Fracking. The Debate, the Facts, and the Path Forward NGVAmerica Annual Meeting & Industry Summit September 9, 2016

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1 Fracking The Debate, the Facts, and the Path Forward 2016 NGVAmerica Annual Meeting & Industry Summit September 9, 2016

2 Founded 1984 Colorado Oil & Gas Association (COGA) Nationally Recognized Trade Association Focused on Issues in Colorado Over 300 Member Companies Major and Independent Oil & Gas Companies Service Companies Mid-Stream Companies Support Services

3 Today s Talk Fracking Fundamentals Public Narrative Political Developments Path Forward

4 Fracking Fundamentals

$The use of fluids to create a crack by hydraulic pressure The continued injection of fluids into the created crack fracture to make it grow larger$

5 The use of fluids to create a crack by hydraulic pressure The continued injection of fluids into the created crack fracture to make it grow larger The placement of small granular solids into the crack to ensure the crack remains open after the hydraulic pressure is no longer applied Definition

6 Why HF a Well? Increase the Rate at which the well is capable of producing oil or gas Most unconventional formations Require hydraulic fracturing to be economic Does not increase total Reserves

7 Why HF a Well? Electronic Microscope Image of Rock Magnification: 1000X Filename: S0178.tif Width of a human hair 100 µm

8 Fractures and Proppant

9 Misperception: Hydraulic Fracturing is Injecting Fluids into Groundwater

10 Drilling Distance Aquifer ft. Wells Fargo Center ~700 ft 7000 ft.

Steel Casing Purpose Protect ground water Provide stable wellbore during drilling operation Provide well control during drilling Depth Requirements

11 Steel Casing Purpose Protect ground water Provide stable wellbore during drilling operation Provide well control during drilling Depth Requirements Set by State and BLM regulations Extends below the aquifer Cement Helps Protect casing from corrosion Provide zonal isolation Support casing in wellbore

12 HF Fluids

HF Fluids Additive Main Compound Common Use Diluted Acid Hydrochloricor, Muriatic Acid Swimming Pools Biocide Glutaraldehyde Dental Disinfectant Breaker Ammonium Persulfate Bleaching Hair Crosslinker

13 HF Fluids Additive Main Compound Common Use Diluted Acid Hydrochloricor, Muriatic Acid Swimming Pools Biocide Glutaraldehyde Dental Disinfectant Breaker Ammonium Persulfate Bleaching Hair Crosslinker Borate Salts Laundry Detergents Iron Control Citric Acid Food Additive Gelling Agent Guar Gum Biscuits Scale Inhibitor Ethylene Glycol Antifreeze Surfactant Isopropanol Glass Cleaner Friction Reducer Polyacrylamide Water and Soil Treatment

14 FracFocus Website 14

15 Improved Search

16 HF Disclosure Example

17 Misperception: Drilling is Getting Riskier

$was granted an exclusive license to pump the new Hydrafrac process 332 wells were treated first 12 months 75% success rate$

18 HydraFrac Process July of Stanolind Oil and Gas 1st Job: Klepper No. 1 gelled kerosene/gasoline mix Hugoton Gas Field, Kansas Late Patent issued, 23 wells H.F. before commercial application began In 1949, The Halliburton Oil Well Cementing Co. was granted an exclusive license to pump the new Hydrafrac process 332 wells were treated first 12 months 75% success rate

19 Boulder Oil Field

20 Boulder Oil Field Today

21 Footprint 1 Well Pad or 32?

23 Misperception: Drilling and Hydraulic Fracturing Use Too Much Water

24 Colorado Water Utilization by Sector, Agriculture uses the majority of Colorado water; energy sector consumes less than 1% of total Municipal 7.0% Recreation and Fisheries 6.1% Large Industry 0.69% Agriculture 85.6% Industrial 1.18% Thermoelectric Power Generation 0.39% Hydraulic Fracturing, 0.09% Snowmaking 0.03% Source: Colorado Division of Water Resources *Other energy development includes solar, coal, natural gas, and uranium development Notes: 5-year hydraulic fracturing totals are estimates; a small margin of error should be noted when analyzing final results. Total water amounts and percentages will vary slightly from year-to-year based on supplies from varying snowpack and demands resulting from varying climatic conditions. Other Energy Development* 0.03%

25 Greeley Water 2011 Thousands of Gallons Billion Gallons: 28% 8.5 Billion Gallons: 34% 9.1 Billion Gallons: 36%.49 Billion Gallons: 2% Source: Greeley Water/Sanitation 0 City Use Agriculture Excess Hydraulic Fracturing Uses

27 Misperception: Hydraulic Fracturing is Destroying our Air

28 Is Natural Gas Clean? Cleanest-burning hydrocarbon fuel Combustion products are primarily CO2 and water vapor

31 Colorado s O&G Industry 54,000+ active wells $1.2B in public revenue $15.8B production value in 2014 $4.1B in employee income to CO households in 2014 $31.7B in total economic output 102,700 direct and indirect jobs in Colorado Average annual wage for direct employee is $105,000 50% higher than the state average for all industry $160 Million in state royalties, rents, and bonuses in 2014 Sources: University of Colorado Boulder Leeds School of Business Research Division Oil and Gas Industry Economic and Fiscal Contributions in Colorado by County, Published December 2015

32 Average household energy costs in Colorado ($1,551 per year) are 23 percent less than the national average, primarily due to historically lower natural gas prices in the state, according to EIA's Residential Energy Consumption Survey.

34 The Fracking Debate

36 The Perception of Concerns

38 The Reality of Concerns

42 National Campaigns Target CO

$Longmont Indefinite ban on fracking and$ $production Boulder A 5-year ban on fracking$ could be interpreted to prohibit even gas

$Collins A 5-year fracking ban.$

43 Bans and Moratoria Moratoria Descriptions Longmont Indefinite ban on fracking and production Boulder A 5-year ban on fracking and production Lafayette A 5-year ban that could be interpreted to prohibit even gas pipelines and residential delivery. Broomfield A 2-year moratorium slightly improved by a supportive city council. Ft. Collins A 5-year fracking ban. Loveland A 2-year moratorium for further study but possibly interpreted as indefinite pending voter recall.

44 Ballot Initiatives & Governor s Task Force Governor s Executive Order Sept. 2014, established task force comprised of 21 representatives from local government, civic organizations, environmental interests, agriculture, and impacted industries (7/7/7). Mission: To make recommendations for COGCC rules or state legislation to harmonize state and local regulation of oil and gas development in Colorado. Public meetings across the state from Sept Feb of 34 recommendations passed by requisite super-majority #75 Local Control of Oil and Gas Development preempt state law # Setback from all new oil and gas facilities and Areas of Special Concern

45 2,500 Foot Setback Effectively Bans Development Current 500 foot Setbacks 2,500 foot Setbacks with areas of special concern 45

46 Lesson 1

47 Lesson 2

48 HF Disclosure Drinking Water Protection Setbacks and Mitigation Spill Reporting Air Emissions Enforcement & Penalty Taskforce Rulemaking Lesson 3

49 Lesson 4

51 Lesson 5

52 Questions?

ESC Technology and Market Assessment Forum

ESC Technology and Market Assessment Forum Hydraulic Fracturing A Historical and Impact Perspective Kent F. Perry Gas Technology Institute October 27, 2011 Hilton Rosemont Rosemont, IL Topics > Hydraulic