1

5 th Annual Shale Play Water Management 2014

– Southern States (DCN SGE01046 )
Recycling Cost Reduction

– Panel Discussion
Competing interests (drillers, complet ion , operators)

– how to get them together to do what’s best for the company.
Kerry Harpole, Marathon Oil, Eagle Ford Challenges: the amount of water that comes back. Collecting the many sources of water to recover is a challenge. Management of ponds

– certain materials added to ponds will make it a waste eventhough the water has been treated.

Don Pence, EXCO Resources: Eagle Ford, Marcellus, Hazel. Eagle Ford is most challenging. Drilling 8

- 15 wells. Complete wells behind the drilling rigs. 8

- 15 wells flowing back for 15

- 20 days

– need to find a place to store. How to move all this water 7 miles t o where they need it within 5 weeks. And then may not need any more water for quite awhile. Satisfying the needs of the drillers and also the completions.
Douglas Park, Cimarex Energy, Challenges: Tremendous growth of the company and how to keep their

arms around that. Not all companies have proper water departments and assigned assets

– mixed bag. Often production staff are reassigned to be “water” people. Water has been a high priority. Recently looking at price of oil and impact on long term planning. An ticipate a huge shortfall in water in the near future. Need to figure out how to recycle to the extent needed. Need to convince management on what to do, level of funding, etc. Permian has biggest challenge for water sourcing. Important to find the level

o f treatment needed for reuse and to stop there. Each formation has different water quality needs. Also frac design is important. Problem when changing both frac design and water at the same time.

Daniel Smith, Apache Corp: challenges are cost and logistic s. Logistical challenges going into operational field. What sources are available? Can you drill for fresh water? How much water will be produced? How to store the water? Recycle/reuse will be most important where water is scarce.

Dennis, Water Solutions: How clean is clean? Are there definitive criteria on quality needed for reuse? If yes, what?
Kerry: crosslink, gel based. Sensitive to boron. Not a salt issue. Frac companies drive quality. What do they want versus what do they have to have? Not the same t hing. Marathon is doing pilot. Hard to know/predict what will be a problem. Use water up to 25

- 30k TDS and also boron levels. Magnesium thresholds as well. Chemicals can fix to certain extent, but cost.
Don, Boron, magnesium, calcium

– preventing crosslink ing. Making slickwater work fine. In Marcellus, can reuse almost anything. Depends on what the completion folks want to see. Cost balance to recycle the water versus completion folks need. Real challenge to recycle all water versus recycling a slip
stream.
Doug: what kind of fracking? Are you crosslinking? When slickwater, works great. Need to get the “crud” out and also kill the bugs so that the water that is return is usable (TSS, microbes).2

Daniel: Clean is clean enough when minimize cost, performs as de signed, and good production. Don’t know the answer yet. Completion engineers are always changing stuff. No two frack jobs are the same, no two wells are the same. Many things at play and no true comparison. Would love to have a huge database of all the var iables and impacts on water

– what hurts, what has no impact, what helps. Calcium is bad actor when trying to hydrate gels. Worst case is everything is good to go, but the available water can’t be used. Prevent by doing tests on the water. Also understand the “rock” and design the completion and determine the needed corresponding water. Boron is an issue with the Bakken. Texas panhandle is all slick water

– pretty simple, just get the bacteria out and TSS. Presentation later will present some guidelines.

Bo b, Hydroflow Technologies: manufacture treatment equipment. Don’t know the quality needed for what trying to do from day to day and from place to place. How to have a system designed and built that can handle all these issues and not cost a fortune?

Danie l: by the time build treatment, the project is over. The trmt equipment needs to be mobile. Large infrastructure intensive, long term solutions will be rare. Oil prices and activities fluctuate. Geology dictates where they are going to move. Won’t see too much variation in the treatment goal

– often more of an issue is the variation in the water being generated.
Terry: will never find the silver bullet. In a play, can generally say what quality is needed. Perhaps tweeking from company to company and locatio n to location. Modular systems are important. Yield of treatment is also important

– can’t get a tablespoon of treated water and a barrel of waste. Can’t have 8 guys out there operating a system. Need controls to automate, but a challenge as great variabil ity in the
water.
WW pipeline company. Love to build pipeline, but disposal challenges. Also trouble getting right of way. Don: some inplace lines. Landowners are fine with bringing in water, but can’t cross the fenceline.

Permian play with stacked play. A nticipate drilling 30

- 50 years, so can have a longer term solution. Do put in some infrastructure for pipeline, etc. Right of way is a challenge. Want to spend money on drilling where immediately get money back, versus spending money on infrastructure whic h is a cost with no
return.3

1. W ater Program Execution
Stephen Lindsey, Quicksilver Resources: Expectation Management for Water Use in Oil and Gas
Regional, US, and global issue.

No doubt that the technical solutions will be found. How fast will the industry be pushed to implement the solution? Concerns that municipalities will raise water prices to prohibit fresh water use. References to Denton.
Texas has 3 stage agencies with jurisdiction over water issues:

- Texas Water Developmen t Board (TWDB)

- Texas Commission on Environmental Quality (TCEQ)

- Texas Parks and Wildlife

Need to make contacts with these folks.
Drought and concerns about water use. In terms of % water use, industry is small (e.g., compared to irrigation and municipal) , but perceived as wasteful as not returned to the environment but disposed.
Need to understand how the regulators and policy makers understand the industry’s water management.
Example of master long

- term planning for a large production complex. 250 wells on 45 pads. Centralized compression station, pipelines, etc. Virtually eliminated trucks. Saved a lot of money taking this approach.
See slide on Water Lifecycle.
Stakeholder process is key. Expect new mandates for water management. Understand and be activ e working with the stakeholders.
Reg Considerations: one size does not fit all. Carve outs for regions. Primacy between City, County, and State. Balancing water mgmt without hurting job creation, tax revenue, econ input from industry, econ stabilization fu nd. Water by law is an owned property rights asset. Massive migration of new residents to TX.
Technology is getting there. Laws have yet to begin mandating. Demand for more restrictive uses will pressure law makers/regulators to act. State and local laws w ill lead the way in mandating water conservation and re

- use measures. Feds to follow. Also, service companies and consultants lobbying to support laws mandating increased recycling.4

Texas is part time legislature that meets in odd years for three months. T his cycle, focus to strip out local control from municipalities. Draft legislation is out there. Unintended consequence would be limits cutting back on other areas of local control from municipalities. This is taking the heat off on water.

Brackish water u se in Permian . Anything to minimize water footprint. Use whatever you can. Effluent from municipality is used at one Quicksilver site. Permian and Eagle Ford have initiatives in how to move and store water.5

2. M inimum Treatment Levels Required

Daniel Smi th, Completions Engineer, Apache Corp
Wheeler County, TX example
Rarely works for one

- off. Need economies of scale. The larger the project, the better the economics.
Transportation logistics can make or break a play. If need to put on a truck, won’t work.
Completions: Active frac program with 85k to 185k Bbls/well
Availability 15k Bbls/day
Pipelines from wells to central tank batteries and then to the central treatment system.
Processing capacity: 240,000 bbls

Trmt: 250

- 400 gpm

Basic Frac Water Criterion: W ater must be compatible with completion fluid design. Water must not be damaging to well production (IP & EUR).
See slide with Wheeler Co Produced Water Chemistry versus rough guideline for upper limit. Averages presented, but highly variable. Simple treat ment design: iron and iron sulfide, suspended solids, bacteria, mitigate scale potential.
Slickwater and no crossing fracs, so boron is not an issue. Barium can be a scaling concern, but not at higher enough concentration to concern, and other ways to mana ge.
Batch Treatment in Processing (Weir) Tanks:

Treat 20

- 30k bbls at a time in a tank. Various treatment options utilized. Waste generation skimmed off, or settled to bottom. Relatively low cost at $0.15

- $0.40/bbl. Operationally challenging with mixed

resu lts.
Utilizing automation to generate ClO2 for produced water treatment:

- 5 nines reduction bacteria (really full bacteria kill), 88% oil and grease (ClO2 breaks up), 70% iron, 55% TSS. Started with manned unit, but too expensive. Now the system is automat ed. ClO2 has a coag effect in the presence of iron. Scum in the weir tank is crude, compressor oil, iron solids. Frothy muck

– at the moment sending to disposal.
Look at reducing ClO2 demand. Added centrifuge as pretreatment, but not good results. Removed the same solids that were previously removed in weir tank. Would not remove particles <6 microns. Begs question: are particles <6 microns impacting the frac? Don’t know. If silica dust, then likely not. If clay, then possibly yet.6

Tried adding chemical pr ecipitation and clarification, again to reduce ClO2 load. Sometimes too much hydrocarbon to clarifier, which made a mess, which was a challenge. Very good results, but takes skill. 5 nines bacteria, 99% O&G/Iron, 92% TSS. Somewhat steep learning curve to o perate, but eventually got good at it. Effluent looks very clear. Is the additional expense providing any value?

Costs:
Weir: $0.2

- 1/bbl
Centrifuge: $0.25

- 1.25/bbl
Clarifier: $0.75

- 1.75/bbl

C h lorides, barium and sulfates, boron not removed by any alternative.

What treatment is needed?

- Production comparisons are difficult due to large number of variables. More data is needed.
Slickwater vs gels: After clarifier has stable gel. After ClO2 has stable FR. Raw water is unusable.

Tested crosslinked visc osities. Clarifier water is similar to tap water.
ClO2+clarification (weir tanks) adequate water quality for slickwater/linear jobs.
Friction reduction and gel hydration increased with water quality.
Borate XL jobs require further water treatment.

Treated water compatible with low PH and cellulose type XL.
Bacteria growth in storage tanks is challenging in warm months. Can kill bacteria, but returns within 2 weeks. Solution: treat bacteria for the frac, with an on the fly system providing an economic high l og kill. Using UV and also adding some biocide. Need high enough flow to make the capital cost of the equipment effective.
Tried to prepare a mobile treatment option, but cost was prohibitive for centralized treatment of multiple smaller dispersed fracs. C ost was 3

- 5 times the cost of fresh water.
Lost cost acquisition and disposal of water makes the cost of treatment prohibitive.

Questions:
Challenges of unmanning the process. Always had Pioneer staff onsite, but no operators from the service company. Only a problem when something went wrong. System was then down until service provider could come.7

Why not look at filtration? Particle distribution demonstrated small particles which are harder to remove. 10 micron filter did nothing. Small cartridge filters p lugged immediately. Didn’t want to spend the time looking further.8

Panel Discussion: Filtration vs. Oxidizing Chemicals
Laura Capper, HALL Petroleum
Slide of water/oil ration (bbl/bbl). US is in 3 rd place behind Oman and Bahrain. All others less water.
Just a few years ago, chloride threshold was 20K ppm, but now 200k ppm. Allows more opportunities for

reuse.
Majority of the flowback coming from the newer, “hotter” plays, but still quite a bit of water from other operations.
On the other hand, regarding produced water, much more water is coming from conventional sources (except Permian).
Eagle Ford

– relatively small amounts flow back, and not economical to reuse.
Slide on Water Treatment is interesting. Shows projected growth and change.
Jason Boyd, QEP Resources
Believes both filtration and oxidizing are important and useful. Don’t know exactly how much solids removals is needed, but think some is needed to avoid clogging.
Oxidation is viable, but uncertainly in constituents going into and out of solutio n, versus filtration where solids are removed.
Bob Mitchell, Bosque Systems
If oxidizing, will want to follow up with filtration to remove from the water and keep it from later coming out of solution.
Mark Patton, Hydrozonix

Filtration and oxidation are complementary. Need to know what is good enough for TSS removal.
Laura’s data sources? In 2008 folks were panicing about what to do with water, especially in Marcellus. Developed a database of anecdotal information from operators. Now more difficult to as semble the information as more difficult to obtain.
TSS removal: Need to consider cost and availability of fresh water versus treatment. Everything comes down to economics but sometimes on availability of water.
What are lowest cost methods? For easy appli cation like slickwater, the minimum issues are TSS, disinfection, scale inhibition. On occasion, bag filters may be enough, but if need to remove iron, then need more complex solution. QEP: don’t know lowest cost method

– need to consider a variety of solu tions to select the best.9

What would make operators recycle more? Greater taxes? Greater regulation will put small play operation out of business. Desire to reuse, but many limiting factors other than cost, so that’s not the solution. Great potential for wrong regulation. Need a more collaborative effort.
Reducing liability would help increase recycling. Liability of above ground storage is an issue (didn’t catch where) that is hindering recycling.

Call to incentivize reuse rather than to force.
Oxidizing chemicals: ClO2 and ozone. Any issues on corrosion? Corrosivity of ClO2 depends on the generation method. Some methods generate free chlorine. Jason Boyd

– issues in the past with over treating with ClO2, which destabilized the frac. Two important issues: corrosivity and compatibility. When too focused on oxidation and bacteria kill, overtreat which creates a residual that can affect compatibility.
Measurement on the fly for dosing? Mark Patton exploring boron methods. ATP realtime bacteria test. Concern a bout inaccuracies in testing of produced water. If testing using an inaccurate method, and lead to inadequate or over treatment.
Hybid fracs and gel fracs: if use minimally treated water, how much dilution with fresh is needed? Dilution is the solution for many constituents.10

Spoke with the Chair, Michael Dunkel, Pionee r Natural Resources during the break.
Anticipates a huge increase in recycling over the next few years. Believes that industry is currently disposing about as much wastewater as they can. Di sposal can’t sustain continued growth in the industry, which will push toward reuse.
Also anticipate large increases in the coming years for E&P putting in centralized treatment for their wells. Possible they will look to a 3 rd party to provide this treatm ent. Also possible that they will accept other firms’ wastewater for treatment.
I asked who I should talk to to learn who the CTWs are that are accepting O&G wastewater. He said there really aren’t any, especially in TX where disposal wells. Mentioned Foun tain Quail in Dallas area (Eagle Ford), but believes they are no longer in operation. Also mentioned NOV (National Oilwell Varko).
He anticipates a day in the future when the volume of water generated will exceed the volume of water than can be recycled. W hen that happens, he anticipates a need for CWTs to take, treat, and discharge the wastewater, and therefore he thinks that option needs to be available.11

3.T reatment Technologies: Case Study
Robert Mitchell, Bosque Systems
Need a company with a toolbox o f technologies.
Things have changed

– paradigm shift

– in water quality needed for fracking. Better technologies allow higher salinity waters. What do you want versus what can you use.
Sulfates are a problem for several reasons. First as food for microbes in the well. Second can bind with boron and calcium to make essentially concrete.
Slides of gel frac versus slickwater frac.
Have seen two different companies working in the same region with one using fresh and one using produced. Why? Slickwater frac f ormations require less stringent treatment. Why ever using fresh water for slickwater fracking?

Pressure Pumping Company

– the largest cost on a frac job. 7 years ago no one using 200,000 TDS frac practices. Now, all the big companies can do it. Need to ch allenge them to get it to work.
TSS can greatly improve TDS. For example, if oxidize iron, will move from dissolved to particulate for removal.

Particle size distribution. Just because TSS in the water doesn’t mean it can be easily removed. Need to know the distribution to target treatment. Can’t just throw a technology at the water without understanding this.
How much TSS are you willing to put down your well? Data from 6 companies range from 50 ppm to 600 ppm. Putting a lot of solids down a well can’t be good. TSS has two parts: removing the TSS and disposing the TSS.
Treatment for: salinity, iron, calcium (scaling as sulfate scale), barium (scaling as sulfate scales), sul fates, H2S, biological organisms.
Ultimately the problem is not the water treatment but moving it around (logistics).
Bosque Systems helps recycle 1 million barrels of water a day and growing.

Discussion:
Recent Rice study on toxicity of produced water. Concern about halo organics. All ClO2 generation systems are not the same, and some in fact have toxic constituents.
Yes, cost driven but a very competitive market. Recommend that pit the companies against each other. But sometimes you get what you pay for . Will do treatment studies for free.12

4.C hloride Removal
Laura Capper, HALL Petroleum
(Note: this presentation was useful, but not really about chloride removal)
Try to track trends in the market.
Interesting chart of TDS across the US. Chart is old beca use doesn’t show Marcellus, but still useful.
Data taken from truck after truck show that TDS levels are increasing over time. When add extreme reuse, will see this increase. In Marcellus, they’ve seen 20 to 40k increases in TDS

. Was supposed to talk about desalination, but not many are doing it. Originally the purpose was to generate a high quality water for discharge or reuse, but this is no longer a need. Now these facilities are focusing on producing a variety of clean brines.

Laura believe s that rigoro us pretreatment is required for desalination. Otherwise downstream desalination is fouled.
Plays in the Rockies have low TDS, so RO is common treatment there.
Low TDS drives up power costs for electro

- coagulation.
Caution about treatment costs presented as they likely do not include all costs (storage, waste disposal, etc).13

5.P roduced Water Treatment Technologies, Chlorine Dioxide

Brian Wrenn, Pureline
Characteristics of concern for reuse and disposal: dissolved solids, suspended solids (including bacteri a), scale formation, iron/manganese, pH

When ClO2 is added to wastewater, it oxidizes iron (also sulfide) . Iron will then precipitate onto anything that happens to be in the vicinity (i.e., colloidal particles). In flocculation, provide gentle mixing condi tions that cause the colloidal particles to collide. The particles grow larger and then settle by gravity under low mixing energy.
Coagulation stage with high mixing energy
Flocculation stage with gentle mixing energy
Settling/Sedimentation with quiescent conditions
Can be achieved in one treatment unit with multiple sections. Typical tank size 50’x14’x10’ . In the field, typically a bank of tanks.
The higher the iron content, the higher the ClO2 demand.
Slide showing TX wastewater and varying ClO2 dosages. Looks like you need a dosage of >200mg/L for TX wastewater. Lower demand for other wastewaters.

Good slide of conclusions.
ClO2 needs 5 mg/L iron to be effective as a coagulant.

ClO2 will oxidize iron, sulfides (in any form), and kill any bacteria that are present.
Try to maintain 2 mg/L ClO2 residual in flocculation. Would like 3 hours settling.
Can modify process to also remove scale species.
What about VOCs and BTEX? No effect. VOCs may be driven off during mixing.14

Spoke with Mark Patton, Hydrozonix during the break.
His firm will be a subcontractor to a firm opening a centralized waste treater in Bills Wyoming (Greenlands?). All the water will be treated for reuse, so treatment will not be to the qu ality needed for discharge. Grasslands just accepted their first wastewater loads.
He talked about PA, which is ahead of others regarding treatment and reuse, and moving toward centralized treatment. Wyoming moving toward centralized treatment. Anticipates that TX will eventually move to centralized treatment, but still a bit premature as the drillers are still moving around.
I asked about centralized wastewater treatment for discharge directly or indirectly. He said the current objective is lesser treatmen t for reuse. But he anticipates and eventual need for treatment for discharge when the industry gets to the point will drilling slows and there is not enough capacity for reuse. I asked when this might occur, and he said perhaps in 10 years. Or sooner if t he Saudis continue to keep oil prices very low...15

6.B acteria Control
Mark Patton, Hydrozonix

Real

- time testing of water quality is very important. Test for bacteria via modified ATP (Adenosine Triphosphate). Also test with MPN and bug bottles.
When testing for bacteria, need to use sterilized bottles and gloves. Also need preservatives to consume residual disinfection for accurate readings.
Discussed variability in test methods for ClO2 residuals

– colorimetry, test strips from different companies. Found tha t test strips not very effective in testing produced water, and that colorimetry is
most accurate.
Where to sample and test for bacteria? Source water, inf/eff, working tanks. Problem with regrowth in working tanks.
Sometimes disinfection is in direct competition with compatibility. The solution is control of the process and adequate testing/monitoring. Disinfection residuals will consume downwell chemical additives, which is a waste of money.
Hydrozonix using ozone t o avoid the residual problems.

Use ORP? Yes, use 6 ORP monitors to monitor and control oxidation treatment. Problem is that the meters foul easily. Often use pairs of probes and average. Also use hand helds. Found differences in different probes.16

7.P lasm a Treatment
Young Cho, Professor, Drexel University
Plasma is ionized gas. Introducing to liquid is difficult.
Use two electrodes, apply 10,000 volts, creates literally lightning in a bottle. Lightning generates: UV radiation, reactive species

– strong oxi dizers (O, OH, H 2 O2), Acidity (H+ and NOx), cavitation, electric field, shock wave, high temp (>2,000k)
Goals: disinfection, softening, SS removal, de

- oiling, dissolved gas removal (light hydrocarbon), desalination

Disinfection

– 4log reduction with 10

- min ute treatment. 2log reduction for 3 minute treatment.
Cost for Shale oil treatment (dark) at $0.02/bbl for energy for disinfection.
Cost for Marcellus is 20 times less energy.

Also tested treatments for filter self

- cleaning and for softening. Cannot remove calcium, but does remove bicarbonate. At high temperature, dissociates bicarbonate. Also dissociates sulfate. Plasma softening removes bicarbonate (and sulfate) ions to prevent mineral fouling without generating sludge.
Small scale testing a t 5 gpm and 30 gpm. Currently developing skids for 100 gpm and 500 gpm.
Also working on desalination treatment using the plasma reactor and vapor recompression.

Computer died

– no more notes today!17

Alternative Water Source s – Panel Discussion

What is hi ghest volume source of alternative water?
Don Pence, EXCO Resources: Not close to any rivers. Through 6 mo negotiations, worked with International Paper to deliver a 23 miles system to deliver real time (no storage) 160k bbl/min. 24” line. Paper plant uses 250k bbl/day. Water has zero oxygen and no bacteria. Worked with LDEQ. 200 million barrels over 10 year period. Wells treated with paper water tend not to scale.
Kerry Harpole, Marathon Oil, Eagle Ford: mix of brackish waters. 80

- 85% of fracking uses this water. Some municipal water, but cities are not very large, so only small amounts of water collected when need large amounts at on time. So far no impact, but as TDS gets higher, it does get harder to gel.
Sam Bacon, Rosewood Resources: not using much alt ernative water right now. Doing vertical wells, which don’t require as much water. Plan for 20% minimum or recycling or alternative water; sometimes achieve and sometimes not.
What is the most difficult source of water to use, across the industry?

Sam: su rface water is the most difficult source to obtain. Usually minimum of 9 months to negotiate agreement.
Kerry: treated produced water is the most difficult alternative source. Significant hurdle. If spill salty groundwater not held to the same risk as spil ling recycle water. Transportation and logistics are big problem.
Dan: Agree that recycled produced is most challenging. Once spill 5 barrels, you are in a pinch.
Acid mine drainage?
Kerry: not using, but expect will be similar to industrial water. Simila r concerns in moving, spilling. But where available, should consider using it. Need to know impact on wells, and that may not necessarily be negative.
Don: issues with custody transfer with the paper water? Needed 3 different permits from the LDEQ. Changed the rules as they went. IP has direct discharge permit to Red River. No issue with transferring custody. Requirement to report large leaks (since using irrigation pipes), but not concern about drips and spills (<1,000 gallons). Paper plant was having poor economic times, so receiving $0.10/bbl was good.
Kerry: If want to sell Marathon’s water to someone else, and they mishandle, it’s on them first but still concern to Marathon. If you generated it, you still own it. This risk/concern is a large hurdle.

Sam : concern about POTW effluent. If spill, then an illicit discharge. Can only go to the stream/river it’s allowed to go to. Some POTWs are required to recharge to river/stream, so limitations on how much water they can give away. If spill, will look at the operator who sold the water, so a concern. Need to use18

POTW water within 9 days without additional treatment. Hard to do 2 wells and stop, and then wait 21 days for next well. So Don’s source that was “on demand” was very good. POTW agreements don’t allow ability to start and stop flow

– wants to deliver flow daily per agreement.
PA DEP sent letter to encourage sharing of produced water. Letter says don’t require any side agreement (i.e., takes the liability away). That is, whoever takes it is responsible a nd the original generator has no liability.
Challenges with shared water with other operators?
Kerry: Landowners. Just because built a pond, doesn’t mean you can do whatever you want with it. Often landowner wants to keep all profit from the water, which i s a disincentive. Don’t want to be a middle man with no benefit.
Sam: put in frac pond and 3 wells. Free use of pond, but paid for water.
What is most challenging geology for water rights?
Kerry: Colorado is the challenging because water is overallocated. Easy to get in trouble. TX is challenging on surface water because overallocated. Surface water is likely temporary rights that can be immediately terminated. Want to be good stewards and not use a constrained resource, but very challenging.

Don: EXCO has not had much problem with water. Often ample sources, so disincentive to reuse water.

Sam: baseflow source

– regulators want to cut you off. Want agreement that once we start, you cannot stop us. Issues with dealing Indian tribes.

Kerry: some people say that what the formation prefers to get is what it gives up (in terms of salinity). Problem is sophistication

– each well is unique in what conditions are needed to optimize production. Need better studies and understanding of these issues.19

13.W ater Sourcing
Alan Chamberlain, Cedar Strat Exploration, Mapping Available Water Resources in Nevada
Nevada has different regional basins. Each area is managed as a separate groundwater basis.
In Diamond Valley, there is not enough groundwater to sustain ag n eeds and mining/milling needs. Either ag or mining has to be suspended until another water resource is developed (not enough to sustain both).
Inadequate geologic survey. Don’t have an accurate hydrology model for Mount Hope. Over allocation of groundwater permits resulted in creating a hydrology disaster. GW levels as dropped so low that the Diamond Valley is now essentially a dessert where used to have lakes and streams and fish.
Shales hundreds of feet deep. Discussed possibility of a discovery of a maj or play in Nevada.
To develop, need to stop all the pivots.
Looking for alternative ways to get water to the valleys. May need to bring in from another source. Possible to bring several miles from another river.20

15.W ater Sourcing

– Regulatory

Kent Wilkin s, Oklahoma Water Resources Board

Michael Sims, Railroad Commission of Texas
Jay Hansen, Arkansas Oil & Gas Commission
Kent: direct authority over water rights (not over oil). A lot of competition over water during these last 5 years of drought.
Any use of water other than domestic requires a water right permit.
Administrative Approval Process

90

- day Provisional Temporary Permits. At sole discretion of the director. This is mostly what the O&G industry uses.
GW is a private property right (ownership tied to overlying land owner)
Surface water is considered public water. Need to justify use to receive an allocation. If not used, can cancel or reduce to the amount actual used. Surface water in the west significantly affected by drought. Some western streams ar e already fully allocated, so need to meet with OK if looking to develop to discuss.
Recent trend for more long

- term water rights permits, rather than temporary. Long

- term can be perpetual, or can be for a specific term (e.g., 10 years)

Starting in 2009, some increase in the number of permits and dramatic increase in the amount of water for permits. Right now, O&G accounts for 5% of OK water use. Over next 50 years, anticipate may group to perhaps 12%. But reuse may reduce that.

Property owners are startin g to apply for permits for water rights for oil and gas. In these cases, no need for E&Ps to go to the state

– contract with the land owner directly. The land owner only needs to report the water use annually. Some land owners also proactively building wat er storage that they fill up when water flowing.
How is withdrawal rate calculated? For GW, you can withdraw at whatever rate you want, subject to annual limit. For SW, need to justify and include the rate in the permit.
Note that domestic use has the high est priority for SW withdrawal.21

20 .I nduced Seismicity and Injection Wells: Arkansas Case Study

Scott Ausbrooks, USGS

Guy

- Greenbrier Earthquake Swarm

- 2010

Western AR is conventional O&G and eastern is unconventional O&G
1970 started to have equipment to detect earthquakes. Earlier data is anecdotal.
Started in 2006 started the shale play. 2006 through 2009 # earthquakes is about what would be expected. In 2010 and 2011 dramatic increase. Most of these in the Guy

- Greenbrier. So far in 2014 about 80 events . Much lower than 2010/11, but still elevated over history.
Two well documented cases (Rocky Mountain Arsenal, CO in the 60s and Paradox Valley, CO in the 90s demonstrate that fluid injection into the subsurface can trigger earthquakes.
There are thousands of disposal wells across the country with no impact on seismicity. Very safe.
In this case, as plausible hydraulic connection exists between the injection depths and the fault.
Dramatic increase in seismic activity with injection in G

- G followed by dramatic decrease when injection stopped.
Now a moratorium on injection in a sizable area around and extending up and down the faults.

Lesson learned

– don’t put injection wells near fault lines, especially fluid filled systems.

Don’t think it ’s lubrication of the fault, or direct hydraulic connection, but rather the pulse from the wells moving through the fractures in the formation.
There can be a lag time of a few days to weeks between injection and response in earthquakes.

Think the issue n ow in OK may be lag time.
Difficulty in knowing surface injection pressure and projecting to at depth pressure. Frac pressure = 7,000. Injection pressure at depth is about 1,000. Some of the studies used 5,000 to evaluate effect on seismicity.

Another less on learned: know the faults in your area and their orientation. Cooperate with state agencies to get 3D seismic.22

23.Disposal Regulatons Arkansas
Jay Hansen, Arkansas Oil & Gas Commission
In AR can’t put produced water in a pit for long

- term storage becau se chemicals will erode liners. Double liner and leak detection for reuse. Storage of flowback is OK.
Wells are 175 miles away from where extraction is occurring. South AR has mostly privately owned wells.
H rules for permit for disposal require conducting geologic studies to provide info to inform potential for seismic activity. Applies only to Fayetteville Shale production area. Staying 5 miles away from faults.
Director may require additional seismic info and fault location during permit review. Well flo w and injection pressure and volume of fluid injected required to be reported on a daily basis.23

25.L and Owner Negotiations
George Oggero, Vanguard Natural Resources
Regulators and regulatory bodies: until recently didn’t need to follow due process and h ad extensive authority

. Need to foster a good relationship. Sponsor fundraisers for charities, etc.
Case Study: wanted to build pond storage.
When land owner calls or emails, need to respond immediately to foster good relations.
You can have an agreement with the land owner, but may also need a separate, prescribed agreement for the state agency.
Apparently injection wells are different than salt water wells. If injection well, don’t need to pay the land owner per barrel fee for injection. If salt water we ll, the land owner can charge a disposal fee.
Terminology: surface use, surface owner compensation, mineral development, surface damages. Mineral rights=right to develop. Surface owner=right to be compensated for surface damages.24

26.W ater Sharing

Joshua Adler, MIT Energy Initiative
Ways to apply technologies developed at MIT, and ways to solve problems.
Industry needs a source water market place for buying, selling and managing water and water services. Plenty of water available for reuse, but sometimes hard to find. www.sourcewater.com
Similar to other online buying/selling marketplaces like ebay or amazon. Probably closest match is ebay. Another good example is travel sites, where see all the available sources at one time.
Move water planning from taking days or weeks working the water cycle versus going on the internet and finding a solution in a few minutes.
By increasing the number of sources, reduces the average distance needed for transportation.

Status: in beta testing now, getting feedback
Next step: pilot trial in early 2015
Will have a reputation

- based assessment system. Will also vet all uses to ensure that they are who they say they are.
Concerns about legal liability? Varies a lot from state to state. In PA, first question is about liability (PA can reach back to assess liability back through users, although they say they will not exercise that authority). TX limits liability when legitimately transfers water.

For beta, first focused in PA as wastewate r recycling rates are high. Thought easy to adopt in PA, but state liability issue has been a hindrance. For beta, also focusing on West Texas, because it’s a much bigger market and less liability issues.25

27.A lternative Water Resource Solutions

Note: no t really alternative water resources, but finding places to drill that require little or not water
Alan Chamberlain, Cedar Strat Exploration

Nevada Great Basin
Most shales have already been naturally fracked. Just need to drill and recover. No need for fra cking and horizontal drilling.
This guy makes things sound so easy and obvious. Why aren’t we drilling there long ago? Table neighbor told me it’s because this guy is contrarian, but sometimes contrarians are right (like the first guy who developed frackin g).
Lots of land available right now in NV for leasing for not much money, if you know where to pick up the leases (which apparently is the trick).