1. UNCONVENTIONAL NATURAL GAS: A BRIDGE FUEL FOR THE FUTURE OR AN ENVIRONMENTAL HAZARD? 3 JUNE 2011 BRADY HAYS ASSOCIATE VICE PRESIDENT, B&V WATER

3. 3 U.S. Energy Consumption by Energy Source Hydrocarbon Fuels Still Dominate Portfolio

4. What about CO 2 Emissions? 4 Inventory of U.S. Greenhouse Gas Emissions and Sinks: U.S. CO 2 Emissions from Fossil Fuel Combustion

5. Fossil Fuel Emission Levels Natural Gas Improves Air Emissions: 50% less GHG than Coal; 30% less GHG than Oil Acid Rain & Smog: NOx, SOx, PM >99% Reduction Zero Mercury Emissions 5 Source: EIA PollutantNatural GasOilCoal Carbon Dioxide117,000164,000208,000 Carbon Monoxide4033208 Nitrogen Oxides92448457 Sulfur Dioxide11,1222,591 Particulates7842,744 Mercury0.0000.0070.016 Pounds per Billion BTU of Energy Input

6. Is Natural Gas the Bridge Fuel to Renewable Energy? 6 Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal. However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilized first, we could quickly reduce coal generation and achieve massive emissions reductions. -- Robert F. Kennedy, Jr., Financial Times, 19 July 2009

7. 7 WECC 28 GW MRO 3 GW SERC 21 GW NPCC 13 GW RFC 11 GW FRCC 6 GW TRE 13 GW SPP 3 GW Source: SNL. Nearly 100 GW of Announced Gas for Power Gen over 10 Years

8. 8 Decarbonization of the US Power Generation Source EIA: Depends on robustness and timing of regulation

9. Source EIA: Reference Case 9 Reducing Imports of Transportation Fuels

10. Energy Security: Natural Gas is a US Energy Source 10

11. Unconventional Gas Reserves 11

12. 12 Horizontal Drilling and Hydraulic Fracturing Process Animation

13. 13 Environmental Concerns – Water and Air Quality Poorly cased wells allow gas to escape into underground aquifers; The shale gas industry uses dangerous chemicals in the fracking process that might contaminate groundwater; Waste water returning to the surface during production, contaminated with salt and radon, may pollute streams; The industry’s use of water for fracking depletes a scarce resource; Inefficient systems lead to excess air pollution

14. Frac Fluid – Transparency is Required 14 Additive TypeMain CompoundPurpose Iron ControlCitric AcidPrevent precipitation Oxygen ScavengerAmmonium BisulfiteReduce corrosivity pH AdjustmentSodium CarbonateMaintain effectiveness ProppantSilica sandKeep fracture open Scale InhibitorEthylene GlycolReduce deposition SurfactantIsopropanolIncrease viscosity Source: ALL Consulting based on data from a fracture operation in the Fayetteville Shale, 2008

15. Better Managing Water Resources Current Approach: 5 MGallons of Freshwater / well 2 MGallons of Flowback/Produced Water Hauled for Disposal 1000s of Trucks 100% Recycle Model: 3 MGallons of Freshwater / well 0.2 MGallons of Flowback/Produced Water Hauled for Disposal 100s of Trucks 15

16. Protecting A Communities Natural Resources Horizontal Drilling: Maximize industry best practices for Completions to ensure protection of local groundwater supplies and minimize the loss of methane emissions during process Hydraulic Fracturing: Transparency to disclose frack fluid constituents and MSDS; Freshwater Supply – Reduce local freshwater resources by 50%; Target >50% by impaired waters such as flowback, municipal wastewater or industrial effluent Water Reuse & Disposal: Maximize Beneficial reuse of flowback and produced waters brought to surface with adequate treatment to reuse within operation or to Regulated discharge limits. Deepwell injection should be used for concentrated brine and NORMs streams Water Transport: Minimize truck hauling for supply and disposal of water; Trucks disrupt communities, impact safety and increase air pollution; Maximizing liquid gathering systems to transport water for supply and reuse in co-located right of ways with gas gathering can reduce truck traffic by >50% Power Generation & Transmission: Minimize the use of inefficient, temporary diesel engines; Maximize the use of efficient natural gas turbines and electric motors; Maximize the use of electrifying fields or available power transmission grids to reduce associated air quality emissions Reduce GHG & Air Emissions by >30% 16

17. Sustainable Infrastructure for Unconventional Gas 17

18. Strategies to Maximize & Protect Communities Natural Resources Natural Gas can lead to significant improvements in Air Quality Emissions compared to current Power & Transport Fuels Unconventional Natural Gas supplies can improve energy security at economically advantageous prices Unconventional Natural Gas can bolster local economies with job and business creation/expansion, real estate price increase, and new housing starts Sustainable Strategies & Infrastructure can be put in place to: 50%-75% improvement in water recycling 10%-25% reduction in freshwater consumption 20%-40% reduction in GHG, NOx, SOx emissions 25%-50% reduction in truck traffic 18

20. 20 There are already nearly 15 million natural gas fuelled vehicles in the world. Natural gas fuelled vehicles are already widely used in some cities such as Washington DC, Kuala Lumpur and New Delhi as a pollution control measure. Now that natural gas tanks for cars have become much smaller, the only obstacle to car drivers also switching to cheap and low emission gas is a lack of infrastructure in the form of refueling stations – admittedly a formidable hurdle. Gas-powered vehicles produce almost no particulates, 60% less volatile organics, 50% less nitrogen oxides and 90% less carbon monoxide, which means less smog, ozone and brown haze. U.S. Energy Demands

21. Decarbonization Approach 21 The dominant fuel in the world fuel mix has gradually shifted from wood to coal to oil over the past 150 years, with gas the latest fuel to grow rapidly. At this rate gas may overtake oil as the dominant fuel by 2020 or 2030. The consequence of this succession is that the carbonhydrogen ratio in the world fuel mix has been falling steadily, because the ratio of carbon to hydrogen atoms is about 10-to-1 in wood, 2-to-1 in coal, 1-to-2 in oil and 1-to-4 in gas. On its current trajectory, the average ratio would reach 90% hydrogen in 2060, having been 90% carbon in 1850. although increased energy use means that carbon dioxide emissions are rising all the time, the world is nonetheless slowly decarbonizing. A sudden and forced acceleration of this decarbonization is climate change policy. switching as much power generation from coal to gas as possible, and as much transport fuel from oil to gas as possible, would produce rapid and dramatic reductions in carbon dioxide emissions

22. U.S. Greenhouse Gas Emissions 22 Per Capita and Per Dollar of Gross Domestic Product

23. Emissions Allocated to Economic Sectors 23 Note: Does not include U.S. Territories

24. 24 Global Fuel Mix Outlook Next Five Years Natural Gas Solar and Wind Coal Nuclear