## MEMORANDUM

TO: Record

FROM: James K. O’Connell, ERG

DATE: June 9 , 201 6

SUBJECT: US Shale Plays Produced Water Management 2015: Cost Reduction

Strategies Notes (DCN SGE0 1243 )

On October 2 8 through 29 , 2015 , ERG attended the US Shale Plays Water Management Conference in Houston, TX . The conference materials are provided as attachments to this memorandum.

The conference notes are presented in order of the conference agenda. The corresponding presentation Document Control Numbers (DCNs) are in dicated at the beginning of each notes section.
Key:

Blue text indicates text from the conference a genda

. Black text indicates ERG’s notes from the conference.



### DAY 1: LONG

- TERM WATER MANAGEMENT, PRODUCED WATER TREATMENT TECHNOLOGIES AND DOWNSIZED WATER FACILITIES

KEYNOTE CASE STUDY: A 360 DEGREE VIEW ON WATER MANAGEMENT COST OPTIMIZATION
9.10 Examining a Cradle

- To

- Grave Water Management Overview t o Streamline Strategies f or Ensuring Maximum Opera tional Margins

 Presenting an overview of the SandRidge Mississippi Lime produced water infrastructure to inform cost

- effective water handling logistics

 Comparing sourcing and fresh water versus produced water to determine the most cost effective option for a given operation

 Considering an economic overview of produced water recycling to ensure quantifiable cost reduction in the short

- term as well as the long

- term

 Contrasting trucking with permanent infrastructure to ascertain the most financially beneficial option

 Detailing the opportunities and pitfalls of midstream water management to advise prescient upstream operationsCathy Pocock, Director o f Marketing Produced Water, SandRidge Energy

Presentation

– DCN SGE01243.A01

SandR idge:

 Robust salt water capacity system with excess capacity

 Premier operator in Mississippi Lime

 Producing over 1 million barrels of water a day

 Own the largest saltwater (produced water) gathering system in US

 Own and operate their own electric grid

2014 Reuse volume data on s lide 8 (along with Characterization of the reused water) Treatment options presented on slide 9

– best alternative to injection >$2.00/Bbl of produced water
Suggested that salt left over from treatment would flood the salt market if sold as a commodity
Slide 10 compares treatment for various basins

– disposal in MS Lime is still most cost effective Gathering is more effici ent than trucking in b asins where high volumes of wastewater are generated
Sub 75 cents/barrel disposal cost in the Mississippi Lime Basin

HOLISTIC WATER MANAGEMENT STRATEGY: PERMIAN CASE STUDY
9:50 Developing a Full Cycle Short a nd Long Term Water Management Strategy f or t he Delaware Basin Assets: Presenting t he ConocoPhillips Permian Unconventional Water Management Team's Process

 Outlining the criteria for holistic water management solutions developed for the assets and

decision analysis used select water management strategy for implementation

 Highlighting the cost and operational benefit of functional collaboration and integrated solutions

 Detailing the successfully piloted produced water treatment strategies that will maximize produced water reuse opportunities for ConocoPhillips in the Delaware Basin

Dr. Kristie McLin, Water Management Project Lead, ConocoPhillips

Presentation

– DCN SGE01243.A02 If they reused all of their produced water, they could meet their frack schedule and still have water leftover Produced water disposal costs can represent over 25% of lifting costs (also called production costs, the
costs to operate and maintain wells and related equipment and facilities per barrel of oil equivalent of oil and gas produced after the hydrocarbons have been found, acquired, and developed for production ) Developed short

- term strategies to immediately improve c osts without investing in long

- term infrastructure (the presenter did not elaborate with examples) Water treatment goals focused on treating water for reuseReuse of produced water requires storage and gathering systems to be cost effective

Treated high ir on in produced water

– treatment shown in slide 14
Water management is a key piece of the cost effective delivery of oil production

ROI OF WATER RECYCLING

DEMONSTRATING THE EFFECTIVENESS OF WATER RECYCLING TO DELIVER A RISK

AVERSE AND PROFITABLE WATER MAN AGEMENT PROGRAM

FRAC FLUID COMPATIBILITY
11:00 Bacterial Disinfection vs. Compatibility

- Supplier Case Study

 Reviewing how residual oxidation can affect Frac fluids

 Presenting methods to reduce compatibility issues while maintaining disinfection

 Discussing why residual oxidation is important for disinfection

 Reviewing field methods to monitor disinfection, residual oxidation and compatibility.

 Discussing the delicate balance between residual oxidation for disinfection and compatibilit y with Frac fluids
Mark Patton, Vice President of Sales & Marketing, Hydrozonix LLC Presentation not provided Bacterial disinfection is a fundamental part of any water treatment program Oxidizers provide a real

- time method for disinfection by providing im mediate results (fast

- acting) Comparison of oxidizers and non

- oxidizers: oxidizers are better in every way except they create compatibility concerns; non

- oxidizers are not better, but they do not create compatibility concerns
Source waters change from begi nning to end of a frack Titrations are the most accurate in field measurements for residual testing

– may require dilution Test strips are not accurate for produced water

– too much interference
Have to be very careful with residual testing because free ch lorine test methods can be inconsistent Real Time Testing: Residual Disinfection

– Free Chlorine and ATP (tests at Bold Johnson 56

- T1

- 34 #1H) Proppant does not appear to be source of bacteria Prevent bacterial spikes with pretreatment systems

– aeration (H ydrozonix have mobile aeration units)

Residual disinfection

– less is more
Currently operating in Marcellus, Permian, and Eagle Ford

TREATMENT VS. DISPOSAL11.35 Presenting a Cost a nd Risk Assessment o f Water Recycling Versus Water Disposal t o

Demonstrate t he Financial Potential o f a Smart Water Recycling Program

 Aggregating the capital expenditure on well cost, well drilling and price

- per

- barrel of water disposal to establish an accurate comparison with the cost of water recycling

 Investigating future regulatory direction and liability on disposal, induced seismicity and produced water spills to ensure a financially feasible long

- term water recycle

- reuse strategy

 Demonstrating chemical and mechanical water recycling techniques and m ethods to allow conservation of freshwater sources

 Exploring cost

- effective and environmentally friendly uses for recycled water, including irrigation, to enhance public perception of operations

 Analyzing on

- site and mobile water treatment methods to elimi nate water transportation costs
Abhishek Gaurav, Reservoir Engineer, Texas Standard Oil

Presentation

– DCN SGE01243.A03 Industry has moved towards water recycling since 2014

Slide 2 shows total wate r costs in different basins. Table 1 shows costs to obtain freshwater for fracking. 60% cost reduction when water is recycled compared to using only fresh water for drilling shale wells
Average TDS in flowback and produced water in various basins shown on slide 3

New treatment methods use c hlorine d ioxide (sodium hypochloride can also be used as oxidizing agent)

. This is discussed further on slides 5 and 6.

12.15 Discussing Methods f or Matching Energy Companies w ith Water Supplies And Water Services t o Maximize Recycling, Secure Water Supplies, a nd Minimize Water Management Costs

 Cutting water management cost by instantly finding the closest, best and most competitive offers for water sourcing, trucking and disposal to save operators money on trucking and disposal "fare sales" while service companies sell more of their daily capacity for higher profits.

 Ensuring the water supply chain by providing multiple alternatives for water supplies and water services such as hauling and disposal at all times on sh ort notice.

 Reducing environmental and community impacts of energy production by reducing average hauling distances, replacing some disposal well usage with recycling and offering non

freshwater fluid sources.
Josh Adler, Founder & CEO, Sourcewater

Present ation

– DCN SGE01243.A04 Water Management is #1 operating cost for O&G production
Water hauling and disposal have a fixed capacity each day, and it behooves operators to fill that capacity because their operation cost is the same regardless of filling their disposal capacity

Economics = Markets Work“D isposal Wells are like restaurants that don’t take reservations ”

One of the main goals of the Sourcewater market place is to increase the use of non

- freshwater resources

PLAY

- SPECIFIC CASE STUDIES

FEATURING WATER RECYCLING CASE STUDIES FROM THE PERMIAN AND THE EAGLE FORD TO ADDRESS PLAY

- SPECIFIC CONCERNS AND TO INFORM PROFITABLE EXPENDITURE

PERMIAN: COST

- EFFECTIVE WATER RECYCLING CASE STUDY
1.45 Showcasing a Profitable Permian

- Based Water Recycling Program t o Demonstrate t he Financial Benefit o f Water Treatment i n Texas

 Determining how a successful operation disposed of less than 10% of the over 3.5 million bbls of water produced using an effective water treat ment strategy

 Examining water chemistries, blended water mixtures and additives to prevent issues with scaling, corrosion and bacteria

 Evaluating costs to demonstrate the financial benefit of water recycle

- reuse Greg Wilkes, Permian Basin Operations Manage r, Broad Oak Energy

Presentation

– DCN SGE01243.A05 Perception that oilfield activity is drying up West Texas towns Drilled water wells to pull from local aquifers
Built fresh water pit with evaporative cover Have produced water tanks (open tops)

– 2 on the north end, 5 on the south end

Able to reuse over 90% of water ; ability to do so is relative to the quality of water

– no barium, slickwater fracks

 Note: They are still using freshwater. They reuse over 90% of their produced water, but they stil l mix that with freshwater before sending downhole Simple treatment to prepare for reuse

 Treat with chlorine dioxide

– removes oil from water, lowers iron concentrations , and kills bacteria

 Filter water before heading to produced water tanks

 Add chlorine dioxide before sending downhole
Bacteria is a very large concern
Run a scale inhibitor and friction reducer that can handle high chlorides on frack itself (no clay stabilizer needed)

Costs outlined on slides 29

– 31 Saving $200,000 per frack by using mixed water (approximately 1 frack per month)

Attempting to make an effort to minimize the use of fresh water Currently no permits for re use of produced water in Texas

Leak detection system and compliance with Texas Railroad Commission ( TX RRC ) pit standards are only requirement to re use produced water in Texas

PERMIAN WATER TRENDS

- SERVICE PROVIDER'S PERSPECTIVE 2.25 Examining t he Trends i n Water Use, Technology a nd Disposal To Identify Storage a nd Transfer Techniques Used i n t he Permian Basin f or Hydraulic Fracturing

 Discussing water use for hydraulic fracturing and utilization of disposal, storage and transfer techniques to gauge trends that have evolved in the Permian Basin and the drivers for these trends

 Outlining trends in water treatment technology as well as fluid che mistry for hydraulic fracturing

 Reviewing the selection criteria for treatment technologies to clarify economic tradeoff and production impacts ass ociated with these technologies

 Detailing case history exampl es on the total solutions of integrated projects to advise economically viable selection of technology and infrastructure
Walter Dale, Executive Director of Solutions, Bosque Systems

Presentation

– DCN SGE01243.A06

I nfrastructure costs are more limiting th an treatment technology costs
Shift from advanced water treatment (Multi s tep total dissolved solids ( TDS ) removal) to removal of total suspended solids ( TSS ) and microb es along with water mixing to meet operator requirements for fluid spec ification s on challenging ions (B, Ca, Cl) & scale inhibition program.
Water treatment costs are decreasing Waste removal costs are decreasing (discussed on slide 9) Technology is one very small piece of return on investment ( ROI ) While being environmentally conscious, the monetary bottom line will often be the biggest motivator Produced water recycling is no longer limited by technology

– many technologies are now available at low costs Challenge to recycling is getting the buy

- in of the landowner

– some landowners may see recycled produced water as a competitor to fresh water . Because landowners are being paid for their fresh water, they may not want to encourage reuse. Scale inhibitors are important for using mixed water for frackingEAGLEFORD: TREATMENT FOR REUSE

- 'FRACK TO TAP'

3.25 Positing Unrealized Water Recycling Potential t o Treat Produced Water t o a Potable Standard t o Convert Contaminated Water i nto a Monetary Asset

 Gauging future potential for treating produced water to drinking quali ty to demonstrate the financial incentive for the development of water treatment techniques

 Investigating the immediate possibility of 'treat

- to

- discharge' into public water bodies to avoid the risks and liabilities of disposal

 Examining desalination proce sses to replace freshwater use with use of brackish within regulatory and OPEX limits
John Tintera, Regulatory Advisor, Texas Alliance o f Energy Producers

Presentation

– DCN SGE01243.A07

Former Exec Director of TX RRC
Frack to Tap

– provocative concept : treating frac wastewater to be used as municipal drinking water.

Texas will be at the forefront of reuse among other US states because of drought conditions

 Nexus of arid climates and O&G developments

 Reusing half of the currently disposed of produced wate r could reduce Texas water debt by 25%
Texas has largest underground injection control ( UIC ) program in the world

– issued 50,000 permits (30,000 still active) EPA delegated permit granting status to TX RRC with a lot of oversight
More and more, surface la nd owners are claiming ownership of reused produced water Toilet to Tap is beginning to emerge in the U.S. (treating sewage to be used as municipal drinking water)

 E.g., Wichita Falls during drought

 Need was so dramatic in Wichita Falls that they were able to overcome public perception of Toilet to Tap

 Manure to Tap at Michigan State University (treating CAFO wastewater to be used as municipal drinking water)
Regulatory framework needs to foster reuse :

 Waters of the US definition seems to be expanding

 NPDES Permits pose high hurdles in Texas

 98 th Parallel runs through the middle of Texas creating an odd situation for state regulators because beneficial reuse is allowed west of the 98 th

 EPA has focused on injection for disposal as the fate for produced water
Need incentives, not mandates for water treatment

“ Water is where you find it, not where you need it ”

– will either need to transport it or treat it Negative public perception of fracking adds an extra layer of public perception difficulty for frack to tap (people are not just concerned about safety (or ick

- factor), they are also concerned about frack operations)Frack to Tap needs:

1) Decide who owns water 2) Regulatory vs. civil definitions 3) Landowner permission 4) Address local government 5) Work up to state level 6) Wo rk up to federal level Regulator’s priorities
1) Public safety 2) Environmental health 3) Economic prosperity

WATER TREATMENT

SHOWCASING PRODUCED WATER TREATMENT ACROSS FILTRATION, OXIDATION AND USE OF CHLORINE DIOXIDE TO ASCERTAIN THE BEST OPTION FOR A GIVEN OPERATION

PANEL: PRODUCED WATER TREATMENT TECHNOLOGIES

- COMPARATIVE STUDY 4.05 Comparing a Variety o f Water Recycling Technologies t o Guarantee Effective a nd Economical Treatment Options

 Exploring technological advances in bacteria control and water holding facilities to reduce recycling costs while maintaining operational efficacy

 Inspecting friction reducers, subfractants and scale inhibitors to inform an appropriate stimulation fluid design

 Scrutinizing mobile water treatment unit s and passive lagoon systems to ascertain the faults and benefits of each method

 Investigating multi

- purpose recycle systems to allow the treatment of flowback to frac water, deionized or fresh water standard Moderator: Timothy Smith, President, Petro Lucr um Panelist: Jason Boyd, Senior Chemical And Water Engineer, QEP Resources
Panelist: Robert Mitchell, VP Technology
, Bosque Systems Panelist: Mark Patton, VP Sales & Marketing, Hydrozonix
No presentation Most treatment technologies are not new; the applications of the technologies are new

There is n o t an adequate understanding of how produced water quality and composition change over time and location
Need technology that can deliver in a wide variety of oilfield conditionsTreatment vendors have to have better business acumen for their technologies to properly penetrate the

market Scaling and logistics pose treatment challenges Regulatory agencies want to see that treatment technologies are leak

- proof, have a well

- documented waste stream, use proper infrastructure
Operators are not required to report produced water spills, but they are required to clean them up If regulators discover a spill/leak that hasn’t been properly cleaned up, the operator will be held accountable, not the treatment technology vendor

98 th meridian is a distinction which marks a divide in the permit requirements for produced water
, although the panelists believe this current distinction is out of date
Need adequate testing to be able to compare treatment technologies in real time Challenges to reuse:

 Downturn in oil prices makes recycling less profitable

 Variety of oilfields and state regulations

 In Oklahoma, for example, one small spill of produced water could leave an operator broke, so it’s not worth the risk of recycling it

 Ov erregulation picks winners and losers



 The almighty dollar

– reuse can be costly

5

- year technology challenges for O&G wastewater :

 Where will the price of oil be then?

 Water will become a top commodity

 Not one single magic technology

 Will need to use more produced water with less treatment

 No desalinization

– more savvy fracking techniques

 Future is reflection of lack of past communication

 O&G only uses 1% of industrial water use

– Agriculture uses 40%

 Other industries will also be facing water issues which will cause more communication
Efficient desalination could lead to reuse of produced water for other industries

Texas legislature is mapping brackish water as a potential resource
Will likely see frack additives that are more compatible with produced water to encourage recycling Once an operation is complete, the water does not simply go away

– something will have to be done with it
May have to find alternatives to injection wells for disposal if there is continued public outcry over induced earthquakes Technology trend: do what you did last year, but for half the priceFrom regulatory perspective: larger organizations don’t listen as well as small organization s

Lean more on unbundling frack pa ckages and using less water (perhaps waterless fracking)
State driven regulatory incentives in tax packages that are cross

- industry could be the future



### DAY 2: COST OPTIMIZATION, REGULATORY DEVELOPMENTS, WATER SOURCING, STORAGE, TRANSFER AND COLLABORATION

WATER MANAGEMENT COST OPTIMIZATION
DISCUSSING CUTTING EDGE STRATEGIES FOR WATER TREATMENT, STORAGE, REUSE AND DISPOSAL TO GUARANTEE INSTANT COST REDUCTION AND COMPLIANCE WITH REGULATION

KEYNOTE CASE STUDY: REDUCING WATER MANAGEMENT COSTS
8.40 Analyzing Water Recycling Techniques, Repurposing o f Produced Water a nd t he Cost o f Fresh Water Versus Produced Water t o Ensure Cost Reduction i n t he Short a nd Long Term

 Contrasting the expenditure required for water recycling versus first party and third party disposal to determine the most cost

- effective option

 Comparing the cost of fresh water versus produced water to guarantee economically viable frac operations

 Delineating strategies across frac water storage, treatment and reuse to ensure compli ance with regulations Frederick Schoch, Division Production Specialist, BOPCO Presentation not provided

BOPCO:

 450 wells

– located in Delaware, Bone Spring, Morrow, Atoka, and Strawn formations

 90,000 gallons of produced water per day

 200,000 net acres of contiguous land, mostly in Eddy County, New Mexico

 Want to reuse as much water as possible

– find that using it for stimulation yields results as good as fresh water use Industry may be moving towards sharing nearby produced water from other operators to conserve freshwater Water in west Texas is an extremely important commodity

– BOPCO wants people to see that the O&G industry is environmentally responsible Primarily use produced water to frack wells , but trying to do it without having to change frack fl uid
About half of their acreage is dedicated to fracks using produced water
243,000

– 312,000 ppm TDS in their produced water Have to do scaling tests when using produced water in Delaware, for example, from Bone SpringTreatment for produced water

– filtration (50

- 100 microns), chlorine dioxide , and scale inhibitors

The cost of using produced water can be more effective if planned properly (sharing frack tanks for multiple wells, simpler well stages) Developing infrastru cture for a gathering system to connect three major areas Holistic model to control water supply

– even in the event of a leak, can still deliver water to frack jobs SCADA system allows management of whole water system
110 miles of pipe in the ground

– gat hering system

WATER DISPOSAL AND SEISMICITY STUDIES

DELIVERING AN OVERVIEW OF STUDIES ON WATER DISPOSAL AND INDUCED SEISMICITY TO ENSURE ADHERENCE TO CLARIFY CAUSATION AND TO AVOID FINANCIAL PENALTIES

INDUCED SEISMICITY

- KNOWNS AND UNKNOWNS 9.20 Analyzing Historical a nd Contemporary Evidence f or Induced Seismicity t o Ascertain Causality o f Recent Earthquakes Across t he Lower

- 48

 Presenting evidence for induced earthquakes during the 20th century to clarify causation

 Describing the scientific consensus about induced earthquakes associated with wastewater injection versus production and hydraulic fracturing to inform safe operations

 Comparing the hazard from induced earthquakes with the hazard from tectonic (natural) earthquakes

 Analy zing induced earthquakes to quantify their hazard level

 Discussing evidence for the potential for larger induced earthquakes than have occurred previously

Dr. Susan Hough, Seismologist, US Geological Survey

Presentation

– DCN SGE01243.A08 Earthquakes in th e midcontinent cluster over time Induced earthquakes have been a threat to public safety for over 100 years Fracking itself is not the cause of induced seismicity ; evidence that deep injection is th e cause of induced earthquake

 High

- rate injection wells se em more dangerous than simply high

- volume
Induced earthquakes, even more so than natural one s , are unlikely to be large Details of how an earthquake breaks can determine how much shaking there is and how much damage it will cause Shaking from induced earthquakes are a notch lower than from natural onesInduced earthquakes are shallow compared to natural ones, so it’s worse to be right on top of them

In general, people are afraid of the wrong things

– earthquakes in the US are not a big hazard

PRODUCED WATER TREATMENT

- COST REDUCTION

11.10 Managing Chemistry a nd Biology i n Produced Water t o Lower Total Reuse Costs

 Reviewing the chemical and biological composition of produced water to ascertain how these components affect water quality

 Outlining monitoring programs to identify causes of probl em issues, verify treatment effectiveness and maintain water quality

 Discussing how levels of hydrocarbons, residual chemicals and degradable organics influence biological load, metabolic content and water quality dynamics

 Detailing water treatment process es for produced water including stages of treatment, components and product use, guidelines for operational parameters and quality targets
Dr. Scott Bailey, Senior Scientist, Flex

- Chem

Presentation

– DCN SGE01243.A10 Reuse quality targets drive treatment

– formation requirements, chemical and biological stability, and fluid systems compatibility

Water constituents and associated issues are discussed on slide 3 General water treatment process (for reuse) described on s lide 4 overview

 Treatment train: TSS

-- > Oil & Grease

-- > COD/BOD

-- > Bacteria

-- > TDS Slides walk through general treatment process, describing individual processes (primary separation, secondary separation, oxidation processes, organics & COD/BOD utilization, disinfection, filtration, and advanced treatment)

WATER SOURCING, TRANSPORTATION AND REFRACKING

PRESENTING NEW TECHNOLOGIES IN WATER MANAGEMENT AND REFRACKING TO MAXIMIZE OPERATIONAL EFFICIENCY AND TO ENSURE REGULATORY COMPLIANCE

WATER INFRASTRUCTURE COST

- REDUCTION

- BRINGING THE NEXT WAVE TO WATER MANAGEMENT 12.40 Analyzing Water Transportation Systems, Strategies a nd Regulations t o Minimize Expenditure a nd Operational Liability

 Assessing water transportation and centra l logistics strategies to minimize water transport
costs

 Comparing the pros and cons of trucking, pipeline and closed loop systems to ensure an accurate economic analysis of water transportation options Reviewing water use permits and regulations in Texas, New Mexico and Oklahoma to clarify issues surrounding water salinity, water spills and crossing state lines

 Considering terrain

- appropriate pipe, pump and booster technologies to effectively cope with geographical elevation changes

 Contrasting temporary t ransfer pipelines, lay flat lines, high density polyethylene pipe and leak detection and prevention technology to create fail safe measures against water spills

 Examining the utilization of permanent hardline systems to economically convey water between fr ac lines and centralized facilities while reducing liability
Michael Dunkel, Member, Texas Independent Producers a nd Royalty Owners' Association

Presentation

– DCN SGE01243.A11

Dunkel is a new VP at CH2M Infrastructure could be a way to reduce costs long

- term Disposal limitations and risk s vary by basin
Infrastructure is needed for both source water and disposal water Energy Water Initiative’s February Report

– possibly available on Anadarko’s website

Desalination is considered lower risk for water tr eatment Small companies have often led innovation in drilling, and that seems to also be the case with treatment
Pipeline infrastructure is fairly complicated which is why it may not be widely popular despite seeming to pay back very quickly

More infrastructure will provide better opportunities for water treatment companies

PANEL: LONG

- TERM WATER SOURCING PLAN: AQUIFER THICKNESS MAPPING
1.20 Proffering a n Analysis o f Historical Aquifer Thickness a nd Provincial Water Use Projecti ons t o Inform Sustainable a nd Fiscally Prescient Water Sourcing Strategies

 Presenting a long

- term aquifer thickness study to recommend sustainable and fiscally prescient operational planning

 Inspecting the US Geological Survey's water use intensity map to advise on responsible employment of resources

 Assessing long

- term population growth and consequent water use projections to apprise of necessary water guardianship

 Making a case for non

- potable and saline water sourcing and water treatment to ensure water conservation and adherence to future regulation

 Interpreting recent EPA legislation to delineate water sourcing options and restrictions

 Considering Oklahoma's annual water

- withdrawal limits based on aquifer characterization to inform Texas

- based procedure s
Moderator: Dr. Alan Chamberlain, President & CEO, Cedar StratPanelist: Michael Dunkel, Member, Texas Independent Producers a nd Royalty Owners' Association

Panelist: John Tintera, Regulatory Advisor, Texas Alliance o f Energy Producers

Panelist: Josh Adler, Founder & CEO, Sourcewater
No presentation Blanket regulations may not actually be suitable for all operators O&G industry has rig exemption

– operators can drill water supply wells without a permit
Water supply and waste disposal are two chokes on the O&G industry; they are the biggest limiting factors for operators Rig exemption will likely be challenged, but will probably survive It appears that operators are turning to brackish aquifers for source water
Environmental groups will be suing the EPA to reverse the RCRA exemption (O&G waste is considered

non

- hazardous)
Regulators will likely start requiring operators to report produced water spills in Texas Brackish water is easier to use for fracking than reused produced water

REFR ACKING: POTENTIAL OPPORTUNITIES AND PITFALLS 2.30 Investigating t he Potential Economic, Operational a nd Regulatory Opportunities a nd Pitfalls

o f Refracturing Operations t o Deliver a Financially Rewarding Re

- Frac Blueprint

 Detailing the technical and economic differences between frac and re

- frac to deliver a profitable re

- frac strategy

 Reviewing cases of successfully re

- fractured wells to provide a viable blueprint for engaging in re

- frac operations

 Discussing potential discrepancies between frac and r e

- frac regulations to mitigate operational risks

 Describing the minimal footprint left by re

- fracturing operations to demonstrate the method's potential public relations boon John Tintera, Regulatory Advisor, Texas Alliance o f Energy Producers

Presentation

– DCN SGE01243.A12 TX RRC just issued Texas A&M a permit to use treated produced water for the irrigation of cotton crops under 40 CFR 435 Subpart E Refracturing will likely become widespread within 18 months (more information on slides 4 and 5)

Halliburt on estimates that there are 50,000 wells that could be refracked

– Tintera believes there could be

more Refracking unconventional shale reservoirs can continue the Texas shale revolutionRegulators often have to play catch up to treatment capabilities

Incentives are better than mandates