Salt Water Disposal Pilot Project October 14 2008

Salt Water Disposal Pilot Project October 14, 2008 1

Purpose • Review City’s current requirements on Salt Water Disposal well (SWD) use • Outline proposal for urban salt water management pilot • Discuss next steps • Answer questions 2

Current Regulations • Prior to 2006 – • After 2006 – – • no commercial salt water disposal wells within City non commercial salt water disposal wells allowed lease use only Must meet requirements of Section 15 -42 of the Gas Ordinance identified on the Railroad Commission form Moratorium on salt water disposal wells currently in effect. 3

Issues Related to Salt Water Disposal • Trucking waste water – Wear and tear on roads – Air pollution contributions • Potential benefit in recycling water • Establishment of environmental standards for piping and disposal of salt water 4

Issues Related to Salt Water Recycling • Recycling salt water remains a challenge – Saline content varies widely – Wells are not consistent – No two technologies are alike • Testing of technology at Brentwood site • On-going support of other technologies elsewhere 5

Water Evaporation System Intevras’ EVRAS system Chesapeake has plans to install four EVRAS water evaporation units at the Brentwood SWD site in Fort Worth. • Employs natural process of evaporation to turn water into water vapor Evaporative section • Uses “waste heat” from compressor; no need to consume fuel This nominal EVRAS unit in Cresson, which has only one evaporative section, is half the size of the four proposed units for the Brentwood SWD, which will use two evaporative sections each. 6

Water Evaporation System • About 1, 200 barrels per day (BPD) of water can be evaporated out of 3, 000 BPD of highly concentrated salt water (produced water) • Result: less water to be injected into salt water disposal wells • Clean water vapor is released into the atmosphere, where it will naturally return to the earth as rain Each of the four proposed units for the Brentwood SWD uses a minimal footprint of 45’ x 20’ x 15’ deep. This EVRAS unit operating in Cresson for Carrizo Oil & Gas has the capacity to produce 175 barrels of water per day. The four units planned for the Brentwood SWD will produce approximately 1, 200 barrels of evaporated water per day from 3, 000 barrels of produced water. 7

Water Evaporation System 8 8

Brentwood Salt Water Disposal Site • Located on East First Street next to old Arc Park • Permitted with the Texas Railroad Commission • Permitted by the City in 2006 before moratorium adopted • Only permitted SWD site within City 9

SWD Pilot Proposal • Goals: – – Decrease truck mileage on Fort Worth Roads Verify recycling technologies Increase the volume of water being recycled Develop a long range plan for the management of saltwater in the City of Fort Worth • City will partner with Chesapeake to permit a broader use of the Brentwood SWD under specific conditions – evaluate benefits of piping and local disposal of salt water 10

SWD Pilot Proposal • Brentwood SWD will remain non-commercial and exclusively for Chesapeake’s use • Chesapeake gas wells in the “Brentwood Pilot Corridor Area” will be allowed to use the Brentwood SWD for handling salt water. Currently: – 31 pads – 81 wells – Approximately 6, 000 bbl water daily • Pilot Program will include: – Increased monitoring and reporting • SCADA • Salinity out/in • Volumes out/in – Include recycling component – Traffic reduction plan – Reduce impact on the environment 11

Brentwood Corridor. Area Brentwood Pilot Corridor 12

Proposed Plan Combines EVRAS system & SWD injection Phase I: All Brentwood Corridor – trucked Phase II: 3 months; Trinity South – piped (& trucked)* Phase III: 12 months; Trinity North – piped (& trucked)* Phase IV: 15 months; East of 820 – piped (& trucked)* *Goal is to pipe as much as possible 13

Phase-In Approach Phase I –all trucked 14

Phase-In Approach Phase I – all trucked Phase II – 3 months: Trinity South piping completed Phase III – 12 months: Trinity North piping completed Phase IV – 15 months: East of 820 piping completed 15

If maximum trucked to Brentwood: 1, 374, 250 miles saved per year If maximum piped to Brentwood: 1, 645, 055 miles saved per year 16

Information and Outreach • August 28, 2008: Met with leadership of neighborhood associations directly affected by pilot • September 9, 2008: Met with Chamber of Commerce to address concerns about trucking and disposal of drilling waste • Future Meetings with Neighborhood Associations, as requested, to delineate plan. 17

Next Steps • Finalize pilot agreement with Chesapeake • Bring to City Council for approval October 2008 • Extend Salt Water Moratorium for 9 months to July 2009 – Monitor operation and efficiency of Brentwood Pilot – Begin conceptual discussions with other operators • How do we expand the Brentwood Pilot model citywide, if successful • Consider the creation of Citywide Saltwater Management Utility – Consider franchise opportunities – Liability 18

QUESTIONS? 19