1. 2015 Texas Energy Innovation Challenge Amin Kiaghadi Shanisha Smith Rose Sobel Varun Sreenivas CEE PhD JD, LLM in Energy CEE PhD MBA

2. Producing water from produced water Produced water volumes are far greater than flowback water *Assuming 2 yr well lifetime

3. Freshwater Resource Fracking Well Disposal Well Produced Water Flowback Water Ground Water Municipal 27% Surface Water Industrial 15% Agricultural 58% Cleaned Produced Water

4. Why the Permian? Proportion of Wells in High or Extreme Water Stress: 87% Proportion of Water Recycled: 2% WATER RISK in the PERMIAN BASIN High water use and water stress

5. Water and Fossil Resources Economics: 57% of Texas’ 2012 Crude oil production 156,000 active wells 34,000 active horizontal wells Land features: 6.4 million acres Agricultural land Population: 450,000 people

6. 1 st Challenge in Treating Produced Water 30,000-200,000 mg/L TDS Produced Water Sea WaterFresh Water 30,000-40,000 mg/L TDS < 1,000 mg/L TDS (Salt) Desalination is needed to treat Permian Produced Water

7. Potential Desalination Technologies Our solution is not limited to this desalination approach Thermal Separation Membrane Separation Vapor Compression Distillation (VCD) Ideal for high TDS and low volumes (<500,000 gallons/day) Low initial cost Linkable with technology

8. Why isn’t desalination more prevalent? makes desalination viable by reducing energy costs Energy 44%

9. Geothermal Energy for Power Generation eliminates well construction costs by using decommissioned wells

10. Pipeline legend: Oil Produced Water Brine Treated Water Geothermal water Tank battery Pre- treatment Pretreatment Desalination unit storage Injection Well Agricultural & Non-Potable Municipal Use Closed loop with fresh water energy generation Current Process Refinery

11. Geothermal Process Annulus Cement Casing Tubing VCD Desalination unit Insulation: P P 0.03 m/s Ambient Temperature Increasing temperature

12. Depth (ft) Extracted flow temperature (°C) Energy per day (KWh) Clean Water (gallon/day) 10,00076720048,000 11,00078751050,000 12,00080782352,000 13,00083829255,000 Depth (ft) Extracted flow temperature (°C) Energy per day (KWh) 10,000767200 11,000787510 12,000807823 13,000838292 How much water can deliver? Geothermal gradient : 25 ◦ C/Km 8 KWh energy for 264 gallons clean water Assuming 20% efficiency A 10,000 ft. geothermal well can deliver 48,000 gallons of cleaned water per day

13. Implementing The Permian Basin has the most challenging conditions so, If we can do it here, we can Power Across Texas. In the Permian Basin At 0.5%, 600 wells are eligible for retrofit.

14. Business Proposal Service provided Take produced water, treat and deliver clean water Scope of operation Produced water from 7 producing wells treated with 1 geothermal well at competitive price Clean water sold to agriculture industry and municipalities Evaluated for Operation in the Permian Basin Treatment Cost: 3.6 c/gal In take of Produced Water from wells 68,000 gal /day Revenue: 7.5 c/gal Clean Water for Sale 48,000 gal/day Revenue: 0.05 c/gal Brine for Deep Well Injection 20,500 gal/day Cost: 8c/gal

15. Financials Capital required – USD 1.88 million Financing –The most expensive option: 10 year bank loan at 6% interest Yearly Performance  Revenue  Costs  Net Income Projected Performance – Feasible Net Present Value – USD 1.22 million Cash Flow – USD 657,000/yr Payback period - 3.4 years Internal Rate of Return – 34 % Operators pay 7.5 cents instead of spending 8 cents for disposal Water users charged for clean water Treatment: 3.6 cents / gal (70% of volume) Brine Disposal: 8 cents/ gal (30% of volume) USD 135,000 / year

16. Sensitivity Analysis

17. Benefits to the Society Add 17.5 million gallons of clean water per year for every unit of operation 600 operating units Supply Water needs of 20,000 acres of agriculture land OR 100% of Non-potable municipal water demand of the Permian region Drought resistant solution.

18. Policy Analysis Regulation OpportunitiesBarriersSolutions

19. ActivityRRCTCEQEPA Drilling Permits ✓ Complaints for O&G exploration, production, and transportation ✓ Process wastewater discharged from O&G sites complaints ✓ Storm water run-off from O&G sites complaints ✓ Drinking Water – Private Wells complaints ✓ Drinking Water – Public Water Supply complaints ✓ Spills associated with the exploration, development, and production of O&G ✓ Process Wastewater (exploration, production, and transportation) ✓ Process Wastewater (not associated with exploration, production and transportation) ✓ Public Water Systems ✓ Water Rights ✓ Regulation OpportunitiesBarriersSolutions

20. Regulation OpportunitiesBarriersSolutions

21. Summary of Groundwater Conservation Districts (GWCDs) in Permian Basin # of Counties GWCD Description % Area 26With a GWCD68% 12With no GWCD32% 8GWCD 3621% 2GWCD 66*5% 16Other GWCD42% 38Total100% Regulation OpportunitiesBarriersSolutions

22. Regulation: Public regulatory policy favoring recycling vs. disposal Oil and Gas Regulation and Cleanup Fund Public: Conserves freshwater Produced water now a resource and sold as a commodity Industry: Affordable solution Favorable public relations- RRC Symposium Stakeholder Interests Regulation OpportunitiesBarriersSolutions

23. Regulation OpportunitiesBarriersSolutions

24. House BillSenate Bill 4021: Provide a tax refund to O&G companies that use alternative fluids in place of fresh water 1972, 2132: Exempting completion operations from a requirement to obtain a permit from a groundwater conservation district, but requiring it meet GWCD reporting standards, including monitoring how much water is withdrawn, and authorizing a fee for water actually withdrawn 655: Water right holder would not require a permit for aquifer storage and GWCD cannot charge fees for groundwater recovered from such a well, but required to report volumes 1248, 1856: relating to renewal or amendment of certain permits required by groundwater conservation districts 1232: requiring a study by the TWDC on mapping groundwater in confined and unconfined aquifers 1635: Relating to management of groundwater, increasing reporting and classification requirements per Texas Groundwater Protection Committee 30, 835, 836: Requiring research on the benefit of large-scale facilities for brackish groundwater desalination and sources & use of brackish water to meet state water needs 950: Expanding power of state auditor of groundwater districts 1221: relating to seller’s disclosures in connection to real property subject to groundwater regulation 1991: relating to improvements on private property for public private partnerships 1990: requiring O&G companies to report and make public the total volume of water used in hydraulic fracturing and its sources listed by type 517: requiring notice of an application for a permit to drill an injection well in the territory of a groundwater conservation district 78: relating to the matters to be considered when developing the state water plan, requiring and assessment of the best available science and technology and future water availability predictions 854: relating to the renewal or amendment of certain permits issued by groundwater conservation districts Current Reform Proposal

25. Pass Tax Credit Legislation Promoting Recycling Water. See HB 4021, filed 3/13/2015 Increase Disposal Well Application Fees and Use Funds for Research Encourage Groundwater Regulation Reform Between Water Agencies 3 Recommendations Regulation OpportunitiesBarriersSolutions

26. An innovative green solution to recycle produced water Marriage of technologies Decommissioned wells have renewed purpose Net contributor of clean water into the Texas water system Very Profitable in a short period Proposed legislation will enhance profits High growth potential to Power Across Texas With our technology: Business will flourish Texas will have new clean water

27. Acknowledgements Professors Zachary Bray, Konstantinos Kostarelos, S. Radha Radhakrishnan, & Hanadi Rifai Maria Modelska Aparna Balasubramani, Taylour Burton, Aeman Javed, Ali Masoudi, Rinki Mukherjee, & Emily Sappington Thank you David Harry and David Stuart