1 Project No.:

0172.09.037.071

Project Name: Coalbed Methane Rulemaking 

### CBI?

Yes

No TELEPHONE CALL RECOR D Incoming Outgoing Date: January 4, 2012 Time:

4:35

EST am

pm

Company Name: Big Cat Energy Corp. ERG Staff Name: Chris Krejci

Contact Name: Tim Barritt Contact Phone Number: 1

- 307

- 468

- 9369

General Subject: ARID Produced Water Reinjection Technology



### TOPICS DISCUSSED AND ACTION TAKEN

I contacted Big Cat Energy Corporation (Big Cat) and tol d the receptionist that I hoped to speak to someone about the ARID technology. I informed her that I work for ERG (contractor to EPA), and that we are gathering information in support of EPA’s ongoing rulemaking for the coalbed methane (CBM) industry. She explained that Tim Barritt would likely be the best person to speak with, but she expected him to be out through January

5 th , 2012. She transferred me to his voicemail, and I left him a message identifying myself, my company, a nd the work we are supporting. I requested that he call me back at 703

- 994

- 7130 at a time that is convenient to him so that we can discuss the ARID technology.

On January 9, 2012, Tim Barritt returned my call and we discussed my questions. Mr. Barritt indi cated that Big

Cat works with a number of operators, and has their technology in place in approximately 12 CBM wells. Big Cat has worked with the following operators (approximate number of wells using the technology in parenthesis):

**•** Anadarko Petroleum Corp oration (2 wells);

**•** Yates Petroleum Corporation ( 3 wells);

**•** Williams Exploration and Production (2 wells);

**•** Brennan Engineering , Inc. (2 wells); and

**•** High Plains Gas, Inc. (3 wells previously owned by Marathon Oil Company ).

He noted that all of the wells using Big Cat’s technology are located in the Powder River Basin. Mr. Barritt was unaware of any company in the U.S. that was marketing a similar technology.

Big Cat hopes to expand their business to have the technology used in Indonesia, Australia, and Canada. Big Cat has also begun a pilot project in the Red Desert Area of Wyoming, and hopes to begin a pilot project in the

Green River Basin in the future. Mr. Barritt noted that operators will not likely use Big Cat’s services at full scale unless a pilot proje ct has proven the technology in their basin. Big Cat is waiting to see if an operator in the Green River Basin will support a pilot project.

To plan for new installations, Big Cat determines whether water in the proposed receiving formation is of

similar quality to the CBM produced water based on whether it is in the same water use class as the produced

water ( Chapter 8 of Wyoming’s Water Quality Rules and Regulations defines the water use classes ) . All of the CBM projects that Big Cat has worked o n have p roduced Class III water

, which is defined as water suitable for livestock, and all of the available receiving formations have been of the same class. As a result, Big Cat has not2 had any difficulty permitting their operations (provided that a receiving for mation is present above the coal seam). Mr. Barritt explained that Big Cat is successful implementing their technology in most cases. He explained that reinjection at some shallow CBM wells on the east side of the Powder River Basin is probably

not feasibl e because of the lack of a proper receiving formation between the shallow producing coal seam and the ground surface. However, he believes that in these cases it may be possible to install the ARID tool so that it reinject s water into a receiving formation beneath the producing coal seam.

Other than the east side of the Powder River Basin, t here have not been any other areas where Big Cat ha s experienced any difficulty, although Mr. Barritt estimated that some receiving for mations very close to Clear Creek may contain Class II water , which is water suitable for agricultural use, based on the quality of Clear

Creek

. If CBM wells were drilled in that area they may not be able to reinject due to the water quality

difference.

Mr . Barritt is not aware of any companies providing a similar technology for domestic CBM production.

Mr. Barritt noted that the company received their first U.S. patent in December 2011 . They also have patent protection in Canada. Their patents include prov isions for configurations where the ARID tool is placed above or below the producing formation. In cases where the tool is placed below the producing formation, the water is reinjected in to a receiving formation below the producing coal seam. Big Cat has n ot yet installed their equipment in this configuration, but they believe this option could be feasible and cost effective. Big Cat is also marketing their technology to the coal and uranium mining sectors, and he believes that this configuration will

likel y first be piloted at a coal mine. Most of the information that Mr. Barritt discussed pertains to the configuration where the receiving formation is above the coal seam.

Mr. Barritt explained that receiving formations do not have to be depleted aquifers to qualify for reinjection, although reinjection has often been used for water storage for potential landowner use at a later date. Big Cat is currently exploring using their technology to augment the City of Gillette’s groundwater resources; however, this p roject is moving slowly because it involves a number of stakeholders (most of which are government

affiliated).

Aside from the requirement that the receiving formation contain water of similar quality, Wyoming Department of Environmental Quality (WYDEQ) requires that the receiving formation be greater than 100 feet deep. Big Cat also checks geologic cross sections to ensure that the receiving formation does not outcrop at the surface nearby the well where the technology is installed.

Mr. Barritt explained that Big Cat did pump tests on the receiving formation when they first began installing the ARID technology, but they now have a good understanding of local receiving formations and are able to predict injectivity without performing pump tests. He explain ed that the water that can be pumped from a given formation is usually greater than what can be injected into a given formation at the same pressure. For example, if a formation can produce 50 gallons per minute (gpm) with 100 feet of drawdown, than it can generally only receive about 35 gpm with 100 feet of buildup during injection. Mr. Barritt uses a rule of thumb of 70 percent to estimate injection capacity from production capacity (35 gpm is 70 percent of 50 gpm).

Mr. Barritt explained that Big Cat is r equired to monitor pressure on the injection formation, and their permit requires that they do not exceed the established fracture gradient of 0.7 psi per foot at any point in the well. Subtracting hydrostatic pressure from this gradient allows them a grad ient of only 0.27 psi per foot. They monitor pressure and make sure that pressure does not exceed this gradient anywhere in the well ; if the gradient were exceeded, Big Cat could be at risk of fracking the formation. Typically, Big Cat installs pressure

tr ansducers on either side of the ARID tool. The transducer above the ARID tool helps the operator verify that they are not at risk of fracking the receiving formation (or any adjacent formations). The transducer below the ARID tool helps the operator verify that downhole conditions are optimized for gas production (i.e., the water3 level is low enough to allow for dry gas production). Mr. Barritt noted that if the water level gets to o close to the ARID tool, it is possible that the well will introduce water i nto the gas sales line at the surface. For this reason, Big Cat prefers at least 200 feet of vertical separation between the h ighest producing coal seam and the receiving formation. This is another reason that the ARID technology may not be successful with shallow CBM

wells on the east side of the Powder River Basin.

Mr. Barritt believes that CBM producers are not losing any appreciable amounts of gas dissolved in the water that is reinjected in wells with ARID technology. He noted that most producers do no t need to use sur face water/gas separation for the depths at which Powder River CBM wells are completed . He explained that the

Wasatch Plateu area in Utah may be an example of deeper gas production where produced water could contain significant dissolved g as.

Mr. Barritt explained that Anadarko is currently writing a Society of Petroleum Engineers ( SPE ) paper on the ARID technology. He did not have the author’s name but he anticipates that the paper will be published soon.

Before installing the ARID technol ogy, Big Cat tests produced water to determine whether reducing bacteria are present that could lead to scaling on the receiving formation. Big Cat may use a chlorine drip system at first to mitigate the potential for scale, but they have not yet had to continuously feed chlorine into the produced water

stream at any of the existing wells using the ARID technology

.

Big Cat typically requires four to six weeks from the time an operator requests their services to the time the technology can be insta lled in a CBM well. Most of this time is used for permitting the well. Big Cat manages the permit application, and the operator provides information on any possible affect ed parties in a half

- mile radius. Affected parties typically include water well owner s and CBM producers. As part of the permitting process, the affected parties are notified of the plans for reinjection and allowed to submit comments. Thus far, Big Cat has received one comment from a concerned well owner. The commenter was concerned about the reinjected produced water affecting the quality of the water pumped from his well. To address this comment, Big Cat changed their plans to reinject into another receiving formation.

Mr. Barritt estimated that the ARID technology has allowed operators to reinject all of the produced water in at least 80 percent of the wells where the technology was installed. In one case, limitations of the receiving formation required that some of the water be produced to the surface. In other cases, CBM producers have chosen to produce some of the water to the surface to meet a surface water need (e.g., livestock watering for a landowner).

Mr. Barritt explained that the ARID technology can be installed on new wells or retrofitted on existing wells.

New installations ar e easier, because the well can be planned in a way that easily incorporates the ARID technology. He explained that operators make decisions about the pumping mechanism, and Big Cat works with the operators to connect the ARID tool to the pumping mechanism. He indicated that most operators have used submersible pumps on the wells they have worked with, but Brennan Engineering installed rod pumps on the two wells for which they used the ARID technology.

Mr. Barritt explained that the ARID technology presents an obstacle to well workovers, because it requires that the tool be removed before the workover and reinstalled afterward. This process is not a major obstacle, but it increases the effort required for a workover. Mr. Barritt noted that WYDEQ required quar terly monitoring of the produced water at first, but they have since become more flexible due to the logistical issues with collecting samples. If a well does not generally produce any water to the surface (i.e., sampling requires equipment removal)

, WYDEQ permits the operator to sample only when the equipment has be en removed to service the

well.4 Other than one well that did not have sufficient injection capacity to reinject all produced water, the only major logistical issue that Big Cat has run into has been the failure of tool seals during installation ; this issue was apparently caused by sharp edges inside the production casing. To mitigate this issue, Big Cat instructs operators to run a “scraper ” from the interval where the tool will be installed to t he surface to smooth the inside of the production casing and prevent damaging the seal. Big Cat offers seals in a variety of hardnesses to suit the conditions of the production casing. Big Cat recommends that operators replace seals each time the y remove

t he tool

– this is the only O&M cost associated with the ARID technology for which the operator pays Big Cat. However, operators incur additional costs for wells that use the ARID tool, because they are required to monitor reinjected water periodically and remove the tool during well maintenance activities (e.g., workovers).

Mr. Barritt and I also discussed cost information for the ARID tool. Mr. Barritt requested that this information be held confidential. Therefore, this information is included in a CBI At tachment to this telecon.

[See Attachment 1]