Damage caused by horizontal fracking

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

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.

Oklahoma shaking cut in half but still tops in Lower 48

AN E&E NEWS PUBLICATION

EARTHQUAKES
Okla. shaking cut in half but still tops in Lower 48

Mike Soraghan, E&E News reporter
Published: Wednesday, January 3, 2018

An earthquake in November 2016 shook the bricks off buildings in Cushing, Okla. Jim Beckel/The Oklahoman via Associated Press

The number of earthquakes experienced in Oklahoma dropped more than 50 percent last year, although the state remains one of the most seismically active in the country.

The quakes have been linked to the state’s dominant oil and gas industry and its wastewater disposal practices. The decline in shaking has been attributed to actions by state regulators and a slowdown in the industry.

Oklahoma had 302 quakes last year of magnitude 3 or greater, compared with 624 in 2016.

The state still had more such quakes than any other state in the Lower 48, including California, based on a preliminary review of data from the Oklahoma Geological Survey and the U.S. Geological Survey. Both agencies generally adjust their numbers each year after a review.

Oklahoma is not the most seismically active state, however. Alaska had hundreds more earthquakes than Oklahoma.

The shaking dropped steeply in the Oklahoma City area. In 2016, there were 74 quakes in Oklahoma County, which includes Oklahoma City. Last year, that dropped to 20.

As in 2016, the western Oklahoma counties of Woodward and Grant had the most shaking. But Lincoln County, east of Oklahoma City, saw an increase in the number of quakes last year.

Scientists have known for decades that deep injection of industrial fluid, such as oil field wastewater, can cause earthquakes in rare cases. The fluid seeps into faults, essentially lubricating them, and they slip.

In Oklahoma, oil production methods that create unusually large volumes of wastewater have combined with favorably aligned faults to cause swarms of quakes.

The state had averaged about two quakes a year until 2009, then the number started increasing. It shot upward as drillers moved into northwestern Oklahoma to produce from the Mississippi Lime formation, which creates far more wastewater than conventional production.

The number of earthquakes of magnitude 3 or greater reached 585 in 2014 and peaked in 2015 with 903.

There have been a handful of injuries, and most of the quakes aren’t large enough to do significant damage, but many residents are concerned about the long-term effects on their homes and the difficulty of getting earthquake insurance.

USGS started attributing the rise in earthquake activity to wastewater injection in 2012. But it took until April 2015 for OGS and state officials to publicly acknowledge such a connection. In a deposition last fall, Oklahoma’s former state seismologist said he quit because of political pressure to not link quakes to the oil industry (Energywire, Oct. 20, 2017).

The number of quakes has been declining since late 2015 or early 2016. The drop has been attributed to restrictions on wastewater injection imposed by the Oklahoma Corporation Commission and the price slump that led to decreased production. As the industry has bounced back, production growth moved from the Mississippi Lime to plays known as the STACK and the SCOOP, which produce far less wastewater with the oil.

STACK stands for Sooner Trend (oil field), Anadarko (Basin), Canadian and Kingfisher (counties). SCOOP stands for South Central Oklahoma Oil Province.

Industry officials say the drop in the number of quakes shows the advantage of cooperation between regulators and oil companies. Chad Warmington, president of the Oklahoma Oil & Gas Association, said companies shared data and expertise with state officials.

“The drop in the number of earthquakes is a good example of what happens when the industry and regulators work together to find reasonable, science-based answers,” Warmington said.

Reprinted from Energywire with permission from E&E News. Copyright 2017. E&E provides essential news for energy and environment professionals at www.eenews.net. For the original story click here.

 

Deadly H2S gas worrying residents and state regulators

AN E&E NEWS PUBLICATION
SAFETY
Deadly H2S gas worrying residents, state regulators
Mike Soraghan, E&E News reporter
Published: Friday, December 15, 2017
Emissions of a potentially deadly gas from wells in one of the country’s hottest oil plays have neighbors worrying about their safety and Oklahoma regulators taking another look at their rules.

Foul-smelling hydrogen sulfide (H2S) has escaped from oil wells near Dover, Okla., in recent weeks, starting in November. State officials say the emissions have been reduced to safe levels, and the companies that operate the wells say they never reached levels high enough to require notifying the public.

That isn’t reassuring to Karen Smilie, who lives across the street from one of the wells.

“They’re not issued a violation. Nobody tells the public,” Smilie said in a phone interview. “Not one person knocked on my door.”

She and her neighbors are especially concerned, she said, because many more wells are planned in the area that is in Kingfisher County, part of what’s called the “STACK” play.

Officials say hydrogen sulfide could become a topic in the coming weeks as oil and gas regulators at the Oklahoma Corporation Commission (OCC) draft new regulations for approval by the state Legislature next year. Agency spokesman Matt Skinner said H2S emissions have usually been in remote rural areas.

“The SCOOP and the STACK involve populated areas,” Skinner said. “We are looking at the H2S rules.”

STACK stands for “Sooner Trend (oil field), Anadarko (basin), Canadian and Kingfisher (counties).” Along with neighbor play the “SCOOP” (South Central Oklahoma Oil Province), it has led the revival of Oklahoma’s oil industry. Both plays reach the western side of the Oklahoma City area.

The Oklahoma Department of Environmental Quality is also investigating complaints about the situation in Dover, according to a spokeswoman.

Smilie and her neighbors are organizing a community meeting in Dover on Monday night to discuss the hydrogen sulfide situation.

The gas can cause “nearly instant death” at levels as low as 1,000 parts per million (ppm) in the air, according to the Occupational Safety and Health Administration.

The well across the road from Smilie’s house registered 900 ppm, according to OCC records. But that is a measure of the H2S flowing up with the fluids inside the wellhead. It’s not a measure of how much H2S was escaping into the air.

Chaparral Energy Inc., which operates the well, said it immediately began treating to reduce the H2S level.

“At no time did the radius of exposure reach the threshold for public notification,” said company spokeswoman Brandi Wessel. There is no OCC notification threshold for Dover, which is not a known H2S area. The threshold for notification in known H2S areas is 300 ppm measured 50 feet from the wellhead.

Chaparral works with regulatory agencies, Wessel said, “to ensure we protect the local communities and environments where we operate.”

Hydrogen sulfide, also called “sour gas,” is a known killer in the oil field. It is often identified by its rotten-egg smell.

It has killed at least seven oil field workers since the beginning of 2013 and in 1975 was responsible for one of the worst oil field accidents in the country. Nine people died in the Denver City, Texas, tragedy, eight of them in a home about 600 feet from the leaking well.

“I basically tell people if they’re living in these areas, they should move,” said Neil Carman, clean air director for the Sierra Club in Texas and a former state inspector. “Hydrogen sulfide is just bad stuff.”

He said there has been concerns for years that the gas could kill children at levels far below what it takes to kill an adult. But there has long been debate about whether frequent exposure to low levels is harmful.

‘It hit me’

The oil and gas industry says such chronic exposure is not dangerous.

“While the smell can be unpleasant, the odor itself is not cause for health concerns,” the American Petroleum Institute (API) states on its website. In a 2010 regulatory filing with other trade groups, API said that chronic health effects are unlikely at levels at or below 5 ppm.

Regulatory agencies, however, say there can be health problems at lower concentrations. OSHA says prolonged exposure to levels as low as 2 to 5 ppm can cause nausea, headaches or loss of sleep. U.S. EPA says lifetime exposure to H2S is unlikely to cause problems as long as the concentration is at or below 0.001 ppm.

The Oklahoma Department of Environmental Quality sets the limit at 0.2 ppm. But oil and gas is generally regulated by OCC, which allows higher amounts.

As the concentration increases, the gas deadens people’s sense of smell, making it hard for them to detect the danger.

Smilie said she was at the hospital in mid-November with her husband, who’d had a heart attack, when a neighbor sent her a message that a yellow flag was flying over the well near her house. She didn’t know what that meant, but the neighbor told her it was a warning for hydrogen sulfide.

A few days later, she woke up with a headache. When she walked downstairs and into her kitchen, she said, “it hit me.” She started seeing double and retching. A neighbor took her to the hospital. Heavier than air, H2S often collects in low-lying areas. After that, she and her husband left and stayed for a week in a recreational vehicle they own on property near Stillwater, Okla.

Her house, she said, is 500 feet or less from the wellhead at the Chaparral site. Oklahoma doesn’t have setback rules for oil and gas wells, so they can be built as close to homes as the drillers want. But a home cannot be built within 150 feet of a well.

Corporation commission records indicate Chaparral installed an H2S alarm system, a vapor recovery system, and scrubbers to treat the gas at the wellhead and water tank. Because it took appropriate measures, OCC officials said, the company didn’t violate any rules.

Another well operated nearby by Gastar Exploration Inc. had similar sour gas levels, according to the OCC records, and was the subject of a complaint. Gastar CEO Russ Porter said in an interview that what neighbors smelled was H2S from the well’s produced water. Company officials hadn’t realized it was in the wastewater and have now begun treating it.

Porter added that there have been oil and gas production operations in the area since at least the 1950s.

But many of Smilie’s neighbors told her and friends they didn’t know the odors were caused by a dangerous gas. They also didn’t know that red and yellow flags flying over the well sites were warnings. On Wednesday night, the smell returned, Smilie said, alarming her and her neighbors.

Hydrogen sulfide emissions have been rising during the oil and gas boom that started in the United States around 2010 (Energywire, Oct. 21, 2014).

In Kansas, state regulators received 15 requests to flare gas containing hydrogen sulfide in 2013, up from three in 2012 and none from 2009 to 2011, state records show. Most of those cases involved the Mississippi Lime field, which also underlies Oklahoma.

Oklahoma regulators calculated that oil and gas operators emitted 594 tons of hydrogen sulfide in 2011 and are planning to do more monitoring of air emissions overall. In New Mexico, which shares patches of the sour-gas-producing Permian Basin with Texas, state officials received reports of five hydrogen sulfide releases in 2013, after receiving none in 2012 and four in 2011.

In Texas, the amount of gas from H2S-containing fields rose 48 percent in the five years before 2015, to 1.7 trillion cubic feet.

Shale fields, where the boom has focused, have been known to have high levels of H2S. Parts of the Eagle Ford field in Texas have a maximum concentration of 68,000 parts per million, according to state data, 130 times the lethal level.

EPA has tried to tighten regulations on hydrogen sulfide, with limited success.

Hydrogen sulfide was on the original list of hazardous substances to be included in the Clean Air Act of 1990, which would have required it to be treated and monitored as an air pollutant. But it was removed before the act became law, after heavy lobbying from industry.

In 2011, EPA reinstated reporting requirements for H2S under the Toxics Release Inventory. But most oil and gas wells are exempt because they are small sources that fall below the reporting thresholds.

Reprinted from Energywire with permission from E&E News. Copyright 2017. E&E provides essential news for energy and environment professionals at www.eenews.net. For the original story click here https://www.eenews.net/stories/1060069131/.

 

The GPT Debate

PLS IRR Scoop Stack Composite

Guest post  –

George Aubrey – Petroleum Engineer and President of Trailblazer Energy

The players in the SCOOP and STACK plays are touting internal rates of return (IRR) in the 50% to 80% range. What does this really mean AND would a 5% change in the Oklahoma severance tax rate (2% to 7%) make a significant change in the operators decision to drill wells?

This is a basic business school discussion… for projects being evaluated independently (i.e. drill in SCOOP or STACK, or any other project of any kind) the cash flows from new projects must include the effects the the new projects have on existing projects. The simple concept compels financial managers to go back and reevaluate existing projects and helps managers focus on the relevant cash flows attributable to a new project.

IRR and net present value (NPV) are kissing cousins. What the players in the slide deck are saying is that they have made a decision to invest in these areas because their return is very swift and is better than anywhere else, otherwise why invest. Clearly the wells being drilled are fantastic.

So we now need to apply a little common sense. Would an operator decide to exit a play where the return took a 5% hit, assuming a severance tax resulted in a true 5% reduction in IRR (it wouldn’t because of all of the other moving parts, stated above)?

Bluntly, hell no.

The range of IRRs in any one area of either the SCOOP or STACK play is greater than the impact of the 5% delta in severance tax across the board. Translation, they would still drill and wouldn’t blink an eye, even the one with the fake tear.

Most of the arguments against the tax are hollow. If an operator is drilling a very risky, costly and complex project and ends up with a 12% IRR, they have other issues. Assuming the public data in these slides is accurate, then returning to the 7% severance tax rate isn’t even a blip on their radar.

Regards,

George Aubrey

 

PLS IRR Scoop Stack Composite (Spreadsheet link)

Restore Oklahoma Now, Inc

Restore Oklahoma Now, Inc.

 

Press release

Oct. 26, 2017

 

Contact: Mickey Thompson

Executive Director

Restore Oklahoma Now, Inc.

(405) 640-2555

 

Small oil producers, state educators push for

Gross Production Tax ballot initiative

 Measure would call for 7 percent GPT, teacher pay increase

 

OKLAHOMA CITY – An organization representing small independent oil producers, educators and concerned Oklahomans is drafting language for a state ballot initiative with the dual purpose of restoring the state gross production tax to a flat rate of 7 percent and addressing the state’s teacher crisis.

 

Restore Oklahoma Now, Inc., is a newly formed nonprofit that has engaged a law firm and is working to raise $3 million with the goal of getting a state question on the general election ballot in November 2018. Organizers of the group have hired Mickey Thompson, former president of the Oklahoma Independent Petroleum Association (OIPA) and long-time oil industry spokesperson, to head up the campaign.

 

The focus of the initiative petition will be two-fold, said Mike Cantrell, chairman of the Oklahoma Energy Producers Alliance (OEPA), a group of small, independent oil producers who have advocated for a restoration of the gross production tax for more than a year and one of the organizational leaders of the new coalition.

 

“We think it’s a matter of fairness to Oklahomans that all oil and natural gas production be taxed at a flat and competitive – with other states – rate that helps sustain essential state services, especially addressing our teacher crisis and teacher pay. Our petition will restore the historical 7 percent GPT immediately on all wells, in other words repealing all the current tiers of state oil and natural gas production tax,” Cantrell, an Ada oilman, said.

 

“Further, we will lock-box the additional proceeds from this restoration for teacher pay and for rehiring thousands of teachers to address the ongoing shortage of qualified teachers.”

 

Thompson said the current discussions at the ongoing legislative special session are a mere bandage on the state’s budget crisis.

 

“The idea this legislature would hike the GPT only on new wells from 2 percent to 4 percent will generate less than $20 million a year to the state,” he said. “It doesn’t scratch the surface of the need to address the education crisis. Our petition will repeal all the special GPT tiers immediately. Our petition will truly level the playing field, 7 percent on all production, period.”

 

Thompson said the Oklahoma Tax Commission has stated that a flat, 7 percent GPT last year would have generated about $725 million for the state, which is $440 million more than was collected under the four-tiered system now in place.

 

“It’s a shame that concerned citizens must go to the people to address the state’s various crises,” Thompson said. “Our legislature has failed to take appropriate action. We feel there is no other option.”

 

Cantrell said response to early fundraising for Restore Oklahoma Now, Inc., has been encouraging.

 

“We have commitments of $700,000 after one week. We think as other groups and individuals join our coalition, we will reach our goal. Obviously, with this much money at stake, we expect strong opposition from those companies who have enjoyed this special tax break for several years,” he said.

OEPA Oil and Gas Tax Benchmark Analysis

OEPA Oil and Gas Tax Benchmark Analysis

The following PowerPoint presentation illustrates research findings conducted by WPA Intelligence in a statewide study among 2018 likely voters in Oklahoma regarding the oil and natural gas industry. Specifically, this research demonstrates strong support for the restoration of the Gross Production Tax to 7% on all oil wells, preferred areas for the funds from the tax to be spent, and the impact the oil and natural gas industry has on Oklahoma.

 

PowerPoint Presentation:

<OEPA Oil and Gas Tax Benchmark Analysis>

 

 

Top 10 reasons Oklahoma should restore 2% gross production tax rate to 7%. 

Correction:

Representative Jon Echols replied that our last sentence in our top 10 reasons to raise GPT  letter was in need of correction.  We always intend to be accurate and we missed one here.  We said:  “It’s disingenuous to call the negotiation which resulted in the 1% rate going to a 4% rate a tax increase. It was sunsetting and would have gone to 7%. So in practicality, it was a tax  decrease.”   

While there was no intent to mislead, it was a misstatement of the facts that we wish to correct. The negotiation that resulted in the 1% rate going to 4% was additional tax revenue and the 4% rate will still go to 7% after the original 48 months from the drilling of the wells. So the best case scenario is that a well drilled June 30, 2015, would still have a 4% rate for only 24 more months, at which time the rate would increase to 7%.  We stand by our position that this was a trade-off to protect the 2% rate without giving up much in reality.  

==========

1. Even at 7% GPT, Oklahoma’s effective rate on oil and gas production would still be the lowest overall tax rate of any major oil and gas state. Much of that is due to the fact that Oklahoma doesn’t levy ad valorem tax on oil and gas minerals in place. Almost all other major producing states do have property tax on minerals.

2. Oklahoma is home to two of the most prolific and economic world-class oil and gas players (Scoop and Stack). Public oil company presentations inform us that these Oklahoma plays have the lowest break-even cost (+/-$24.40/barrel). These oil and gas assets will be drilled regardless of a marginal increase in the tax rate.

3. Using companies own reporting numbers rate of returns are as high or higher than in North Dakota (May 2017) – and comparable to Texas; there is no need for a 2% tax rate.

First-year returns reported as:

  • ND Bakken – 40-50%
  • Okla Stack- 100%
  • Okla Scoop-70%

4. Changing the 2% rate to 7% would impact only a small number of taxpayers, most of whom are the same big oil companies that pay the higher rates everywhere else.

5. If having a 2% tax rate is so crucial to big oil company profitability, why aren’t these same companies threatening to pull out of North Dakota and Texas? Why aren’t these companies moving their headquarters or their major drilling operations to Oklahoma? Why aren’t the big oil lobbyists descending on the North Dakota and Texas capitals threatening them with leaving if they don’t lower their rate to 2%?

6. There is absolutely no correlation between tax rates and the rig count! You drill where the oil and gas is!

We get the same economic benefit from a 7% rate as a 2% rate.

7. This tax break for big oil producers vs small, vertical producers is 71.4% (the difference between 2% and 7% tax). Most of this massive tax subsidy goes to out-of-state stockholders, investors, foreign companies (partners) and even foreign governments. So Oklahoma really doesn’t get a significant bump from the multiplier effect of a low tax rate.

8. Horizontal frack jobs are destroying hundreds of marginal, but still profitable vertical wells which pay a 7% rate. (Damage to 451 wells has been documented in Kingfisher County alone!)

9. Horizontally fracked wells recover 60-80% of all the oil and gas within the three-year period of the 2% rate. With low oil prices, we are incentivizing the accelerated taking of a valuable but finite resource at low prices. Whatever happen to conservation and allowables?

10. Bottom line, this massive tax subsidy is a fairness issue. Why should operators of 2,000-6,000 barrel per day wells only pay 2% when low-volume stripper wells, most only marginally profitable at today’s prices, are just hanging on… and must pay 7%?

Speaking of fairness, horizontal drillers championed the repeal of several minor tax provisions which meant nothing to them just so they could claim that their taxes have been “dramatically” raised already. It’s disingenuous to call the negotiation which resulted in the 1% rate going to a 4% rate a tax increase. It was sunsetting and would have gone to 7%. So in practicality, it was a tax decrease.

Your call to action is:

  1. Call Governor Fallin at (405) 521-2342 and ask her to support restoring the 2% GPT to 7%.
  2. Contact your Legislators at  https://okpolicy.org/resources/find-your-legislator/ and tell them to put Oklahoma first and restore the GPT from 2% to 7%.

Thank you for your support. Please share!