1. Induced Seismicity Houston Bar Association Environmental Law Section Houston, Texas January 21, 2015 Mark K. Boling Executive Vice President and President, V+ Development Solutions INDUCED SEISMICITY: WHAT IS THE RISK AND HOW SHOULD IT BE MANAGED?

2. Induced Seismicity 1 1. Enacting Smart Regulations 2. Induced Seismicity – What is it? 3. Managing the Risk of Induced Seismicity

3. 1. Smart Regulations 2 Balancing the economic, environmental and social impacts of the regulated activity.

4. IDENTIFY the risks 1 Implement strategies to MITIGATE the risks 3 ASSESS the probability of occurrence and potential impact of each risk 2 13 2 Smart Regulation = Effective Risk Management 3 Three Steps to Effective Risk Management:

5. PERCEIVED RISK ACTUAL RISK INFORMATION GAP Ensuring Smart Regulation 4 ACTUAL RISK PERCEIVED RISK COLLABORATION AND RISK COMMUNICATION SMART REGULATION PERCEIVED RISK ACTUAL RISK PUBLIC TRUST & ACCEPTANCE ACTUAL RISK PERCEIVED RISK SMART REGULATION PERCEIVED RISK ASSESSED RISK COLLABORATION AND RISK COMMUNICATION PUBLIC TRUST & ACCEPTANCE

6. 2. Induced Seismicity – What is it? 5

7. Induced Seismicity – What is it? Earthquakes or “seismic events” that are attributable to human activities. In the context of oil and gas operations, the “human activity” is the injection of fluids into, or the withdrawal of fluids from, subsurface formations. I will focus on fluid injection operations. 6

8. Induced Seismicity – What causes it? 7 Coulomb Criterion: Ʈ = µ (σ – p) Where: Ʈ is the shear stress (force acting parallel to the fault); µ is the co-efficient of friction; σ is the normal stress (force acting perpendicular to the fault); and p is the pore pressure (the pressure of fluids in the pores of the rocks). Movement along a fault will not occur if the shear stress ( Ʈ ) acting on the fault is less than the effective normal stress (σ – p) acting on the fault. Movement can be triggered by (i) a decrease in normal stress (σ), (ii) an increase in pore pressure (p), and/or (iii) an increase in shear stress ( Ʈ ).

9. 25,000’ BASEMENT SHALE INDUCED SEISMICITY WATER DISPOSAL WELL HORIZONTAL SHALE WELL SAND A typical seismic event generates the same amount of energy as dropping a gallon of milk from chest high to the floor. 8 SHEAR STRESS EARTH STRESS NORMAL STRESS

10. 25,000’ BASEMENT SHALE INDUCED SEISMICITY HORIZONTAL SHALE WELL SAND 9 EARTH STRESS SHEAR STRESS SHALE NORMAL STRESS

11. 3. Induced Seismicity – Managing the Risk 10

12. Main Factors Influencing Induced Seismicity 1.Presence, orientation and physical properties of fault(s); 2.Amplitude and direction of in-situ stress field in area of fluid injection; 3.Pore pressure prior to injection; 4.Volume and rate of fluid being injected; 5.Change in pore pressure as a result of injection; and 6.Physical properties of rocks in area of fluid injection. 11

13. Risk Assessment – Two Questions 1.What factors are responsible for triggering the seismic event? Shear stress Normal stress Pore pressure 2.What factors determine the magnitude of the seismic event? Shear strength of faulted rock Fault rupture area Fault displacement 12

14. Induced Seismicity – Regulatory Approaches 13 Arkansas:  Moratorium Zone-all disposal wells are prohibited  Regional Fault-no disposal wells within one (1) mile of regional fault  Moratorium Zone Deep Fault-no disposal wells within five (5) miles of MZD fault  Minimum Distance Between Disposal Wells-five (5) miles for deep wells; one- half (1/2) mile for shallow wells  Other Requirements-operator to provide daily injection volume and pressure information

15. Induced Seismicity – Regulatory Approaches Ohio: New Permitting Requirements (determined on well-by-well basis) Agency may require applicant to:  Conduct pressure fall-off and bottomhole pressure testing  Investigate potential faulting (including seismic surveys)  Submit well logs, tracer survey and seismic monitoring plan  Conduct “other tests” No drilling into Precambrian basement rock 14

16. Induced Seismicity – Regulatory Approaches Texas: Applicant must survey 100 square mile area around well location for “historical seismic events” (USGS data) Commission may require applicant to provide well logs, cross sections, structure maps and/or pressure front boundary calculations if the disposal well is located in area of increased risk that injected fluids will not be confined to injection interval “Increased risk” areas – complex geology, injection interval is close to basement rock, presence of transmissive faults, and/or history of seismic events 15

17. Induced Seismicity Houston Bar Association Environmental Law Section Houston, Texas January 21, 2015 Mark K. Boling Executive Vice President and President, V+ Development Solutions INDUCED SEISMICITY: WHAT IS THE RISK AND HOW SHOULD IT BE MANAGED?