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2015 Texas Energy Innovation Challenge
Amin Kiaghadi Shanisha Smith Rose Sobel Varun SreenivasCEE PhD JD, LLM in Energy CEE PhD MBA
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Freshwater Input Flowback Water Produced Water*
0
1
2
3
4
5
6
7
8
100%40% 60%
Formation Water
Ave
rage
Flu
id V
olum
e pe
r fra
ckin
g w
ell
(mill
ion
gal
lons
)Producing water from produced water
Produced water volumes are far greater than flowback water
*Assuming 2 yr well lifetime
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Freshwater Resource
Fracking Well
Disposal Well
Produced Water
Flowback Water
Ground Water Municipal 27%
Surface Water
Industrial 15%
Agricultural 58%
Cleaned Produced Water
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Why the Permian?
Proportion of Wells in High or Extreme Water Stress: 87%Proportion of Water Recycled: 2%
WATER RISK in the PERMIAN BASIN
High water use and water stress
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Water and Fossil ResourcesEconomics: •57% of Texas’ 2012 Crude oil production
•156,000 active wells•34,000 active horizontal wells
Land features: 6.4 million acres Agricultural landPopulation: 450,000 people
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1st Challenge in Treating Produced Water
30,000-200,000 mg/L TDS
Produced WaterSea WaterFresh Water
30,000-40,000 mg/L TDS
< 1,000 mg/L TDS (Salt)
Desalination is needed to treat Permian Produced Water
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Potential Desalination Technologies
Our solution is not limited to this desalination approach
Thermal Separation Membrane Separation
Vapor Compression Distillation (VCD)• Ideal for high TDS and low volumes (<500,000 gallons/day)• Low initial cost• Linkable with technology
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Why isn’t desalination more prevalent?
makes desalination viable by reducing energy costs
Energy44%
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Geothermal Energy for Power Generation
eliminates well construction costs by using decommissioned wells
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Pipeline legend: Oil Produced Water Brine Treated Water Geothermal water
Tank battery
Pre-treatment
Pretreatment
Desalination unit
storage
storage
storagestorage
Injection Well
Agricultural & Non-Potable
Municipal Use
Closed loop with fresh water energy generation
Current Process
Refinery
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Geothermal Process
Annu
lus
Cem
ent
Casi
ng
Tubi
ng
VCD Desalination
unit
Insulation:
P
0.03 m/s 0.03 m/s
Ambient Temperature
Incr
easin
g te
mpe
ratu
re
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Depth (ft)
Extracted flow temperature (°C)
Energy per day(KWh)
Clean Water (gallon/day)
10,000 76 7200 48,00011,000 78 7510 50,00012,000 80 7823 52,00013,000 83 8292 55,000
Depth (ft)
Extracted flow temperature (°C)
Energy per day(KWh)
10,000 76 720011,000 78 751012,000 80 782313,000 83 8292
How much water can deliver?
• Geothermal gradient : 25◦C/Km • 8 KWh energy for 264 gallons clean water • Assuming 20% efficiency
A 10,000 ft. geothermal well can deliver 48,000 gallons of cleaned water per day
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Implementing
The Permian Basin has the most challenging conditions so,
If we can do it here, we can Power Across Texas.
In the Permian Basin
At 0.5%, 600 wells are eligible
for retrofit.
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Business ProposalService provided • Take produced water, treat and deliver clean waterScope of operation • Produced water from 7 producing wells treated with 1 geothermal well at
competitive price• Clean water sold to agriculture industry and municipalities• Evaluated for Operation in the Permian Basin
TreatmentCost:
3.6 c/gal
In take of ProducedWater from wells68,000 gal /day
Revenue: 7.5 c/gal
Clean Water for Sale48,000 gal/day
Revenue: 0.05 c/gal
Brine for Deep Well Injection
20,500 gal/dayCost: 8c/gal
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FinancialsCapital required – USD 1.88 millionFinancing –The most expensive option: 10 year bank loan at 6% interestYearly Performance
Revenue
Costs
Net Income
Projected Performance – Feasible• Net Present Value – USD 1.22 million• Cash Flow – USD 657,000/yr• Payback period - 3.4 years• Internal Rate of Return – 34 %
• Operators pay 7.5 cents instead of spending 8 cents for disposal
• Water users charged for clean water
• Treatment: 3.6 cents / gal (70% of volume)• Brine Disposal: 8 cents/ gal (30% of volume)
• USD 135,000 / year
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Sensitivity Analysis
$0.07 $0.08 $0.09 $0.10 $0.11 $0.12 $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
Tax Rate= 35%
Linear (Tax Rate= 35%)
Disposal Cost for Operators
Ann
ual N
et In
com
e fo
r
Every 1 cent increase in disposal cost will lead to $114,400 increase in annual net profit
$0.07 $0.08 $0.09 $0.10 $0.11 $0.12 $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Tax Rate= 35%Linear (Tax Rate= 35%)Tax Rate= 25%Linear (Tax Rate= 25%)
Disposal Cost for Operators
Ann
ual N
et In
com
e fo
r
Every 1 cent increase in disposal cost will lead to $114,400 increase in annual net profit
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Benefits to the Society
Add 17.5 million gallons of clean water per year
for every unit of operation
600 operating units
Supply Water needs of 20,000 acres of agriculture land
OR100% of Non-potable municipal water demand
of the Permian region
Drought resistant solution.
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Policy AnalysisRegulation Opportunities Barriers Solutions
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Activity RRC TCEQ EPA
Drilling Permits ✓
Complaints for O&G exploration, production, and transportation ✓
Process wastewater discharged from O&G sites complaints ✓
Storm water run-off from O&G sites complaints ✓
Drinking Water – Private Wells complaints ✓
Drinking Water – Public Water Supply complaints ✓
Spills associated with the exploration, development, and production of O&G ✓
Process Wastewater (exploration, production, and transportation) ✓
Process Wastewater (not associated with exploration, production and transportation) ✓
Public Water Systems ✓
Water Rights ✓
Regulation Opportunities Barriers Solutions
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Regulation Opportunities Barriers Solutions
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Summary of Groundwater Conservation Districts (GWCDs) in
Permian Basin
# of Counties
GWCD Description % Area
26 With a GWCD 68%
12 With no GWCD 32%
8 GWCD 36 21%
2 GWCD 66* 5%
16 Other GWCD 42%
38 Total 100%
Regulation Opportunities Barriers Solutions
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Regulation: • Public regulatory policy favoring recycling vs. disposal • Oil and Gas Regulation and Cleanup FundPublic:• Conserves freshwater • Produced water now a resource and sold as a
commodity Industry:• Affordable solution • Favorable public relations- RRC Symposium
Stakeholder Interests
Regulation Opportunities Barriers Solutions
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Aquifer Depletion
Cost
Regulation
Regulation Opportunities Barriers Solutions
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House Bill Senate Bill4021: Provide a tax refund to O&G companies that use alternative fluids in place of fresh water
1972, 2132: Exempting completion operations from a requirement to obtain a permit from a groundwater conservation district, but requiring it meet GWCD reporting standards, including monitoring how much water is withdrawn, and authorizing a fee for water actually withdrawn
655: Water right holder would not require a permit for aquifer storage and GWCD cannot charge fees for groundwater recovered from such a well, but required to report volumes
1248, 1856: relating to renewal or amendment of certain permits required by groundwater conservation districts
1232: requiring a study by the TWDC on mapping groundwater in confined and unconfined aquifers
1635: Relating to management of groundwater, increasing reporting and classification requirements per Texas Groundwater Protection Committee
30, 835, 836: Requiring research on the benefit of large-scale facilities for brackish groundwater desalination and sources & use of brackish water to meet state water needs
950: Expanding power of state auditor of groundwater districts
1221: relating to seller’s disclosures in connection to real property subject to groundwater regulation
1991: relating to improvements on private property for public private partnerships
1990: requiring O&G companies to report and make public the total volume of water used in hydraulic fracturing and its sources listed by type
517: requiring notice of an application for a permit to drill an injection well in the territory of a groundwater conservation district
78: relating to the matters to be considered when developing the state water plan, requiring and assessment of the best available science and technology and future water availability predictions
854: relating to the renewal or amendment of certain permits issued by groundwater conservation districts
Current Reform Proposal
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• Pass Tax Credit Legislation Promoting Recycling Water. See HB 4021, filed 3/13/2015
• Increase Disposal Well Application Fees and Use Funds for Research
• Encourage Groundwater Regulation Reform Between Water Agencies
3 Recommendations
Regulation Opportunities Barriers Solutions
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An innovative green solution to recycle produced water• Marriage of technologies• Decommissioned wells have renewed purpose• Net contributor of clean water into the Texas water system• Very Profitable in a short period • Proposed legislation will enhance profits• High growth potential to Power Across Texas
With our technology:• Business will flourish• Texas will have new clean water
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Acknowledgements• Professors Zachary Bray, Konstantinos
Kostarelos, S. Radha Radhakrishnan, & Hanadi Rifai
• Maria Modelska• Aparna Balasubramani, Taylour Burton,
Aeman Javed, Ali Masoudi, Rinki Mukherjee, & Emily Sappington
Thank you
• David Harry and David Stuart