Environment

As we manage our operations, we must understand the impact of our business on the environment. Potential impacts on the environment vary by site according to the nature of each operation. We work to reduce and manage the impacts of our operations, including water, chemicals, greenhouse gases, etc. Our projects and operations are set in a diverse range of environments. By understanding the potential impact we have on our surroundings, we help to responsibly use our resources and effectively manage our asset footprint.

Air Quality & Emissions

The development of oil and gas is governed by local, state, and federal air quality regulations. These regulations establish emissions limits, emissions control requirements, monitoring, testing, record-keeping, and reporting requirements to protect and maintain air quality. We are committed to meeting or exceeding these regulations and continuously seek out new ways to minimize the emissions generated by our operations.

Enviroment Image Enviroment Image Enviroment Image

At Carrizo, we utilize green completions, better known as reduced emissions completions, in all our operations across all our assets. Green completions are designed to recover natural gas produced during completion operations and eliminate or significantly reduce the need for flaring. In this way, they minimize the release of volatile organic compounds (VOCs) and methane during well completions. As a result, we flare as little gas as possible and strive to turn the gas to sales as soon as production begins. When we do flare gas, it is burned in highly-efficient, specialized combustors that convert the methane into water and carbon dioxide. This results in a far lower Global Warming Potential (GWP) as methane is believed to cause 25x as much warming as an equivalent mass of carbon dioxide over a 100-year period. We also have a policy against venting produced gas under any circumstance.

We take pride in being proactive regarding emissions control. The first step is designing our facilities in a manner that minimizes emissions. We use vapor recovery towers to reduce associated gas in production tanks, where warranted. We then use vapor recovery units when there is enough gas recovered in the towers to be economically sold. We also equip our dehydration units with BTEX condenser systems, which further eliminate the release of hazardous air pollutants (HAPs) into the atmosphere. We also control liquid load-out from tanks and route vapors to flares, if required.

The next step is monitoring our equipment and facilities. In Colorado and Texas, which account for the majority of our oil production, we implemented a fugitive monitoring program prior to it being required and the program now covers all of our operations. As part of our program, we voluntarily monitor our equipment for emissions leaks more frequently than required by existing regulations. Through our fugitive gas emissions program, we are able to identify and address areas of possible fugitive emissions containing VOCs and methane.

At Carrizo, we take the monitoring of our emissions very seriously. Daily monitoring of emissions is done by audio, visual, and olfactory (AVO) practice through our Leak Detection and Repair (LDAR) Program. This program covers all of our oil and gas facilities in the Eagle Ford, Delaware, Niobrara, Marcellus, and Utica. This includes all wells, separation equipment, storage tanks, flowlines, dehydration units, piping, and ancillary equipment from the wellhead to the sales meter at over 120 sites across our assets. If leaks are discovered, an immediate attempt to repair is made. If an immediate repair cannot be done, the leak is documented and a scheduled repair is done as soon as possible.

Methane Leak Detection Overview

We have employed the use of forward-looking infrared (FLIR) cameras at our facilities in order to aid in regular monitoring of emissions and have in-house camera technicians to perform the monitoring. While LDAR programs are now required in many areas, we first began using FLIR cameras at our facilities before it was required.

By the nature of our business and operations, produced fluids including water and oil are frequently removed from the wellsites using large trucks. Reducing truck traffic can have a materially positive impact on the environment and on surrounding communities. In 2015, Carrizo initiated an active truck reduction program that has significantly reduced oil and water truck traffic.

For oil production, our goal was to transport more than 60% of our produced oil in the Eagle Ford via pipeline, which would remove 120-130 truckloads per day off local roads. As of mid-2017, we have exceeded this level, as approximately 65% of our Eagle Ford oil production is currently transported via pipelines, helping to keep 150-160 truckloads per day off local roads.

For produced water, our goal was to transport approximately 70% via pipelines to disposal sites, which would further reduce the number of trucks used in our operations. As of mid-2017, we have exceeded this target, with more than 70% of produced water from Carrizo-operated Eagle Ford wells being transported via saltwater disposal pipelines to water disposal facilities. This is equivalent to removing 60-70 truckloads per day, which has resulted in a large reduction in emissions, fuel usage, and impact on local roads.

Truckloads per year

Additionally, we utilize multi-well pads and pipeline gathering systems in our operations. While this results in efficiencies in our operations, it also reduces truck traffic during the drilling and completion operations, which in turn reduces emissions. We are currently planning to begin a similar initiative in West Texas as our activity ramps up. We currently have minimal drilling activity planned for 2017 in our Colorado, and Pennsylvania operations. Thus, we do not have any near-term plans to install pipelines for saltwater disposal in those areas.

We currently use pipelines to transport water to our facilities for completion operations. This also helps keeps a significant amount of trucks off the road.

We seek to minimize our emissions by using energy efficient equipment at all our facilities. Examples of this include solar arrays to power meters at our production facilities and natural-gas-powered or lean-burning engines in our operations. We also use low-emission engines for a large number of compressors in each play.

Carrizo began reporting greenhouse gas emissions to the Environmental Protection Agency (EPA) in 2011. We are able to quantify and calculate the volume of emissions by using air quality modeling software, as well as EPA-published emission factors and calculations. Our reported greenhouse gas emissions are made available to the public and can be found on the EPA FLIGHT (Facility Level Information on Greenhouse Gases Tool) system.

Total Reported Emissions

Total Emissions

Water & Waste Management

We recognize that water is an essential natural resource for the communities where we do business. And while the oil and gas and mining industries combined only account for approximately 1% of the water used in the United States, we recognize that it can have an outsized impact on communities where we live and work. As such, we believe the management and protection of this resource, as well as the responsible management of our waste products, are key components to the long-term success of our business. Our water and waste management program is designed to meet or exceed all state and federal regulations governing water use and protection.

Water usage by industry in us

While we do not reuse produced or flowback water in the areas where we are currently operating, it is our practice to consider any available cost-effective recycling options in all areas of our operations that may face water supply limitations. When possible, we recycle and reuse produced water in an effort to lower our operating costs and reduce freshwater consumption. For example, in the past when we completed wells in the Marcellus Shale, we recycled 100% of the produced water for use in subsequent well completions. This allowed us to complete future wells with approximately 40% recycled water and 60% new water, thus significantly reducing our overall water consumption. As we ramp up our activities in the Delaware Basin, we are evaluating the viability of recycling our produced water in order to reduce our water consumption and disposal.

In Colorado and Texas, we use mainly fresh water during completion operations. Whenever possible, we try to access water from aquifers at deeper depths than those used by the local communities for drinking water.

2016 Percentage of Water Sourced

In order to safeguard the surrounding environment, we take steps to safely store and manage our produced water and other waste products as well as our oil production. As a policy, we do not store produced water in open-air earthen pits. All of our produced water is either stored in closed tanks or piped directly to disposal wells to minimize the potential for leaks and spills.

We use closed loop systems across all our assets for the management of drilling residuals that may contain toxic or hazardous materials. For our production facility containment systems, we use corrugated, steel-walled construction and sprayed-on liners. This significantly exceeds the requirement for containment systems, which is generally an unlined earthen berm. Should there be any leaks or spills, our containment systems sit inside lined pads to prevent any fluids from reaching the ground. As an added precaution, all tank connectors are sealed inside containers known as spill pods. These spill pods are designed to catch leaks or spills and drain them back into the tanks. We believe these added precautions help prevent possible leaks or spills from contaminating the surround environment or harming animals.

We also perform natural occurring radioactive material (NORM) surveys on all our equipment to safeguard our employees and the surrounding community. It is our practice to perform full NORM surveys across our entire asset base on a biannual basis and spot check on an as-needed basis. If NORM is found during a survey on a closed vessel or pipeline, it is documented and labeled with the reported NORM level reading. All appropriate personnel would then be notified of the finding. If a vessel or pipe with a reported NORM reading needs to be opened and cleaned out, our policy is to hire a third-party company licensed and trained for the handling and disposal of NORM. At Carrizo, employees are trained on NORM awareness. If an employee sees potential NORM, it is reported to our Environment, Health, & Safety (EH&S) department, and a licensed third party company would be dispatched to inspect and handle. In all cases, these incidents are reported and filed with our EH&S department.

Hydraulic Fracturing

At Carrizo, we utilize hydraulic fracturing in order to produce hydrocarbons from depths ranging between approximately one to two miles beneath the surface. As we drill down to these target formations, we encounter numerous shallower zones, some of which are fresh groundwater sources. We take great care to ensure that our operations do not impact these sources.

Fresh water protection is regulated by all states, and Carrizo meets or exceeds all state and federal guidelines. In Colorado and Pennsylvania, where our operations may be in close proximity to residential wells, we routinely test nearby water wells both before and after drilling and completion operations to ensure quality and safety. In Texas, our operations are located in rural areas and applicable law does not require the testing of nearby water wells. Our wells are designed according to strict internal guidelines with layers of casing and cement to protect underground sources of fresh water. Casing and cementing are critical parts of the well construction process that not only protect groundwater, but also help ensure efficient production of oil and gas from the well.

Before hydraulic fracturing, or fracking, begins, the cased and cemented well is tested at pressures greater than those that will be used during fracking operations to ensure well integrity and safety. Additionally, a cement bond log using sound waves is conducted to further ensure the integrity of the seal in the vertical portion of the well. In areas with a high risk of seismic activity such as Ohio, we evaluate seismic data to identify and avoid inducing seismic activity that would create risk to the surrounding environment.

We recognize that we are not the only company operating in our core areas, and that the industry needs to work together if it is to truly operate in an environmentally-friendly manner. As such, we notify nearby operators of our drilling and completion schedules to reduce the risk for offset operator activity. While this notice is required in Colorado, we operate under a good neighbor policy, so we provide notice in our other areas as well.

Hydraulic fracturing requires different types of sand, proppant, and chemicals. Our hydraulic fracturing practices do not use diesel or volatile organic compounds (VOCs) such as benzene, toluene, ethylbenzene, or xylenes (BTEX). We support public disclosure of the chemical composition of frac fluids by working with our vendors to submit information to FracFocus. FracFocus is the national hydraulic fracturing chemical registry managed by the Ground Water Protection Council and Interstate Oil and Gas Compact Commission. This is a national registry with participation from 27 states, including all of the states where we do business. We seek to provide this information in a transparent manner so that all of our stakeholders can take comfort in the practices, procedures, and technology necessary to find and develop oil and gas.

We work with all of our vendors in order to report fluids used in hydraulic fracturing to FracFocus. As a producer, we are required by state and federal law to keep Material Safety Data Sheets (MSDS), which are prepared and provided by our vendors. The MSDS describes the components of a given hydraulic fracturing fluid by well location. OSHA regulations govern the content of the MSDS and establish the criteria for the disclosure of this information including protecting “trade secret” and "confidential” business information. We provide the information included in the applicable MSDS to FracFocus, but we are not permitted by law to disclose hydraulic fracturing fluid components used by our vendors that are protected as “trade secret” or “confidential.”

In 2014, Carrizo was commended by the Colorado Oil & Gas Conservation Commission for our timeliness in submitting FracFocus information.

For comprehensive information on a per well basis, please visit the website www.fracfocus.org.

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