PRODUCED WATER:BENEFICIAL CONSEQUENCES &WATER TREATMENT MARKET

OPPORTUNITIES

ATLANTIC COUNCIL CONFERENCE“FOSSIL FUEL PRODUCED WATER: ASSET

OR WASTE?”

WASHINGTON, D.C.JUNE 24-25, 2013

Benjamin W. SebreeSebree & Tintera, LLC.

General Counsel, Texas Water Recycling Association

The Oil & Gas Industry Saved the Whales

The Automotive Industry Saved New York City &

Recycled Produced Water Will Help Save Texas

The Oil & Gas Industry Saved the Whales

How?Beginning in the 1700’s, whale oil was

used as the primary illuminant for lamps.

By 1830, the United States became the pre-eminent whaling nation in the world.

The whaling industry reached its height in 1856, then began to swiftly decline.

Why?

1859 – Drake drills first significant oil well in Titusville, PA ushering

in modern petroleum era.

Petroleum and Kerosene Displaced Whale Oil as an Illuminant and Lubricant

Kerosene became available at less than ¼ the cost of whale oil.

Kerosene burned with less odor than whale oil.

By 1860, 40 kerosene plants were in production.

The Automotive Industry Unexpectedly Saved New York City

The Great Horse Manure Crisis of 1894

1800: NYC Population ~ 30,000

1900: NYC Population ~ 4.5 million

Horse Population~200K ~5 million manure pounds per day ~1.6 million urine gallons per day

Massive Waste and Public Health Problem

Cholera Typhoid Typhus Yellow Fever Malaria Mortality Rate

Skyrocketed

Solution?

Not Governmental Law or Policy

Not Regulation Rather: An

Unintended Consequence of a New Technology – the HORSELESS CARRIAGE

Produced Water Will Help Save Texas

Texas Water Crisis

DECREASING WATER SUPPLY

INCREASING POPULATION

Texas Population Growth

Population is expected to increase from 25.4 to 46.3 million by the year 2060

This represents an 82% increase

Texas Water Demand Municipal

water demand is expected to see a 73% increase by 2060

Total demand is expected to see a 22% increase by 2060

Available Water Supplies

Available Water Supplies

Groundwater storage has been steadily decreasing.

By the year 2060, existing water supplies are expected to decrease by 10%

Drought

Drought

Drought

Precipitation is expected to decrease by more than 1 inch by the year 2050.

Total precipitation is expected to decrease to 0-2 inches per year for most of Texas.

Desertification

Texas is rapidly undergoing desertification, representing a long term climate shift towards a more arid climate.

The current rate is 10 miles per year, moving east from west Texas.

This process is indicative of more severe droughts to come.

Water Shortages

By the year 2060, water shortages could account for $116 billion dollars in lost income and 1.1 million lost jobs in the state of Texas alone.

An Unexpected Benefit and Market Opportunity

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Recycling Produced Water Can Help Solve the Problem

Texas Water Demand & MARKET OPPORTUNITIES

CATEGORY 2010 2020 2030 2040 2050 2060

MUNICIPAL 4,851,201 5,580,979 6,254,784 6,917,722 7,630,808 8,414,492

MANUFACTURING 1,727,808 2,153,551 2,465,789 2,621,183 2,755,335 2,882,524

MINING 296,230 313,327 296,472 285,002 284,640 292,294

STEAM ELECTRIC 733,179 1,010,555 1,160,401 1,316,577 1,460,483 1,620,411

LIVESTOCK 322,966 336,634 344,242 352,536 361,701 371,923

IRRIGATION 10,079,215 9,643,908 9,299,464 9,024,866 8,697,560 8,370,554

TEXAS TOTAL 18,010,599 19,038,954 19,821,152 20,517,886 21,190,527 21,952,198

2011 REGIONAL WATER PLANSTATE SUMMARY OF WATER DEMAND PROJECTIONS FOR 2010 - 2060 (IN ACFT*)

Texas Water Shortage

Water Shortages &MARKET OPPORTUNITIES

Existing water supplies are expected to decrease 10% by the year 2060.

Average Expected Shortfall:2020 = 2.3 Million Acre Feet (7.5 Billion

Gallons)2040 = 2.5 Million Acre Feet (8.15 Billion

Gallons)

Without developing other water supplies, during a severe drought, Texas is expected to have an annual shortage of 8.3 million acre-feet (2.7 trillion gallons).

Comparisons, Solutions, and Opportunities

Approximate Amount of Fresh & Brackish Water Used per Year for Texas Oil & Gas Production:

1,397,965,619 barrels58,714,555,998 gallons

180,106 acre feet(less than 1% of Total State Water Demand)

Approximate Amount of O&G Produced Water per Year DISPOSED:

7,066,172,806 barrels296,779,257,852 gallons

910,365 acre feet

(Approximately 5% of Total State Water Demand; 2/3rd Recycled Yields 3.3% of Total State Water Demand AND

26% of projected WATER SHORTAGE)

Texas Water Supply-Demand Gap

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Market Opportunity

2010 2020 2030 2040 2050 20600

5000000

10000000

15000000

20000000

25000000

Projected Water Supply vs. Demand

Demand

Supply

Year

Acr

e-F

eet

per

Yea

r

Texas Water Supply-Demand Gap

Market Opportunity

2010 2020 2030 2040 2050 20600

5000000

10000000

15000000

20000000

25000000

Projected Water Supply vs. Demand

DemandSupply

Year

Acr

e-F

eet

per

Yea

r

Solutions & MARKET OPPORTUNITIES

By recycling produced water from oil and gas activities, a significant portion of the projected water shortage can be addressed.

Current produced water rates are ~7 billion barrels per year, or 294 billion gallons.

100% recycled produced water would meet roughly 39% of the PROJECTED WATER SHORTAGE in year 2020.

More realistically, 66% recycled produced water would meet 26% of the PROJECTED WATER SHORTAGE in year 2020.

Conclusions Produced Water is an Asset.

The Texas Oil & Gas Industry Uses Less Than 1% of Total State Water Demand.

But, It Can Contribute to the Hydrologic Cycle FAR MORE than It Uses.

Recycled Produced Water Can Help Solve the Texas Water Crisis.

If 2/3rds (Reasonably Achievable) of Produced Water in Texas Were Recycled, It Would Yield Approximately:

3.3% of Current State Water Demand26% of Projected State Water Shortage in 2020.

PRODUCED WATER:

ASSET

BENEFIT

SOLUTION