Oklahoma Senate passed House Bill 1010XX last night. It restores GPT to 5% for all new wells and will raise enough revenue to give our teachers a $6,000 per year raise! We are proud to be the only oil and gas association to have supported a bill that will give our Oklahoma teachers a living wage!
Supreme Court rules unanimously In favor of SQ 795.
OEPA has spearheaded and supports this intuitive petition to pay our teachers and bring tax fairness to all producers at 7%, which is lower than any other oil and gas producing state.
OEPA renews call for 7% GPT, Vertical Well Protections TULSA, Okla. – The Oklahoma Energy Producers Alliance (OEPA) elected Dewey F. Bartlett Jr. as chairman at its January board meeting. Bartlett, owner of Keener Oil Company, is a small independent producer with operations mostly in eastern Oklahoma. Bartlett, the former mayor of Tulsa, is a […]
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.
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.
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.
AN E&E NEWS PUBLICATION
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.
|AN E&E NEWS PUBLICATION|
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.