the pressure required for injecting wastewater increases and the injection rate decreases. North Star estimated their two relatively shallow wells in operation are capable of injecting 500 to 600 barrels per day on average. Howeve r, the deeper wells North Star drilled that are not yet in operation may be able to accept 2,000 to 4,000 barrels per day.

3 The total depth of all underground injection wells in 2011 was 60,699 feet or an average depth of 3,200 feet.

Available online at: http://www.ohiodnr.com/portals/11/publications /pdf/oilgas11.pdfMeeting Summary Page 5 of 7

Wastewater Quality Acceptance C riteria

North Star requires that all wastewater meets two q u ality acceptance criteria in order to

acce pt a load. T he wastewater must have a total suspended solids (TSS) concentration of less than one percent. This is because TSS clogs the formation and decrease s porosity and permeability. North Star samples every incoming load for TSS using a test tube and flocculent

addition

. The wastewater must have a density of 9.5 pounds per gallon or higher in order to be injected. This is because it requires less pressure to inject higher density brines. North Star does

not restrict b acteria levels because the wastewa ter is not stored onsite for long periods of time

.

Well Life

The t ypical lifespan for an underground injection well is approximately 30 years but is hard to predict and varies well to well. An o perator can drill a new underground injection well directly next to an existing well that has reached the end of its life . However, it is likely that the

formation in this location is saturated and unable to hold additional wastewater under normal operating pressures.

Cost Summary

Table 1 provi des a summary of costs provided by North Star and from OH DNR’s

website

. The c ost for disposal varies with demand and wastewater density

. Because less dense wastewater requires higher injection pressures or blending, North Star may surcharge operators

for less dense wastewater.

Table 1 . Summary of Costs Provided by North Star and from OH DNR

Cost Description Cost a Note s

Convert a producing well to an underground injection well $300,000

- $400,000

Drill a new shallow underground injection well $700,000

- $1,000,000 Shallow wells are approximately 4,000 feet deep and can accept 500 to 600 barrels per day.

Drill a new deep underground injection well $3,500,000 Deep wells are approximately 10,000 feet deep and can accept 2,000 to 4,000 barrels per day.

OH DNR Costs In

- state fee: $0.05 per barrel

Out

- of

- state fee of $0.20 per barrel Permit application fee of $1,000 Costs under Senate Bill 165

. b

Disposal Cost to SGE Well Operators $4.00 per barrel Does not include trucking. Cost is subject to surcharge if wastewater has low density.

Trucking Cost to SGE Well Operators $95 to $105 per hour 100 barrel capacity for d ense wastewater and 130 barrel capacity

for freshwater.

a

— North Star and trucking c osts are approximate and vary with demand and natural gas prices.

b

— OH DNR costs reported online at: http://www.ohiodnr.com/mineral/injection/tabid/10374/Default.aspxMeeting Summary Page 6 of 7

Attachment 1

Table A

- 1. List of Meeting Participants

Name Affiliation Phone Email Bill Hays North Star 330

- 623

- 0678 bhays@mohawkservices.us

Dave Jenkins North Star Not Provided Not Provided Terry Smerks North Star Not Provided Not Provided

Lisa Biddle US EPA 202

- 566

- 0350 Biddle.Lisa@epamail.epa.gov

Erik Helm US EPA 202

- 566

- 1049 Helm.Erik@epa.gov Betsy Bicknell ERG 703

- 633

- 1612 betsy.bicknell@erg.com Meghan Camp ERG 703

- 633

- 1684 meghan.camp@erg.com

Brent Ruminski ERG 703

- 633

- 1701 brent.ruminski@erg.comMeeting Summary Page 7 of 7

Attachment 2

Table 2

. North Star 2011 Pennsylvania Shale Gas

Wastewater Volumes by Operator

Operator Volume (barrels) a

EOG Resources 182,287

REX Energy Operating Corporation 110,396

Pennsylvania Generation Company, LLC 66,798

EQT Production Company 41,216

Seneca Resources Corporation 17,957

Atlas Resources, LLC 9,416

Consol Gas Company 6,360

CNX Gas CO, LLC 6,176

Chevron Appalachia, LLC 4,962

Stone Energy Corporation 3,488

Snyder Bros, Inc 2,070

Vista Operating, Inc 515

Total 451,642

Daily Average 1,237

a

— Report volume is for both of North Star’s wells.

Source: PA DEP’s Oil an d Gas Reporting database.