Business Profile: Comtech Industries

Interview with Dean Grose, Owner of Comtech Industries, Inc.

By Ed Becker
www.theuticashale.com
APRIL 5, 2011

dean-grose-comtechOne of the hottest topics to emerge from the Marcellus Shale industry is what to do with the frack water that comes from drilling. It presents environmental challenges to the drilling company, concerns for landowners, and demands on state regulators.

However, the field of “hydro-recycling” has also brought opportunities to companies that can remove toxicities from the water and essentially ‘recycle” it for continued use.

Dean Grose owns and operates Comtech Industries, Inc. based in Washington, PA and operating at numerous sites throughout Northeast Pennsylvania. His business is about recycling the frack water so companies can re-use it.

In the following interview, Grose discusses why hydro-recycling is so critical to the gas drilling process and why his company offers at least one major advantage over other hydro recycling companies. He also shares his ideas on how the state can help, not hinder natural gas extraction.

TMS: Dean, tell us a bit about your background. Your experience in the type of work you’re doing.

Dean Grose: I have 20 plus years of industrial water treatment experience. I started with Nalco Chemical in 1989 servicing the basic industry market. This would include Steel, Paper, Refineries, Utilities, and Cogeneration. I was involved with boilers, cooling systems and raw and waste water clarification.

I left Nalco in 1994 and worked for General Chemical for 8 months selling and servicing commodity chemical business.

I started Comtech Industries, Inc. in 1995 as a specialty water treatment company to service the basic industry market. Our initial focus was residual sales and services targeting this market segment. We went well beyond conventional treatment allowing Comtech Industries to separate itself from the competition. We also began consulting and engineering and started to get involved in Build, Own, Operate facilities. We have a proven track record of problem solving any issue that would require a specialist in water treatment.

I started a Union & Trades construction company specializing in Boilermaker work in late 2007. That company primarily focuses on industrial boiler repair and BOP hood maintenance and mill outages.

Comtech Constructors DBA was separated into its own entity January 1st of 2011. It is now called Comtech Constructors, LLC.

The Oil & Gas division of Comtech operates currently under the Comtech Industries, Inc. umbrella.

TMS: When did you first become aware of the Marcellus Shale industry here in PA and see its potential.

Dean Grose: I became involved in the Marcellus Shale industry six years ago when we were working with mud suppliers for shallow well production. At that time the focus was on TSS (suspended solids, i.e. dirt) removal from the water. I recognized the hazardous nature of the Marcellus flowback and knew a solution would be required to adequately treat this water. We also recognized an eventual need to treat the produced water coming from the wells as well.

TMS: Tell us about your company and its backstory? How long has it been around? Why was it created? How many people work for your company?

Dean Grose: We currently have 62 part and full time employees. The company was created primarily to service the Specialty Water Treatment basic industry market. This is a specialty niche market that requires extensive expertise in the water treatment field.

We have branched out as we have grown to capitalize on market opportunities as they have presented themselves. We have been in business for 16 years.

TMS: In layman’s terms please explain what your company does. What is the service you provide to drilling companies?

Dean Grose: Comtech provides a mobile water treatment service remediating Flowback and Produced water. Most companies will dilute this water 90/10 with fresh and call that treatment. Comtech does not require any additional fresh water. We remediate the water to a point that it can safely be reused down hole without causing harm to the well completion.

We test the “Clean” water before it goes back down hole to frac another well to ensure it is safe to reuse. Companies on average are spending $5-6 million dollars to get the well to a point where it can be fracked. They want assurances that the water we remediate will not do any damage or plug the well.

Our extensive laboratory capabilities behind the scenes allow us to do a full analytical work up on the remediated water to ensure it is acceptable for reuse. We do Geochemical modeling, analytical analysis including ICP, FTIR, Spectrophotometric and titrimetric, FR loop performance etc… This makes sure the water is safe for reuse. (Inductively Coupled Plasma, Fourier Transform Infrared, Friction Loop)

We are also involved in Pit Mud remediation. We remediate the mud for disposal and treat the effluent for reuse in fracing other wells. Comingling the pit mud effluent with the flowback actually reduces the overall cost of treatment.

Comtech is also starting to remediate other forms of water that are produced during the drilling process. We take a comprehensive approach to water treatment evaluating all the produced streams so they can work synergistically together.

Comtech is starting to become involved in AMD (acid mine drainage) treatment. The requirement for fresh water is going up substantially. Comtech is evaluating methods to provide fresh water from remediated AMD sources. We can successfully remediate the AMD, but for now it is a niche market due to cost. Some AMD sources are strategically located and have the right properties for treatment. Other streams because of their peculiarities preclude treatment.

This is the clarified flowback/produced water with the constituents of concern removed. This is the water that will be reused to frac another well.

PGE-030_opphotobrine_300 TMS: Again, in layman’s terms, explain about frac water and the challenges it can be on a drilling company. In terms of cost, how can NOT recycling frac water become a big expenditure to a company?

Dean Grose: Frac water contains constituents that preclude conventional water treatment. Reverse Osmosis was tried but the concentration gradient was too great for it to be successful. The water contains heavy metals, TSS, biologicals, divalent species that affect FR performance.

All of these constituents require treatment so that the “dirty” water can be reused safely or disposed of properly. Initially the water was being returned to the watershed before there was an understanding of the potential harm that could be done to the environment. Then the water was being disposed of through municipal water treatment systems that do not actually treat the water but provide a “dilution effect”.

Finally a solution exists were the water can be remediated to a point where it can be reused safely. Since typically only 20% of the down-hole water returns as “Flowback”, it can all be reused to frac another well. Many years from now when the last well is fracked, that will be the water that will require treatment and final disposal.

The public perception is easily misled by media disinformation and parties with agendas adverse to the American way of life. Those parties typically cannot carry a concise, logical conversation of the topic so they throw out eight second sound bites that look good but are empty and hollow. Unfortunately, the public is easily scared and deceived into believing the exception is the norm or their children and grandparents will be at risk.

These groups play on the public’s emotions and cause a disconnect between perception and reality. This is a major threat to the drilling industry and gas production. The public needs to know that an environmentally acceptable solution exists to allay their fears and misconceptions.

The cost of not informing the public is shown by the moratorium in place in New York and Maryland. These states are self-imposing harm without knowing all the facts.

Not recycling frac water will eventually shut most drilling companies down or severely curtail their operations. These companies must come up with acceptable solutions because the problem is not going away.

TMS: There are other hydro recycling services out there, but what is unique about your process? What do you do that other companies typically don’t do in terms of recycling the water? Explain the evaporation/crystallization process and how you do it differently.

Dean Grose: As far as I know, Comtech is the only company that has successfully done 100% remediated fracs. Everyone else needs to add 80-95% fresh water to their “remediated” water so it won’t plug the well. We don’t need fresh water and can remediate every drop of water that is produced for reuse. No one else can make that claim.

A lot of companies have “data” or have been studying this problem for quite some time but I can’t point to anyone that has been successfully operating in the field. Comtech has been successfully remediating water for over two years in the field. We are not in the “data” collecting stage. We are a successful, viable operating company treating flowback and produced water on a daily basis.

Evaporative/crystallization technology is viable and can be made to work. The question is who will pay for it. Being a thermal based process the costs for operation are immense. One of the largest costs associated with treatment is trucking and transportation. Having to treat on site and then truck the water to a central facility for further treatment will price this option out of the market. Evap/crystallization technology will have a niche at a later date in the future when the produced water far exceeds the completion needs but currently I don’t believe the economics will work for this technology. If this was the only option then companies would be scrambling for it as the environmental pressures continue to mount.

It comes down to one simple fact. Others claim but cannot produce results or show successful completions. Comtech is currently remediating water successfully.

TMS: How many different sites are you typically operating at one time?

Dean Grose: We are typically operating at 2-4 sites at a time

TMS: Do you test the water for chemical levels on-site? What are you looking for in terms of chemicals and their levels? Is there every a situation where you can’t recycle the water for one reason or another?

Dean Grose: We have an extensive on site lab that monitors and controls the treatment process. When we started a specification did not exist that defined what is acceptable and what is not. This is what makes Comtech unique. There are constituents of concern in the water that we have uncovered over the past two years that the other companies do not even know exist.

Eventually other companies will develop treatment processes that address all the major concerns and they will believe the water is acceptable for reuse. There are instances where they will be wrong and cause substantial damage to the well completion. We have worked with companies who have undergone just this scenario.

Comtech has developed a specification that we feel confident will not cause harm to the well completion.

Water samples taken during every stage of the treatment process are sent back to our laboratory for final analysis before being used for a frac. We have had instances over the past two years that we have met specification and the water looked great. It failed miserably in the lab. We uncovered the cause and re-remediated the water to a point that it could be reused.

We have never come across water we could not successfully remediate. Some water takes more time than others but eventually we have found an acceptable treatment process. We have never had an un-successful well completion.

TMS: Discuss what happens to the byproducts that are removed from the water. How is it diposed?

Dean Grose: We have environmentally approved landfills that accept the waste. All the waste produced undergoes extensive testing and cannot be moved from site until it is complete and the State approves of its disposal. Once the testing is complete and the approvals are received from the State, then it is transported to approved landfills for disposal.

All the waste generated is non-hazardous.

TMS: What is the cost of each system? Talk about your yearly revenue from your company, and your projections in coming years.

Dean Grose: Each system costs approximately $1.3 million depending upon what is required for treatment. Believe it or not each water source is unique and presents its own challenges. The one thing we have seen is that each company’s water is remarkably different than its competitors. This requires us to adapt to each water source.

We are growing exponentially and anticipate revenues exceeding $50 million in 5 years. This is a $1 billion dollar + market so we anticipate increased growth beyond that point.

TMS: What specific state/government regulations does your company come under? Talk about regulations about handling of this water and the disposal of the byproducts.

Dean Grose: There are specific regulations for treating water and disposing of waste. We comply with all the regulations and permitting requirements.

TMS: What are your views and opinions on finding the balance between over regulation or taxation of your industry, and meeting the environmental concerns, or fears of people who live near a well site.

Dean Grose: The Marcellus Shale play is creating and forming a tax base for Pennsylvania. The jobs that are being developed are sustainable and desirable. These are more than minimum wage entry level jobs without benefits. These are jobs that will allow individuals to prosper and raise a family on.

The answer is not to tax the industry to death or the point where it cannot sustain itself. Being involved in the basic industry market over the past 20 year in the Tri-State, I have seen firsthand the effect of onerous environmental regulations on business. I don’t see new steel mills and chemical plants being developed but I can point to 20+ plants that have been shuttered or shut down over the past 20 years.

The politicians and regulators need to balance the needs of protecting the environment with the needs of creating and sustaining jobs. Foster an environment with low taxes and without undue regulation and those new jobs will create the tax base. Do not allow a confiscatory environment to shut this industry down.

We need to protect the environment and act responsibly. We don’t need politicians scaring the public in an attempt to line their pockets with more tax revenue so they can get re-elected.

Original article can be found here: http://theuticashale.com/business-profile-comtech-industries-inc/

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