Comparative economic analysis - Vertebrae Horizontal nested well system versus vertical extraction wells

1 | INTRODUCTION

This report summarizes the process and results obtained from an economic analysis comparing the installation cost of the VertebraeTM horizontal nested well system to a vertical well groundwater pump and treat system such as might be installed at a gas station, terminal, or small manufacturing plant. The purpose of the analysis is to help decision makers gain an understanding of the potential value that could be realized from the installation of the VertebraeTM at a given site. The results indicate that for a small site such as a gas station the average the installation cost for the VertebraeTM system is approximately 15% less than that of a standard vertical well system. For larger sites, such as terminal or manufacturing plant; the average savings is on the order of 57%.

This is a preliminary evaluation that considers only the cost required to install a system to begin treatment operations, and not full life cycle costs. Given the efficiencies associated with horizontal wells, operational flexibility of the horizontal nested well system, and the ability to use the Vertebrae system for investigation and remediation, it is anticipated that the life-cycle savings associated with the VertebraeTM system will be substantial when compared with traditional vertical well systems.

2 | VERTEBRAETM DESCRIPTION AND BENEFITS

Although this report is focused on economics, it is important to briefly describe the VertebraeTM system and its associated benefits since they have a considerable effect on the economics in both the short and long term. The VertebraeTM system represents an extension and improvement on horizontal well installation techniques used for purposes of remediation.

Horizontal wells offer many advantages over vertical wells because of the increased formation contact area that can be achieved with horizontal well bores. This increased contact area is especially valuable when dealing with soils consisting of finer grain materials and those having low vertical to horizontal permeability ratios. Another significant advantage of horizontal wells it that they can be placed directly under surface structures such as above ground storage tanks or manufacturing buildings where the largest volume of released contaminants often occurs. At the present time horizontal wells are most often used to treat contamination by the injection of reagents or by dual-phase fluid extraction.

The traditional horizontal well design involves a well screen interval that extends throughout most of the horizontal bore. The primary disadvantage of the traditional design is that it does not address the problem of preferential flow paths that result from the heterogenous nature of the subsurface environment (i.e., (mixtures of sand, silt, clay and fill materials). These preferential flow paths prevent the homogenous delivery of reagents to the impacted soils. They also limit the extraction of fluids from all soils encountered by the wellbore. Thus, coarse gained soils with higher permeabilities receive the greatest amount of treatment while fine grained low permeability soils receive minimal treatment. This problem exists with vertical wells as well, and is one of the reasons for the long durations associated with pump and treat operations. It also explains the rebound of dissolved concentrations of contaminants in groundwater after pump and treat operations are ceased.

The VertebraeTM design makes use of segmented and isolated well screens that are individually piped to the surface. This design overcomes the influence of preferential flow paths and allows for substantial flexibility of operation, both in the introduction of reagents and in the dual-phase extraction of fluids.

The VertebraeTM design also enables the use of the system for assessment of contaminant distribution. This is done by collecting water and/or air samples from the segmented zones. The result is a more detailed delineation of contamination under surface structures than can be obtained by traditional methods. Therefore, this design introduces additional life cycle cost savings since the system used for additional site assessment is available for immediate use as a remediation technology.

3 | ANALYSIS METHODOLOGY

It is well known within the remediation industry that site characteristics such as the type of surface structures, the soil types, depth to groundwater, and depth to bedrock can vary considerably from one site to another. In addition, labor rates and equipment cost are somewhat location specific. To account for this variability and uncertainty, this analysis makes use of Monte Carlo simulation.

Monte Carlo simulation replaces fixed cost estimates for completing various implementation tasks with probability distribution functions (PDFs). PDFs describe the range of cost values that are possible for the various implementation tasks as well as the probability of taking given values within the range. During the simulation, the input PDFs are repeatedly sampled and the total cost based on the sum of these sampled costs is repeatedly calculated. Each input sampling and calculation event is referred to as an iteration. For this analysis, the small and large site simulations involved 5,000 iterations.

4 | MODEL INPUTS

There are a number of different types of PDFs than can be used to represent a range of values based on the application type. A common and popular PDF used for purposes of cost estimating is the Program Evaluation and Review Technique (PERT) distribution. This distribution is popular for two reasons. The first is that the parameters used to shape this distribution are minimum, most likely and maximum estimates. The second is the distribution can take on the shape of a normal distribution (often referred to as the bell curve) or a lognormal distribution which can be skewed to the left or right based on the numerical difference (or distance) between the three input values. Normal and lognormal PDFs are commonly found to be associated with economic parameters (e.g. home values, automobile prices, and construction cost) as well as environmental parameters (e.g., soil hydraulic conductivity and porosity).

The process of estimating model inputs began with identifying relevant cost components for the VertebraeTM system and the vertical well systems that would be used at both the small and large sites. Additional assumptions were made regarding the size as the small and large sites. The small site was assumed to be approximately one acre in size, with features that might be found at a gas station or historical dry cleaner operation. The larger site was assumed to be two to five acres in size with features similar to a terminal or manufacturing plant.

Once the cost components were identified, minimum, most likely and maximum cost estimates were developed for each component of VertebraeTM and the vertical well systems. These estimates are based on a combination of information found in RS Means cost manuals, online research of supplier costs, and expert judgement. In a number of cases, the minimum, most likely and maximum component costs are based on a detailed breakout of unit costs and the number of units estimates. This is best demonstrated by way of example.

Exhibit 1 shows the estimated minimum, most likely and maximum estimates for each of the cost components of the vertical well extraction system for the small site. These estimates assume that the minimum system will include two extraction wells, the most likely system three extraction wells, and a maximum system five extraction wells.