DCN: SGE00607



## Meeting Summary

T opic : Conference Call with Quicksilver Resources

, Inc. about shale gas

operations

Meeting D ate : 11 October 201 2

Participants : Lisa Biddle

, Ahmar Siddiqui, Brian D’Amico ( EPA/EAD )

Meghan Camp, Brent Ruminski (ERG)
Todd Hutson

, Keith Mouser , James Segars

, Carl Bowers ( Quicksilver )

On 11 October 201 2

, the U.S. Environmental Protection Agency (EPA ) held a conference
call with Quicksilver Resources Inc. ( Quicksilver ) to discuss their shale gas operations in Texas
and Colorado

. Discussion topics included:

 Current shale gas a ctivity ;

 Well d evelopment;

 Source w ater m anagement;

 Wastewater volumes; and

 Wastewater manag ement

.

Attachment 1 lists the meeting participants

.

Current Shale Gas Activity

Quicksilver is an oil and gas producer that operates approximately 900 shale gas wells i n Texas and Colorado

. 1 According to their website, Quicksilver focuses on develop ing unconventional formations with most of their production in the Barnett. During the call, Quicksilver indicated that

, due to low gas prices

, they are investing in new liquid rich formations in Colorado. The liquid rich formations in these areas include the Niobrara and Mancos. At the end of 2011, their proven reserves included 77 percent natural gas, 22 percent natural gas liquids, and one percent oil. 2

Table 1 provides the number of Quicksilver shale gas wells in the Barne tt, Mancos, and
Niobrara formations from Drillingi nfo , Inc’s HPDI database. 3 Quicksilver currently u ses slick water fracturing for all of their Barnett shale gas wells. In the Mancos and Niobrara, they are still evaluating their development approach , and h ave tried several types of fracturing techniques including slick water, gel, and gas. Quicksilver is monitoring the performance of the wells they fractured using each technique before selecting a technique for large scale development

. In

1 Shale gas well cou nt from Drillinginfo , Inc’s HPDI database

. 2 Information available online at: http://www.qrinc.com/about/company_fact_sheet/

3 HPDI database last updated in December 2011 and includes wells through the end of 2010.Meeting Summary Page 2 of 8

general, gas fract uring is the mos t expensive technique

, involves more hazards , and generates the least wastewater requiring disposal

.

Table 1

. Quicksilver’s 2010 Shale Gas Well Count by

Formation

Formation States Type of Fracturing Number of
Wells

Barnett TX Slick water 891

Niobrara CO Gel Oil, Gel Gas

, Slick Water

- Gel,
Slick Water 1 1

Mancos CO Slick Water 2

Source: Drillinginfo , Inc’s HPDI database

L iquid rich formations produce a mixture of oil, condensate, and gas. If gas pipelines are already available at a particular location, Quicksilver captures and sells the gas . If gas pipelines are not already available, the gas may be flared or incinerated u ntil the company determines it is
economical to install a gas pipeline. When asked how liquid rich formation wells are defined (i.e., as an oil or gas well ) , Quicksilver deferred to the applicable state definition. The oil and gas
wells in Texas and Colora do are defined as follows:

 Texas

— Gas well is defined as any well where gas to oil ratio is more than 100
MCF to 1 barrel of oil. 4

 Colorado

— Gas well is defined as a well where the principal production is gas, as defined by the Act. 5

Figure 1 shows all Quicksilver Barnett wells in the Fort Worth, Texas area using EPA’s Geoplatform and coordinates from Drillinginfo , Inc’s HPDI databas e. 6 Quicksilver’s Barnett
wells are located in the south eastern portion of the Barnett formation in the counties of Hood, Tarrant, Somervell, Denton, Hill, and Johnson

. According to the Texas Railroad Commission

, t h e south eastern portion of the Barnett f ormation tends to produce less liquids and more dry gas compared to the north western portion

. 7

4 Texas Administrative Code. Title 16 . Part 1 Chapter 3, Rule 3.79. Available online at: http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&p _tac=&ti=16&pt=1& ch=3&rl=79

5 Definition available online at: http://cogcc.state.co.us/RR_Asps/100Series.pdf

6 HPDI database last updated in December 2011 and includes wells through the end of 2010.

7 Information available online at: http://www.rrc.state.tx.us/barnettshale/countyproducing.phpMeeting Summary Page 3 of 8

Source : Developed using EPA’s Geoplatform tool using coordinates from Drillinginfo , Inc’s HPDI database

.
Figure 1

. Quicksilver Barnett Shale Gas Wells Through 2010

Well Development

According to Quicksilver, the timeline for well development varies by state, county, and

season. The first step in the process is to obtain the necessary drilling permit and leases. The time for acquiring a permit will depend on the area and amount of experience Quicksilver has in working with the permitting authorities in that area. In areas where Quicksilver has more experience working with particular permitting authorities, permit acquisit ion is relatively quick

. In areas where Quicksilver has less experience working with permitting authorities (e.g., Colorado), the process tends to take more time.

After Quicksilver obtains the necessary drilling permit and leases, they construct the well

p ad and drill the well

. Quicksilver estimates one to two weeks for pad development. Drilling schedules depend on a number of outside forces, such as lease holds, regulations, drilling rig movement, seasonality, and population factors. For example, in the urban setting of Fort Wor th, drilling schedules are restricted to 12 hour work days. In general, Quicksilver estimates three to seven days to move the drilling rig onsite, seven to ten days to drill the well, and three to sevenMeeting Summary Page 4 of 8

days to move the rig off

site. Therefore, the total dr illing process may take approximately three to four weeks to complete. When Quicksilver first drilled in the Barnett, the average well required 30 days to drill. Today, the average well requires 13 to 24 days (including rig mobilization) to
drill due to an increase in drilling efficiency.

Quicksilver’s average Barnett well pad requires 2.5 to 4.5 acres, holds 2 to 8 wells, and

costs $ 75,000 to $150,000 to construct. Quicksilver drills most of their Barnett wells 6,000 to 7,000 feet deep with 3,000 to 9,000 foot laterals.

Source Water Management

Quicksilver obtains water from the following sources to use in the hydraulic fracturing

processes :

 Non

-

jurisdictional freshwater ponds;

 Groundwater wells;

 Surface water from river authorities; or

 Surface water from p rivate property. 8

Source water is trucked from the water source to the well pad. Quicksilver reported transporting the water from the source to the well pad typically requires a 1 to 3 hour round trip
i n the Barnett and 2 to 4 hour round trip in Colorado

. The trucking companies charge $ 90 to $ 110 per hour on the road and each truck holds approximately 120 barrels. These rates also apply to trucking wastewater. Table 2 provides typical costs Quicksilver ’s pays for source water not including trucking.

Table 2

. Quicksilver’s Source Water Acquisition Costs

Formation Source Acquisition Costs ($/bbl)

Barnett Non

-

jurisdictional freshwater ponds $0.20 to $0. 30

Groundwater wells $0.20 to $0.30

Surface water from river authorities $0.20 to $0.30

Surface water from private property $0.20 to $0.30

Mancos /Niobrara Non

- jurisdictional freshwater ponds $0.20 to $0.30

Groundwater wells $0.20 to $0.30

Surface water from river authorities $0.20 to $0.30

Surface water from private property $0.20 to $0.30

8 Some operators may use municipal wastewater in the Barnett area. Some permits even require the use of municipal

wastewater.Meeting Summary Page 5 of 8

Wastewater Volumes

During hydraulic fracturing, Quicksilver injects 30,000 to 40,000 barrels per 1,000 feet of lateral in the Barnett. Injection volumes in Colorado are not as defined since Quicksilver is still evaluating fracturing techniques in that region. After the hydra ulic fracturing process is complete, a pe rcentage of the injected volume returns the surface as flowback water at high flow

rates . In the Barnett, initial flowback flows at approximately 1,500 to 2,000 barrels per day and decreases to 800 to 1,000 barrels per day after a week

. After the initial flowback, water flow

rate s decrease to less than 100 barrels per day for the remaining life of the well. However, if the
fractures at the well bore entered a w ater

- containing formation above or below the Barnett
form ation, produced water volumes may remain high . Quicksilver typically shuts in a well in this
situation because they are uneconomical.

Table 3 summarizes injected wastewater volumes, flowback recovery percentage, and produced water flow rates for the Barnett, Mancos, and Niobrara formations. However, Quicksilver noted that Mancos an d Niobrara estimates are only based on a few wells.

Table 3

. Typical Hydraulic Fracturing and Wastewater Volumes

Formation Hydraulic

Fracturing Volume (million gallons) Flowback

Recovery Percentage a Produced

Water Flow
Rate (bbl/day) Notes

Barnett (slick water) 3 to 7 b 5 to 1 5 < 100 The recovery over the lifetime
of the well is between 35 and 65 percent.

Mancos (slick water) 1.3 20 to 25 ~100 Quicksilver noted that they
have not fractured with LPG or Gel gas in the Mancos
formation.

Niobrara (slick water) 1.3 30 to 50 25 to 50

Niobrara (LPG) .00 25 0 0 This type of fracturing produces

no wastewater.
Niobrara (Gel) .0025 0 0 This type of fracturing produces

no wastewater.

a

— Recovery percentage is the percent of injected fracturing fluid that returns to the surface.
b

— Calculated based on volumes of 30,000 to 40,000 per 1,000 feet of lateral and 3,000 to 9,000 foot laterals.

Wastewater Management

In the Barnett, Quicksilver currently manages all of their wastewater via Quicksilver

owned underground injection wells

. In the past, Quicksilver attempted to treat their wastewater for reuse in fracturing but the total cost was three to four times higher than the cost for underground injection. As a result, they currently only use underground injection. Quicksilver stated that they do not discharge any wastewater to publicly

- owned treatment works (POTWs)
because the Barnett Shale wastewater is not suitable for treatment at a POTW and POTWs are
not available. Quicksilver is also unaware of any third party waste treatment facilities in the

Barnett area

. In order to reuse wastewater , Quicksilver suggested that they would need to firstMeeting Summary Page 6 of 8

remove total suspended solids (TSS) and metals and then blend with freshwater. In addition, the
ble nding ratio w ould be limited to 30 percent wastewater given the cost effectiveness of friction reducers and the increase in horsepower required for fracturing.

Quicksilver transports wastewater from approximately 60 percent of their wells to their undergro und injection wells via disposal piping and truck wastewater to injection wells from the remaining 30 percent of wells. Trucking the waste water from the gas well to the underground injection well typically requires a five to 15 mile one way trip in the Bar nett. 9 As previously stated, trucking companies typically charge $ 90 to $ 110 per hour on the road and each truck holds approximately 120 barrels. When using disposal piping, Quicksilver is able to reduce trucking miles, risk for trucking accidents, dust, and local traffic. Quicksilver pays approximately $ 90,000 per mile of disposal pipel ine materials and installation

. Disposal pipelines are not shared between companies.

During the flowback process in the Barnett

, Quicksilver collects wastewater in 5 00 barrel fracturing tanks with secondary containment. These tanks are used to initially collect the high volume wastewater exiting the well . If the well is connected to an injection well by disposal piping, the fracturing tanks will feed the wastewater t o the disposal lines. T he disposal lines are in place at the onset of flowback. If disposal lines are not used, then the wastewater is collected in fracturing tanks and trucked to the injection well. Quicksilver stated that they usually rent fracturing tan ks that are used at the site for flowback storage, which typically cost between $35 and $50 per day

.

During production in the Barnett

, Quicksilver will remove the fracturing tanks from the pad. If the well is connected to an injection well by disposal pipi ng, then wastewater will flow directly from the well into the disposal lines. Quicksilver does not use any onsite storage tanks at well pads that are equipped with disposal piping to an injection well. If disposal piping is not used at the well, then Quick silver collects the produced water in 400 barrel above ground storage
tanks , which typically cost $15,000 per tank

. A typical well pad will have one to four above ground storage tanks for produced water management. T rucks periodically empty the tanks and
haul the wastewater to Quicksilver’s underground injection wells

.

In the Mancos and Niobrara formations of Colorado, Quicksilver does not have a consistent wastewater management plan because they are still evaluating frac turing techniques

. The fracturing technique will impact the amount of water that the wells will produce. Quicksilver noted that some formations are difficult to treat with slick water and require gels or clay
stabilizers

. Quicksilver is also evaluating liquid petroleum gas (LPG) fracturing techniques in
Colorado. Quicksilver indicate d that underground injection capacity is limited in Colorado. At
the time of the teleconference

, Quicksilver has managed all wastewater generated by their Colorado wells using third

- party evaporation ponds

. H owever, Quicksilver noted that these evaporation ponds will not provide sufficient disposal capacity for high volume production

.

9 In one of their areas in the Barnett, the average well is five to s ix miles from their nearest underground injection well. In the other area in the Barnett, the average well is ten to 15 miles from their nearest underground injection
well.Meeting Summary Page 7 of 8

Table 4

. Quicksilver’s Wastewater Management Costs

Formation Cost Type Transportation Type Disposal or

Treatment Cost ($/bbl) Notes

Barnett Underground injection Disposal pipeline or
truck ~ $1.50

Reuse after onsite
chemical treatment ~ $4.00 to $5.00 Minimal Activity

Mancos/Niobrara Evaporation pond Truck $5.50 Includes trucking

Underground injection Truck $5.50 Includes trucking

Centralized wastewater
treatment facilities Truck N/A Quicksilver noted that they do not use this type
of management

Reuse after onsite
chemical treatment Truck N/A Quicksilver noted that they do not use this type
of management

N/A

— Not available; Bbl

— Barrel.Meeting Summary Page 8 of 8

Attachment 1

Table A

- 1. List of Meeting Participants

Name Affiliation Phone Email
Todd Hutson Quicksilver 817

- 66 5

- 5434 thutson@qrinc.com

Keith Mouser Quicksilver 817

- 665

- 4199 kmouser@qrinc.com James Segars Quicksilver N/A a N/A a

Carl Bowers Quicksilver 817

- 665

- 4013 cbowers@qrinc.com
Brian D’Amico US EPA 202

- 566

- 1069 Damico.Brian @epamail.epa.gov

Lisa Biddle US EPA 202

- 566

- 0350 Biddle.Lisa@epamail.epa.gov

Erik Helm US EPA 202

- 566

- 1049 Helm.Erik@epa.gov Meghan Camp ERG 703

- 633

- 1684 meghan.camp@erg.com

Brent Ruminski ERG 703

- 633

- 1701 brent.ruminski@erg.com

a

— This employee no longer works for Quicksilver.