Environmental Responsibility Air, Land, and Water

As we manage our operations, we must understand the impact of our business on the environment. Our projects and operations are set in a diverse range of environments, and potential impacts on the environment vary by site according to the nature of each operation. Our operations are largely focused in rural areas away from large communities, areas of high biodiversity, or protected habitats. Regardless, we work to reduce and manage the impacts of our operations, including water, chemicals, greenhouse gases, etc. By understanding the potential impact we have on our surroundings, we help to responsibly use our country’s natural resources and effectively manage our asset footprint in order to limit our impact on biodiversity. Some of the ways we have managed our environmental footprint include:

Environmental Responsibility

Drilling Location Selection and Design

When assessing potential drilling locations, we carefully look at geography and topography as well as the surrounding area’s biodiversity. We select areas that allow us to avoid or minimize impacts to the environment while also giving us the ability to drill multiple wells from the same pad, thereby reducing overall footprint and impact. If a protected habitat or species is identified, we try to relocate the site in order to protect that resource.

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Corporate Recycling

Our corporate office is an active participant in our building’s business waste recycling program. Each of our employee kitchens is equipped with recycling receptacles for paper, aluminum, and plastic. We also strive to reduce toxic hazards from battery disposal by encouraging our employees to bring used batteries to the office for recycling.

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Reducing Physical Footprint

In 2018, our corporate office began consolidating office space in order to reduce the amount of utilized space and remove wasted space. In total, we were able to reduce our physical footprint by 25%. Not only has this effort has helped us achieve overall corporate energy savings, but it has also increased the efficiency of our operations.

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Active Truck Reduction Program

In 2015, Carrizo initiated an Active Truck Reduction Program that has significantly reduced oil and water truck traffic. By the nature of our business and operations, produced fluids including water and oil are frequently removed from the wellsites using large trucks. We believe that reducing truck traffic by transporting produced fluids through pipelines is not only efficient, but also the safest means of transportation. Reducing truck traffic also has a positive impact on the environment and on surrounding communities.

For oil production, our goal was to transport more than 60% of our produced oil in the Eagle Ford Shale via pipeline. With respect to our 2017 production, this removed approximately 120-130 truckloads per day from local roads. As of December 2018, we exceeded this level, with approximately 82% of our Eagle Ford Shale oil production – and 93% of our Permian oil production – transported via pipelines.

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 December 2018, we had also exceeded this target, with almost 90% of produced water from Carrizo-operated wells being transported via saltwater disposal pipelines to water disposal facilities.

By transporting our oil and produced water via pipelines, we have removed the equivalent of more than 1,200 truckloads per day. This has resulted in a large reduction in emissions, fuel usage, and impact on local roads.

For our Eagle Ford Shale drilling and completion operations, we utilize multi-well pads and pipeline gathering. While this does result in operational efficiencies, it also reduces truck traffic which in turn reduces emissions, fuel usage, and impact on local roads. As we ramp up activity in the Permian Basin, we are undertaking a similar initiative.

The reduction of trucks on the roads also benefits the environment, biodiversity, and surrounding community by reducing noise, light, and odor disruptions.

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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. Our policy is to meet or exceed these regulations and continuously seek out new ways to minimize the emissions generated by our operations.

Emissions Control

We take pride in being proactive regarding emissions control and voluntarily implement measures to reduce air emissions from the start of our site and facility design. The first step is designing our facilities in a manner that limits 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 equip our dehydration units with benzene, toluene, ethylbenzene, or xylenes (BTEX) condenser systems, which further reduce 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.

At Carrizo, we seek to minimize our emissions by using energy-efficient equipment at our facilities. Examples of this include solar arrays to power meters at our production facilities, natural-gas-powered or lean-burning engines in our operations, and low-emission engines for a large number of compressors in each play. We also utilize reduced-emissions completions, better known as green completions, in our operations across 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 are able to significantly reduce the amount of flared gas and strive to turn the gas to sales as soon as production begins. 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.

Leak Detection and Repair Program

At Carrizo, we take the monitoring of our emissions very seriously. We were proactive in implementing 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.

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 Texas. This includes wells, separation equipment, storage tanks, flowlines, dehydration units, piping, and ancillary equipment from the wellhead to the sales meter across our assets. If leaks are discovered, repairs are attempted promptly. If a prompt repair cannot be made, the leak is documented and a scheduled repair is made as soon as possible. We currently monitor more than 145 sites in Texas. At a minimum, we check these sites quarterly via infrared cameras.

We employ 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.

Emissions Reporting

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-emissions calculation software, as well as EPA-published emission factors. 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

(Metric tons of carbon dioxide equivalent)

BY AREA1 2018 2017 2016
Total 794,297
597,166 647,832
Appalachian n/a 39,077 35,693
Gulf Coast 594,961 515,134 548,036
Permian2 199,336 123,309 n/a
Denver n/a 42,955 64,103

1Areas are listed as reported to the EPA. Carrizo divested its Appalachian assets in 4Q 2017 and its Denver assets in 1Q 2018.
2Permian Basin operations did not trigger emissions reporting thresholds in 2016.

Water and 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 (5% in Texas where we currently operate), 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.

Us Water
Texas Water

Source: USGS Estimated Use of Water in the United States in 2015 Report

Water is used during the drilling and completion stages of oil and gas development. Our water use can vary depending on the geological complexity of the zones being developed and the specific drilling and completion plans designed for each well. Water obtained for fracture stimulations comes from a variety of sources including industrial water wells, surface water sources, and non-potable water sources such as recycled flowback, produced water, and non-potable groundwater. We do not draw water from any areas that communities use for drinking water and we do not operate in areas or regions with high or extremely high baseline water stress. Whenever possible, we try to access water from aquifers at deeper depths than those used by the local communities for drinking water. As such, we work closely with federal, state, and local agencies to evaluate and permit our freshwater usage.


Percentage of Water Sourced

Barrels Groundwater Surface Water Flowback Water
Total Water Withdrawn 45,366,000
N/A
Total Water Consumed



Eagle Ford 34,300,000 100%
0%
Permian 11,066,000 73%
27%
Total Water Discharged 0
N/A

Water Recycling

It is our Company’s practice to mitigate the risks associated with water procurement and disposal by considering cost-effective recycling options in our operations. When practical, 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.

In 2018, we took our best practices from the Marcellus Shale and implemented a water recycling program in the Delaware Basin. As of December 2018, up to 20% of the Company’s water demand in the Delaware Basin was met through the use of recycled water. And we are currently testing increased use of recycled water in our completion operations.

Spill Prevention

Our Water and Waste Management team is committed to protecting the surrounding environment and spill prevention is vital to minimizing adverse environmental impacts while helping to ensure a safe workplace. This begins with having a Spill Prevention, Control, and Countermeasure Plan for each operating area. These plans describe preventative measures, as well as control and countermeasures, for different types of spills resulting from various scenarios such as weather, fires, or other issues. These plans are reviewed and approved by Carrizo’s management team and certified by a Registered Petroleum Engineer.

We take steps to safely store and manage our produced water and other waste products as well as our oil production. Spill prevention includes containment measures, continual maintenance, and immediate responsiveness depending on the situation. As a policy, we do not store produced water in open-air earthen pits. All of our non-recycled 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 in our assets for the management of drilling residuals that may contain toxic or hazardous materials. For our production facility containment systems, our policy is to construct our facilities using 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, 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 surrounding environment or harming animals.

Carrizo documents the volume of oil and produced water spilled from our operation as well as the volumes we were able to recover. We are proud that our spill prevention protocol resulted in a loss of only approximately 1,350 barrels of water and 100 barrels of oil in 2018 despite our significant level of production.

Oil & Water
Percentage of Spill Recovered 2018 2017
Oil 40% 3%
Water 22% 4%

Our Oil Spill Rate is calculated by dividing the aggregate volume of oil barrels spilled during a period times 1,000,000 by our gross barrels produced during the same period. Our oil spill rates for 2017 and 2018 are as follows:


2018 2017
Oil Spill Rate
(barrels per million barrels produced)
7.77
14.98

Our Water Spill Rate is calculated by dividing the aggregate volume of water barrels spilled during a period times 1,000,000 by our gross water produced during the same period. Our water spill rates for 2017 and 2018 are as follows:


2018 2017
Water Spill Rate
(barrels per million barrels produced)
35.11 23.56
Hazardous Waste and Toxicity

Hazardous Waste and Toxicity

Exposure to hazardous waste is always a possibility in our industry. At Carrizo, our Hazardous Waste Operations and Emergency Response Program comprehensively addresses the issues of evaluating potentially hazardous waste and communicating information concerning these hazards, and details appropriate operating procedures and protective measures for employees as well as disposal and emergency response should the situation require it. We perform natural occurring radioactive material (NORM) surveys on our equipment to safeguard our employees and the surrounding community. As such, Carrizo employees are trained on NORM awareness. It is our practice to perform initial NORM surveys on assets upon acquisition and follow-up with additional NORM surveys when pipes are removed from wells and equipment is taken down for cleaning or servicing. If NORM is found during a survey on a closed vessel or pipeline, it is documented and labeled with the reported NORM level reading. 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. If an employee sees potential NORM, it is reported to our 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 on our wells in order to produce hydrocarbons from depths ranging between approximately one to three 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 adversely impact these sources.

Fresh water protection is regulated by all states, and Carrizo's policy is to meet or exceed all applicable state and federal guidelines. We routinely test nearby water wells both before and after drilling and completion operations to ensure quality and safety. We do this despite the fact that 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 help 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, we evaluate seismic data to identify and avoid inducing seismic activity that would create unnecessary risk to the surrounding area.

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 some areas, we operate under a good neighbor policy, so we provide notice regardless of local requirements.

Hydraulic Fracturing 2

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 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 our stakeholders can take comfort in the practices, procedures, and technology necessary to find and develop oil and gas.

We work with our vendors in order to report fluids used in hydraulic fracturing to FracFocus and maintain 100% compliance on all our wells. 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, by law, we are not permitted to disclose hydraulic fracturing fluid components used by our vendors that are protected as “trade secret” or “confidential.”

For comprehensive information of our fluids usage on a per-well basis, please visit the website www.fracfocus.org.