### CORRESPONDENCE

TO: Ahmar Siddiqui, U.S. EPA

FROM: Joe Olson, Williams

DATE: February 20, 2012

SUBJECT: Downhole Separation Use with Coalbed Methane Wells (CBM00679)

The following email correspondence was initiated by Mr. Ahmar Siddiqui requesting additional information about the use of downhole gas/water separation in the coalbed methane industry. Mr. Siddiqui contacted Mr. Joe Olson at Williams to ask about the use o f downhole gas/water separation at their CBM operations. Mr. Olson provided the following response to Mr. Siddiqui and Mr. Chris Krejci, ERG, on February 20, 2012 regarding downhole/gas water separation.

Ahmar and Chris,

I have been out of the office for the past week, and I just got Chris’ message this morning. Pertaining to the use of Big Cat Energy’s ARID downhole separation tool, we actually only tested one such tool for a limited time, and have not used them in any ot her application. There are several issues that impacted our decision not to move forward with additional ARID systems. Some of the issues were regulatory, some were logistical, and some were geologic.

Geologically speaking, our issue with using any tool such as ARID is in finding potential injection zones with sufficient lateral extent and permeability to support injection of sufficient quantities to make such systems economic. The shallow geology in the Powder River Basin is highly lenticular and discont inuous, and it is often very difficult to correlate sands (potential injection horizons) even across very short distances. Thus, it is extremely risky to based our water management for any given development on injection, whether that be in a separate

dedic ated injection well or through the use of the ARID tool. If we were to begin injecting in a zone that we thought had potential, the risk would be high that, eventually, we would confront a barrier boundary in the injection zone that would preclude us from injecting sufficient volumes be able to produce gas from our CBM wells. Our highest priorities in selecting water management tools in any of our producing fields are reliability, certainty, and cost. Because of the geologic uncertainty in the basin, inject ion options present unacceptable risk. We need water management options that we can rely on over the life of any given project.

Regulatorily, we would have had difficulty with regard to sampling of the wells associated with

the ARID tool. The issue stemm ed around the fact that we would have needed to catch periodic samples of the water being injected. Because the tool functioned by injecting water in the injection zone prior to the water coming to surface in a CBM well, any time we needed to catch samples , we would have had to shut the well in, pull all of the production and injectionMemorandum

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equipment from the well, go back in with a pump and tubing to get water to the surface for sampling, and then reinstall the injection tool and production equipment. If we had these tools installed in hundreds or even thousands of wells, this would have had a significant, material impact on our cost and on production over time.

I hope this helps to answer some of your questions. At the end of the day, this option simply did

no t appear to be a reliable, efficient means of water management for us. That, coupled with the fact that, in most cases, the landowners we operate on want the water on surface for livestock watering, etc, caused us to continue to seek other means of produci ng and managing our water.

Joe