Water ManagementBarnett ShaleNovember 21, 2008

2

Today’s Discussion

Hydraulic fracturing & water useSaltwater disposalWater transport optionsBrentwood water pipeline systemsRecycling technologyQuestions

A salt water disposal well in Cleburne.

3

Chesapeake’s Water Use in the Barnett Shale

Drilling a well About 5,000-7,000 barrelsCompleting a well About 70,000 barrels

(including fracing process)

Total usage per well: About 75,000-77,000 barrels

Chesapeake’s water use in the Barnett Shale, based on 600 wells drilled annually*, is about 45 million barrels.

*Chesapeake’s water use in the Barnett Shale 2.5 county area. Estimate based on 2008 proposed usage.

(One barrel = 42 gallons)

4

Chesapeake’s Current Water Sources

Surface water sources 35%Brazos River AuthorityTrinity River AuthorityU.S. Corp of Engineers

Private water sources 25%Private lakes and ponds Stock tanks

Water supply wells 25%Chesapeake owns 3 water supply wellsMajority of water wells usedalready exist

Municipal water purchases 15%ArlingtonBurlesonCleburneCrowley

Trinity River near University Drive in Fort Worth

Reuse / waste water Less than 1%CleburneFuture plans includeVillage Creek

KeeneFort WorthGrand Prairie

5

Water Use in the Barnett Shale

Municipal uses 80.4% 10 billion barrels

Electric generation 5.7% 800 million barrels

Irrigation 5.4% 650 million barrels

Manufacturing 3.9% 500 million barrels

Livestock 2.3% 300 million barrels

Mining 1.8% 200 million barrels

Oil & gas operations .5% 55 million barrels

Source: Fort Worth Basin/Barnett Shale Natural Gas Play: An Assessment of Present and Projected Fresh Water Use, by L. Peter Galusky Jr., Texerra, April 3, 2007

(One barrel = 42 gallons)

Annual water consumption for all users across the Fort Worth Basin

6

Water Use ComparisonDrilling vs. Golf Course

*Source: Colorado State University Agricultural and Resource Policy Report, April 2004

One natural gas well, during its projected 20-year lifespan, uses about 80,000 barrels of waterFort Worth’s 10 public golf courses, during a span of two days, use about 94,000 barrels of water*

(One barrel = 42 gallons)

7

Water Use ComparisonLocal Business Use

University of Texas at Arlington uses 7 million barrels per yearGeneral Motors uses 6 million barrels per yearHurricane Harbor uses2.9 million barrels per yearTexas Rangers use1 million barrels per yearOne 12-well drillsite uses960 thousand barrels in 20 years

The Ballpark in Arlington

Hurricane Harbor in Arlington

UTA campus

(One barrel = 42 gallons)

8

Ellenburger Formation

Ellenburger formation is more than a mile and a half below the earth’s surfaceThe formation consists of a porous rock containing naturally occurring saltwaterEllenburger is separated from freshwater formations by impervious rock beds

In the Barnett Shale, flowback and produced water is injected into the Ellenburger formation using saltwater disposal wells.

9

Injection Wells

Class II Injection WellsLicensed to dispose of waste water and materials associated with the production of oil and natural gas Almost 144,000 operating in the United StatesMore than 50,000 in the state of Texas**

Salt Water Disposal WellsSubset of Class II injection well licensed for disposal of water generated from the production of oil or gasEllenburger: a porous strata which absorbs the water, located underneath the Barnett Shale11,700 active SWD wells in Texas***

* Environmental Protection Agency, February 12, 2008** Railroad Commission of Texas, September 2008***John Tintera, RRC, 2008

10

Wellbore Integrity

Texas Railroad CommissionMonitoring & Testing

*Areas in which Chesapeake exceeds Railroad Commission of Texas standards

(5) Packer

(1) Surface Casing

(6) Steel tubing

(2) Surface Casing Cement(3) Production Casing(4) Production Casing Cement

7 Layers of Protection

(7) Plastic coating

Plus 1.5 miles of impermeable rock

Drilling and Completion• Casing*• Impervious Cementing*• Tubing*• Packer

Testing Prior to Service• Impervious Cement Bond Log• Pressure Testing

Operations• Continuous Monitoring*• Annual Integrity Testing*

Reporting• Prior to Placing in Service• Monthly

• Injection Date• Pressure• Volume

11

Wellbore Integrity

1. Surface casing run between 150-200 feet below deepest aquifer2. Surface casing cemented back to surface3. Production casing through 1.5 miles of rock between the

groundwater sands and the Ellenburger formation4. Production casing cemented back to surface in three stages 5. Packer located at 7,600 feet (RRC: less than 100 feet from

formation top)6. Steel tubing to the Ellenburger7. Internal plastic coating on tubing to prevent corrosion

Other Safeguards:Injection limited into the Ellenburger formation at 7,649 feetMechanical integrity testing annually (RRC: 5 years)Pressure monitored continuously (RRC: monthly)

7 layers of protection

12

Salt Water Disposal Injection Facility

Mann SWD - Cleburne

13

Water trucks transport between 5,040 — 6,300 gallons of water per trip

Water pipeline systems reduce the need for water trucks, resulting in reduced emissions and less road wear

Some trucking is inevitable

Water Transport Options

Two ways to transport produced water to saltwater disposal wells: truck and water pipeline

14

Increase in Truck Traffic Is Temporary

Water production for one well drops significantly over time

Water output drops 47% in second week

Water output drops 72% after 60 days

Water trucks are necessary to transport produced water

First day of production, 13-17 trucks are needed to remove produced water

Less than one truck per day needed after three months

Water trucks transport produced water to salt water disposal wells.

Urban residents often do not notice the delivery trucks, school buses, gasoline tankers, garbage trucks, etc. that they encounter every day.

(Photo from www.handtrucksystems.com)

15

Brentwood SWD Site

Close-up of Brentwood SWD well in East Fort Worth.

16

Brentwood SWD Site

42-acre property, located in East Fort Worth, north of I-30 near OaklandSite of Chesapeake’s East Tarrant County field office2 compressor stations: Brentwood CF and Arc Park CF2 compressor stations: Brentwood CF and Arc Park CF4 padsites: Brentwood A, Brentwood B, Carter State, and coming soon White Lake Hills BBrentwood SWD injection well

Tank batteries at the Brentwood SWD site hold produced water until it is injected into the saltwater disposal well.

17

Reducing Traffic at Brentwood

Long driveway improves accessibility for water trucks entering the Brentwood site, helping to minimize traffic on adjoining road

Planned water pipeline system connecting drillsites to the Brentwood SWD will reduce the number of trucks needed to transport produced water

18

Strategically Located SWD Wells & Pipelines

Success of the DFW Airport and Brentwood SWDs can be replicated all over the Barnett Shale region Strategically located SWD wells can reduce miles trucks must travel to dispose of produced waterAddition of water pipeline systems can lessen truck traffic even more dramaticallyResult is decrease in water truck traffic, related emissions and road wear

19

What About Recycling?

Majority of the water returned from a well (95%), with its high salt content, is too saturated to make its recycling economically viable

Natural gas industry is testing the feasibility of recycling flowback water with limited success

Flowback water accounts for only about 5% of water byproduct

About a week after fracing, flowback salt content can reach as high as 70,000 ppm, more than twice the salinity of sea water

Current recycling technologies require increased space in which to operate, translating into larger footprint on the environment

Increased recycling efforts mean increased truck traffic, to move the recycled water back out into the field so that it can be used again

20

Evaluating Recycling Technologies

Chesapeake Energy and others in the industry are constantly evaluating opportunities to treat the water generated from natural gas production, so that less of it will need to be injected using SWD wells

Barnett Shale Water Conservation Management Committee meets regularly to evaluate feasible recycling optionsPilot recycling projects are being undertaken by natural gas companies in an effort to increase efficiency and feasibility of current recycling technologiesChesapeake has begun a pilot program involving water evaporation system technology

21

Chesapeake is testing a new evaporative technology system at the Brentwood SWD site: Intevras’ EVRAS system.

Water Evaporation System

Employs natural process of evaporation to turn water into water vapor –resulting in less water to be injected into SWD

Uses “waste heat” from compressor; no need to consume fuel

Clean water vapor is released into the atmosphere, where it will naturally return to the earth as rain

This nominal EVRAS unit in Cresson is half the size of each of the four units at the Brentwood SWD.

Evaporative section

22

Why Use Intevras’ EVRAS System?

Proximity of “waste heat” —energy source which otherwise would go to wasteSmall footprint on environment: 45’ x 80’ x 15’ deep for four units

Compliant with EPA regulationsLow noise — runs on electricity, so no noisy combustion engines40% efficiency rate

Salt water tanks store concentrated water after the evaporation process. Some of this concentrate can be used in work-over operations; most will be injected.

Compressor station: “waste heat” source

One Intevras’ EVRAS unit with one evaporation section

22

Currently being employed by Devon Energy In the Fort Worth Barnett Shale area

2,500 BBL/day throughput with 2,000 BBL/day of fresh water

Requires approximately 100 mcf/day of natural gas to process the fluid

Fountain Quail Distillation/Evaporation System

Currently being employed by EnCana in the Barnett Shale

Uses a reverse osmosis membrane system to remove salt from flowbackwater

10,000 bbl/day throughput with a limit of 20,000 ppm chlorides

Requires approximately 100 mcf/day of natural gas to process the fluid

Triad RovanReverse Osmosis Filtration System

25

The Earth’s Water Cycle

Evaporated water becomes part of nature’s recycling system.

Clean water vapor is released and rises, to be stored in the earth’s atmosphere

When the air becomes saturated, what was once evaporated water will naturally return to the earth as rain

26

Why Use SWD Wells?

Proven technologyEvery possible mechanical safeguard employedInjected into Ellenburger formation to depths greater than 7,500 feetOversight and inspection by the Railroad Commission of TexasExcellent track record

Why is Chesapeake an advocate of SWD wells?

A salt water disposal well in Cleburne.

Moving ForwardWater Resource Challenges

Competition for Resources

Multiple users in areas

Use of water resource to produce another resource – natural gas

Proper planning

Open communication with agencies and the public

Perception of Excessive Use

Transient use

Education

Misconceptions of Technology

No magic bullet

Economics

Moving ForwardWater Resource Opportunities

Identification of Non-Competitive ResourcesWastewater reuseNon-potable sourcesStrategic capture of surface flows during wet season

Use (payment) for Excess Water RightsEnhancement of infrastructure

Use of treatment technologies where practicalRecycling/treatment of flowback and produced watersTreatment of saline groundwatersContinual evaluation of new technologies

29

Chesapeake Energy Corporation | Barnett Shale Headquarters

100 Energy Way, Fort Worth, Texas 76102

817.502.5000 | chk.com

www.AskChesapeake.com

NYSE: chk