'Un~4 ~ \\ 1/(1 Economic Issues of Coal Bed Methane Development and Water Management By Dr. Roger Coupal Department of Agricultural and Applied Economics University of Wyoming For The Wyoming Environmental Quality Council January 17, 2007
The problem of water mgt ii 't ~ ;, 'i . Evidence of a problem - politicaland legal t challenges - Water quality issues ,!,,- - Water quantity issues . Is it a problem of too much water at lower quality or too mu~h water at higher quality _K'. Loss of a valuable resource . Splitestate issues
Economic Issues . Who's responsibility is it? - State (beneficial use approach) - CBM companies (externality approach) . Regulatory/technical approach: - Regulated treatment versus tax approach . Water that is defined beneficial should be used beneficially
Reference Material: ALL Consulting. January 2006. "Feasibility Study of Expanded Coal Bed Natural Gas Produced Water Management Alternatives in the Wyoming Portion of the Powder River Basin, Phase One". Prepared for the U.S. Department of Energy National Office of Technology Laboratory and the Wyoming State Planning Office. Tulsa, Oklahoma. Bank, Gregory C., Vello A Kruskraa. January 2006. "The Economics of Powder River Basin Coalbed Methane Development". Prepared for the U.S. Department of Energy Goerold, W. T. 2002. "Powder River Basin Coalbed Methane Financial Model" presented at the University of Colorado's (CU) Natural Resources Law Center Coalbed Methane Conference, Boulder, Colorado, April 4-5, 2002. Montana Environmental Quality Council. December 2005. "Economic Impacts of The Petition for Proposed Amendments Pertaining to Nondegradation Requirements for Electrical Conductivity and Sodium Adsorption Ration and Definitions for Technology-Based Effluent Limitations and the Adoption of New Water Quality Rules I through X Pertaining to Minimum Technology-Based Controls and Treatment Requirements for the Coal Bed Methane Industry" Prepared by the Montana Department of Environmental Quality. U.S. Department of Energy (DOE). 2002. Powder River Basin Coalbed Methane Development and Produced Water Management Study. U.S. Department of Energy. Office of Fossil Energy and National Energy Technology Laboratory Strategic Center for Natural Gas.. U.S. Environmental Protection Agency (EPA). 2003c. Guidance for Developing Technology-Base Limits for Coalbed Methane Operations: Economic Analysis of the Powder River Basin. February 2003. University of Wyoming December 2005. "Water Production from Coalbed Methane Development in Wyoming: A Summary of Quantity, Quality and Management Options". Ruckelshaus Institute for for the Environment and Natural Resources. Laramie Wyoming.
Economics of the Water Treatment Approach . Increases cost to producers . Can potentially reduce production depending upon the mandated approach . Still have water quantity issues (and perhaps quality)
Economic Issues, continued . State defines how water is managed and treated . State imposes its responsibility to manage drainage, and therefore water that is disposed of in those drainages - Technical approach (water quality requirements - Economic approach (discharge fees)
Treatment approaches . Increased . St ream bank . Most produced Capital costs: Surface . $1,400/well capital waterin PRB stream erOSIOn discharge . Increased direct to surface flow cost (Goerold(2002) is discharged to . Increased surface . $1,500/well (ARl, flow at drainagesor land application water drainagesor npanan 2006) soils habitat O&M Costs: crossmgs . $0.02/bbl Goerold . Riparian . Suppleme ntal erOSIOn or (2006) and irrigation change in DOE(2002) . $0.04/bbl water vegetation ARl . . Salt Water for (2006) . livestock deposition . A d verse or wildlife effects on established irrigation; e.g. creation of hardpan soil . Can dilute naturally turbid waters impacting native aquatic SDeCles
Treatmentapproaches Impoundments . 121 bonded & . Stock . Mobilization of . A v erage Off channel water salts and other for PRB: (can be lined or permitted by . Recha . $10,300- WOGCC as of un-lined) elements by infiltration from 8/04 $19,237 rge . Wildli unlined pits per . Possible surface fe impound ment habitat aquifer . W etla degradation from (unlined) . R e cre nds unlined pits capital . Evaporation cost . $0.06/bbl . Fisher increases water ation salinity (lined operation & Ies pits) . Water source is maintenan ce costs temporary . Increased mosquito habitat brings West Nile VIruS concerns On channel I . Approx 1,629 Same as above for Same as above for Cost estimate not available at this time, unlined pits unlined pits, plus permitted as of captures flow trom but likely similar to 12/04 by SEO . 2,682 permitted natural runoff unlined off channel (Feltner, 2004) costs by SEO as of 5/05 (LaBonde, 2005)
Treatmentapproaches . 308 wells . Water not . Aquifer . $6,350- Injection statewide Class V DEQ . A qui fer recharge immediately $15,150/injectionw permits available for (most in PRB) ell capital costs, additional permitted by DEQ storage for depending on depth . $0.045-$0.098/bbl (injection to coal beneficial with 60 actively recovery or non-coal and re-use surface uses reporting operation & . Avoids aquifer for re- (Frederick 6/05) maintenance costs (e.g., stock and use) . Gillette drinking wildlife envlronme ntal watering) water aquifer impacts of surface . Potential . Approx 5,000 . A voids dischar e . $35,200- Class II for WOGCC permits enVlfonme migration $62,500/inject ntal permits statewide, and ionwell capital (deep well contaminati including costs impacts of injection, conventional surface on of other presumably including oil and gas and for rework of discharge aquifers if . Provides a disposal and/or well is CBM (Marvel, existing oil & water flood water 6/05) improperly gas well to enhanced oil . 4 injection wells source for completed injection well recovery (EOR)) EOR . Requires . Up permitted for to > $1 EOR additional million for surface new disturbance installation of for new deep disposal injection well (George, well sites 2005) . $0.095- and storage ponds $0.14/barrel
Treatment approaches . Treatment . Finding . $450,000-$1.025million capital costs for RO I . Pilotprojecton Treatment . Full operation waste Reverse osmosis Tongue River results in high w/commercialbrine disposal brine . $744,278-$1.269million for RO wlbrine injection qualitywater for re-use on Prairie Dog disposal . $0.19-$0.73net present value costlbbl for RO . Permit pending Creek location . $0.26-$0.34 net present value costlbbl for RO wlbrine wlcommercialbrine disposal s . on Crazy High injection Woman Creek cost for (Kuipers, 2004; CDM, 2004) brine (Thomas, 2004) disposal . E n ergy- intensiv e Ion Exchange . IX w/Higgins . IX systems . Requires a Class I rocess . IX w/Higgins loop = $0.60Ibbl net present value cost . w IHiggins (IX) remove cations . CC = $0.35Ibbl net present value loop permitted injection permit . Hydro = $0.63Ibbl net present value cost (CDM, 2004) cost and bicarbonate . Warm temp, non- . Approximately by WYPDES . Counter- for20cfs Loop turbid effluent operation on >90% water water may affect the Powder R. Powder R. fish current (CC) recovery . IX will not remove (Wagner, y d r 0 process 2004) eolites unwanted anions (2) . CC IX used in . Waste brine can be several acidic requiring locations in neutralization PRB prior to disposal . Hydro IX and 2 . Costs for brine not in use yet disDosal
Treatment approaches . Plans for . Does not require . Energy intensive . Costly Deionization or process . Not desalination acidlbase capacitive process suitable for CBM water greater than desalination unit for WY, regeneration of 2,500 ppm TDS no pennit as exchanger yet (Thomas, 2004, . Used some in . Less . Reduced water . Ice can form Atomization costly than other treatment options below atomizer the PRB volume (water droplets . Concentrates are dispersed contaminants on under pressure soil through a nozzle . Water is wasted atop a tower) . Wind drift of plume results in salt deposition to areas not intended for disposal
Economic impacts Bank and Kruskraa . Choice of treatment approach will affect production levels - Cost/price relationship - assumes either a well is marginal enough where they do not produce or they cut off production earlier than they would have otherwise. - 15 percent hurdle rate Reduction in production $4 / MCF $7 / MCF Water disposal and mgt option NA 8.170/0 Impoundments NA 12.6% Shallow Re-injection 27.0% 6.90/0 Partial RO with trucking of residual - 500mg/l 12.4% 4.50/0 1,000 mg/l 17.570/0 5.00/0 Ion Exchange - 500 mg/l 6.670/0 3.3% 1,000 mg/l
..---.---------------------- 0 c.> ...... ..... ...... c.> 0> CO I\) I\) I\) c.> ..... I\) 01 00 0 0> '0 '0 '0 .. 0 0 0 0 '0 '0 "0 0 "0 "0 "0 "0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 <:) 0 Water Production (Bbl)
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