Environmental Stewardship in Water Management

Phil Vogel President CCS Corporation USA

Global Water Management Market

Large global industry Oil and gas sector
Accounts for over 50% of the industrial segment ~10 times larger than the next largest segment

Global Water Market (2009)

Point of Use 3.0% Packaged Water 18.4% Irrigation 2.1%

Industrial Water 10.0%

$531B

Utilities 66.6%

Protection of water resources and sustainable use is a major public concern Water is critical to the continued development of unconventional resources Unconventional resources are key to North American energy security

Rest of the World $29 billion

Wastewater CapEx 23.6%

Utility Operating Expenditure 50.1%

$53B

North America $24 billion

$354B
Drinking Water CapEx 22.6%

North America
Control 28.0% Chemicals 29.2%

Transportation 9.1%

$24B

Process Water Equipment 9.0% Services 9.6%

Source: Global Water Intelligence

Wastewater Equipment 15.1%

Small User, Big Attention

Oil and gas sector:
A small user of water relative to other segments A large recipient of attention and regulatory scrutiny

Percentage of Water Used by Market Segment in the U.S.

Industrial, 5% Domestic, Aquaculture, 2% 1%

Industrys water management and overall environmental performance impacts public perception & in turn regulatory agenda Regulations continue to tighten on industry & limit access Industry has an opportunity to show leadership through action

Irrigation, 37%

Thermoelectric Power, 41%

Public Supply, 12%

Livestock, 1% Mining and Oil & Gas, 1%

Source: USGS

Produced Water Market

- North America

Source: Ground Water Intelligence, CCS

Produced Water Volumes O & G

Produced water volumes predicted to increase by 32% by 2025* Potential for water reuse exists to decrease freshwater use Produced water management is a major cost to industry and consumes resources otherwise slated for hydrocarbon production
Other states 20% USA 661.5 billion gal/yr Texas 35% 2205 billion gal/yr Worldwide produced water volume (2007) USA 661.5 billion gal/yr Produced water volume (2007)

California 12%

Wyoming 11% Rest of the world 1,543.5 billion gal/yr Oklahoma 11%
* Source: Clarke & Veil, 2009

Louisiana 5% Kansas 6%

Drought Cycles Demand Excellence

U.S. Drought Monitor Archive
100.00%

Jan 2000 - May 2011

D0 - Abnormally Dry D1 Drought - Moderate

80.00%

60.00%

40.00%

D2 Drought - Severe D3 Drought - Extreme

20.00%

D4 Drought - Exceptional
0.00% 01-Jan-00 01-Jan-01 01-Jan-02 01-Jan-03 01-Jan-04 01-Jan-05 01-Jan-06 01-Jan-07 01-Jan-08 01-Jan-09 01-Jan-10 01-Jan-11

Data source: http://www.drought.unl.edu

Inconsistent drought cycles demand excellence in water management practices Closed loop systems for renewal and reuse are critical By user classification, all water investments must be understood, measured, monitored and optimized Water productivity or the life cycle returns on a gallon invested needs to be broadly understood
Source: http://www.cpc.ncep.noaa.gov

Frac & Drilling Water Volumes

- by shale play

Shale Play Barnett Fayetteville Haynesville Marcellus

Volume of Drilling Water (US Gallons/Well)

Volume of Frac Water (US Gallons/Well)

Total Volume of Water (US Gallons/Well)

400,000 60,000* 600,000 80,000*

Source: U.S. Department of Energy, 2009

2,300,000 2,900,000 5,000,000 3,800,000

2,700,000 2,960,000 5,600,000 3,880,000

* Drilling performed with an air mist and/or water-based or oil-based muds

U.S. Water Productivity

1 0.9 0.8 0.7 0.6 0.5
Energy in M Calories / gallon of water
AGRICULTURE / CROPS CORN CRUDE OIL / NATURAL GAS

360x

0.4 0.3 0.2 0.1 0

1

Crop

U.S. Corn

U.S. Oil & Gas

Energy output in Agriculture and Oil & Gas

One gallon invested in energy production yields approximately 360 times that of agriculture or 1.45 Mega Calories of life energy Industry education of governments, NGOs and the public at large is critical to industry growth and sustainability!
Energy calculated for crop production is based on a global average estimated value 25,451 MJ /Ha /Year 3500 calories of energy per kg of corn produced Ref: USDA ARS 1 barrel crude oil = 6119.32 mega joules 1 cubic feet of natural gas=1.0846 mega joules Ref: www.eia.gov energy conversion

BTU Return on Initial Water Investment

- Typical Haynesville Well
125X

5,000,000
146X

250,000
2.88 lifetimes
146 lifetimes

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0

4,252,500

200,000
211,050

150,000

100,000

1,474,200 1,449

50,000

0
Average Gallons of Water Gallons of Water Average Billion Gallons Total Recoverable Billion to Drill & Frac a Typical Consumed per person in a Consumed per person in a Gallons over the Life of a Haynesville Well 78 year life cycle in the US Typical 78-year Lifespan Typical Haynesville Well We use 2.88 *lifetimes of water to drill a typical well. That well returns over its life approximately 146 lifetimes of energy.
* Based on an average 78 year life span
Source: U.S. Department of Energy, 2009

Water Restrictions & Issues

Access to Fresh Water
Becoming increasingly restricted and/or a last resort option in many areas

Treatment and Reuse of Flow Back Water

The most environmentally responsible option Technology just now being developed

Transportation and Disposal of Produced Salt Water

Transportation is a costly expense Trucking restrictions imposed in some areas due to road damage Other trucking issues include increased safety concerns, carbon emissions and risk of spills Some salt water disposal sites are not compliant with regulatory standards penalties and fines on the rise

Regulatory Environment
Heightened public concerns are key drivers to regulatory push High profile oil and gas activities under spotlight
Hydraulic fracturing: water contamination, freshwater use, wastewater disposal Oil sands: tailings ponds, water contamination, freshwater use, waste management Transportation: Heavy traffic on rural roads (water, waste, fluids..), greenhouse gas Emergency response cases: Oil spills, pipeline integrity, uncontrolled releases

Industry and corporate social responsibility standards need to address public mistrust pushing regulatory change Industry needs to proactively respond to environmental concerns to ensure longterm access to develop resources and reduce regulatory uncertainty

Frac Flowback Options

Re-use & Recycle is the Ultimate Goal
The most environmentally responsible method is treatment and re-use of water Recycling of flow-back for future frac-water requirements addresses many key concerns faced by industry Dilution is not the solution General requirements for re-use Removal of hydrocarbons Removal of suspended solids Removal of scale forming dissolved solids Compatibility with other frac additives Salinity is not a problem when using high chloride friction reducers
Increasing Cost & Complexity

DISTILLATION/ CRYSTALLIZATION

SOFTENING TSS REMOVAL

Increasing Reservoir Damage potential

NO TREATMENT
Source: Global Water Intelligence

Deep well injection is not always available and discards a potentially valuable asset

Evaporative and crystallization technologies are available but generate complex waste streams and have high energy consumption Evaporation has a high carbon foot print Reverse osmosis systems are effectively limited to lower TDS concentrations

Conclusions
The Oil and Gas Industry has an Opportunity to take a Leadership Position Access to Fresh Water Becoming Increasingly Restricted
- Investigate fracturing with produced and/or treated salt water - Investigate treatment of produced salt water - Investigate re-use of frac flow back water

Transportation and Disposal of Produced Salt Water is Becoming Increasingly Expensive

- Investigate on-site treatment services - Outsource salt water disposal to oilfield waste management specialists

A Bit About CCS Corporation

Oil and Gas Sector Waste Management
Treatment, recovery & disposal facilities and landfills

Environmental Services
Dredging, dewatering & treatment Soil and groundwater remediation, environmental construction, demolition and decommissioning, asset recovery and recycling Geotechnical drilling & coring services Site assessment and disposal of naturally occurring radioactive materials (NORM)

Energy Services
Water treatment services (produced and frac) Well servicing & abandonments Drilling fluids, hot oiler services, frac water heating, frac tank rentals, closed loop solids control systems, water hauling for disposal

Thank You