Class II SWD Disposal Well Issues: Myth versus Reality

Produced Water Conference January 18-20, Sugarland, Texas

Laura Capper CAP Resources

www.cap-res.com [email protected]

Class II SWD Disposal Well Issues: Myth versus Reality… and Impacts we can Anticipate

Talk Basis: Seismicity and Disposal Well & Formation Health Coverage Universe (13 States, Basins)

Texas – Statewide and detailed Breakouts for Eagle Ford, Permian, Barnett, East Texas, Panhandle Oklahoma Colorado North Dakota Montana New Mexico Louisiana Kansas Pennsylvania / Ohio Nebraska West Virginia* Wyoming Limited coverage (lack of pressure data and analysis): Pennsylvania, Ohio, Wyoming, West Virginia. Partial coverage (some pressure data, not comprehensive): New Mexico, Louisiana *seismic only, no pressure or volumetric data

A 300 page report which identifies and qualifies the risks and complexities associated with current Oil and Gas operational reliance on Class II Salt Water Disposal wells. This conservative, unbiased, fact-based, transparent report specifically addresses and attempts to quantify key operational questions and specific SWD operations which might be most impacted by an upturn or changes in industry regulations.

A Reference document for operators wishing to stay ahead of disposal risk.

COPYRIGHT 2017 CAP RESOURCES LAURA CAPPER, ALLEN BLANCHARD, PRINCIPALS

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Report Background : Field Experience

Laura Capper is a principal in newly formed EnergyMakers

Advisory Group, and founder and CEO of CAP Resources.

Laura has provided operations and strategy consulting services

to over 600 companies spanning every continent, including

virtually all U.S. based major integrated E&P companies,

leading independent oil companies, and over 100 hundred

oilfield service companies. Her expertise includes

unconventional drilling, completion, production and

environmental technologies and market strategies, technology

commercialization, advanced materials, and integrated oilfield

waste management strategies. She is an oilfield water

management expert and has evaluated some 400 technologies

related to oilfield waste treatment and water management. She

is the principal author of a series of annual reviews of the state

of the market in North American Water Management. Most

recently she has been responsible for over $3 B in acquisitions,

joint ventures and investments for leading oil and gas

companies. Laura is a B.S.E.E. from Rice University with

minors in Bioengineering and Computer Science, and currently

serves as Director of 5 privately held companies, and is a

Director or advisor to 4 non-profits tasked with advancing

technology development and access to education.

Allen Blanchard a Texas PBE specializing in the oil and gas

environmental lifecycle both in technical and business areas, especially

related to environmental and waste operations, design, project

management, compliance workflow, and regulatory management. 27

years experience includes:

• disposal of >30MM bbls of oil and gas waste, including NORM

(naturally occurring radioactive materials) and solids;

• boots on the ground assessment of >2200 sites; the

• NORM remediation of >300 sites and 400,000 bbls;

• facility siting,

• design,

• permitting,

• construction,

• operation,

• assessment,

• decontamination,

• remediation,

• compliance scoping and

workflow

Water Management, Treatment, Logistics Environmental Engineering, Waste Management, Regulatory Expert


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Typical earthquake Effects Magnitude Typical Earthquake Effects Estimated

Events per

Year

8 and

higher

Major damage to buildings, structures likely to be destroyed. Will cause

moderate to heavy damage to sturdy or earthquake-resistant buildings.

Damaging in large areas. Felt in extremely large regions. Death toll ranges

from 1,000 to 1 million.

1 ¹

Ex:Chile, 1960

7 - 7.9

Causes damage to most buildings, some to partially or completely collapse

or receive severe damage. Well-designed structures are likely to receive

damage. Felt across great distances with major damage mostly limited to

250 km from epicenter. Death toll ranges from none to 250,000.

10-20 ¹

Ex: San

Francisco,

1906

6 - 6.9

Damage to a moderate number of well-built structures in populated areas.

Earthquake resistant structures survive with slight to moderate damage.

Poorly designed structures receive moderate to severe damage. Felt in

wider areas;

100 to 150 ²

Ex: Kobe,

Japan 1995

5 - 5.9

Can cause damage of varying severity to poorly constructed buildings. At

most, none to slight damage to all other buildings. Felt by everyone.

Casualties range from none to a few.

1000 to 1500 ²

Ex:

Northridge,

CA 1994

4 - 4.9

Noticeable shaking of indoor objects and rattling noises. Felt by most people

in the affected area. Slightly felt outside. Generally causes none to minimal

damage. Moderate to significant damage very unlikely. Some objects may

fall off shelves or be knocked over.

10,000-15,000

3 - 3.9

Minor – often felt by people, but very rarely causes damage. Shaking of

indoor objects can be noticeable. Over 100,000

Ex: OK City

Bombing

2 - 2.9 Minor – easily recorded but not felt generally, felt slightly by some people,

no damage to buildings Over

1,000,000

Less than

2 (Micro)

Microearthquakes not felt, or rarely felt by sensitive people Continual /

several million

per year

Typical microseismic events during hydraulic fracturing are less than -2 M (< minus two)


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Induced Seismicity

2 -1 0 1 -2

FELT RANGE

INJECTION-RELATED INDUCED SEISMICITY

HYDRAULIC FRAC’ING (TYPICALLY -2 M TO -.5 M)


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Source: pbslearning.org

2006-2016 Seismic Events


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A volatile world

A volatile country –

with or without

induced earthquakes


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California Contribution (Alaska not Shown)


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Then and Now


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What’s Changed? Our Ability to Detect Small Earthquakes

Prior to 1961 there were no seismic stations in Oklahoma, with the closest being in St. Louis, some 600 miles away.

Today, we compare that initial coverage prior to 1961 to current coverage, which is far more extensive.

Current seismic arrays in

place include both fixed

arrays, “traveling” arrays,

and temporary monitoring

devices.


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What’s Changed? Our Ability to Detect Small Earthquakes From a global standpoint, there were approximately 350 seismic monitoring stations operating in the world

in 1931, compared to more than 8000 now.


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but…monitoring sensitivity aside, there have been recent swarms


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Induced Seismicity Categories in Oil and Gas (Used in Our Report)

Commercial Disposal Well Injection Private Disposal Well Injection EOR Injection Combination of Induced Factors Unknown Hydraulic Fracturing* (*Hydraulic Fracturing events are negligible in onshore U.S.; 6 suspected correlations, but do occur in certain plays in Canada, and observed in Blackpoole, UK)

Since the 1920s, induced seismicity has been documented and has been attributed to a wide

range of human activities such as filling lakes by new dams, mining operations, geothermal

projects, nuclear testing, and subsidence from oil and gas production, amongst other activities. In

this report, we focus specifically on more recent energy-related activities over the last 40 years or

so:

• Fluid / Brine Extraction (not produced water)

• Subsidence related to Production or Extraction

• CO2/Gas injection

• Chemical Injection Waste

• Mining Related

Induced Seismic Activity Categories used in Report


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Oklahoma: Numbers of Low Magnitude(M) events correlate with Higher Magnitude events (Gutenberg-Richter law of distribution)

The parameter b (commonly referred to as the "b-value") is commonly close to 1.0 in seismically active regions. This means that for given a frequency of 4.0 event there will be 10 times as many magnitude 3.0 quakes and 100 times as many magnitude 2.0 quakes. There is some variation of b-values in the approximate range of 0.5 to 2 depending on the source environment of the region.


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Can we draw conclusions overlaying Seismic activity (yellow and red) and injection volumes (blue townships?)


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Factors effecting disposition to seismicity


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NOT MUCH IS KNOWN ABOUT DEEP BASIN FAULTS Seismic evidence of a two-layer lithospheric deformation in the Indian Ocean Yanfang Qin & Satish C Singh Nature Communications 6,

Article number: 8298 doi:10.1038/ncomms 9298 Published 14 September 2015

The more significant induced seismic events are often caused by a combination of energy transmission which might include shallower faults, which somehow intersect very deep faults, or “basement faults”. Tectonic activity within these deeper basement faults are able to generate, and transfer, significantly more energy than shallower faults, generally speaking. These deeper faults are in the less ductile crystalline rocks below shallow sedimentary rock and are less likely to plastically deform when critically stressed.

Examples of Deep Basin Faults (Indian Ocean)

http://www.nature.com/ncomms/2015/150914/ncomms9298/full/ncomms9298.html





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Geology 101 (or 100)

The bulk of current U.S. shale and LTO production stems from the Cretaceous Period and the Mississippian Epoch


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Geology 101 (or 100)

We don’t know what we don’t know…


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Barnett / Aledo, Texas Activity Bears this Out

Most of the higher

magnitude (larger, colored

circles) correlate to what is

inferred (dashed line) to be

a deep basin faults

because of the alignment of

the seismic epicenters.

The authors interpreted a

normal fault and a

shallower antithetic normal

fault, in addition to the

inferred deep basin fault.

Causal factors for seismicity near Azle, Texas Matthew J. Hornbach, Heather R. DeShon, William L. Ellsworth, Brian W. Stump, Chris Hayward, Cliff Frohlich, Harrison R. Oldham, Jon E. Olson, M. Beatrice Magnani, Casey Brokaw & James H. Luetgert Nature Communications 6, Article number: 6728 doi:10.1038/ncomms7728 Published 21 April 2015


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And in Oklahoma…


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Regional geology and lithospheric structure and the modern stress field

Randy Keller / Andrew Cullen, Warwick Energy, 2016

All Submitted Faults

Understanding earthquake hazards requires having an understanding of the regional

geology and lithospheric structure and the modern stress field.

Randy Keller / Stress development in heterogenetic lithosphere: Insights

into earthquake processes in the New Madrid Seismic Zone

Yan Zhan, Guiting Hou, Timothy Kusky, Patricia M. Gregg 2016

Predicting Seismic Susceptibility is Extremely Difficult


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Managing UIC Risk With Publicly Available Information

Formation Health – Can my formation continue to except fluids without pressuring up?

Operational Risks – Am I (or my vendors) minimizing operational risks?

– Are behaviors minimizing exposure to seismicity?

– Do I have ample nearby disposal supply capacity?

– Are my commercial suppliers operating within my comfort zone?

Regulatory Risks – Am I operating clearly within the bounds of regulatory compliance?

– How should I stay ahead of regulators in case regulations tighten?


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Unfortunately, 1 well – your well - won’t tell the whole story…

Formation health may be impacted by every well with perforated within the formation


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But if I keep tabs on my

volumes, I can probably

manage pressures, right?


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The Pressure-Volume Relationship is far more complex than meets the eye

Yes and No.

Mainly No.

Lies, damned lies, and statistics

- i.e. a consultant’s toolbox COPYRIGHT 2017 CAP RESOURCES LAURA CAPPER, ALLEN BLANCHARD, PRINCIPALS

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Be careful with the data – there are many ways to go wrong…..


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12 MONTH AVERAGE: 468


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500 700

500 800

4750

500 300

475 500 400 380 450

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

TREATING ANOMOLIES: SPIKES & SURGES Surface Pressure

(PSI)


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Dirty Data and Pressure Spikes

500 700

500 800

4750

500 300

475 500 400 380 450

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000



(PSI)


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Dirty Data and/ or Pressure Spikes

12 MONTH AVERAGE w/ spike: 855

psi

500 700

500 800

4750

500 300

475 500 400 380 450

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000



(PSI)


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Dirty Data and Pressure Spikes

12 MONTH AVERAGE w/o spike: 459 psi

12 MONTH AVERAGE w/ spike: 855

psi


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Are Pressure Spikes / Anomalies Frequent? 1. How well are we controlling our own operations? 2. How are Commercial SWD vendors doing for us?

Pressure anomalies are seemingly controllable behaviors…effects of solids loading, trucking bottlenecks and injection rate surges, insufficient wellsite storage, etc.


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What is Average, anyway? (Units versus Volume-Weighting)

Jan Feb Mar Apr May Jun

Well A 549 720 512 959 539 622

Well B 579 660 562 700 626 602

Well C 979 980 946 900 1,075 894

Well D 749 880 704 1,300 764 768

Well E 630 720 646 908 649 553


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What is Average, anyway? (Units versus Volume-Weighting)

Jan Feb Mar Apr May Jun

Well A 549 720 512 959 539 622

Well B 579 660 562 700 626 602

Well C 979 980 946 900 1,075 894

Well D 749 880 704 1,300 764 768

Well E 630 720 646 908 649 553


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What is Average, anyway? (Units versus Volume-Weighting) Monthly

Average

Volume

(BPD)

250 Well A

400 Well B

11,000 Well C

840 Well D

450 Well E


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But what about downhole, where the action is?


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Conclusion: You may not be able to pick which mine will go off and when, but it is possible to identify those fields (counties, formations, and depths) where you have potential exposure. This process also allows better direction of capital investments to mitigate risk an upturn scenario.

Talk Basis: Seismicity and Disposal Well & Formation Health Coverage Universe (13 States, Basins)

Texas – Statewide and detailed Breakouts for Eagle Ford, Permian, Barnett, East Texas, Panhandle Oklahoma Colorado North Dakota Montana New Mexico Louisiana Kansas Pennsylvania / Ohio Nebraska West Virginia* Wyoming Limited coverage (lack of pressure data and analysis): Pennsylvania, Ohio, Wyoming, West Virginia. Partial coverage (some pressure data, not comprehensive): New Mexico, Louisiana *seismic only, no pressure or volumetric data

This comprehensive 300 page report identifies and qualifies the many risks and complexities associated with current Oil and Gas operational reliance on Class II Salt Water Disposal wells for the disposal of produced water, fracwater, and oilfield liquid wastes. This unbiased, fact-based, transparent report specifically addresses and attempts to quantify key operational questions for those most impacted by potential changes to industry in the use of SWDs.

A key reference document for operators wishing to stay ahead of disposal risk.

Documents

Class II SWD Disposal Well Issues: Myth versus Reality