The oil and natural gas industry 9.16 million contributes tremendously $1 trillion $178 billion U.S. and global energy demand is rising

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2 The oil and natural gas industry contributes tremendously to the U.S. economy as one of the nations largest employers and purchasers of goods. The industry also produces many products essential to everyday living and provides an economical fuel source for the nation s transportation, agriculture and manufacturing needs. U.S. and global energy demand is rising significantly as worldwide population grows and quality of life improves for people around the globe. In fact, the International Energy Outlook 2010 projects a 50 percent increase in world energy consumption between 2007 and Policies that encourage domestic oil and natural gas production are necessary to meet this increasing demand and drive economic growth here in the United States and abroad. These abundant resources create American jobs, generate much-needed government revenue and provide reliable energy supplies to American families and businesses million Number of people directly and indirectly employed by the U.S. oil and natural gas industry $1 trillion Amount contributed to the national economy by the oil and natural gas industry $178 billion Amount paid to the U.S. government in rent, royalties and bonus payments from 1892 to 2009 $95.6 billion Amount paid in 2008 U.S. income taxes alone $194 billion Amount invested to improve the environmental performance of its products, facilities and operations since 1990 $58.4 billion Amount invested in low- and zerocarbon emission technologies from 2000 to 2008 more than either the federal government or all U.S.-based private industries combined

3 Jan-1920 Aug-1922 Mar-1925 Oct-1927 May-1920 Nov-1932 Jun-1935 Jan-1938 Aug-1940 Mar-1943 Oct-1945 May-1948 Nov-1950 Jun-1953 Jan-1956 Aug-1958 Mar-1961 Oct-1963 May-1966 Nov-1968 Jun-1971 Jan-1974 Aug-1976 Mar-1979 Oct-1981 May-1984 Nov-1986 Jun-1989 Jan-1992 Aug-1994 Mar-1997 Oct-1999 May-2002 Nov-2004 Jun-2007 Jan-2010 In 2009, the most recent year for which data is available, the oil and gas industry supported a total value added to the national economy of more than $1 trillion or 7.7 percent of the U.S. gross domestic product.

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6 Unconventional Reserves refers to: Unconventional oil which is petroleum produced or extracted using techniques other than the traditional oil well method. Natural gas resources require greater than industry-standard levels of technology or investment to harvest The three most common types of unconventional gas resources are Tight sands, CoalBed Methane (CBM), and Gas Shales. There is good reason to expect significant increase in harvests, based on undeveloped reservoirs. Dr. Hans- Holger Rogner of the International Atomic Energy Agency estimates that globally, there are: o 9,000 Tcf of gas in place in coalbed methane o 16,000 Tcf of gas in place in shale gas, o 7,400 Tcf of gas in place in tight gas sand Tcf = Trillion Cubic Feet The growth has led to increased investment in exploration and production. Unconventional gas production is forecast to increase from 42 percent of total US gas production in 2007 to 64 percent in 2020

7 In its Annual Energy Outlook for 2011, the US Energy Information Administration (EIA) more than doubled its estimate of technically recoverable shale gas reserves in the US, to 827 Trillion Cubic Feet 1

8 1 Well is drilled and lined with steel casing. 2 Holes are made by a special perforating gun, shooting throught the casing. 3 Under high pressure, fluid is pumped through the holes and into the rock. Pressure fractures the rock. 4 Fluid carrying sand is pumped into the fractures. 5 Gas pushes fluid back out. Sand remains holding the fractures open. 6 Natural gas trapped in the rock travels through the fractures and out of the well. Hydraulic fracturing (fracking), uses fluids pumped at high pressure to pulverize rock and release the oil and gas trapped deep underground.

9 In the United States produced water is defined by the EPA. One version of their definition is: "Produced Water" means the water (brine) brought up from the hydrocarbon bearing formation strata during the extraction of oil and gas, and can include formation water, injection water, and any chemicals added downhole or during the oil/water separation process." oil-producing wells in the US* Each barrel of crude oil creates approximately 10 barrels of produced water gas-producing wells in the US* In natural gas extraction, hydraulic fracturing (frac'ing) injects over 80,000 lbs of chemicals into the earth s crust for each well that is drilled

10 The treatment of produced water is a major component of the cost of producing oil and gas. Wells may start out producing little water but sooner or later all oil wells produce a much larger volume of water than oil. The ability to efficiently and economically dispose of this water is critical to the success in the oil production business. Annually, the U.S. produces 20 Billion barrels (882 Billion gallons) of produced water, onshore and 700 million (29.4 Billion gallons) off-shore. The Sionix mobile, modular water treatment systems co-locate with the contamination source at the wellhead! Costly and risky transportation of these highly toxic wastes no longer need to cross the busy highways and byways of rural America threatening told and untold catastrophes. What s more, with our new evaporator technology, the highly concentrated brine from treatment processes that has been injected in deep wells across the country will also be eliminated, and sale of recovered salts can become recurring revenue.

11 Problems associated with produced water for drillers include: Plugging of disposal wells by solid particles and suspended oil droplets Plugging of lines, valves, and orifices due to deposition of inorganic scales Corrosion due to acid gases and electrochemical reactions of the water with piping and vessel walls Exceeding discharged oil concentrations Growth of bacteria that plug lines and valves or result in the formation of harmful products

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13 Chemicals must be used in hydraulic fracturing to ensure the producing formation is effectively treated. The charts shown depict generic hydraulic fracturing chemical usage including the types of chemicals, their uses in the process, the consequences of not using them and the additive types and amounts which are typically used in the hydraulic fracturing of shales.

14 Hydrochloric Acid Glutaraldehyde Quaternary Ammonium Chloride Quaternary Ammonium Chloride Tetrakis Hydroxymethyl-Phosphonium Sulfate Ammonium Persulfate Sodium Chloride Magnesium Peroxide Magnesium Oxide Calcium Chloride Choline Chloride Tetramethyl ammonium chloride Sodium Chloride Isopropanol Methanol Formic Acid Acetaldehyde Petroleum Distillate Hydrotreated Light Petroleum Distillate Potassium Metaborate Triethanolamine Zirconate Sodium Tetraborate Boric Acid Zirconium Complex Borate Salts N/A Ethylene Glycol Methanol Polyacrylamide Petroleum Distillate Hydrotreated Light Petroleum Distillate Methanol Ethylene Glycol Guar Gum Petroleum Distillate Hydrotreated Light Petroleum Distillate Methanol Polysaccharide Blend Ethylene Glycol Citric Acid Acetic Acid Thioglycolic Acid Erythorbate Lauryl Sulfate Isopropanol Ethylene Glycol Sodium Hydroxide Potassium Hydroxide Acetic Acid Sodium Carbonate Potassium Carbonate Copolymer of Acrylamide and Sodium Acrylate Sodium Polycarboxylate Phosphonic Acid Salt Lauryl Sulfate Ethanol Naphthalene Methanol Isopropyl Alcohol 2-Butoxyethanol

15 In a petition filed on behalf of 114 state and national groups, the environmental law firm EarthJustice is urging the U.S. Environmental Protection Agency to require natural gas drilling companies to disclose the chemicals they use. Bloomberg reports that the groups also want EPA to require toxicity testing for the chemicals used in fracking. The EPA is studying the effects of fracking on drinking water amid questions about the safety of the technique, in which millions of gallons of water, sand and chemicals are forced into rock to free trapped gas and oil. Results of the U.S. study aren t expected until 2014, according to the agency. New York state may lift a ban on fracking later this year. Thousands and thousands of wells are being drilled each year using these chemicals, [EarthJustice attorney Megan Klein] said yesterday. We want the public to fully understand the risk of these chemicals being injected near their homes, schools and hospitals.

16 A mixture of performance standards for the disposal processes and regulations limiting discharges mandates the standards for treatment of produced water. Produced water must be either reused or disposed of.it can be used as a source of water for waterfloods or pressure maintenance or pressure maintenance projects. If reuse is not an option produced water is disposed of by discharge to the sea or injection under ground. Standards of treatment for reuse are set by industry technical organizations such as the American petroleum Institute (API) and its member companies, the Oil Producers Association (OPA) (formerly the E&P Forum) and other industry groups. Standards for produced water disposal are determined by State, National and international regulatory bodies.

17 Clean Water Act Disposal of flowback into surface waters of the United States is regulated by the National Pollutant Discharge Elimination System (NPDES) permit program. The Clean Water Act authorizes the NPDES program. State regulations In addition to federal authority to regulate the hydraulic fracturing process, states may have additional regulations on hydraulic fracturing and the production of fossil fuels. The National Pollutant Discharge Elimination System (NPDES) permit program controls water pollution by regulating point sources that discharge pollutants into waters of the United States. Point sources are discrete conveyances such as pipes or man-made ditches. Individual homes that are connected to a municipal system, use a septic system, or do not have a surface discharge do not need an NPDES permit; however, industrial, municipal, and other facilities must obtain permits if their discharges go directly to surface waters. In most cases, the NPDES permit program is administered by authorized states.

18 EPA asks drillers to disclose what they do with contaminated water (Forbes) - Sharpening its focus on drillers that use hydraulic fracturing to extract natural gas from deep shale formations, the EPA has directed six firms drilling in Pennsylvania to disclose by May 25 what they do with contaminated water produced by their wells. It ordered a seventh firm to stop injecting fracking fluid and brine it receives from drillers into an abandoned mine near Saltsburg in Indiana County, Pa. "We want to make sure that the drillers are handling their wastewater in an environmentally responsible manner," said EPA mid-atlantic Regional Administrator Shawn M. Garvin. The companies had been taking their produced water, which contains petroleum and an uncertain array of chemicals, to wastewater treatment plants. The Pennsylvania Department of Environmental Protection asked the drillers to halt that practice because the plants are not equipped to treat fracking fluids.

19 The SIONIX Mobile Water Treatment System has superior utility, producing 403,200 gpd of treated water - supported by patented technology, in a small footprint, requiring very low energy, and uses little or no chemical assist all contained in ISO mobile shipping containers. SIONIX DESIGNS innovative and advanced mobile water treatment systems (MWTS) with our patented and proprietary DAF technology as the heart of our systems. Our systems are designed for use in energy, government facilities, healthcare facilities, emergency water supplies during natural disasters, housing development projects, as pre-treatment for desalination and other membrane filtration applications, and various industrial processes especially subterranean fracturing used in oil and gas drilling.

20 280 GALLONS PER MINUTE treated 403,200 GALLONS PER DAY (for our standard DAF) (~10,000 barrels) LOW ENERGY - 75 kwh per day if running for 24 hours Stainless Steel construction Small Footprint Can be mounted on a skid or left on wheeled trailer Proactive and efficient alternative to sedimentation Easily Maintained SCADA software controls each machine Wireless communications are used for data transmission (Can be operated with a smartphone/iphone)

21 Using a patented dissolved air flotation (DAF) technology packaged in a mobile shipping container, air bubbles between the size of 1 and 2 microns are injected and float organic contaminants to the surface where 99.95% are skimmed off, and a majority of inorganic contaminants are also captured and removed. This compares to standard DAF units which historically have been limited to using bubble sizes of 50 microns or larger. The size of these bubbles is important because the smaller the bubble, the greater the surface tension. They can then hold together longer and elevate more organic contaminants to the surface for removal. Eleven patents granted and three patent applications on file for advancement of DAF and evaporation technology NOT A CHEMICAL INTENSIVE TREATMENT Eliminates chlorineresistant contaminants Avoids chlorine byproducts such as Trihalomethanes Sionix provides the means and capability to recycle and reclaim contaminated water, for multiple uses, with the convenience of one-stop shopping. Sionix can be the start to finish source and ultimately bridge your operation s needs with the needs of the environment. Basic technology in use for almost 100 years

22 1. Raw Water enters PRE-TREATMENT at approximately 280 gpm 2. ph and water temperature measured 3. Raw water mixed with COAGULANT in in-line static mixer, if necessary 4. Pumped to Dwell Tank for up to 5 minutes 5. If necessary, mixed with flocculent in in-line static mixer 6. Pumped into CLARIFIER - heavy wastes fall out and pumped into waste tank 7. Clarified water disinfected 8. Pumped to DAF Tank where dissolved air introduced 9. DAF process water is drawn to DAF Pump Feed Line to make DAF bubbles 10. CONTAMINANTS FLOATED to top of DAF tank and skimmed off 11. Contaminates washed off skimmer and into a collection tank 12. Clean water drawn off bottom of DAF Tank (excluding TDS) 13. CLEAN WATER pumped through media filters (excluding TDS) 14. Clean water pumped through carbon filters (excluding TDS) 15. Pumped to DE-SALINATION process (RO) (if needed) where TDS/Salts are removed to produce drinking water 16. Clarifier sludge and backwash from filters collected in Waste Tank - mixed with DAF Sludge 17. De-watered by filter press, belt press or centrifuge 18. Water from the above process returned to system intake and processed again 19. Clean RO Water to Clear Well 20. RO Brine to Evaporator

23 COAGULATION (IF NECESSARY) Occasionally, our process may start with a chemical injection of a flocculent and/or coagulant, depending on a number of factors such as ph, temperature, COD/BOC conditions. CLARIFIER Water passes into a pre-processor or clarifier where macro particles settle out. The pre-processor can be more complicated than mentioned or nothing at all. The source water chemistry and needs of the client dictate the pre-processor configuration. DAF CHAMBER From the pre-processor the water passes into our proprietary DAF chamber where the water is saturated with air bubbles at a rate of 20 gallons per minute (76 liters per minute) of water and 2 liters per minute or air. The gas mixture can be altered as needed for contaminate removal. For example, ozone can easily be added to reduce chemical or biological oxygen demand (COD/BOD). The contaminants float to the surface of the DAF tank where they are skimmed off. DAF CONTINUED Water extracted from this process is returned to the pre-processor, preventing re-contamination of treated water. In the DAF tank, all organics that are not part of the TDS are removed. The effluent from the DAF is passed to a post-processor with a NTU of 0.5 or less. Clear water is then used as a continual loop for bubble creation. MEDIA FILTERS In the final step, treated water from the DAF is sent to the post-processing component. The post-processor may be nothing or a complex set of filters and/or de-salination units (as the circumstances may dictate). DISINFECTION The last component can be anything from a chlorinator to UV unit or an agricultural unit - again as the case may necessitate. The water now meets the specifications of the client. Water loss in the process is dependent on the source water chemistry and direct calculation is not possible.

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25 Proven: Field Proven, Commercialized Product Convenient: Units co-locate with the source of contamination Inexpensive: Economical, Easily Maintained Easy to use: Portable, Mobile, Expandable, Upgradeable Third Party Validated: Under agreement with PACE and PERC Rapid Deployment: A MWTS can be installed in hrs and fully commissioned in 3 to 6 weeks, depending on application Diversely Effective: Our standard MWTS produces approximately 400,000 gallons of treated water per day, but can range from 50K to 1.2MMGPD

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