Pennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 1



## Marcellus Shale Technology Joseph H. Frantz, Jr. Vice President - Engineering Range Resources-Appalachia, LLC

RANGE RESOURCESPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 2 

# Range Resources  Natural gas production company  Included in S&P 500 

##  Committed to Pennsylvania  Regional Headquarters in Washington County 

##  Pioneered Marcellus Shale, 2004  More than $3 billion invested 

## in Pennsylvania  Employs about 350 Pennsylvanians, thousands of 

## indirect jobsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 3 

# Range Resources Strategy Proven track record of performance following these principles

Nora Area Berea, Big Lime, Huron Shale, CBM Marcellus Shale 20 to 31 Tcfe resource potential Upper Devonian Shale 10 to 14 Tcfe resource potential

Utica Shale

West Texas / New Mexico Wolfcamp, Penn Shale, Avalon/Bone Springs Midcontinent Ardmore Woodford, Cana Woodford, Granite Wash, St. Louis, Mississippian • Grow production and reserves at top -quartile or better cost structure
• Focus on PER SHARE GROWTH
• Maintain simple, strong financial positionPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 4 

# Marcellus Shale

 Marcellus Shale covers approximately 28 million acres  The Appalachian Basin services the best natural gas market in the world  Range has operated in Pennsylvania for nearly 30 years  There are other shales of great interest above and below the Marcellus that could combine to be as prolific as the MarcellusPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 5 

# Marcellus Drilling Permits

LEGEND NEW PERMITTED WELLSPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 6

Field Name 1 South Pars/North Dome Iran and Qatar 1,235 MARCELLUS UNITED STATES OF AMERICA 489 (2) 2 Urengoy Russia 222 3 Yamburg Russia 138 4 Hassi R’Mel Algeria 123 5 Shtokman Russia 110 6 South Iolotan - Osman Turkmenistan 98 7 Zapolyarnoye Russia 95 8 Hugoton Unites States of America 81 9 Groningen Netherlands 73 10 Bovanenko Russia 70 Country Recoverable Reserves, Tcf

(1) Rafael Sandres, Global Natural Gas Reserves – A Heuristic Viewpoint, March 2006 (2) Dr. Terry Engelder, Penn State University – from August 2009 issue of Fort Worth Basin Oil & Gas Magazine 

## The World’s 10 Largest Natural Gas Fields (1)Pennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 7 

# Natural Gas is a Game Changer for the USA
 ―Merry Christmas America,‖

– Dr. Terry Engelder in TIME Magazine  ―Recent innovations have given us the opportunity to tap large reserves— perhaps a century's worth— in the shale under our feet. The potential here is enormous,‖

– President Barack Obama  ―At a time of increased energy anxiety, the shale gas revolution is both a major innovation and a formidable new addition to our energy supply,‖

– Daniel Yergen in the Wall Street JournalPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 8 

# Key to Clean Energy Future Electricity Demand  The U.S. demand for electricity will increase by an average rate of 1.8% per year through 2025.  Which will call for 340 gigawatts of new electric generation  Of the 448 new power plants built by 2014, more than 40% will be fueled by natural gas  By 2025, 57% of new electric generation will be fueled by natural gas.  Key to America’s Energy PortfolioPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 9 

# Expanded Uses for Natural Gas

• Advantages 

### o 50% less CO 2 

### than coal; 30% less than oil o 80% less nitrogen oxides than coal or oil o Almost no sulfur or particulates 

### o One third the cost of crude oil or gasoline o Reduced dependence on oil imports Gas -fired electric generation Compressed natural gas for vehicle fuelPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 10 

# Water Consumptive

Source: USGS, Pennsylvania Water Consumption  Water use in Marcellus Shale drilling "may not be as big an issue as we originally thought it was," the DEP analyses are determining that the average daily consumption in the shale industry is "no greater than one of our power plants.―

- Dana Aunkst, DEP's acting deputy secretary for field operationsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 11 

# Water Consumption Per MMBTU Energy Resource Range of Water Used per MMBTU of Energy Produced (Gallons) Deep Shale Gas 0.60 – 2.0 Nuclear 8 - 14 Conventional Oil 8-20 Synfuel -coal gasification 11 -26 Coal 13-32 Oil Shale 22 -56 Tar sands/oil sands 27-68 Fuel ethanol from corn 2,510-29,100 Biodiesel from Soy 14,000-75,000 Source: Ground Water Protection Council and the U.S. Department of EnergyPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 12 

# Regulatory Environment

 Been there, done that – often forgotten that Pennsylvania revamped regulatory program in 2008  Consistency – still work to be done, but huge leaps in permitting process  Staffing Up – new permit fee structure allows for sustainable regulatory staffing

increases  Opportunity – Pennsylvania recently recognized as exceptional regulatory

program for hydraulic fracturingPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 13 

###  States have regulated oil and gas drilling for 150 years  PADEP’s Bureau of Oil and Gas Management enforces a comprehensive set of state and federal laws and regulations



###  Additional regulation of certain activities by Susquehanna and Delaware River Basin Commissions, and U.S. Army Corps of Engineers  DEP’s BOGM staff has more than doubled over the past two years 

### to address Marcellus activity, funded by drilling permit fees. Pennsylvania Statutes: • Oil and Gas Act • Coal and Gas Resource Coordination Act • Oil and Gas Conservation Law • Clean Streams Law • Solid Waste Management Act Federal Statutes: • Clean Water Act • Safe Drinking Water Act • Clean Air Act • Resource Conservation and Recovery Act 

# RegulationsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 14 

## Drilling Is Performed in Rural and Wooded AreasPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 15 

### Drilling Pads  Engineered site design  ESCGP - 1 Permits required  E&S controls 

###  3-4 acre drilling pad 

## Protecting Water through Engineered LocationsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 16 John Perez Graphics 

# Horizontal Drilling TechnologyPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 17 

#  Small bend in drilling motor assembly, roughly 1 -2 ° , drills the curve over the course of 900’, at a rate of 10 ° per 100’ to achieve a 90 ° turn horizontally.  It’s not abrupt, rather a gradual sweeping motion. 

# How Do You “Drill Horizontal?”Pennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 18 

# Horizontal Drilling

Total surface disturbance during drilling, including access road, drilling pad and required pipeline infrastructure: • Horizontal (yellow) develop 1,000 acres per pad with 1% surface disturbance • Vertical (purple) on 1,000-foot spacing develop 23 acres per well with 19% total surface disturbancePennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 19 

# Ground Water is Protected

 Range and other producers, through the Marcellus Shale Coalition, have advocated for modernized well casing regulations and standards in Pennsylvania  Unique and varying geologic conditions  Three million pounds of steel and concrete to isolate wellbore  Hydraulic fracturing has not impacted ground waterPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 20 

# Multiple Steel Casing Strings and Multiple 

# Cement Layers Protect Ground WaterPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 21 

# Hydraulic fracture stimulation or “fracing” injects water and sand 

# at high pressure, fracturing the rock and safely releasing the gas 

# CompletionPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 22 

# Hydraulic FracturingPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 23 

# Fresh Water Aquifers are Protected

Actual measured hydraulic fracture growth from micro-seismic surveys

Surface casing depth (below deepest fresh water) Fracture top Fracture bottom

Source: American Oil & Gas Reporter, July, 2010, “Data Confirm Safety of Well Fracturing”, Kevin FisherPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 24 

# Green Completion Objectives
• Continue treatment design advancement with service provider partnerships and focus on 

## reusing flowback and long -term produced water • Develop fluid systems in line with 12 principles of Green Chemistry • We continue to share best practices with: • Industry • State agencies 

## • Trade groups • Keep additive volume low • < .1% of job volume 

## • Transparent operationsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 25 

# Hydraulic Fracturing Fluid by Volume

Water 94.05% Chemical Additives 0.10% Antimicrobial .03% HCL Acid .01% Scale Inhibitor .01%

Friction Reducer .05% • Based on latest Marcellus completions listed on www.MyRangeResources.com • Some Marcellus completions use only 3 additives; HCL Acid eliminated when possiblePennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 26 

# Frac Fluid Additive Disclosure Range became the first company to voluntarily disclose all hydraulic 

## fracturing additives on a well to well basis.Pennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 27 

### Water Storage Facilities - Storing Water Pre & Post Frac Operations

– 

### Tanks and Impoundments

– 

### Engineering and planning

– 

### Dam Permits through PA DEP Oil & Gas 

## Site Development and ConstructionPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 28 

###  23 impoundments constructed 

###  8 constructed to handle produced water  5.7 million bbls of total water capacity  Water sources vary

– 

### Surface waters (creeks, streams, rivers, etc.)

– 

### Municipal water supplies

– 

### Produced waters from area wells 

##  Water maintained by basic filtration and aeration  Impoundments reduce the number of storage tanks on location for fracing and significantly reduce truck traffic 

# Impoundment ImpoundmentsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 29 

# Water ImpoundmentPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 30 

# Impoundment
• Centralized locations • Bird - netting • Aeration system • Manifolds • Remote Level Monitoring System • Security/Privacy Perimeter Fencing • Double liner system • Under-drain catch basinPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 31 

## Water Transfer Lines
• Saves thousands of trucks on highways • Can pump water several miles from 

### impoundment to well during fracturing operation • Aluminum irrigation pipe for fresh water • HD Polyethylene or PVC for pumping recycled water • More permanent, buried lines 

### eventuallyPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 32 

# Collaborations with Academic Institutions
 University of Pittsburgh

– 

### Advanced Treatment Technologies for Flowback and Produced Water

– 

### Alternative Water Source Evaluation (AMD) and Treatment Technologies 

##  Carnegie Mellon University

– 

### Advanced Treatment Technologies for Flowback and Produced Water

– 

### Biological Characterization and Treatment 

##  Texas A&M

– 

### Flowback/Produced Water Data SharingPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 33 

# Radiation Associated with Marcellus Shale
• Marcellus Shale and flowback water contain very low levels of naturally occurring radioactive material 

## (NORM) • Nothing new to Pennsylvania – low level NORM is common in oil and gas wastewaters worldwide 

## • Industry has performed significant testing and provided data to DEP • DEP’s Bureau of Radiation Protection has been evaluating Marcellus wastes (drill cuttings and fluids) for the past three years and found no public health concerns 

## • Industry fully supports additional testingPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 34 

# What About the Roads?
 Nearby roads may be damaged  Drillers are liable to repair all 

### damages  Roads cleaned  Industry spends millions 

### repairing roads  Better than before  Tax-free road improvementsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 35 

# Air Quality DEP Issues Report on Short-Term Air Quality Impacts from Marcellus Shale Operations in Southwest PA – 11/1/2010 • five -week air quality study conducted near Marcellus Shale natural gas operations in southwestern Pennsylvania’s Greene and Washington counties • “the data shows no emission levels that would constitute a concern to the health of residents living near these operations ," DEP Secretary John Hanger said. 

### Other studies: • Texas Commission on Environmental Quality has studied air quality impacts extensively in the Barnett Shale field where over 12,000 

### shale wells have been drilled over the past 10 years. • Spot and continuous air testing has indicated no air pollution of concern • Blood and urine tests of Dish, TX residents found no elevated levels of air- borne toxinsPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 36 

# Production FacilitiesPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 37 

# Multi - Well Pad Production Facilities
• Site is reclaimed to a small fraction of its original size • Production equipment will remain for life of the well • Produced water will be removed and safely reused or 

### disposed, similar to field operations across USAPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 38 

# Reclamation
•Work hard to 

## restore property to a condition the same as or 

## better than before the process began • Often difficult to find afterPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 39 

# ReclamationPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 40 

# Renz #1H - First Modern Marcellus Shale Well

Washington County, Pennsylvania First Modern Marcellus Well – Reclaimed LocationPennsylvania’s Natural Gas: Maximizing the Opportunity, May 3, 2011 l 41 

# Thank you!

First Marcellus Shale Well Renz #1