## Converting Fresh Water Regulatory 

## Challenges into Opportunities

Nathan Kuhnert

- Devon Energy SPE Workshop on Reducing Environmental Impact of Unconventional Resource Development Denver, Colorado April 24

- 25, 2013

# Presentation Agenda

• Reasons for Increased Regulatory Challenges

• Context of Oil & Gas Fresh Water Use and Water Use Intensity Comparisons

• Mitigation of Risks and Opportunities



### • Risk

- based Permitting

• Engineering and Technology

• Case Studies

• Cana Woodford Reuse

• New Mexico Frac Ponds

– Covers

• West Texas NV Water Plan

NYSE DVN www.devonenergy.com page 2

# Media and Public Attention The Expression of Public Concern

NYSE: DVN www.devonenergy.com page 3

## Recent Snapshot of U.S. Drought 

## Conditions

NYSE: DVN www.devonenergy.com page 4

## Retrospective

- Extreme to Exceptional 

## Drought in Southern U.S. Great Plains

NYSE: DVN www.devonenergy.com page 5page 6 www.devonenergy.com NYSE: DVN 

## Water Used for Hydraulic Fracturing in 

## Texas is ‘Small Proportion’ of State’s Overall Use

SOURCE: Texas Water Development Board 2008 Annual Water Use Survey • The total water demand for the Hydraulic Fracturing process still represents only about one percent of the state’s overall use even with water use for HF doubling from 2008 to 2011, says the TWDB.

• Texas Bureau of Economic Geology scientist, Dr. Jean

Philippe Nicot says that it will not create a water shortage at a statewide level.

• The BEG also says that the amount of water used for mining, which includes fracking , is too small to endanger aquifers.page 7 www.devonenergy.com NYSE: DVN 

## NYSE: DVN www.devonenergy.



## com page 7 

# Projected Water Demand
State of Oklahoma

- 2010

SOURCE: Oklahoma Water Resources Boardpage 8 www.devonenergy.com NYSE: DVN 

## NYSE: DVN www.devonenergy.



## com page 8 

# Projected Water Demand Canadian County

- 2010

SOURCE: Oklahoma Water Resources Boardpage 9 www.devonenergy.com NYSE: DVN 

# Ways to Mitigate Risks and Reduce Environmental Footprint

• Apply industry

- accepted Best Management Practices;

• Participate in industry work groups from (i.e., Permian Basin Water Management Council, Eagle Ford Task Force) to best leverage resources;

• Advocate for risk

- based permitting with state agencies for conveyance, storage and treatment solutions of brackish and produced water ;

• Continue to facilitate research and development on frac fluids for increased tolerance of high TDS water;

• Build a comprehensive Water Management Plan.page 10 www.devonenergy.com NYSE: DVN 

## Applying Industry Best Practices to 

## Minimize Impacts Associated with Fresh Water Use

• Source selection

• Recycling

• Wastewater collection

• Wastewater storage

• Wastewater transportation

• Wastewater disposal



### • http://www.shalegas.energy .gov/resources/HF2_e1.pdf

• “Operators should engage in proactive communication with local water planning 

### agencies to ensure resources are not constrained...”NYSE: DVN www.devonenergy.com page 11 

# Collaborating both Within and 

# External to our Industry

Trades and initiatives in no particular order or priority:

• Major Trades

– API, AXPC, ANGA, IPAA, etc.

• State Trades

– TxOGA , TIPRO, etc.

• Regional Groups

– Permian Basin Water Management Council, Granite Wash Water Management Focus Group

• SPE Water Handling Workshop Handling Series Community

• LLC type of groups

– comprised of independent and majors that come together with antitrust guidelines in mind to drive continuous improvement:

• Conduct a desktop literature review of existing research studies and other publications per water use and quality related to shale oil and natural gas production;

• Develop methodologies for a replicable water mapping model and pilot the model in several oil and natural gas basin in the U.S;

• Gather and develop potential industry strategies, practices and technologies that can be employed to more effectively use and manage water and protect water quality;

• Develop a process to identify and implement potential conservation measures for within or external to oil and natural gas operations.

## Further Development and Standardization 

## of Fresh Water Use and Intensity Metrics for Hydraulic Fracturing Operations

OperationsProduting • To be able to compare relative impacts of industries competing for limited local and regional water supplies, water intensity comparisons are created.



### • There has been an historic lack of consistency in tracking and reporting water use and energy production data within the oil & gas industry.

• AXPC developing a workable definition of water intensity to 

### allow for comparison between the different energy sources on an equivalent basis:

 Water Intensity = Fresh Water Consumed during Drilling & HF (volume)
EUR as Energy Value (e.g. MMBtu )



### • Existing comparisons in terms of water intensity relative to other energy production are favorable.

NYSE: DVN www.devonenergy.com page 12

## Comparison of Water Use for Hydraulic 

## Fracturing Operations Compared to other Energy Producing Operations

NYSE: DVN www.devonenergy.com page 13 SOURCE: Department of Energy, 2006. Energy Demands on Water Resources Report.

## State and Regional Regulatory 

## Developments

– Recycled Water Use

NYSE: DVN www.devonenergy.com page 14 Railroad Commission of Texas Chapter 3

– Oil and Gas Division
Rule § 3.8

– Water Protection
ACTION : Proposed rule.
SUMMARY: The RRC of Texas adopted amendments to Chapter 3 and 4 Rules, regarding commercial recycling. The effective date was April 15, 2013. The adopted amendments authorize certain recycling activities, clarify permitting of other recycling activities and update the rule. 

### The RRC has reduced impediments to recycling. Industry and 

### Trades worked with the RRC to ensure risk

- based permitting. For instance, can now bring in “off

- lease” water and other operators water to facility on your lease under PBR (no H

- 11 Permit is required). Also, discharging completely treated water west of the 98 th 

### meridian is an option under different 

### regulatory authority.page 15 www.devonenergy.com NYSE: DVN 

## Promoting Additional Reuse 

## Opportunities through ongoing R&D Shale Water Research Center

• Overall Objective:

– Research water compatibility issues in shale production

• Feasibility of economically reusing produced water

• Feasibility of alternative water sources ( e.g. saline aquifers and other non

- fresh waters)

• How produced water and other saline water affect successful fracs



### • How to mitigate saline water effects

• Encompass results into software and training for companies



## 15page 16 www.devonenergy.com NYSE: DVN 

## Promoting Additional Reuse 

## Opportunities through ongoing R&D Shale Water Research Center



## • Overall Results:

– Physically sampled dozens of wells in each of 6 basins visited

– Analyzed sampled water for quality characteristics

– Developed cost effective field test kit

• pH, temp, Ca , Fe, Sulfate, Sulfide, TDS, Ba, Alkalinity, Oxidation Reduction Potential

– Identified numerous water compatibility issues with reusing produced water

– Identified key characteristics to determine fluid viscosity and guar hydration

– Performed studies on viscosity and hydration of guar in various water conditions

– produced water, saline aquifer, individual components, etc.

– Created beta software to predict certain parameters of mixed water sources

– Identify future directions of research on fluid compatibility



## 16

# Utilization of Saline Aquifers

17 Depth to saline ground water in the United States (generalized from Feth and others, 1965) USGS Fact Sheet 075

- 03, Oct. 2003page 18 www.devonenergy.com NYSE: DVN 

## SWRC Summary and Future Work 

## Ross Tomson , J.D., M.E.S.

– Director
ross.tomson@shalewatercenter.com



## – Summary

 Successfully crosslinked guar gum using AlOOH colloids. These colloidal particles could be an alternative to boric acid;

 Synthetic polymers can be crosslinked with AlOOH NPs as well;

 Synthetic polymers could possibly be added to guar gum and reduce the use of guar gum as fracturing fluid.



## – Future work

 Further study of guar gum/synthetic polymer blends to demonstrate the possibility of reducing the use of guar gum;

 Full investigation of guar gum/NPs gel systems. Study the effects of pH, salinity, temperature, degradation, proppants testing and etc.

 Develop synthetic polymer/NPs gels to improve the property and realize potential usage in oil and gas industry.


## 18

# Case Studies

- Risk

- based Regulatory 

# Permitting and Engineering and TechnologyNYSE: DVN www.devonenergy.com page 20 

### Exceptional produced water quality in the Cana Woodford Shale

• Very low total dissolved solids (TDS)

• Early stages of produced water quality is approximately 12,000 TDS

• Later stages of produced water quality is approximately 20,000 TDS



### • Potential exists to reuse these fluids, thus reducing the demand for fresh water Current quantities available for re

- use:



### • 26,000 barrels per day of produced fluid from 196 wells 

# Opportunities for W ater Reuse
Cana Woodford ShaleNYSE: DVN www.devonenergy.com page 21 

# Developing a New Pit Rule for 

# Produced Water

Cana Woodford Shale

• With the development of the Cana

- Woodford Shale, Oklahoma regulators and Devon recognized the use of larger pits to store produced waters from the flowback process

• Earlier regulations allowed only for temporary storage

• New revised regulations include enhanced construction and design requirements and permitting optionsNYSE: DVN www.devonenergy.com page 22 

# Cana

- Woodford Water Reuse 

# Facility Storage Pit now Operating

• 502,000 BBL Capacity plus 2’ Freeboard

• 60 Mil High Density Polyethylene Liner

• Leak Detection System

• Automated: Level and Chlorides

• Linked to pipelines handling 30,000 bpd and connect to 30 sections

• Reuse water will contribute to completion of 270 wells

# New Mexico Reuse Pilot

– Cross 

# Linked Fluid System

 Goal

– Use produced water as base fluid for hydraulic fracturing operations
 Drivers


##  Increasing stakeholder interest
 Physical limitations
 Drought


##  Economics
 Water cycle considerations
 Project is the 2 nd 

## of its kind in New Mexico

NYSE: DVN www.devonenergy.com page 23

# NM Pilot Program Specs

 Using high crosslink gel systems that are normally used in SENM provided some challenges with recycled water
 Testing two different areas & formations provided a much needed data set for future full scale operations


###  pH of the water (pre

- EC/post

- EC) was the biggest factor
 Single well frac

– Turquoise 27

- 5
 Produced water from existing wells
 Stored in batteries
 Trucked to frac tanks
 Treated using Baker Hughes H2prO TM 

### water treatment technology
 Quality control

– frac tanks prior to impoundment
 Temporary impoundment

– Less than 1 month

NYSE: DVN www.devonenergy.com page 24

# NM Pilot Produced Water Quality

Well Source Concentration (mg/L)
TDS Chloride Agate 21

- 2 187,068 112,389 Agate 21

- 4 158,405 95,620 Beryl Fed 33

- 1 168,771 102,210 Diamond 22

- 3 179,727 108,290 Diamond 22

- 4 179,518 108,013 Emerald 20

- 1 215,250 130,663 Emerald 20

- 2 222,697 135,411 Emerald 20

- 3 192,415 116,201 Emerald 20

- 4 188,897 114,294 Jasper 4 197,877 119,391 Onyx 29

- 1 192,324 116,431 Onyx 29

- 3 207,256 125,792

NYSE: DVN www.devonenergy.com page 25

# NM Pilot Permitting for Storage 

# NMAC 19.15.17

 Temporary Pit
 Form C

- 144


###  For temporary pits, closed

- loop systems, and below

- grade tanks
 Siting Criteria
 Depth to groundwater
 Distances to permanent residence, school, hospital, institution or church, water wells, wetlands, subsurface mines, unstable areas, floodplains

NYSE: DVN www.devonenergy.com page 26NYSE: DVN www.devonenergy.com page 27 

# NM Pilot Treated Source Water 

# Passing the Lip Test

# Summary

 Meeting Devon’s Water Management Strategic Imperatives
 Reducing fresh water use
 Reducing volumes of wastewater to be injected
 Supporting innovative technologies

 Water Storage
 Water Treatment
 Frac Fluid Technology

NYSE: DVN www.devonenergy.com page 28

# Gemstone Frac Pond Cover 

# Installed 1

- 25

- 2013

NYSE: DVN page 29

# Potential Savings
A dding C over to 285K bbl Frac Pond

NYSE: DVN page 30 Surface Area 4 Acres

Depth 10 feet

Daily loss in bbls 2,700 (3 months = 243K bbls )

Daily Evaporation Cost $4,100

Monthly Evaporation Cost $124,000

Cost of Cover $215,000

Payout 1.7 months ($2.41 cost to truck, $1.50 cost to pipe)NYSE: DVN www.devonenergy.com page 31 

# Opportunities for West Texas 

# Study

- Drivers

Traditional water supply approach:

• Satisfies near

- term requirements

• Is operations driven There are emerging risks:

• Increasing demand

• Increasing stakeholder interests

• Permitting uncertainty



### • Increasing competition for supplies
Potential Outcome

• Supply interruption



### • Increasing costs

• Schedule delaysNYSE: DVN www.devonenergy.com page 32 

# Sustainable Water Resources 

# Planning

Step 1

– Estimate demands Step 2

– Inventory sources Step 3

– Identify deficits Step 4

– Identify new strategies Step 5

– Criteria and ranking Step 6

– Detailed feasibility Step 7

– Field Investigations 

### Step 8

– Implementation

# Example Demand Schedule

– 

# Multiple Counties

page 33NYSE: DVN www.devonenergy.com page 34 

# New Strategies

- Supply Options

Shallow groundwater

• Occurrence and quality

• Regulatory/lease availability
Brackish Groundwater

• Conveyance and storage
Surface water

• Regulatory/physical availability 

### Municipal wastewater

• Location and discharge rate
Produced water and flowback



### • Availability correlates with well development

• Water quality challenges

# Thank You.