Turning Brownfields into Clean Energy. Today s Discussion

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1 Turning Brownfields into Clean Energy NOVEMBER 18, 2009 Today s Discussion Chesapeake Energy: Who are we? Barnett Shale overview What lead us to purchase Brownfields? Making a positive impact in Fort Worth *as of June 1,

2 Chesapeake Energy One of the largest producers of U.S. natural gas Most active driller in U.S. Natural gas focused All onshore U.S. Not in the Gulf of Mexico Not in the Rockies Not international Focused on Big 4 shale plays Barnett Shale Fayetteville Shale Marcellus Shale Haynesville Shale 3 Why Natural Gas? As a fuel for transportation Abundant, affordable, clean, domestic Cleanest burning fossil fuel 43% cleaner than coal and 28% cleaner than oil * 24% of total U.S. energy consumption is natural gas - Petroleum 39%, coal 23%, nuclear 8%, renewable 6% - Heating 36%, lighting 19%, cooling 12%, water heating 8%, cooking 6%, drying 3%, other 16% * Reduce our dependence d on foreign energy 4

3 What is the Barnett Shale? Mississippian age sedimentary rock ( million years old) Located more than one mile beneath the surface Discovered in 1990s, but emerged slowly Covers approximately 5,000 square miles in the Dallas-Fort Worth area Tarrant County is sweet spot of the shale Typical gas shale outcrop 5 What we do Five basic steps to natural gas exploration and production Site selection and well pad preparation Drilling the well Completing the well Marketing the gas Reclaiming the site After well completion After well is plugged and abandoned Drilling Production Reclamation 6

4 Why is the Barnett Shale Different? Most oil and gas wells are in rural areas The Barnett s urban setting created new challenges for energy companies Site selection / land availability Acquisition costs Proximity and density of major urban area Numerous municipalities and regional governing bodies Land use compatibility Noise concerns Safety concerns Light pollution from drill rigs Energy companies had to adapt approach to exploration and production, such as: Sound blankets and sound walls Electric drill rigs Directional lighting on drill rigs Use of horizontal directional drilling and multi-well pads to avoid sensitive receptors and reduce overall footprint on the landscape 7 Why is the Barnett Shale Different? One notable adaptation was a move toward acquiring real estate for future pad sites A common practice in Barnett Shale and more cost effective in certain cases Owning real estate also provides greater flexibility Siting (wells, access roads, and other infrastructure) Pad construction, drilling, and completion Site reclamation Even with common practice of acquisitions, leased sites far outnumber acquired sites Chesapeake s land development arm became one of the largest landowners in Tarrant County, TX Purchased more than 200 properties and more than 6,000 acres in the Barnett Shale Wide range of property types purchased Many sites purchased fit the EPA definition of a Brownfield Environmental issues at most sites turned out to be surficial and immaterial Trash, debris, tires, etc. Asbestos containing building materials Low level soil contamination typical of urban sites 8

5 Making a Positive Impact Chesapeake is making a positive impact to Brownfields before drilling ever starts Conducted a significant amount of demo and surface cleanup in last few years Some of the cleaned up sites will be used for gas production, some will be returned to real estate market in a more desirable state Purchased two former City of Fort Worth brownfield assessment sites Cleanup and demo are ongoing efforts on an as needed basis Support Chesapeake construction activities Address public nuisances Dumping Vandalism Graffiti Safety Fix prior owners last-minute stunts Chesapeake has improved many Brownfields left behind by other non oil and gas uses 9 Making a Positive Impact To build one of these... Sometimes we have to purchase these 10

6 Making a Positive Impact 11 Making a Positive Impact 12

7 Making a Positive Impact 13 Making a Positive Impact 14

8 Making a Positive Impact Many blighted properties will be developed as natural gas well padsites Supplying clean, local source of energy Supplying source of revenue for the community and royalty owners Once blighted properties are cleaned up and wells completed, adjacent property can be used for compatible development Improving community is important We live and work there Invested in long term success Some key sites may be maintained for future development A few sites have high potential for commercial or mixed use development One site in particular has potential to be a future Brownfields success story 15 A Future Brownfield Success Story? 7 th Street properties Approximately 40 acres / numerous parcels 2-3 acres on northern end used for natural gas production History of site includes Auto salvage / service Warehousing Printing Asphalt roofing material manufacturing/storage. Oil refinery (c. 1927) Steel manufacturing (c. 1927) Extensive environmental studies by some of the former owners UST removal Cleanup and VCP closure 16

9 A Future Brownfield Success Story? The site s potential: Proximity to downtown Fort Worth Thriving cultural district Soon to be riverfront property p Adjacent to major proposed rail corridor and station Adjacent to Montgomery Plaza - one of Fort Worth s biggest Brownfields success stories Premier site for transit-oriented and mixed use development No immediate development plans May seek a development partner Montgomery Plaza Chesapeake Plaza Downtown Fort Worth 17 Putting Brownfields to Productive Use Chesapeake has cleaned up over 40 blighted properties/630 acres in North Texas Most will be used for natural gas wells, some will be returned to the real estate market at a clean site Of the 40 sites cleaned up, 17 sites are now padsites with natural gas wells Even with conservative estimates, one 12-well padsite can produce $144 million in total revenue ($12 million per well) $24 million in royalties to residents $9.8 million to state and local taxing jurisdictions $20 million to local workforce and businesses One site also serves as a Chesapeake regional office Overall impacts of Barnett Shale in Texas $ million in direct and indirect tax revenue $10.1 billion in increased annual economic activity 99,726 new jobs in Texas 18

10 Questions? Contact information Jimmie Hammontree Corporate EH&S Specialist Chesapeake Energy 19