1. THE ENERGY WATER NEXUS: A Dynamic Spatial Case Study of the San Juan Basin, NM KATIE ZEMLICK, PRESENTER 1 University of New Mexico Elmira Kalhor Janie Chermak, PhD Bruce M. Thomson, PhD Sandia National Laboratories Vincent C. Tidwell, PhD US ASSOCIATION FOR ENERGY ECONOMICS NORTH AMERICAN CONFERENCE OCTOBER 25-28, 2015

2. Chermak, 2015 Objective Develop an integrated approach to understanding the tradeoffs between water and energy development in New Mexico to aid in future decision making. ◦Quantify resources present, distribution ◦Well-level analysis of gas production ◦Resource type ◦Formation ◦Well age ◦Drivers of gas production ◦Economic ◦Regulatory ◦Supply/Demand ◦Systems-level analysis 2

3. Chermak, 2015 Objective Develop an integrated approach to understanding the tradeoffs between water and energy development in New Mexico to aid in future decision making. ◦Quantify resources present, distribution ◦Well-level analysis of gas production ◦Resource type ◦Formation ◦Well age ◦Drivers of gas production ◦Economic ◦Regulatory ◦Supply/Demand ◦Systems-level analysis 3

4. Geology & Hydrology Technology: Conventional vs. Unconventional Economics Introduction Growth in natural gas reserve estimates ◦Global: 40% increase since 2010 (USGS, 2010) ◦Domestic: 90% increase since 2000 (US EIA, 2015) ◦Population in American Southwest is growing ◦Economic benefits of energy development ◦Oil and gas contributed $2.44 billion to the state’s $70.5 billion economy in 2011 4 Source: US EIA, 2015

5. Energy Water Nexus 5 Source: New York State Water Resources Institute. http://wri.cals.cornell.edu/research-topics/shale-gas Water required at nearly every step in energy life cycle: extraction, refining, production

6. Energy Water Nexus 6 Source: New York State Water Resources Institute. http://wri.cals.cornell.edu/research-topics/shale-gas Water for gas production and produced water Injection: 2-7 Mgal Production: 6-70 Mgal Gallegos et al., 2015

7. San Juan Basin 7 The San Juan Basin contains natural gas reserves Conventional: 59-165 BCFG Unconventional: ~50 TCFG Water scarcity Precipitation: 8-40 in./yr. Evaporation: 40-60 in./yr. Source: Sullivan Graham, 2015

8. San Juan Basin Fragmented land ownership presents unique issues 8

9. Historic Data 9 New Spuds vs. Henry Hub Gas Spot Price Predominantly Conventional Production

10. Historic Data 10 New Spuds vs. Henry Hub Gas Spot Price Predominantly Conventional Production

11. Historic Data 11 New Spuds vs. Henry Hub Gas Spot Price Predominantly Conventional Production

12. Historic Data 12 New Spuds vs. Henry Hub Gas Spot Price Predominantly Conventional Production 1975 – 2015 ~28,000 gas producing wells Monthly observations ~13 million data points

13. Data Sources and Software Energy and Water Geology and hydrology (Kernodle, 1996; Kelley et al., 2014) Natural gas resources (USGS TPS Assessment, 2002) Natural gas well production logs (NM OCD, 2015) Economics (US EIA, 2015) Spot Prices Production costs Price and demand projections through 2040 Software:ArcGIS, Pandas, R, Powersim 13

14. Conceptual Model 14 Econometrics and System Dynamics Framework

15. Subsurface Model 8 formations, 425 Township Range Boundaries Account for geologic variability 15 Volume-weighted approach to resource distribution Generalized geologic cross section of the San Juan Basin Source: New Mexico Bureau of Geology and Mineral Resources

16. Results Historic gas and water production, water injection data ◦~28,000 wells ◦Monthly data points, ~13 million ◦SQL for managing, querying, mining of Big Data ◦Lots of challenges with Big Data ◦Missing data ◦Erroneous data ◦Interpretation 16

17. Preliminary Results 17 Barrel/mcf Sandstonevs. Shale GAS PRODUCTION WATER-TO-GAS RATIO Kirtland Fruitland Sandstone Mancos Shale

18. Kirtland Fruitland Sandstone Production distribution 1970-2010 18 1970 2000 19902010 1980

19. Mancos Shale Production distribution 1970-2010 19 1970 20001990 2010 1980

20. Conclusions Future natural gas production will likely be from shale Conventional Wisdom vs. Historic Data ◦Shale does not produce significantly less water than sandstone ◦Injection data is difficult to interpret ◦Factors other than geology influencing water production ◦Disposal of produced water will be significant ◦New development influenced by land ownership 20

21. Future Work ◦Incorporate econometrics results into system dynamics model ◦Treatment, reuse, and/or disposal options for produced water as a function of quality ◦Develop future scenarios based on: ◦Changes/fluctuations in the price of gas ◦Regulatory changes ◦Land use changes ◦Climate factors influencing water availability 21

22. Acknowledgements Funding for this research was provided by: ◦The UNM Center for Water and the Environment, an NSF funded Center for Research Excellence in Science and Technology (CREST), NSF Award #1345169 ◦New Mexico’s Experimental Program to Stimulate Competitive Research (EPSCoR), NSF Award #IIA1301346 22

23. References Kelley, S. E. (2014). Hydrologic Assessment of Oil and Gas Resource Development in the Mancos Shale in the San Juan Basin, New Mexico. Socorro: New Mexico Bureau of Geology and Mineral Resources. Kernodle, J. M. (1996). Hydrogeology and Steady-State Simulation of Ground-Water Flow in the San Juan Basin, New Mexico, Colorado, Arizona, and Utah. Albuquerque: U.S. Geological Survey. McLemore, V. T., & Chenoweth, W. L. (2003). Uranium Resources in the San Juan Basin, New Mexico. New Mexico Geological Society Guidebook, 54th Field Conference, Geology of the Zuni Plateau, (pp. 165-177). Roach, J., & Tidwell, V. (2009). A Compartmental–Spatial System Dynamics Approach to Ground Water Modeling. Groundwater, 47(5), 686-698. US Energy Information Administration. (2015, April 2). U.S. Crude Oil and Natural Gas Proved Reserves. Retrieved from US Energy Information Administration: www.eia.govwww.eia.gov U.S. Environmental Protection Agency. (2015, May 7). EPA Analysis of Frac Focus 1 Data. Retrieved from EPA Web site: http://www.epa.gov US Geological Survey. (2013). Total Petroleum Systems and Geologic Assessment of Undiscovered Oil and Gas Resources in the San Juan Basin, Province, Exclusive of Paleozoic Rocks, New Mexico and Colorado. Denver: US Geological Survey. 23