Developing Ecological Offsets for U.S. Shale Plays: Five Years of Learning(s)

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1 Developing Ecological Offsets for U.S. Shale Plays: Five Years of Learning(s) Russ Krauss Vice President, Marketing & Analysis Resource Environmental Solutions, LLC Seventh Environmental Issues and Solutions in Exploration, Production, Refining & Distribution of Petroleum

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4 Permitting U.S. Onshore Environmental Issues for U.S. Shale Gas Plays Barnett Shale Fayetteville Shale Haynesville Shale Marcellus Shale Utica Shale Eagle Ford Shale Traffic New Development Areas Urban Development Water Sourcing Wildlife Noise Well Siting, Well Construction Hydraulic Fracturing Vegetation Air Emissions NORM Archeology and Cultural Resources Water Management Wetlands and Streams Surface Impacts: Well Siting, Drilling Pads, Flowlines, Laterals, Gathering Systems, Processing Plants

5 NEPA: National Environmental Policy Act One Project, Many Federal Permits Natural Gas Act Section 7 Resource Reports Wetlands and Water Use Water Quality Clean Water Act and National Pollution Discharge Elimination System Program Coastal Zone Management Act Executive Order (Construction in Floodplains) Vegetation Wildlife Fish Culture Migratory Bird Treaty Act Endangered Species Act National Wilderness Act Magnuson- Stevens Fishery Conservation and Management Act National Historic Preservation Act Archeological and Historic Preservation Act Land Use and Recreation National Parks and Recreation Act National Wilderness Act Air and Noise Quality Clean Air Act Executive Order (Construction in Wetlands) Wild and Scenic Rivers Act Wild and Scenic Rivers Act 2010: Ruby Pipeline: 2.5 years permitting, $3.8MM for acres of Habitat; $1.7MM Threatened Species 2013: Post-project Enforcement In Process

6 Haynesville Shale Potential Surface Impact to Wetlands Every 5 th Well Permits: CWA 404 RGP/IP Well Pad and Infrastructure Access Roads and Flowlines USACE Vicksburg District 6

7 Wetlands 7

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9 Streams and Waterways 9

10 Typical Regulators of Wetlands And Streams

11 Environmental is a small part of our project budget. Environmental issues and permitting have the largest impacts on project timing.

12 Fayetteville Shale

13 Utica Shale

14 Eagle Ford Shale

15 Eagle Ford Shale

16 Eagle Ford Shale

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20 Waters of the United States

21 Enforcement Assuring Energy Extraction Sector Compliance with Environmental Laws EPA will develop an initiative to assure that energy extraction activities are complying with federal requirements to prevent pollution of our air, water and land.

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23 What to do? Be Proactive Early Understanding of Scope and Magnitude Seek Alternatives and Solutions You have no impacts, no need to permit We ll skip the 404 permit process -- our impacts are too small We only drill one well a quarter, why plan ahead? Risk Management Liability Transfer Do Not Avoid Compliance, The Costs are Too High

24 Ecosystem Services Ecosystem services are societal benefits derived from ecosystems Provisioning Services Fisheries Fresh water Wood products Natural pharmaceuticals Regulating Services Air quality Local climate Water quality/quantity Waste assimilation Soil quality Cultural Services Navigation Recreational angling Scuba diving Education/Research Supporting Services Cycling of carbon, phosphorus, silic on, etc. Photosynthesis Chemosynthesis

25 Ecology Economics Organization Operation Outcome Stock Flows Services Structure Functions Goods Infrastructure Services Benefits Pattern Processes Income (After Fisher, Turner and Morling, 2009)

26 Ecology of Wetlands Structure Soils, flora, and fauna communities Goods Food & fiber products, water supply Processes Nutrient cycling, plant colonization Societal Benefits of Wetlands Services Flood control, water purification Methods for Valuing Wetland Services Markets Non-monetary evaluation Revealed preferences Stated Preferences Functional Indicators Bio-physical equivalence Ecosystem Service Indicators Socio-economic equivalence Credit for Wetland Mitigation (Adapted from Hein et al 2006 and Turner and Daily 2008)

27 Functional Assessment Methods Applied to Quantify Impacts to Waters of the United States Play State Wetlands Streams Haynesville Louisiana Vicksburg District: Charleston Method Marcellus Pennsylvania Ratio and Level 2 Wetland Rapid Assessment Protocol Utica Ohio Ohio EPA: ORAM and Ratio Eagle Ford Texas Fort Worth District: TXRAM, Galveston District: HGMi Little Rock District Stream Assessment Method Ratio and Level 1, Level 2 Riverine Rapid Assessment Protocol Ratio and Huntington/Pittsburgh Approaches Fort Worth: Ratios, TXRAM Galveston: Interim Stream Assessment SOP

28 Comparison of Assessment Methods on Single Wetland Fill Project *Based on results of typical bottomland hardwood wetland impact/mitigation scenario comparison conducted by Society of Wetland Scientists Functional Assessment Workshop, National Wetlands Research Center, Lafayette, Louisiana. **Assumes $20,000 per mitigation acre.

29 Mitigation Typical Mitigation Sequence for Environmental Impacts: Avoid Minimize Compensate Compensatory Mitigation In Order of Preference: Mitigation Banks In Lieu Fee Programs Permittee Responsible Mitigation

30 AFTER BEFORE

31 Post Drilling Restored Well Site

32 Degraded Stream Before Restoration Restored Stream Post Construction

33 Post Construction Stream and Riparian Buffer

34 Post Construction Stream Post Construction Stream With Buffer Grown Out

35 Resource Environmental Solutions, LLC Houston Baton Rouge Lafayette New Orleans Pittsburgh Russ Krauss website wetlands photo here