E&P STORM WATER OVERVIEWDomestic Onshore EnergyE&P STORM WATER OVERVIEWDomestic Onshore Energy

May 10, 2005

Road to Domestic EnergyRoad to Domestic Energy

Road to Domestic Energy: Geological & GeophysicalRoad to Domestic Energy: Geological & Geophysical

11stst look at look at subsurface subsurface

Define geologic Define geologic target using target using surface surface geophysical geophysical equipmentequipment

Subsurface drivenSubsurface driven

The Road to Domestic Energy: Land LeasingThe Road to Domestic Energy: Land Leasing

Leases have terms, Leases have terms, penalties, deadlines penalties, deadlines and a expiration date and a expiration date that drives a project that drives a project timelinetimeline

Leases have multiple Leases have multiple surface and surface and subsurface ownerssubsurface owners

Split Estates; surface Split Estates; surface and mineral and mineral ownership differentownership different

Multiple mineral lease Multiple mineral lease agreements and agreements and requirementsrequirements

Competitive situationCompetitive situation

The lease situation The lease situation drives our clockdrives our clock

The Road to Domestic Energy: PermittingThe Road to Domestic Energy: Permitting

There are numerous There are numerous permit considerationspermit considerations– PrivatePrivate– StateState– FederalFederal

Oil & Gas AgencyOil & Gas Agency– DrillingDrilling– ConstructionConstruction– Pipeline ROWPipeline ROW

Environmental ProtectionEnvironmental Protection– AirAir– WaterWater– WasteWaste– Historical & CulturalHistorical & Cultural– Vegetation & WetlandsVegetation & Wetlands– WildlifeWildlife

The Road to Domestic Energy: ConstructionThe Road to Domestic Energy: Construction

Exploration or Exploration or development welldevelopment well– lease roadlease road– well padwell pad

Access Right of Ways Access Right of Ways have to accommodate have to accommodate environmental and environmental and surface conditionssurface conditions

Allow for:Allow for:– Surface sensitivitiesSurface sensitivities– Landowner requestsLandowner requests– Surface structuresSurface structures– Balance surface Balance surface

conditions to reach conditions to reach subsurface targetsubsurface target

The Road to Domestic Energy: ProductionThe Road to Domestic Energy: Production

If SuccessfulIf Successful

– Well finalizedWell finalized

– Rig moves offRig moves off

– Production Production equipment equipment installedinstalled

– O&G to sales and O&G to sales and water to disposalwater to disposal

– Drill site reduced Drill site reduced and reseededand reseeded

– ““Foot Print” Foot Print” reducedreduced

If UnsuccessfulIf Unsuccessful

– Plug & AbandonPlug & Abandon

– Restore locationRestore location

Storm Water Comparison: Real Estate vs. Oil & GasStorm Water Comparison: Real Estate vs. Oil & Gas

Real Estate DevelopmentReal Estate Development Oil & Gas DevelopmentOil & Gas Development

Static PlanStatic Plan Blueprint Designed Upfront Blueprint Designed Upfront Construction Follows BlueprintConstruction Follows Blueprint Real Estate is All Surface Real Estate is All Surface

Dynamic Plan Dynamic Plan Design As We GoDesign As We Go Each Well Tells a Geologic Story Each Well Tells a Geologic Story Oil & Gas is Sub-Surface DependentOil & Gas is Sub-Surface Dependent

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Storm Water Comparison: Real Estate vs. Oil & GasStorm Water Comparison: Real Estate vs. Oil & Gas

Real Estate

Surface Use Driven

Land Owned

Timeline more Flexible

Planning Certainty

Metropolitan/Centralized

Single Site SW Administration

Real Estate

Surface Use Driven

Land Owned

Timeline more Flexible

Planning Certainty

Metropolitan/Centralized

Single Site SW Administration

Oil & Gas

Subsurface Driven

Land Leased

Timeline Is Critical

Uncertainty

Remote/Decentralized

Scattered Multi Site SW Administration

Oil & Gas

Subsurface Driven

Land Leased

Timeline Is Critical

Uncertainty

Remote/Decentralized

Scattered Multi Site SW Administration

Because of differences E&P needs regulatory flexibilityBecause of differences E&P needs regulatory flexibility

““One Rule Does Not Fit All Industries”One Rule Does Not Fit All Industries”

CostCost

Future StateFuture State

*Refer to Department of Energy 2005 Cost Impact Study *Refer to Department of Energy 2005 Cost Impact Study

US Drilling Wells: US Drilling Wells: 30,000 per year 30,000 per year

SWPPP Implementation:SWPPP Implementation: $5,000 to $15,000 per well $5,000 to $15,000 per well

Well Construction Size:Well Construction Size: 2 to 10 acres 2 to 10 acres

Current StateCurrent State

GovernmentGovernment– Recordkeeping – Inspection – Recordkeeping – Inspection –

MonitoringMonitoring

– Permit approvals timeline increasesPermit approvals timeline increases

– StaffStaff

– Administrative burdenAdministrative burden

IndustryIndustry– Increased “notice of intent” filingIncreased “notice of intent” filing

– Delayed NOI approvalDelayed NOI approval

– Annual cost burden $150-$450 Annual cost burden $150-$450 million*million*

– Limited qualities resourcesLimited qualities resources

– Lease expiration risks are realLease expiration risks are real

Summary – Take AwaySummary – Take Away

Intent of Storm water regulations are to protect Intent of Storm water regulations are to protect surface waters from sediment and erosion surface waters from sediment and erosion runoff created by construction activitiesrunoff created by construction activities

Covered Oil & Gas ProcessCovered Oil & Gas Process

Comparisons/Differences between Oil & Gas Comparisons/Differences between Oil & Gas and Real Estateand Real Estate

Stormwater Regulations Are Not Manageable Stormwater Regulations Are Not Manageable For Oil & GasFor Oil & Gas

Conclusion – Take AwayConclusion – Take Away

There is a better alternative than the There is a better alternative than the proposed stormwater rule change:proposed stormwater rule change:

No Storm water permitNo Storm water permit

Implementation of RAPPS for all Oil & Implementation of RAPPS for all Oil & Gas construction will control sediment Gas construction will control sediment and erosion runoffand erosion runoff

Implementation of RAPPS for all Oil & Implementation of RAPPS for all Oil & Gas constructionGas construction

E&P STORM WATER OVERVIEWE&P STORM WATER OVERVIEW

May 10, 2005