1. Oil in Paradise and Florida’s Debate on Formation Stimulation: the Professional Geology Perspective By: Thomas A. Herbert, Ph.D, P.G. Lampl Herbert Consultants Tallahassee Florida

2. Discussion Topics Comment on Professional Geology in Florida Review of Florida petroleum regulatory/political framework Comments on statutory and administrative rule changes and review panel from recent legislation Review several points on hydraulic fracturing of rock “fracking” in the context of Florida oil production history and geology Tomorrow‘s Panel will discuss technical topics in more detail 2

3. LHC Professional Background Lampl Herbert Consultants formed in 1978 Principals (3) have over 100 years of geology and regulatory experience Geologic consultants for oil and gas basin studies Involved in regulatory and policy matters for oil exploration since 1973 in Florida Permitting consultant for major drilling and seismic projects Consultants for corporate social responsibility

4. Florida Oil and Gas Regulation State Geologist was in charge of program 1943-2002 Majority of E&P was under Dr. R.O. Vernon, CPG (through 1975) O&G program was directed out of “bare bones” statutes in Chapter 377 FS for many years (no O&G rules per se) – Florida’s statutory law governed until 1981 – From 1981 to present the statutes supplemented by O&G Rules Majority of Florida development drilling completed by 1985

5. Well Workover Rule from 1981 Allows Hydraulic Fracturing and Acidizing 62C-25.002 “Definitions” (61) WORKOVER shall mean an operation involving a deepening, plug back, repair, cement squeeze, perforation, hydraulic fracturing, acidizing, or other chemical treatment which is performed in a production, disposal, or injection well in order to restore, sustain, or increase production, disposal, or injection rates. Precedent for Workover Procedures Until the Hughes Well in Collier County in 2013, workover’s were handled by a simple “notice” to the department representative that the operator intended to workover and/or fix a problem In 2013 Hughes notified FDEP 30+ days before start of work with a detailed plan prepared by Baker-Hughes

6. Debate on Hydraulic Fracturing in Florida The common statements involving some geologic clarification include: – Florida’s geology is unique – Rock are very fragile – Injected fluids under pressure at depth of 11,400 feet will pollute surface aquifers through “poorly” plugged wells – Drinking water aquifers at risk – Injection zones for oilfield waste water are not safe – Earthquakes are a risk – Karst chasms will open underground – Karst / limestone beds beneath our feet could not withstand high pressure and chemicals – Florida’s geology would prevent safe use of hydraulic fracturing – Excessive amounts of water are used in drilling – Mystery chemicals are used that cause cancer – Naturally occurring radiation present (NORMS) – Environmental health (cancer) issues from escaping methane 6

7. Florida Oil Production In Florida we live in “conventional formation” basins with the short answer being “we don’t need to hydraulically stimulate” 741 million barrels of oil equivalent (BOE) all produced by conventional methods... – No hydraulic stimulation used – 460 total producing wells 1943 to date One failed fracking attempt in Florida has created a furor over the method Oil is produced from below 11,000 feet in two basin areas and massive anhydrite thickness separates surface from hydrocarbon zones 7

8. 8 Jay Sunniland Sunniland Trend : Discovery 1943 14 Oil/Gas Fields ≈ 450 wells drilled 121 Million Bbls Oil 10 Billion CF Gas Jay – Blackjack Trend : Discovery 1970 8 Oil/Gas Fields ≈ 300 wells drilled 500 Million Bbls Oil 700 Billion CF Gas

9. 9 Florida’s Drilling / Production : Crude Oil: 612 Million Bbls Natural Gas: 700 Billion CF ≈ 1100 wells drilled ≈ 1500 Drilling Applications ≈11,000 to 17,000 feet depth Peak Production 1978 48 Million Barrels 8 th in U.S. Peak Production 1978 48 Million Barrels 8 th in U.S. 1943 2014

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11. Formation Stimulation Conventional formations are sandstones and carbonates e.g. limestone and dolomite, that have inherent porosity and permeability Fluids flow freely to the well bore with help from flushing and cleanup Unconventional formations are carbon-rich shales and similar laminated, tight rock types West Florida is Smackover LS and Norphlet SS do not need stimulation South Florida is vuggy, karstic shoals in carbonate ramp system with evidence for hypogene speleogenesis 11

12. Well Cleanup/Conditioning with Acid versus Hydraulic Pressure Stimulation in Florida Wells – Often Confused Wells drilled in carbonate rocks create lime mud that forms a wall cake in the well bore and most critical in the producing zone (often referred to as the matrix) Fluids and detritus are removed from the well and placed down Class II Underground Injection Control wells permitted by EPA and the FDEP 12

13. Comment #1 Excessive Water Used for Drilling Oil Wells Surficial Aquifer System (SAS) zone is the source and the WMDs issue consumptive use permits Usually two water supply wells are drilled at oil well sites A typical conventional oil well uses a total of 5-6 million gallons to drill and operate the well – a nominal consumptive industrial use 13

14. Comment #2: Aquifer Systems Will Be Contaminated by Formation Stimulation Fluids Water of drinking quality is from the upper few hundred feet in the Surficial Aquifer System and protected by three casing strings from drilling fluids – there is no interaction between the zones The lower Floridan is the receiving zone for UIC wells with Total Dissolved Solid levels greater than seawater 14

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16. Comment #3: Mystery Chemicals Are Used for Well Stimulation Hydraulic fracturing has been discussed in a recent EPA review and chemicals are discussed Chemicals used are listed in “Frack Focus” an online source of information with the majority by volume being --99.2% fresh water 16

17. Comment #4: Aquifer Contamination by Injection of Formation Fluids Injection of oilfield waste fluids is in to Class II UIC wells regulated by EPA and FDEP (43 total are permitted in Florida) Receiving zone is the Lower Floridan Aquifer which is a vuggy, karstic interval (2,300-3,600 feet bls in South Florida) Boulder Zone >34,000 TDS is beneath a thick anhydrite confining layer 17

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19. Oil Well Fluids Production Producing oil wells in Florida and in most other geographic areas also bring up “formation water” In the Sunniland Trend of South Florida wells are pumped at a rate of 1,500-3,000 barrels of fluids per day and 90-95% of the fluids are concentrated saltwater at 180,000+ parts TDS 19

20. Comment #5: Radiation from Oil Wells The geologic formations contain naturally- occurring radionuclides, which are referred to as Naturally Occurring Radioactive Materials (NORMs) and include: NORMs often occur as mineral scale inside pipes 20

21. Pipe Scale with Possible TENORMs in Production Tubing 21

22. Comment #6: Earthquakes Florida is not earthquake active and in fact, along with North Dakota, the state has the lowest occurrence in the US 22