2012 No. 39

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Recent technological advancements in horizontal drilling and hydraulic fracturing (fracking) have made it economically feasible to recover natural gas, concentrated natural gas liquids and crude oil from shale reservoirs, often called shale plays.

Due to the impermeable nature of shale, significant deposits of oil and natural gas become trapped in its sedimentary layers. In the past, this unconventional source of oil and natural gas was ignored because it wasn’t commercially viable to tap.

Shale plays in the U.S. are estimated to contain 33.2 billion barrels of oil and 482 trillion cubic feet (Tcf ) of natural gas, according to the U.S. Energy Information Administration’s (EIA) “Annual Energy Outlook 2012,” published in June.The current shale gas resources alone are the equivalent of approximately 20 years of current energy consumption. For every Tcf of natural gas, 15 million homes can be heated for one year.

As shown in the map on page 10, the largest U.S. shale plays in the Lower 48 include: • Bakken Shale in North Dakota and Montana • Barnett Shale in North Texas • Eagle Ford Shale in South Texas • Haynesville Shale on the Gulf Coast • Marcellus Shale in the Appalachian Basin • Woodford Shale in Oklahoma

The shale boom has changed the mix of capital investment in oil and gas infrastructure. For instance, in 2010, Burns & McDonnell oil and gas process business was 80 percent downstream and 20 percent midstream. As a result of the shale boom, in 2012, the firm is now working on 80 percent midstream and 20 percent downstream oil and gas projects.

Natural Gas Over the past several years, 2005 to 2010, domestic shale gas production has grown on average 45 percent each year. This continued growth could transform the U.S. from a natural gas importer to an exporter by the mid-2020s. The EIA credits shale plays for this transformation. By 2035, the EIA anticipates shale gas production will grow to 49 percent

The Shale BoomU . S . E n e r g y G a p

Shale Oil and Gas Are Closing the

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of total U.S. dry gas production from 23 percent in 2010.

And by 2015, unconventional natural gas production — shale gas currently represents a significant portion of unconventional natural gas production — is anticipated to create more than 1 million U.S. jobs, according to an IHS Chartered Enterprise Risk Analyst energy advisory report.

Oil Domestic oil production is also on the rise — the first time since 1986 — increasing to 5.5 million barrels per day in 2010 from 5 million barrels per day in 2008. As we produce more oil domestically, we become less reliant on foreign imports and increase U.S. energy security.

With newly accessible oil deposits, like those in the Bakken Shale, our nation’s top oil-producing states are shifting. Vast oil reserves in the Bakken Shale are catapulting North Dakota to become the nation’s second-leading oil producer behind Texas, surpassing Alaska. In 2008, North Dakota was the nation’s eighth-leading oil producer; its production has since quadrupled.

Environmental Concerns While there are inevitable environmental concerns with the production of any energy source, it’s important to consider the whole picture.

Acquiring shale oil and gas involves fracking, or fracturing shale to release the oil or natural gas trapped inside the rock. Fracking requires approximately 1 million to 5 million gallons of water per well. That water is mixed

with sand to structurally support the shale formation, with 0.5 percent of the fracking fluid containing chemical additives.

To mitigate the amount of water required for fracking, water sources not suitable for drinking water or agriculture are being considered. Also, the portion of water returned to the surface as flowback can be treated and reused or recycled, depending on the conditions at that particular shale play.

Surface water discharges of the flowback are regulated by the National Pollutant Discharge Elimination System (NPDES) program, which requires flowback to be treated prior to discharge into surface water or underground injection. Treatment is typically performed at wastewater treatment facilities for surface discharge. Effluent is treated to remove chemicals as part of the NPDES permits, and the entire process must comply with the U.S. Environmental Protection Agency’s (EPA’s) Clean Water Act.

Underground injection of flowback is regulated by either the EPA Underground Injection Control (UIC) program or a state with primary UIC enforcement authority. Injection of natural gas production wastes would be considered as acceptable for a class II well injection.

From an emissions standpoint, natural gas combustion emits only small amounts of sulfur dioxide, nitrogen oxide and particulate matter and is considered a lower emitter of carbon dioxide than other fuels. With the expected increase in natural gas use, portions of the country could see improvements in air quality related to these pollutants.

However, some gases released during the fracking process have come to the attention of the EPA. The EPA recently finalized new source performance standards for gas wells, which require immediately flaring fracking-related gas releases that contain volatile organic compounds and methane emissions. In 2015, the second stage of the rule will require capture of the fracking-related gases.

This continued growth could transform the U.S. from a natural gas importer to exporter by the mid-2020s.

Shale plays in the U.S. are estimated to contain 33.2 billion barrels of oil and 482 trillion cubic feet of natural gas. Source: U.S. Energy Information Administration

U.S. Shale Oil and Gas Deposits

Shale plays Current plays Prospective plays

Stacked plays Shallowest/youngest Intermediate depth/age Deepest/oldest

Basins * Mixed shale and chalk play ** Mixed shale and limestone play*** Mixed shale and tight dolostone-siltstone-sandstone

2012 No. 311

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Marcellus Shale

Horizontal Drilling

Hydraulic Fracturing

Supporting Infrastructure “Rapid growth in production of shale oil and gas bolsters pressure for infrastructure improvements, especially in less-populated areas surrounding shale plays — from transferring and housing workers to improving roads to handle heavy loads to securing access to electricity, pipelines and water treatment,” says Mark Swanson, business development manager in the Process & Industrial Group at Burns & McDonnell.

As a full-service engineering, architecture, construction, environmental and consulting firm, Burns & McDonnell can assist with all phases of project development from conceptual planning and permitting through

Storage and Distribution Facilities

Oil

Natural Gas

Producing Wells

Gathering Lines

Distribution Systemto Customers

Gas Transmission Pipelines

Transmission Pipelines

Gathering Lines

Refinery

City GatePower Plant

Compressor Stations

Booster Stations

Natural Gas Liquids Pipelines

Pump Stations

Fractionator

ProcessingPlant

Petrochemical and Industrial Customers

Private Consumers

full engineer-procure-construct (EPC) delivery of supporting plants, facilities and infrastructure. Burns & McDonnell is currently assisting clients involved in the shale booms in the Bakken, Barnett and Eagle Ford shales and also the Illinois Basin.

Available services include: • Gas processing and gas treatment plants • Oil and gas product fractionating and refining • Terminals and storage • Pipeline compressor and pump stations • Pipeline modeling • Pipeline routing and permitting • Right-of-way acquisition • Power supply or cogeneration • Electrical transmission and distribution • Air quality control and permitting • Environmental services • Buildings and facilities • Landfill design and permitting • Transportation • Wastewater services • Watershed services

“It’s an exciting time to work in oil and gas, as we contribute to closing the U.S. energy gap with shale plays,” says Swanson.

For more information about oil and gas processing, contact Mark Swanson at 816-822-3812. For more information about pipelines, contact Dana Book at 816-823-7535. For more information about environmental services, contact Mark Knaack at 816-822-3306. For more information about infrastructure improvements, contact Gene Sieve at 952-656-3636.

This process diagram illustrates oil and gas processing and transportation after these energy sources are obtained from a shale reservoir.

Oil and Natural Gas Processing

Vast oil reserves in the Bakken Shale are catapulting North Dakota to become the nation’s second-leading oil producer behind Texas, surpassing Alaska.

Shale Deposit Geology

These technological advancements — horizontal drilling and hydraulic fracturing — have made it possible to economically mine natural gas, concentrated natural gas liquids and crude oil from shale reservoirs.

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1 Includes lease condensate2 Natural gas plant liquids3 Conventional hydroelectric power

Note: Percentages do not add to 100 because of rounding.

Biomass 5%

Geothermal, Solar/Photovoltaics,

Wind1%

Hydroelectric Power 3 4%

NGPL2 4%

Natural Gas29%

Coal29%

Crude Oil1

16%

Nuclear ElectricPower11%

The U.S. energy portfolio, as of 2010, relies on a combination of fossil fuels and renewable energy sources to meet the nation’s energy needs.Source: U.S. Energy Information Administration

20

40

60

80

100

120

Consumption

Production

1950 1960 1970 1980 1990 2000 2010

The U.S. energy gap is widening, but the rapid growth of natural gas production from shale plays could transform the U.S. from a natural gas importer to exporter by the mid-2020s.Source: U.S. Energy Information Administration

U.S. Energy Gapin quadrillion British thermal units

U.S. Energy Portfolio

North DakotaIn North Dakota, oil production is booming from the Bakken Shale and so is the state’s economy. Each oil rig produces approximately 120 jobs, directly and indirectly, according to the North Dakota Petroleum Council. In Western North Dakota, active rigs range between 200 and 215 as of mid-2012.

As of May 2012, North Dakota is experiencing the lowest unemployment rate in the nation, and Business Insider recently ranked the formerly sleepy town of Williston, N.D., 15th in its list of “The 15 Hottest American Cities of the Future.” The state is also experiencing revenue surplus — $1 billion over the next two years — which will fund infrastructure improvements to support the growing population.

Burns & McDonnell has been providing engineering, architecture, construction and environmental services for clients in North Dakota for years and currently has several active projects in the state.

Environmentally Responsible Exploration and Production Waste ManagementAlso resulting from the Bakken Shale oil boom in North Dakota is a need to properly dispose of exploration and production wastes. To keep up with growing demand, Prairie Disposal Inc. — now an R360 Environmental Solutions company — has contracted Burns & McDonnell to design a master plan and to permit multiple future landfill expansions that increase capacity by more than 750 percent on a fast-track time frame of approximately two years.

To maximize Prairie Disposal’s revenues, Burns & McDonnell is proposing the use of an alternative landfill liner design, which increases the effective air space of the landfill. Traditional liners consist of a membrane over 3 feet of compacted clay. The alternative features a liner comprised of two membranes over prepared subgrade and is less than 1-inch thick.