1. GE Energy November 6, 2012 Unconventional Fuels: Opportunities, Challenges, Solutions Timothy J. Richards, GE APEC Energy Group

2. 2 GE © 2012 – All Rights Reserved The world’s largest natural gas fields Initial recoverable resources. Source: IEA, World Energy Outlook 2011: Golden Age of GasWorld Energy Outlook 2011: Golden Age of Gas

3. 3 GE © 2012 – All Rights Reserved Supply Anxieties? This Time it’s Different Comparison on selected US and North American natural gas supply curves. Source: MIT, The Future of Natural GasThe Future of Natural Gas Source: Various

4. 4 GE © 2012 – All Rights Reserved Demand growth Nature abhors a vacuum. Low prices and extreme oil/NG price disparity set feedbacks in motion. Source: EVA to EPRI, Feb. 2012 Industrial, power sector, LNG exports, GTL, transport?

5. 5 GE © 2012 – All Rights Reserved * Large range of regional variation exists Low High Water availability Frac flowback water Produced water Land clearing Wastewater treatment/disposal Chemical composition of frac fluid Water rights Venting or flaring from completions/workover s Truck traffic Regional ozone attainment QuantitySource Uncontrolled release - blowout Western Issue Source: GE Energy, Global Strategy & Planning; based on customer discussion not a statistical survey Degree of public scrutiny* Water issues elevated in national debate Environmental issues in upstream gas INDUSTRY PRIORITY & FOCUS GE Proprietary & Confidential Business Information ©Copyright 2011, GE Water & Process Technologies. All Rights Reserved.

6. 6 GE © 2012 – All Rights Reserved Key Unconventional Gas Basins Barnett Shale Water availability Emissions Haynesville Shale Wastewater disposal Water availability Marcellus Shale Wastewater disposal Water impoundment ponds Fayetteville Shale Wastewater disposal Source of water supply Source: GE Energy, Global Strategy & Planning Resource (Size, concentration) Proximity to (urban or wilderness areas) O&G industry maturity Low High Forces driving Environmental sensitivity Moderate High Rockies basins CBM Wastewater disposal Water availability Emissions Large gas plays, in close proximity to urban or pristine areas with little local familiarity to the O&G industry are likely to draw the most intense scrutiny Environmental focus stronger in some regions Niobrara Shale Water availability Wastewater disposal Emissions Anadarko Woodford Shale Water availability Wastewater disposal Emissions GE Proprietary & Confidential Business Information ©Copyright 2011, GE Water & Process Technologies. All Rights Reserved.

7. 7 GE © 2012 – All Rights Reserved Shale Gas: Federal Regulatory Overview EPA has authority to regulate….. Safe Drinking Water Act: Fracking cannot be regulated except where diesel fuel used ……and is using it Clean Air Act: EPA can regulate emissions from O&G operations that are “major sources” Clean Water Act: EPA can regulate direct and indirect (thru POTWs) discharges Proposed SDWA guidance requires permits if diesel use; produced water can be regulated under existing rules Current rules prohibit direct discharges; indirect discharges currently unregulated, but pre-treatment standards being developed, likely in 2014 New rules require “green completion” or flaring at wells until 1/1/2015; both after that date; more stringent emission limits for gathering and processing facilities Toxic Substance Control Act: EPA has broad authority for chemical testing/disclosure NGOs petitioned for chemical testing/use disclosure in all O&G exploration/development; EPA denied testing but granted disclosure/reporting request BLM has power over Federal lands …....…and it too is using it BLM has broad powers over activities on federal lands— 38% of US gas wells on federal land Proposed rule issued in May would require chemical disclosure, data submission on geology/well integrity, and BLM operational approvals

8. 8 GE © 2012 – All Rights Reserved Shale Gas: State Regulatory Developments Vermont/New Jersey have ban/ moratorium, but neither has shale gas resources Ohio has comprehensive new law  covering chemical disclosure  waste disposal (including for underground injection well owners)  well construction requirements  pipeline safety requirements  local approval of permits but not a severance tax New York moving to allow shale gas development in some counties Pennsylvania: state law preempting local ordinances overturned— groundwater contamination a continuing issue 1 2 3 Key criteria Fracking activity Regulatory regime Potential for change Prohibited Established Burdensome Supportiv e High prob.Low prob.

9. 9 GE © 2012 – All Rights Reserved Key environmental considerations Category Water lifecycle Issues GE mitigant Water scarcity Potential surface water contamination Potential groundwater contamination Source water filtration Water reuse/recycling Mobile evaporators Fixed treatment solutions Operational issues GHGs Air quality On-site efficient power generation Pipeline & meter technology Compressors/pneumatic devices Well venting/flaring Seismic issues Safety Potential property damage Potential groundwater contamination Community impacts Safety Potential infrastructure damage Potential property value impact Nuisance Water reuse/recycling Mobile evaporators Fixed treatment solutions On-site efficient power generation Water reuse/recycling Mobile evaporators Fixed treatment solutions

10. 10 GE © 2012 – All Rights Reserved Frac gas and oil development Minimal increase to mining sector’s water withdrawals 3,563 BB/yr Total US water withdrawals Billion barrels per year (BB/yr) Source: USGS, 2005 data Frac fuels–related withdrawals are a drop in the bucket Other Mining* Power 1% US Frac fuels injected water projections Billion barrels per year (BB/yr) Mining sector w/out frac gas and oil development Frac gas and oil development contributions * Fracking fuels water withdrawals fall into the mining sector Source: USGS 2005; GE Energy, GSP estimates 2012 34.9 +1.4 +3.2

11. Challenge - filter hydraulic fracturing source water to reduce chemical treatment and cost and meet environmental regulations Solution - mobile ultra-filtration systems Challenge - reduce operation costs through solid and bacteria removal and chemical reduction Solution - one pass filtration Challenge - cost effectively treat produced and flowback water for reuse or discharge Solution - mobile and fixed membrane systems and thermal evaporators with service contract Source water filtration to reduce chemical pretreatment Water reuse/recycling On-site mobile evaporators Fixed evaporation & crystallizers GE solutions for water issues 11 GE © 2012 – All Rights Reserved Mobile Evaporator

12. GE solutions for fugitive methane emissions breakdown by source of emissions Reciprocating Compressors Low Emissions Rod Packing Reduces packing emissions 70% Standard offering on small HP today…extending to high HP Pneumatic Devices Becker ZERO BLEED™ Eliminate atmospheric bleed gas Masoneilan LE Packing, EF Seal Reduces emissions from control valves <100 ppm Gas Engine Exhaust Waukesha 275GL+ 1.2% greater fuel efficiency Reduces CO2 by 1,900 tons/yr.5 g/bhp-hr w/o emissions after treatment Centrifugal Compressors ICL Compressor Line Electric powered not natgas No venting when stopped Completely closed design means no seal leaks Dry Gas Seal RulePak Software for non-ICL compressor seals Pipeline Leaks & Meters USM Go, Rightrax RVI XL/ Rovver, X-ray ERESCO Ultrasonic, remote visual inspection, and x-ray tools for monitoring and preventing leaks Reduce leak service calls ecomagination Product % Total Emissions Well Venting & Flaring PEMS, GF868, GM868, XGM868i Predictive Emissions Monitoring System software Reliable, accurate meters for new installations or retrofits 39 % 14 % 13 % 7% 5% 4 3 3 3 2 Source: EPA Estimates, NatGas Star Program http://www.epa.gov/gasstar/basic- information/index.html

13. 13 GE © 2011 – All Rights Reserved Unauthorized Reproduction Prohibited Natural gas produces far lower operating emissions 7.7 0.5 NO x (grams per bhp-hr) 95% lower CO (grams per bhp-hr) 2.7 8% lower 2.5 Natural gas also reduces on site vehicular traffic