1 Salt Water Disposal Pilot Project October 14, 2008

2 Purpose Review City’s current requirements on Salt Water Disposal well (SWD) use Outline proposal for urban salt water management pilot Discuss next steps Answer questions

3 Current Regulations Prior to 2006 –no commercial salt water disposal wells within City After 2006 –non commercial salt water disposal wells allowed –lease use only –Must meet requirements of Section of the Gas Ordinance –identified on the Railroad Commission form Moratorium on salt water disposal wells currently in effect.

4 Issues Related to Salt Water Disposal Trucking waste water –Wear and tear on roads –Air pollution contributions Potential benefit in recycling water Establishment of environmental standards for piping and disposal of salt water

5 Issues Related to Salt Water Recycling Recycling salt water remains a challenge –Saline content varies widely –Wells are not consistent –No two technologies are alike Testing of technology at Brentwood site On-going support of other technologies elsewhere

6 Water Evaporation System Intevras’ EVRAS system Chesapeake has plans to install four EVRAS water evaporation units at the Brentwood SWD site in Fort Worth. Employs natural process of evaporation to turn water into water vapor Uses “waste heat” from compressor; no need to consume fuel This nominal EVRAS unit in Cresson, which has only one evaporative section, is half the size of the four proposed units for the Brentwood SWD, which will use two evaporative sections each. Evaporative section

7 Water Evaporation System About 1,200 barrels per day (BPD) of water can be evaporated out of 3,000 BPD of highly concentrated salt water (produced water) Result: less water to be injected into salt water disposal wells Clean water vapor is released into the atmosphere, where it will naturally return to the earth as rain This EVRAS unit operating in Cresson for Carrizo Oil & Gas has the capacity to produce 175 barrels of water per day. The four units planned for the Brentwood SWD will produce approximately 1,200 barrels of evaporated water per day from 3,000 barrels of produced water. Each of the four proposed units for the Brentwood SWD uses a minimal footprint of 45’ x 20’ x 15’ deep.

8 Water Evaporation System 8

9 Brentwood Salt Water Disposal Site Located on East First Street next to old Arc Park Permitted with the Texas Railroad Commission Permitted by the City in 2006 before moratorium adopted Only permitted SWD site within City

10 SWD Pilot Proposal Goals: –Decrease truck mileage on Fort Worth Roads –Verify recycling technologies –Increase the volume of water being recycled –Develop a long range plan for the management of saltwater in the City of Fort Worth City will partner with Chesapeake to permit a broader use of the Brentwood SWD under specific conditions –evaluate benefits of piping and local disposal of salt water

11 SWD Pilot Proposal Brentwood SWD will remain non-commercial and exclusively for Chesapeake’s use Chesapeake gas wells in the “Brentwood Pilot Corridor Area” will be allowed to use the Brentwood SWD for handling salt water. Currently: –31 pads –81 wells –Approximately 6,000 bbl water daily Pilot Program will include: –Increased monitoring and reporting SCADA Salinity out/in Volumes out/in –Include recycling component –Traffic reduction plan –Reduce impact on the environment

12 Brentwood Pilot Corridor Area

13 Proposed Plan Combines EVRAS system & SWD injection Phase I: All Brentwood Corridor – trucked Phase II: 3 months; Trinity South – piped (& trucked)* Phase III:12 months; Trinity North – piped (& trucked)* Phase IV: 15 months; East of 820 – piped (& trucked)* *Goal is to pipe as much as possible

14 Phase-In Approach Phase I –all trucked

15 Phase-In Approach Phase IV – 15 months: East of 820 piping completed Phase III – 12 months: Trinity North piping completed Phase II – 3 months: Trinity South piping completed Phase I – all trucked

16 If maximum trucked to Brentwood: 1,374,250 miles saved per year If maximum piped to Brentwood: 1,645,055 miles saved per year *The four EVRAS units proposed for Brentwood SWD can handle 3,000 barrels per day, out of which approximately 1,200 barrels per day will be evaporated. **Goal is to pipe as much as possible. Some trucking is inevitable.

17 Information and Outreach August 28, 2008: Met with leadership of neighborhood associations directly affected by pilot September 9, 2008: Met with Chamber of Commerce to address concerns about trucking and disposal of drilling waste Future Meetings with Neighborhood Associations, as requested, to delineate plan.

18 Next Steps Finalize pilot agreement with Chesapeake Bring to City Council for approval October 2008 Extend Salt Water Moratorium for 9 months to July 2009 –Monitor operation and efficiency of Brentwood Pilot –Begin conceptual discussions with other operators How do we expand the Brentwood Pilot model citywide, if successful Consider the creation of Citywide Saltwater Management Utility –Consider franchise opportunities –Liability

19 QUESTIONS?