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_______________________________________________________________________________________________ENERGY REPORT (Section 4) 9/29/10

Marcellus Shale (Frac Fluids)PurposeThe purpose of this report is to look at the frac fluids used for the Marcellus Shale gas reserves and some of the issues.

Fracking Fluids

Frac Fluids (the Secret Sauce)Hydrofrac fluids are often treated with proprietary chemicals to increase the viscosity to a gel-like consistency that enables the transport of a proppant, usually sand, into the fracture to keep it open after the pressure is released. The viscosity of these fluids then breaks down quickly after completion of the hydrofrac, so they can be easily removed from the ground. The chemical formulations required to achieve this are highly researched and closely guarded, and finding out exactly what is in these fluids may present a challenge. The data publicly available on Marcellus Shale hydrofrac treatments indicate that a slickwater frac works best on this formation . These types of hydrofracs employ linear gels and friction reducers in the water, and utilize only small amounts of proppant, relying instead on fracture surface roughness to hold it open. The potential problems for local wastewater treatment facilities caused by proprietary chemical additives in hydrofrac fluid are unclear.

Along with the introduced chemicals, hydrofrac water is in close contact with the rock during the course of the stimulation treatment, and when recovered may contain a variety of formation materials, including brines, heavy metals, radionuclides, and organics that can make wastewater treatment difficult and expensive. The formation brines often contain relatively high concentrations of sodium, chloride, bromide, and other inorganic constituents, such as arsenic, barium, other heavy metals, and radionuclides that significantly exceed drinking water standards. http://geology.com/usgs/marcellus-shale/

Chemicals Used at Drilling Sites a Secret?Drilling companies must disclose the names of all chemicals to be stored and used at a drilling site in the Pollution Prevention and Contingency Plan that must be submitted to DEP as part of the permit application process. These plans contain copies of material safety data sheets for all chemicals, and DEP recommends to operators that a copy be kept on each well site. This information is on file with DEP and is available to landowners, local governments and emergency responders. http://www.hellerspringfield.com/issues/marcellus-shale-fracking.htm

The fact is that government agencies do have access to confidential fracture-fluid ingredient information on an as needed basis, and the public has access to nonproprietary information identifying ingredients. Such is available from the Environmental Protection Agency (EPA), from other government reports, and from industry sources. Further, the Occupational Safety and Health Administration requires material safety data sheets for fracture fluids to identify hazardous components, provide safe-handling information, and to provide guidance to first responders and hospitals. The identity of some components of a particular fracture fluid may be a trade secret. To encourage innovation, the law allows limited protection of trade secret identities of specific components, but only where necessary to protect commercially valuable information from competitors. http://www.spe.org/jpt/print/archives/2010/05/7GuestEditorial.pdf

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List of Fracking Solutions with Hazardous Componentshttp://www.dep.state.pa.us/dep/deputate/minres/oilgas/FractListing.pdf

Proppants

The use of proppants to hold fractures open after a hydraulic fracturing treatment is not new to the oil and gas industry. However, over the past five or six years, the proppant materials themselves have greatly improved and the technology for specially engineered proppants continues to advance.

According to some suppliers, the type of proppant makes an economic impact on the well productivity.

Per this supplier……As an example, more than 100 field studies showed that optimizing the choice of proppant increased fracture conductivity and well productivity by 20 to 30%, as well as increasing the estimated ultimate recovery (EUR) by 30%. http://www.carboceramics.com/economic-conductivity/

And according to this supplier,…… The proppants are expected to be employed as an additive in the portion of the fracture where they can afford maximum value (i.e., beyond the conventional proppant pack or in the conductivity-limited near-wellbore region or both). It is expected that Oxane’s proppants will comprise 20% to 30% of the total proppant pumped and conventional proppants will comprise the balance.  

Oxane’s proppants afford operators new degrees of freedom in hydraulic fracturing job design (proppant density, proppant size, fluid selection, and pumping rate) which improve the probability that frac jobs will be successful while reducing operating cost and environmental impact. A lighter proppant requires less horsepower to place, reducing the propensity of fractures to grow out of zone (particularly in slickwater) and the total amount of horsepower required, thus reducing cost, CO2 emissions, and noise/surface disturbance. The cost associated with placing frac materials out of zone (waste prop, chemicals, and fluid) also should be reduced. http://www.epmag.com/Magazine/2010/8/item63837.php

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Frac Fluid DisposalThe current disposal practice for Marcellus Shale liquids in Pennsylvania requires processing them through wastewater treatment plants, but the effectiveness of standard wastewater treatments on these fluids is not well understood. In particular, salts and other dissolved solids in brines are not usually removed successfully by wastewater treatment, and reports of high salinity in some Appalachian rivers have been linked to the disposal of Marcellus Shale brines. Another disposal option involves re-injecting the hydrofrac fluids back into the ground at a shallower depth. This is a common practice in the Barnett Shale production area of Texas, and has been utilized for some Marcellus wells drilled in West Virginia.

Concerns in Appalachian States about the possible contamination of drinking water supply aquifers has limited the practice of re-injecting Marcellus fluids, however. Another option might be to inject the waste fluid into deeper formations below the Marcellus Shale that are not used as aquifers, such as the Oriskany or Potsdam Sandstones. A third disposal process used in Texas places the wastewater into an open tank to evaporate. The solids that remain behind are then disposed of as dry waste. Although this may be an effective technique in the deserts of the American Southwest, its usefulness in the humid climate of the Appalachians is questionable. A systematic study of the options for Marcellus Shale waste fluid treatment, disposal, or recycling could help to determine the best available procedures.http://geology.com/usgs/marcellus-shale/

1) Re-injecting According to this July 2010 report from Argonne National Laboratory, …At least some of the Marcellus Shale gas operators are sending flowback and produced water to commercial disposal wells located in Ohio. The author contacted the Ohio Department of Natural Resources, Division of Mineral Resources Management (DMRM), to learn which commercial wastewater disposal companies were operating injection wells in eastern and central Ohio to receive flowback and produced water from Pennsylvania. Tom Tomastik, an Underground Injection Control program manager with the Ohio DMRM, replied:

“Ohio does not distinguish between commercial and non-commercial Class II injection wells. So basically, it’s the operator who determines if they will take other operator’s oil and gas fluids. Although we track brine hauling from cradle to grave, it would be a huge process right now to go through and delineate the fluids from the Marcellus. Starting on June 30th, however, passage of Ohio Senate Bill 165 will require a 20 cent per barrel fee for out-of-district oilfield fluids to be paid to us, so we will start tracking out-of-state fluids more closely (mostly Marcellus) then.” (Tomastik 2010). the injection wells can be either onsite wells operated by the gas producer or offsite third-party commercial disposal wells. See details (chapter 3) http://www.ead.anl.gov/pub/doc/Water%20Mgmt%20in%20Marcellus-final-jul10.pdf

2) Discharge to Surface Water Body Many types of industrial wastewater are discharged to streams, rivers, and other surface water bodies. Permission to discharge wastewater is made through National Pollutant Discharge Elimination System (NPDES) permits issued by state agencies. However, discharging flowback or produced water directly from a well site presents various challenges. First, the water typically contains high levels of TDS (salinity) and other constituents that would require treatment. In response to concern over flowback and produced water discharges, the PADEP, in April 2009, proposed a new strategy that would add effluent standards for oil and gas wastewaters of 500 mg/L for TDS, 250 mg/L for sulfates, 250 mg/L for chlorides, and 10 mg/L for total barium and total

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_______________________________________________________________________________________________strontium. On May 17, 2010, the Pennsylvania Environmental Quality Board approved the new discharge requirements as revisions to the Pennsylvania regulations. According to the material released on that date, these revisions will go into effect upon publication in the Pennsylvania Bulletin as final rulemaking (as of June 30, that publication has not yet occurred). Second, the U.S. Environmental Protection Agency (EPA) has adopted national discharge standards for many industries (known as effluent limitations guidelines or ELGs). See details (chapter 3) http://www.ead.anl.gov/pub/doc/Water%20Mgmt%20in%20Marcellus-final-jul10.pdf

3) Haul to POTWs Prior to the recent rapid development in the Marcellus Shale region, the oil and gas development activities in the region generated relatively small volumes of produced water. Some POTWs accepted limited quantities of produced water from oil and gas operators. The produced water was trucked from tanks or pits at the well site and discharged into the treatment facility. The treatment processes found at most POTWs are designed to remove suspended solids and biodegradable materials, but not salinity or TDS.

As the Marcellus Shale development grew in popularity, operators sought permission to bring more truckloads of salty flowback and produced water to the treatment plants. The increased input of TDS resulted in increased levels of TDS in the discharge. The May 17 revisions to the PADEP discharge regulations mentioned in the previous section will place restrictions on the volume of flowback and produced water that POTWs can accept. See details (chapter 3) http://www.ead.anl.gov/pub/doc/Water%20Mgmt%20in%20Marcellus-final-jul10.pdf

4) Haul to Commercial Industrial Wastewater Treatment Plant Several Pennsylvania companies have provided wastewater disposal service to the oil and gas community for many years. As the volume of flowback and produced water has increased rapidly over the past few years, new commercial disposal companies are opening their doors, while still others are applying for permits from PADEP.

Argonne obtained a list of commercial industrial wastewater treatment plants that currently accept flowback and produced water from the PADEP (Furlan 2010). See details (chapter 3) http://www.ead.anl.gov/pub/doc/Water%20Mgmt%20in%20Marcellus-final-jul10.pdf

5) Reuse for a Future Frac Job The gas companies are interested in finding water to use in frac jobs and in managing the subsequent flowback and produced water from those wells in ways that minimize costs and environmental impacts. One way to accomplish this goal is to collect the flowback water and reuse it for frac fluids in other wells. Several gas companies are currently using this approach.

The May 17 revisions to the PADEP discharge regulations also include a requirement that any oil and gas wastewater having TDS of less than 30,000 mg/L cannot be discharged but must be recycled and reused. See details (chapter 3) http://www.ead.anl.gov/pub/doc/Water%20Mgmt%20in%20Marcellus-final-jul10.pdf

MEMORANDUM (From the US House of Representatives) February 18, 2010Intro

In 2003, EPA entered into a voluntary memorandum of agreement (MOA) with the threelargest hydraulic fracturing companies, Halliburton, BJ Services, and Schlumberger, to eliminate

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_______________________________________________________________________________________________diesel fuel from hydraulic fracturing fluids injected into certain wells located in undergroundsources of drinking water. Aside from this MOA, there is virtually no federal regulation ofhydraulic fracturing. [The MOA does not contain any enforcement provisions nor does it confer immunity in an action to enforce the SDWA or EPA’s regulations on underground injection.]

In 2005, Congress exempted the practice of hydraulic fracturing from theSafe Drinking Water Act (SDWA), except when the injected fluids contain diesel fuel. Oil andgas companies can use additives and chemicals besides diesel fuel in their hydraulic fracturingfluids, but federal regulators have no authority to limit the types and volumes of thesesubstances. Indeed, oil and gas companies do not need to report to federal regulators what theirfracturing fluids contain or where they are used.

As Chairman of the House Committee on Oversight and Government Reform in the lastCongress, Chairman Waxman requested and received some data from Halliburton, BJ Services,and Schlumberger on the chemicals used in their fracturing fluids. According to this data, two ofthese companies used diesel fuel as a fracturing fluid between 2005 and 2007. Halliburtonreported using more than 807,000 gallons of seven diesel-based fluids, a potential violation ofthe MOA. BJ Services reported using 1,700 gallons of two diesel-based fluids in severalfracturing jobs in Arkansas and Oklahoma. In a letter to the Oversight Committee, BJ Servicesacknowledged that these events were “in violation of the MOA.” The companies also indicatedthat they used other chemicals in their fracturing fluids – such as benzene, toluene, ethylbenzene,and xylenes – that could pose environmental and human health risks.

The information provided to the Oversight Committee did not specify whether thesefluids were injected into wells located in or near underground sources of drinking water. This isan important issue because injecting the chemicals in or near sources of drinking water couldcreate contamination risks. In addition, it could be a violation of the Safe Drinking Water Act ifthe fluids contain diesel fuel. The information also did not address how the companies disposeof their fracturing fluids and whether this is being done in an environmentally safe manner.Three of the letters being sent today seek additional information from Halliburton, BJServices, and Schlumberger on these and related issues. In addition, we are seeking similarinformation from five smaller fracturing companies that comprise a growing share of the market.The extraction of natural gas from unconventional sources appears to hold great potentialfor enhancing our energy independence and reducing air pollution, including carbon emissions.But as the development of this new technology proceeds, it should be conducted in anenvironmentally safe manner. The purpose of the letters is to help the Committee assess whetherthe new technology poses any environmental or public health risks that Congress should address.

BackgroundConcerns about Hydraulic FracturingFederal regulators currently do not have access to a full accounting of the types andquantities of chemicals used in hydraulic fracturing fluids, although some states requiredisclosure. Under the Emergency Planning and Community Right to Know Act, approximately22,000 industrial and federal facilities must report to EPA the quantity of toxic chemicals they

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_______________________________________________________________________________________________release, store, or transfer, which is then made public in the annual Toxics Release Inventory(TRI). Oil and gas exploration and production facilities are exempt from this reportingrequirement. EPA also does not have authority under the Safe Drinking Water Act (SDWA) torequire disclosure of the chemicals injected in hydraulic fracturing operations.

EPA has raised particular concerns about diesel fuel, noting that the “use of diesel fuel infracturing fluids poses the greatest threat” to underground sources of drinking water. Dieselcontains constituents regulated under SDWA because of their toxicity, including benzene,toluene, ethylbenzene, and xylenes (BTEX chemicals). The Department of Health and HumanServices, the International Agency for Research on Cancer, and EPA have determined thatbenzene is a human carcinogen. Chronic exposure to toluene, ethylbenzene, or xylenes candamage the central nervous system, liver, and kidneys.

Environmental groups, public health officials, and communities across the country haveraised other concerns about hydraulic fracturing, beyond potential impacts on drinking water. InTexas, state regulators are responding to tests showing high levels of benzene in the air nearwells in the Barnett Shale gas fields. In Pennsylvania, state regulators are facing a newchallenge of how to ensure proper disposal of the millions of gallons of wastewater generatedfrom natural gas development in the Marcellus Shale. In New York, the state Department ofEnvironmental Conservation analyzed wastewater extracted from wells and found levels ofradium-226 as high as 267 times the limit safe for discharge into the environment and thousandsof times the limit safe for people to drink. Others have raised concerns about water scarcity,since the drilling and hydraulic fracturing of a horizontal shale gas well may require 2 to 4million gallons of water.

EPA’s Recent Work on Hydraulic FracturingIn May 2009, EPA Administrator Lisa Jackson said that she found allegations of drinkingwater contamination linked to hydraulic fracturing “startling” and told members of Congress thatit may be time to take another look at the safety of the hydraulic fracturing process. EPA hireda consulting firm to survey media reports and publicly available documents describing severalcases of drinking water contamination allegedly linked to hydraulic fracturing. Based on thisreview of available literature, the firm concluded that 12 of the contaminant cases examined“may have a possible link to hydraulic fracturing, but, to date, EPA has insufficient informationon which to make a definitive decision.”

A conference report for the Department of the Interior, Environment, and RelatedAgencies Appropriations Act for Fiscal Year 2010, signed into law on October 30, 2009,requested that EPA conduct a new scientific study of the hydraulic fracturing process.Specifically, the report states that EPA is to “carry out a study of the relationship betweenhydraulic fracturing and drinking water, using a credible approach that relies on the bestavailable science, as well as independent sources of information.”

The Committee’s Letters

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_______________________________________________________________________________________________To help answer these questions, the Subcommittee on Energy and Environment issending a new request to eight companies engaged in hydraulic fracturing in the United States:Halliburton, BJ Services, and Schlumberger, as well as Frac Tech Services, Superior WellServices, Universal Well Services, Sanjel Corporation, and Calfrac Well Services, five smallercompanies that comprise a growing share of the market. The Committee is requesting the mostrecent data on the types and quantities of chemicals used in hydraulic fracturing fluids withadditional information on whether the companies injected these fluids in, near, or below anunderground source of drinking water. The Committee also is requesting documents related toany allegations that the hydraulic fracturing caused harm to human health or the environment. Inaddition, the Committee is requesting information on the chemical contents of water producedfrom hydraulic fracturing operations and how the companies dispose of this waste.

See details http://energycommerce.house.gov/Press_111/20100218/hydraulic_fracturing_memo.pdf

Transporting Fluids and Supplies

Large hydrofrac treatments often involve moving large amounts of equipment, vehicles, and supplies into remote areas. Transporting all of this to drill sites over rural Appalachian Mountain roads could potentially cause erosion, and threaten local small watersheds with sediment. Drill pad and pipeline construction also have the potential to cause similar problems. Of equal concern is the possibility for spills or leaks into water bodies as the fluids and chemical additives are transported and handled. Little is known about how a Marcellus Shale drilling "boom" might adversely affect the land, streams, and available water supplies in the Appalachian Basin. Even under current Marcellus gas production levels, complaints of rural road damage and traffic disruption from drilling equipment have been received, indicating that this could be a significant problem if carried out across thousands of active drill sites. http://geology.com/usgs/marcellus-shale/

State Accredited Water Testing

http://extension.psu.edu/water/resources/publications/water-pollutants/testing/thirdpartylabs.pdf

Author Mike Chmela (Project Director, Market Research)

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