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Gastem USA

Environmental Concerns,

Mitigating Actions & Best Practices

Otsego County, NY.

Gastem USA: Introducing an Industry

WHO: Orville Cole-Gastem USA,, Rich

Nyahay-Senior Geologist Gastem USA,

Meghan Leaver-Gastem Inc.,

Environmental Affairs, Aaron Sulkey-

Environmental Scientist Gastem USA,

Tiffany McGivern-Hydrology Intern

Gastem USA, Kelly Wright-Construction

Supervisor.

Independent - Thomas Byrnes, Hydro-

geologist, Strategic Environmental

WHAT: Natural Gas Exploration in New

York State

WHERE: Otsego, Delaware Counties,

New York State

WHEN: On-Going Exploration

Pro Environment and Pro Growth

Water Use; volume of water use, drainage issues(sediment load), aquifer baseline, chemicalintroduction and frac flowback disposal.

Impact to Community; Open dialogue, economicimplications and education.

Terrestrial Change; landscape ecology, logging,wildlife, access improvement, land use changes

Protection Policies and Procedures; Federal,Regional, State and Industry Best Practises

Accountability Structure

Federal: EPA

Regional: SRBC

State: NYSDEC

County: Department of Soil & Water Conservation & Emergency Services

Industry Standards: Gastem USA Best Practises

Regulatory Jurisdiction

The Environmental Protection Agency (EPA)– Regulates the operations of all effluent from Waste Treatment Facilities to Rivers & Streams.

The Susquehanna River Basin Commission (SRBC) controls the use of all fresh water surface and sub-surface in the basin which encompasses much of south central New York State, Pennsylvania and Delaware.

The New York Department of Environmental Conservation (NYSDEC) oversees the drill permitting, water management and site constructions and remediation

Gastem develops a preferred practice to work closely with County Representatives for the awareness sharing of local expertise for both groups.

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Baseline Water Quality Study

Tested all wells within a 1 mile radius of the

immediate site

Tiffany’s poster, pre drilling and post frac tests

evaluated water quality on 19 wells and 10

surface ponds and streams.

Results indicate that slight changes have

occurred from seasonal conditions and natural

unrelated condition changes.

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Residential Well Sampling Analysis List

Dissolved methane, propane and ethaneVolatile Organic Compounds (EPA Method 524 or 8260)

GlycolspH

Conductivity ChlorideAlkalinity

SulfateTotal Dissolved Solids

Total Suspended SolidsCalcium

MagnesiumSodium

PotassiumIron

ManganeseArsenicBarium

ChromiumLead

LithiumStrontium

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Baseline Testing for Surface Water

and Sub-surface Aquifers

Natural Gas Drilling: Fact Sheet

Conductor was set through the glacial till to a

solid rock seat.

16 inch to 126’ and 10 inch to 138’

7 inch Surface Casing was set at 780’ and

cemented to surface. This is 95’ below the

deepest water well found within 2 miles.

4.5 inch casing to 4950’ cemented to surface.

H2O Management and Mitigation

All fluid hauling was monitored to ensure that the same volumes delivered to site were accounted including the 80,000 gallon frac job and subsequent disposal of 38,160 gals. of frac flowback fluid and 21,000 gals. of freshwater

Chemicals were finger printed and water analysis is scrutinizing local aquifers

SWPPP to mitigate potential sediment erosion

Drilling Fluids

NYSDEC permit reads « …All drilling fluids, fluids displaced

out of the well during cementing, and well water (collectively

the fluid) must be contained in a water-tight tank or container

and disposed of properly. »

Water and Disposal of Fluids

Disposal of 38,160 gallons of frac flowback fluid to Watertown facility in January 2010.

Full battery of tests and lab analysis from third party certified labs including testing for TDS, TSS, heavy metals and radioactivity testing

Baseline testing on all wells within 2 miles of the drill site (current government qualification is 2000 ft.)

SWPPP: Stormwater Pollution

Prevention Plan

“A plan required for major construction projects under the U.S. Environmental Protection Agency National Pollutant Discharge and Elimination System … The SWPPP is required to address measures to prevent erosion, sedimentation, and other potential discharges of pollutants to water bodies and wetlands”

Department of Transportation,

2008. http://www.1395-rt9-

study.com/glossary.html

Community and Public Disclosure

Publicly available lab results

Town hall sessions, including Town of Maryland official representatives, County Soil and Water Management and Emergency Response team / 911 first responders

Media, Environmental lobby groups and any number of Elected Officials have had access to our site

SWPPP: Ross #1

Minimise effluent

and sediment run-off

to the water

ecosystem

Constructed by a

certified hydro-

geologist in

adherence with

stipulated guidelines

Utica Flowback Results – Summary of Significant Detections

TDS – 6,460 mg/l

Chloride – 5,070 mg/l

Barium – 15.3 mg/l

Iron - 38.1 mg/l

Sodium – 2,600 mg/l

Strontium – 34.1 mg/l

Organic Compounds:

Toluene – 0.074 mg/l

Analysis

Groundwater or Drinking Water

Standard or Guidance Value

Well A

8/20/08

Well A

12/17/09

Well A

3/26/10

Calcium No standard 26 mg/l 27 mg/l 27 mg/l

Magnesium No standard 6.1 mg/l 5.9 mg/l 5.6 mg/l

Sodium 20 mg/l 37 mg/l 39 mg/l 40 mg/l

Potassium No standard 0.93 mg/l 0.57 mg/l 0.84 mg/l

Iron 300 µg/l Not Detected Not Detected Not Detected

Arsenic 25 µg/l Not Detected 1.9 µg/l Not Detected

Barium 1000 µg/l 64 µg/l 62 µg/l 60 µg/l

Chromium 50 µg/l Not Detected 6.6 µg/l Not Detected

Lead 15 µg/l Not Detected Not Detected Not Detected

Mercury 0.7 µg/l Not Detected Not Detected Not Detected

Strontium No Standard 570 ug/l 580 µg/l 540 µg/l

Chloride 250 mg/l 1.6 mg/l 1.1 mg/l 1.5 mg/l

Total Dissolved Solids 500 mg/l 230 mg/l 210 mg/l 190 mg/l

Volatile Organic Compounds

Standards vary by compound Not Detected Not Detected Not Detected

Dissolved Methane 10 mg/l Not Detected Not Detected Not Detected

Residential Well Sampling Results Summary – Well A

Laboratory Analysis

Groundwater or

Drinking Water

Standard or

Guidance Value

Well B

8/6/09

Well B 9/30/09 Well B 1/13/10 Well B 4/20/10

Calcium No standard 32 mg/l 31 mg/l 32 mg/l 33 mg/l

Magnesium No standard 8 mg/l 7.8 mg/l 8.0 mg/l 8.2 mg/l

Sodium 20 mg/l 26 mg/l 24 mg/l 25 mg/l 26 mg/l

Potassium No standard 0.68 mg/l 0.59 mg/l 0.73 mg/l 0.73 mg/l

Chloride 250 mg/l 2 mg/l 2 mg/l 2.5 mg/l 2.6 mg/l

Iron 300 µg/l 55 ug/l 64 ug/l 50 ug/l 59 ug/l

Lithium No standard 10 ug/l 8.4 ug/l 11 ug/l Not Analyzed

Manganese 300 µg/l 210 ug/l 230 ug/l Not Analyzed Not Analyzed

Arsenic 25 µg/l Not Detected Not Detected 1.6 ug/l Not Analyzed

Barium 1000 µg/l 1.9 µg/l 38 ug/l 40 ug/l 38 ug/l

Chromium 50 µg/l 11 µg/l Not Detected 3.9 ug/l Not Detected

Lead 25 µg/l Not Detected Not Analyzed Not Analyzed Not Detected

Strontium No standard 170 µg/l 170 ug/l 180 ug/l 170 ug/l

Sulfate 250 mg/l 6.6 mg/l Not Detected 5.7 mg/l 11 mg/l

Alkalinity No standard 160 mg/l 160 mg/l 170 mg/l 160 mg/l

Total Dissolved Solids 500 mg/l 220 mg/l 190 mg/l 162 mg/l 190 mg/l

Total Suspended Solids No standard Not Detected Not Detected Not Detected Not Detected

Dissolved Methane 10 mg/l Not Detected Not Detected Not Detected Not Detected

Residential Well Sampling Results Summary – Well B

GASTEM BEST PRACTISES

The result of New York Regulation,

specific conditions and local

opportunities and global experience

has allowed us to develop specific

practices that will be applied on all

future operations.

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Recommended Best Practices

Gastem has experience across North Americaand has proposed operations formulas thatalign with the exploratory nature of our workin NYS. We have used a minimum of 1 mileradius for baseline test water analysis ofsurface stream, ponds and private water wells.

Our water analysis procedures will end in theimmediate area of our work sites after a oneyear clean bill of health which is currently thesituation in the area of the Ross well site.

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Aquifer Protections

Gastem recognizes the NYSDEC requirement

for a bond log and maintains a company policy

to cement all casing to surface unless there is a

clear reason for alternative actions.

Usable aquifer have been detected within a

few feet of hydrocarbon sources in Otsego

County. This example is not shale gas so we

agree that caution is necessary throughout the

industry21

Bond Log

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Shallow Water & Gas Intervals

Terrestrial

NYSDEC permit reads « If any archeological or structural remains are encountered during site construction operations, the permittee must immediately cease, or cause to cease, all work and notify the Albany Mineral Resources office. Work shall not resume until written permission to do so has been received from the Department. »

Innovation in Land Use

• Beneficial Use

Determination (BUD)

study in conjunction with

local academic institutions

Currently sponsoring a

$20,000 study at Colgate

University to evaluate drill

cuttings to replace liming

agent for agriculture.

• We will develop well sites

with reusable matting

materials to reduce surface

disturbances. The matting

will be appled for all

temporary work space.

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Industry Employment Potential

*The gas industry-funded report issued last year by Penn

State's College of Earth and Mineral Sciences concluded

that the natural gas industry created more than 29,000

jobs in Pennsylvania in 2008 and 48,000 jobs in 2009.

Next year, the study estimates 111,000 new jobs will be

created as a result of Marcellus Shale-related industry.

A new industry will require at least a two year training

cycle with continuous activity to develop the industry in a

safe manner for new workers.

Development of education programs with BOCES and

local training is starting.

*Reference –June 30, 2010 – Scranton Times-Tribune - DAVID FALCHEK

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Current Employment & Local

Initiatives Gastem USA employs a Geologist from Cobbleskill, NY

We recently hired a Environmental Scientist graduate from SUNY

Oneonta and continue to have a Hydrology Student interning with

us from Little Falls, New York.

We currently have a contract worth $90,000 to a local

supplies for Hemlock matting that will fill 40% of our

projected needs for 2010 pending drilling approvals.

Colgate University is analyzing drill cuttings for chemical

content prior to a planned field test with SUNY Morrisville

to test high ph drill cuttings as a replacement for liming

on local agriculture land.

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Our Local Contractor Report

A few of the Contractors and Suppliers from the area;

Ken Ross Construction

Barber & Deline

Bruce Hall True Value

Lawson Surveying

Seward Construction

Town of Worcester (Water Supply)

Town or Maryland (Road Access)

Swatling Lumber

Riccelli Trucking

MOSA

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Development requires Evolution

The opportunity to develop a strong new Industry in New

York State currently exists. The local Banks, education

institutions including BOCES, SUNY Oneonta,Hartwick,

Colgate, SUNY Morrisville and the STEM Education

Coalition have all visited our well site or we are

participating with them in focused projects.

We are currently working with County staff and hope to

expect to continue with initiatives that will develop a

water well registry and standards on road use and road

bonds.

We Understand the Geology

NYSDEC has Standards for Safe

Drilling and Fracturing Operations

Gastem USA has Protected the

Aquifer

Natural Gas Leases in Otsego

County Gastem USA – 150 Leases

Atlas Energy – 50+ Leases

Whitmar & Lenape - ?

Worcester Land Association – 240 Families on 26,000 acres (1000 acres in

Delaware County)

Tri-Cities Land Coalition Maryland -16,000 acres = 134 Families

Unadilla - Otego – 29,000 acres – 320 members