Art and Yavonne Platt – Horizontal Fracking Victim

Art and Yvonne Platt lost everything due to horizontal fracking.

It is gut-wrenching when we watch longtime Oklahoma small business oil and gas producers lose everything to the disregard of Horizontal frackers who take the oil and gas they have found and are producing leaving their destroyed vertical wells in their wake. This story really says it all. It’s never right to take someone else’s property.

The Williams Well in Kingfisher County

The Williams well in Kingfisher County was fracked into in January 2019. Frack fluid came up our wellbore and overflowed the tanks.

Rhino Peck – Blaine County

Rhinos Peck in STACK country operates 4 wells, sections 27 and 28-16N-10W in Blaine County.  Two have been blown up by a single DVN horizontal well (Kraken) in section 28.  Below is a picture and video of the frac sand blown out of our water tank (Peck 1-28 location).

Rhinos Peck 1-28 blew out during a nearby Devon frack. This well was hit with over 3000 psi of pressure. (Wellhead connections are usually 125psi test.) This is the second time Devon had fracked into this well – from another frack job.

This happened despite Rhinos Protest of The permitting of the well at the Oklahoma Corporation Commission. They were told no matter what they said the well would be permitted. The day before the frack they served Devon legal notice to not commence the fracking operation and that to do so would instigate another trespass.

Damage caused by horizontal fracking – Blaine County

This is what it looks like when a vertical well is fracked into from a horizontal frac job.

The well in this video is the Singer Oil Koetter 1-35. It’s located in 35- 17N-10W of Blaine County Oklahoma. Casing and tubing were shut in, and the pressure blew stuffing box rubbers out. Pride Energy was fracking their Red Land 1H & 2H wells from more than 600 feet away. The Corporation Commission was called to inspect the cleanup. They also filed a well impact form. This is fracing water coming out.

The well in this video was 660 feet away from the horizontal frac. The Corporation Commission has a rule that they have to stay 600 feet away, but they routinely wave that rule. Some horizontal frac jobs are within 50 feet of vertical wells.

This is not good for the environment. This is not good for small operators. This violation of property rights and harm to the environment is not good for Oklahoma.

When the long lateral bill was passed, Representative Weldon Watson said on the house floor that the damage in this video doesn’t happen. The big oil companies at that time said this doesn’t happen. It happens almost every day! In fact, we have access to data that shows 1,000 wells have been hit in Kingfisher Co. alone, and this well was in Blaine County.

Oklahoma started off as outlaw territory. Our state has had an unfortunate history of lawlessness, bribery, and “wild-west behavior“. Unfortunately, this is where we are in the regulatory arena. It is not the Corporation Commission‘s fault; at least not entirely. They don’t have enough resources to count all the wells, much less regulate them.
Big oil companies continue to have much more influence in Oklahoma than any other state. In other words, they get what they want. That is not good for the industry in the long run. The public eventually discovers the game and often times puts a drastic end to it. We need professional and honest regulation. That’s why we at the Oklahoma Energy Producers Alliance have filed a bill to allow the Corporation Commission to self-fund by assessing a small fee on oil and gas. This will allow them to hire the staff they need and free up 8million to go towards our Oklahoma budget problems.

Improperly Plugged Well – Seminole County

If a picture is worth 1,000 words, then this video is worth 10,000 words. This video was filmed close to an old unplugged or improperly plugged hole in Seminole Co., Okla. It was taken 2.5 years ago by an oil field worker on location who said five other wells were hit at the same time. If you listen closely you can hear the frac job over a mile away.

We need a new regulatory regime for horizontal drilling and fracking to protect Oklahoma’s most valuable resource – our drinking water.

Damage to Vertical Well in McClain County

This video shows the damage that was done to a vertical well by a horizontal frac job in McClain County. In this case, the frac fluid migrated up through the tubing and went into the oil tanks of the vertical operator overflowing them. This is becoming a weekly, if not a daily, occurrence.

Why? And how does it get solved?

The problem begins with the rule-making process at the Oklahoma Corporation Commission. Rules determine what and how drilling gets permitted.

The rules have not been changed to address the challenges that come with horizontal drilling. Rule changes take several months and the hearings are dominated by the big horizontal companies. Both OIPA and OKOGA work with big oil companies and testify on their behalf. Almost every attorney that practices with OIPA and OKOGA represents the horizontal drillers and are very adept and experienced at getting their clients what they want.

The judicial process at the Oklahoma Corporation Commission:

The first step is to go before an Administrative Law Judge(ALJ). The ALJ almost always rules in favor of the company wanting to drill and in one case told a protester, “Why do you keep protesting when you know we are always going to let them drill?” The appeal of that decision is the Appellant ALJ, with almost always the same results.

The final step of appeal is before the three Commissioners.

One resolution would be to take every protest before the elected Commissioners. All three are honorable public servants and will almost always do the right thing. This resolution cost upwards of $100,000 to protest before the elected Commissioners. Most small producers stop before they get there.

Oklahoma is the most pro-development oil and gas state. That is a good thing, but only to a point. Almost any company that wants to drill a well can get a permit to do so regardless of the potential harm to vertical well operators, and sadly even at the expense of the environment. The OCC routinely issues permits for these horizontal wells knowing (sometimes even with the horizontal well owner testifying that they will hit the vertical well). Most times horizontal drillers lie at the hearing and say that they will not impact vertical wells and then tell the vertical well operators to shut their wells in, knowing full well they are going to hit them.

Our regulatory body has the responsibility to prevent waste and protect rights. They also have the mandate to prevent oil and gas pollution. Granted they are understaffed. Permitting drilling activity gets almost all of the attention. That needs to change.

OEPA is sponsoring legislation to allow the OCC to self-fund. For 2.4 cents a barrel of oil and the BTU equivalent for natural gas. This would allow the Corporation Commission to fund the staff positions they need to keep up. It would also free up 8 million dollars for the legislature to use to solve the budget problems.We ask the other two petroleum associations to drop their opposition to this bill. Surely all of us that drill for and produce in this state should want a well funded professional regulatory body. The public should demand it!

Video property of Oklahoma News on Youtube. Find official video here.

Kingfisher County Horizontal Fracking Victims

Kingfisher, Oklahoma producers share their stories of how horizontal wells damaged their vertical wells.

 

Johnny Fleming – Kingfisher Horizontal Fracking Victim

Johnny Fleming, Kingfisher, Oklahoma shares his story of how horizontal wells damaged his vertical wells.

Rick Roberts – Horizontal Fracking Victim

This video is a bit hard to hear at times because of the wind but it’s important to us to go to the small vertical producers out there and get their voice heard so that everyone knows what is really happening.

Rick Roberts is no “fat cat”. He and his partner Rhonda have operated wells for other people for many years. Rick works in the field. Rhonda handles the office work. They were finally able to buy a few wells of their own. Now they have lost two of those wells and believe they will lose more. Right now they just want to get to the end of the year.

Unacceptable Consequences of Vertical Well Destruction

Guest post by Goetz Schuppan, Singer Oil Co., LLC

This shows the anatomy of losing a well; emphasizing that the operator is not a willing seller but is forced to sell for what the state says its worth Through the Corporation Commission forced pooling. This lowers values for everyone by multiple of as much as ten times.  Oklahoma is the only state that allows the state to set prices. In All other states the parties negotiate for property. Isn’t that a novel concept?

 Well Valuation (Excel spreadsheet)

If you look at the spreadsheet, a 30MCF/2bbl oil well has a valuation of $980,000.  I would never pay that for a well but that is the profit that such a well is forecast to generate over the next 20 years.

After our wells get fracked into, settlement discussions often break down because we cannot come to an agreement on valuation.  I think the most important point to consider is that we are not WILLING sellers of our wells and that traditional valuation models do not apply.  I don’t agree to being FORCED into selling a well for a 5 year payout at today’s prices. Below are our assumptions:

  • In a transaction between willing parties, there has to be room for the buyer to make a healthy profit over the remaining lifecycle of the well. We are not a willing seller. Traditional valuation models with 5 or 7 year paybacks don’t apply. Many of our wells have been around for 40 years and it is reasonable to expect another 20 years of production.  We compare profits from our wells to annuities.
    • Note: Mechanical integrity is a risk over that time period. We think it is offset by the potential for increased value due to new technology or changing environments. E.g.:
      • Refracking of old zones using coiled tubing.
      • Exponential increase in acreage value over the last 5 years
  • We use a discount rate of 5% which is the interest rate we pay to our bank for loans.  We don’t see a reason to use PV9 or PV12.
  • We use oil and gas price forecasts from the US Energy Information Administration published in the “Annual Energy Outlook”. A lot more analysis goes into creating this forecast then what goes into the price deck from the local bank that is used to protect the bank’s loan values.
  • Most of our wells are many years old and have a fairly flat decline curve.
  • Our overhead and operating expenses are a fraction of the costs of bigger companies. We are able to operate profitably year after year because we keep costs to a minimum.
    • Our operating costs are kept low by being geographically concentrated.
    • We don’t have layers of management
    • We do a lot of the repair and maintenance work ourselves, with older equipment that we own.
  • We take the long view:
    • We don’t have to answer to boards or financial investors.
    • We don’t have to meet acquisition or divestiture targets.
      • We don’t buy wells when we think prices are too high
      • We don’t willingly sell wells in a low price environment. We would not willingly sell a well in the current pricing environment

Goetz Schuppan

Singer Oil Co., LLC