SUSTAINABLE WATER AND ENERGY SOLUTIONSBLACK & VEATCH CORP.STEVE TARALLO

SUSTAINABLE SOLUTIONS FOR OIL & GAS PRODUCED WATER

24 Ju

ne 2

013

AGENDA• Dealing with Oil & Gas Produced Water:

Now vs. Then• Fresh Look at Collaborative vs. Singular

Wastewater Solutions• Earlier Barriers to Collaborative

Wastewater Solutions are Starting to Ease• Recent Developments Offer a New Forward

Look for Wastewater Handling

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1. Oil & gas development no longer is “remote”

• Fields are being developed in more heavily populated areas

• Need to mitigate tensions between economic growth and residential life

DEALING WITH OIL & GAS PRODUCED WATER: NOW VS. THEN

24 June 2013

Produced water is not invisible to modern stakeholders - as it might have been 60 years ago

Upper photo: Preparing well site on Daniel Mast's Newcomb Road farm in Parkman Township, Ohio, 2011.http://www.geaugamapleleaf.com/freestory/lack-of-gas-ol-well-driling-control-concerns-commissioners-12-8

Lower photo: Postcard of Amarillo, Texas, ca. 1930s.http://www.allacrosstexas.com/uncovered-texas-postcard-detail?image=OilWell.jpg&city=Amarillo

Then …

Now …

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2. Water no longer can be considered “cheap”

• The natural supply of drinkable water is limited and is in demand by a growing population

• Droughts are impacting sensitive regions, including shale oil & gas developments

DEALING WITH OIL & GAS PRODUCED WATER: NOW VS. THEN

24 June 2013

Produced water must be considered in the context of overall water supply and economics for multiple users

Upper image: Water auction prices before and after Eagle Ford shale oil & gas development, south Texas.http://fuelfix.com/blog/2013/06/16/fracking-fuels-water-fights-in-nations-dry-spots/

Lower image: Three shale oil & gas plays encountering drought conditions.http://www.droughtmonitor.unl.edu/

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3. Disposal of wastewater through underground injection no longer is a “given”

• Geology is not supportive everywhere

• Public concerns about environmental consequences

• Questions about possibilities for re-use – why throw it away forever?

DEALING WITH OIL & GAS PRODUCED WATER: NOW VS. THEN

24 June 2013

Underground injection of wastewater cannot be done everywhere and the issue now is … should it be done

Upper image: Unusual earthquake activity surrounding oil & gas wastewater disposal wells in Ohio.http://thinkprogress.org/wp-content/uploads/2012/01/cnnaerialearthquake.jpg/

Lower image: Pictorial simulation of progressive treatment of oil & gas produced “graywater”.http://www.spe.org/industry/docs/reusingwater.pdf

Produced

Treated for Re-Use

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• Traditional approach to handling produced water emphasized singular solutions• Each producer

implemented an individual solution• Injection well

(conventional oil & gas)• Water treatment

modules delivered to the well pad (shale gas)

• Water recycling within a single producer portfolio

FRESH LOOK AT COLLABORATIVE VS. SINGULAR WASTEWATER SOLUTIONS

24 June 2013

Emphasis on fastest solution available to an individual portfolio – almost always a singular fix

Producer A

Injection Well 1

Producer B

Injection Well 2

Producer C

Modular Water

Treatment at Wellpad 3

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• Sustainable approach must consider collaborative solutions• Several producers in the

same play cooperate in centralized solutions• Shared wastewater

treatment facility connecting multiple wellpads

• Efforts toward beneficial re-use of treated wastewater

FRESH LOOK AT COLLABORATIVE VS. SINGULAR WASTEWATER SOLUTIONS

24 June 2013

Efficiencies of scale can offer advantages both in cost control and regulatory compliance

Producer A

Producer B

Producer C

Disposal | Re-Use

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• Mergers & acquisitions provide operational streamlining• Some independent producers now are part of

majors (XTO/ExxonMobil, Petrohawk/BHP Billiton)• Larger water infrastructure investments now are

more feasible• State regulatory changes are encouraging

recycling & re-use which favor collaboration• Lightening of liabilities formerly associated with

“pooled” wastewater reduces risks of shared solutions

• Ad hoc water markets in resource plays provide transparency needed for collaboration• Water auction bid/ask activity create benchmarks

for “market value” of water operations

EARLIER BARRIERS TO COLLABORATIVE WASTEWATER SOLUTIONS ARE STARTING TO EASE

24 June 2013

Collaborative solutions are more compelling in 2013 than they were in 2007-2008

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• Pennsylvania• Beginning 2007, in absence of disposal wells, wastewater

from Marcellus development was trucked to Ohio for underground injection

• Since 2011, wastewater must be reused and recycled, or collected and treated at an authorized wastewater treatment facility• State approval is required before the receiving treatment facility

can accept the wastewater for processing and/or disposal• Modular treatment at wellpads became popular as a way

around insufficient capacity at fixed treatment facilities• State now an excellent candidate for more centralized

treatment facilities designed to accommodate high-TDS wastewater from multiple oil & gas developers

RECENT DEVELOPMENTS OFFER A NEW FORWARD LOOK FOR WASTEWATER HANDLING

24 June 2013

Regulatory requirement for recycling provides a motivation for collaborative solutions – economy of scale

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• Texas• Since the 1900s, abundant disposal wells have been the

default solution for wastewater – now including the Barnett, Eagle Ford and Permian Basin developments• Disposal wells operated by individual developers• Commercial disposal wells used by multiple developers

• In March 2013, State rules for wastewater recycling were amended to make collaborative recycling solutions easier• Recycle defined as “To process and/or use or re-use oil and gas

wastes as a product for which there is a legitimate commercial use and the actual use of the recyclable product.”

• Waives recycling permit if operators are recycling fluid on their own leases or transferring their fluids to another operator’s lease for recycling

• Centralized Commercial Solid Oil and Gas Waste Recycling is defined as a specific option

RECENT DEVELOPMENTS OFFER A NEW FORWARD LOOK FOR WASTEWATER HANDLING

24 June 2013

Lowering of regulatory hurdles encourages developers to cooperate and move toward centralized solutions

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• Summary• Sustainable solutions for oil & gas produced water are more

important than ever• Disposal wells no longer can be considered the universal

solution• Situationally useful but geologically not feasible everywhere• Permanently removes water from the hydrologic cycle• Some bothersome side effects (i.e., earthquakes)

• Modular treatment at individual wellpads is not a long-term solution• Situationally useful but challenged with high volumes in large

developments• Regulatory progress at the State level is recognizing the

importance of recycling and the value of having centralized solutions

RECENT DEVELOPMENTS OFFER A NEW FORWARD LOOK FOR WASTEWATER HANDLING

24 June 2013

The time is right to explore ways to facilitate collaborative wastewater solutions among multiple developers