Hall murrayaapgdeg savingmoneyconservingfreshwater

W D Hall Company Austin, Texas 1

“Saving Money and Conserving Fresh Groundwater while

Expanding Development of the

Eagle Ford Shale”

AAPG – DEG Workshop February 26-27, 2013Fort Worth, TX

Doug Hall, W D Hall CompanyAnd

Gene Murray, W&M Environmental Group


Eagle Ford Shale


The Eagle Ford Shale from Space!


Drought spurring fracking

concerns (San Antonio Express-News, 2011)Water availability, not contamination,

worries residents above Eagle Ford

Shale (CC Caller, 2011)

Karnes County drought nearing most severe stage (mySouTex.com 2011)

2011

Oil’s Growing Thirst for Water (WSJ Dec 6, 2011)


Texas must limit agricultural water use

Houston Chron., May 29, 2012

Growing water needs pit agriculture against recreation Houston Chron. July 16, 2012

Water use for hydraulic fracturing in Texas2008 = 36,000 ac/ft; 2011 = 81,500 ac/ft125% increase (TX Oil & Gas Assoc., 2012)

2012

Boom Promises 20,000 New Jobs but Shortages TooKATE GALBRAITH (July 14, 2012, Texas Tribune)

http://topics.nytimes.com/top/reference/timestopics/people/g/kate_galbraith/index.html


Texas study finds increase in use of water used for fracking (Texas Tribune, Jan 15, 2013

Eagle Ford Shale Going Full Speed Ahead (CC Caller, Feb 7, 2013)

Drought puts drain on water supplies for power

plants (Houston Chronicle, Feb 6, 2013)

Texas Legislature: Group pursues reuse of water from fracking

(San Angelo Stand Times, Feb 16, 2013)

Collaborative conservation key to ensuring adequate resources (Andrew Sansom, Feb 2, 2013) 201

3

For Texas Legislature, what a difference no rain makes (StateImpact, Feb 5, 2013)


Eagle Ford Shale Petroleum Windows


How Many New Oil & Gas Wells in the Eagle Ford?

Map view showing impact of one well (Eric Potter, BEG, 2013)



How will we know?

Who will decide?

Collaboration! ……….. And Planning

Is There Enough Water to Expand Development of the Eagle Ford Shale?



TWDB Regional Planning Area L


Forecasted Municipal Water Shortages in Region L (HDR, Region L, 2011)


Forecasted Irrigation Water Shortages in Region L (HDR, Region L, 2011)


And Oh Yes…the Drought


And the answers are:

Water Yes – required volumes exist in the region

Fresh groundwater No supply concerns where drilling intensity is high in rural counties. fresh groundwater may not always be where it is needed

Is There Enough Water to Expand Development of the Eagle Ford Shale?


Who directly impacts the availability of groundwater for E&P operations?

Land Owners

Groundwater Conservation Districts (GCDs)

Railroad Commission

“Regulatory” Availability of Groundwater



The water Sheriff is the General Manager of the local Groundwater Conservation District

And the District Board of Directors

A water well used solely to supply water to a drilling rig for oil and gas is exempt from obtaining a drilling permit from the GCD

Big question – Is a frac water supply well exempt?

“Regulatory” Options of the GCDs


What are they?

Desired future conditions are the desired, quantified condition of groundwater resources such as:

water levelswater qualityspring flows, or Volumes

for a specified aquifer within a management area at a specified time or times in the future.

Regulatory Drivers – Desired Future Conditions (DFCs)


Fresh Groundwater

Conservation Ideas


Options Onsite treatment for reuse/recycling of

flowback and produced water

Use of alternate water supplies

Non-water hydraulic fracturing options

Opportunities to be smart, cost effective and develop good relationships with local communities

Conserving Fresh Groundwater During E&P Operations


Onsite treatment for reuse/ recycling of flowback and produced water

Railroad Commission has permitted a number of Mobile Produced Water Treatment Companies for work in the Eagle Ford

Treatment choices For reuse (clean brine/TSS removal (some blending

with fresh groundwater) – reuse in fracs For recycling (clean water/TSS and TDS removal); sold

for other uses?

Conserving Fresh Groundwater During E&P Operations (cont.)



General water management expenses for E&P operations

Clean water supply acquisition costs Water supply transport cost Pipeline costs Vacuum trucks to remove waste water Trucks cost to transport produced water to SWD well SWD well fees

E&P operators are paying $3-$8/bbl to convert produced water to clean water + acquisition, storage and transportation costs




Pros Lower water acquisition costs Reduced disposal costs Reduced use of fresh water Reduced environmental impact from transport and disposal Fewer truck trips Former waste stream becomes part of supply chain Adding water to the hydrologic system!

Cons COST - If fresh groundwater is abundant and locally available from water

wells, treatment and reuse / recycling is not usually economical Increased environmental risks from additional site treatment operations



Use of alternate water supplies From municipal wastewater system to industry – Crystal City,

Pleasanton, Kenedy, Poth,

From industrial wastewater systems to other industry users – San Miguel Electric Coop, Gonzalez Southern Clay

Before either municipal and industrial wastewaters are used for hydraulic fracturing, the transaction will need authorization from TCEQ.

Brackish groundwater – Is being used! Brackish groundwater has 1000 to 10,000 mg/l TDS. Both brackish and saline water (> 10,000 mg/l TDS) can be used for hydraulic

fracturing. Brackish groundwater is plentiful in many parts of Texas.

Conserving Fresh GroundwaterDuring E&P Operations (cont.)


$1/bbl/hr


Non-water hydraulic fracturing options

Providers and users in the Eagle Ford GasFrac Energy Services, Inc. – uses liquefied petroleum gas (LPG) instead of water Chimera Energy – exothermic reactions instead of water, metal oxides create heat that expands and cracks

the shale Baker Hughes – VaporFrac uses CO2 or nitrogen instead of water eCORP Stimulation Technologies - uses propane (Frio County) Users - Blackbrush Oil & Gas and Jadela Oil

Pros – water conservation; reduce costs for water wells; more compatible with formation’s gas; quicker completions with no flowback water; wells can be placed into production faster; fewer additives required; reduced formation damage; cost saving where water isn’t available; helps lift reservoir fluids; no clay swelling; allows more gas to escape.

Cons – LPG cost – 50% premium over traditional fracking companies;; Safety compared to water fracs? Potential for the propane to ignite; TBD. Closed pressurized (nitrogen) system, hot zone; smaller jobs than water fracs; open hole vs plug and perf; logistics of NGL delivery; fluid availability.

Slow to catch on for some reason?

Conserving Fresh GroundwaterDuring E&P Operations (cont.)


Something Else to Consider…


$$$$$-Saving and Revenue Generating Water

Management Ideas

Operate centralized treatment facilities for produced water from multiple operators and leases which can be sold for a variety of

beneficial uses


Yes if:

There are sufficient quantities and appropriate locations of produced water that are available to treat

These quantities are available for greater than 5 years Local fresh water costs increase and available supply decreases The facility operation costs are predictable and controlled The facility stays flexible with cost-effective treatment

technology The costs to transport water for re-sale are reasonable The facility has the right to re-sell the treated/recycled water The commercial facility saves $$$$ for E&P operators Operator obtains regulatory and community approval and more!

Saving $$$$ - Does it make sense to invest in a Stationary, Commercial Produced

Water Reuse/Recycling Facility?



Water for hydraulic fracturing used in Region L counties In 2011- 17,500 ac/ft or 136 million bbls (Nicot, 2012, Table 15)

Salt water injected/ disposed of in non-productive zones in Region L counties

In 2011 – 70,417 ac/ft or 546 million bbls (W-14 data from existing wells in Railroad Commission files)

The potential exists for use of produced water in Region L to fulfill needs of most hydraulic fracturing operations in

Region L

Modified Water Balance for EF Shale Developmentin Region L for 2011 – Is the produced water therer?


What Does a Stationary, Commercial Produced Water Reuse/Recycling Facility Look Like?

Saving $$$$$ &Generating Revenue



High Sierra’s Pinedale Anticline facility in Wyomingtreats 60,000 bpd of frac water


Red Desert Reclamation, Wyoming20,000 bpd of produced and flowback water


What might a Stationary, Commercial Produced Water Reuse/Recycling Facility in Texas look like?

Location – close to produced water generators (> 100 wells) from multiple E&P operators and treated water users (within approx. 25 – 50 mile radius)

Size – 100 to 300 acres; security fencing

Lined ponds and tanks for water storage (500,000 bbls or more); berms for water control

Facilities and Equipment – truck loading/ unloading and washing, treatment equipment (able to treat at least 30,000 to 50,000 bpd), office and laboratory, maintenance shop, living accommodations, communication towers, water pumps and pipelines, chemical storage sheds, fresh water well, brackish water well, and SWD well? And a waste storage area.

Smart logistical management and process monitoring (software): in-out water volumes, inventory, lab analysis and results, storage and transport/ distribution services; equipment performance

Reliable communications and reporting for business, technical, and regulatory needs


STW Resources to build two facilities to treat produced water in Texas, US(Water-Technology.net - February 6. 2013)

One facility to be located in Upton County in West Texas and the second will be in the Eagle Ford in South Texas

Polk Breaks Ground at Recycling Facility in Eagle Ford (Rigzone, Feb 14, 2013)This commercial, stationary recycling facility owned by Polk Operating, LLC will remediate oil-based drilling fluid and cuttings. The 200 acre site will also include a full-service salt water disposal facility and recycling of produced water.


Better pricing from economies of scale of a large, off-lease facility

Reduce the time E&P companies need to be concerned about treatment of flowback and produced water on their sites

Less onsite water handling and storage costs; reduced labor costs

More economical and flexible treatment options at the commercial site

Fewer concerns with spill and leakage control on the well site

Lower SWD well disposal volumes and costs

Remediation costs – prevent or minimize costs for spills/leaks

Possibility for dependable/reliable access to predictable quality of water for hydraulic fracturing

$$$$$-Saving Benefits of Stationary, Commercial Produced Water Reuse/Recycling Facilities for E&P Operators


“The results of our economic analysis show that, over the long-term, the large volumes of water managed in the development and production of shale resources justify investments in water treatment infrastructure.”

“Lifecycle water management in the development and production of shale resources presents a significant opportunity for cost savings.”

Water Management Economics in the Development and Production of Shale Resources, International Association of Energy Economics, 2012, Christopher J Robart, Pac West Consulting

Partners, Houston, TX.

Commercial Treatment Facility - Good Investment?

for

E& P Operators? Service Companies? Independent Investors? Waste Management

Companies?


Approval of stationary, commercial water recycling facilities Complete the RRC permit application (New in 2013) What about the issue of air emissions? Communicate with TCEQ

Is Produced Water a Reliable Revenue Source for Commercial Treatment Facility Owners? What needs to happen?


Approval of centralized, stationary, commercial water recycling facilities Approval to collect and combine produced water from

different operators and leases Looks promising in proposed regs

Is Produced Water a Reliable Revenue Source for Commercial Treatment Facility Owners? What needs

to happen?


Approval of centralized, stationary, commercial water recycling facilities Approval to collect and combine produced water from different operators

and leases Decide who owns the water once it leaves the lease and

goes to the commercial recycling facility Appears the RRC will look to the owner of the commercial

facility for liability responsibilities Still not sure who has the right to sell water




and leases Decide who owns the water once it leaves the lease and goes to the

commercial recycling facility Agreement on analytical measurements and procedures

required to document the quality of water when it leaves the recycling facility

How clean is clean? How clean does it need to be for intended uses? And how do you know?

TBD





commercial recycling facility Agreement on analytical measurements and procedures required to

document the quality of water when it leaves the recycling facility Decide if owners of the commercial recycling facility can

sell water to users other than oil and gas E&P operations Depends on the intended usage






document the quality of water when it leaves the recycling facility Decide if owners of the commercial recycling facility can sell water to

users other than oil and gas E&P operations Besides E&P operations, what are acceptable uses of water

from stationary, commercial water reuse/recycling facilities? Not acceptable for drinking or for watering edible crops What is OK? Dust control? Boiler feed water? Fire control? Livestock

watering? Wildlife habitat? Aquaculture? Irrigation? Vehicle washing?






document the quality of water when it leaves the recycling facility Decide if owners of the commercial recycling facility can sell water to users

other than oil and gas E&P operations What are the current restriction on use of water from centralized,

stationary, commercial water recycling facilities? Will it be necessary to involve TCEQ in approvals for reuse

of the recycled produced water? Signs point to YES (30 TAC Chapter 210E) Especially if for reuse in non-oilfield situations






document the quality of water when it leaves the recycling facility Decide if owners of the commercial recycling facility can sell water to users

other than oil and gas E&P operations What are the current restriction on use of water from centralized,

stationary, commercial water recycling facilities? Will it be necessary to involve TCEQ in approvals for reuse of the recycled

produced water? What about financial incentives for operators or recyclers?

The drum beat has begun. Texas Water Recycling Association (TWRA) – new in 2013

Is Produced Water A Reliable Revenue Source for Commercial Treatment Facility Owners? What needs to happen?


Technology development (Produced water treatment & management)

Reliable water chemistry data – before and after treatment Collaboration with RWPD and GCDs Tax incentives Pioneer investors and solid financial analysis Focus on reducing water transport and storage costs Legislative changes and Regulatory rules updates

All required for recycling and profitable sale of treated produced water to conserve fresh groundwater in South Texas.

Bottom Line:Water is jobs, pure and simple

Summary


Thank You

For more information / brainstorming:Doug Hall

W D Hall CompanyAustin, Texas512-306-8444

Hall murrayaapgdeg savingmoneyconservingfreshwater

Documents

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water wells

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