BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: HUNTER DISPOSAL LLC ) (WHOLLY OWNED SUBSIDIARY OF ) PLYMOUTH EXPLORATION, L.L.C.) ) 110 W. 7th St., SUITE 2600 ) TULSA, OK 74119-1031 ) CAUSE PD NO. ) 201400143 ) RELIEF SOUGHT: NON-COMMERCIAL SALT WATER ) DISPOSAL WELL ) VICTORIA FALLS # 1-5 Well LI1'J.E 0 i oi LEGAL DESCRIPTION: SW/4 SE/4 SW/4 SW/4 AND ) NOV 02 SW/4 NE/4 NW/4 SW/4 OF SECTION 5 TOWNSHIP 24 NORTH, RANGE 4 WESOORT CLERK'S OFFICE - OKC GARFIELD COUNTY, OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE COJPORATION COMMISSION OF OKLAHOMA 1. The record in this cause, Interim Order No. 635847 of the Commission Granting Application for Non-Commercial Disposal Well, was reopened and heard on September 23, 2015, at 8:30 a.m. before Administrative Law Judge Andrew T. Dunn ("AU") for the Corporation Commission of the State of Oklahoma ("Commission") in the Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and by the rules of the Commission. SUMMARY OF THE CAUSE 2. On October 24, 2014, this cause originally came on for hearing before Susan Osburn, Administrative Law Judge for the Commission. J. Fred Gist, Attorney, appeared for the Applicant, Hunter Disposal, LLC, (wholly owned subsidiary of Plymouth Exploration, LLC) ("Hunter" or "Applicant"). Keith Thomas, Assistant General Counsel for Conservation, appeared on behalf of the Conservation Division of Commission. AU Osburn heard the cause and recommended that the Commission grant the requested relief, but only on an interim basis, recommending that the Commission issue an Interim Order in this cause. Interim Order No. 635847 approved the Victoria Falls #1-5 Well to dispose into the Arbuckle at a depth of 6,626' to 9,326', injecting at a maximum 25,000 barrels per day at a maximum pressure of 1,500 psi. The Interim Order imposed special requirements on the Applicant because of seismicity in the area where the Victoria Falls #1-5 well is located. These requirements are on page 6, paragraph 10 of Interim Order No. 635847.
ORDER - PAGE 2 3. On September 23, 2015, this cause was re-opened by the ALJ. J. Fred Gist appeared for Hunter. Susan Conrad, Deputy General Counsel, appeared on behalf of the Conservation Division of the Commission. Interim Order No. 635847, which was recommended by ALJ Osburn in October 2014, requires the record to be re-opened for the purpose of evaluating the pressure information and other data submitted by the Hunter. It also requires the Conservation Division of the Commission and the Underground Injection Control Department of the Commission ("UIC Department") to state its position in the case and whether they are in support of, or opposed to, the issuance of a Final Order granting the Application and the utilization of the Victoria Falls # 1-5 SWD Well. (See page 6, paragraph 10 of Interim Order No. 635847). The re-opening is for the Commission to adjudge whether Hunter is in compliance with the Interim Order. APPEARANCES 4. At the time of hearing, J. Fred Gist, attorney, appeared on behalf of Hunter. Susan Conrad, Deputy General Counsel, appeared on behalf of the Conservation Division of the Commission. JURISDICTION 5. The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission, including publication notice made more than 15 days prior to the date of the hearing in Oklahoma and Garfield Counties. RECOMMENDATIONS 6. It is the determination of the ALJ that Second Interim Order be recommended, containing the same stipulations as Interim Order No. 635847 (including the present UIC Department's guidance to Hunter to keep the injection volumes voluntarily at 5,000 barrels of water per day) with the additional modified requirements provided below. a. Hall integral and derivative data for the Victoria Falls #1-5 well. This data must be submitted with a calculated coefficient of determination (which is to provide a 'goodness-of-fit' measure for the UIC Department to interpret). The information must cover the cumulative injection for the life of the well. b. 3-D seismic studies must be conducted and submitted to the Commission for technical experts to review to determine whether the components found necessary for significant injection-induced seismicity are or are not present in the Arbuckle and Reagan formations and the Granite basement rock in the vicinity of the SWD wells. The 3-D seismic must be provided in an adequate format for UIC staff to 2
ORDER - PAGE 3 examine the data. This may require technological considerations and coordination between Commission and the Applicant. c. The Applicant shall collect from the Oklahoma Geological Survey ("OGS") seismic data within 6.21 miles of the injection well and shall supply such data, if any, to the UIC Department on a weekly basis. The UIC Department shall independently collect seismic data for review and comparison. d. This information is to be provided at the time of the re-opening of the Second Interim Order cause within 6 months from the date this cause is recommended. The Victoria Falls #1-5 will be allowed to operate at the present time with Hunter gathers the data for submission to the Commission. SUMMARY OF EVIDENCE & FINDINGS OF FACT 7. Exhibits # 1-9 were submitted in the initial hearing for Cause PD No. 201400143. This cause was recommended and Interim Order No. 635847 issued. 8. Exhibits # 10-19 were submitted at the reopening of Interim Order No. 635847 for Cause PD. No. 201400143. Exhibit # 10: Mechanical Integrity Test dated January 30, 2015. Exhibit # 11: 0CC SWD Daily Injection Report from January 21, 2015 through August 31, 2015. Exhibit # 12: "Injection Volumes & Pressures v. Time, Victoria Falls SWD" graph. Exhibit # 13: Victoria Falls #1-5 well information table. Exhibit # 14: "Hall Integral & Derivative v. Cumulative Injection, Victoria Falls SWD" graph. Exhibit # 15: An expanded map of a portion of Garfield County centered on Section 5, Township 24 North, Range 4 West. The map shows seismic activity and some known faults in the area. Exhibit # 16: An expanded map of a portion of Garfield County centered on Section 5, Township 24 North, Range 4 West. The map shows seismic activity and some known faults in the area. 3
ORDER - PAGE 4 Exhibit # 17: An expanded map of a portion of Garfield County centered on Section 5, Township 24 North, Range 4 West depicting seismicity during the 60 days prior to September 23, 2015. The map also depicts salt water disposal wells in the lands covered. Exhibit # 18: An expanded map of a portion of Garfield County centered on Section 5, Township 24 North, Range 4 West depicting seismicity during the 30 days prior to September 23, 2015. The map also depicts salt water disposal wells in the lands covered. Exhibit # 19: A map of a portion of Garfield County covering Section 1 and Section 2, Township 24 North, Range 4 West, and Section 35 and Section 36, Township 25 North, Range 5 West, depicting seismicity during the 60 days prior to September 23, 2015. The map also depicts salt water disposal wells in the lands covered. 9. Hunter's Victoria Falls #1-5 noncommercial salt water disposal well is at the following location: Surface hole location: SW/4 SE/4 SW/4 SW/4 Bottom hole location: SW/4 NE/4 NW/4 SW/4 All in Section 5, Township 24 North, Range 4 West, Garfield County, Oklahoma 10. The reopening of Interim Order No. 635847 is for the Commission to adjudge whether Hunter is in compliance with the requirements set under the Interim Order. Specifically, Interim Order No. 635847, which was recommended by ALJ Osburn in October 2014, requires the record to be re-opened for the purpose of evaluating the pressure information and other data submitted by Hunter. It also requires the Conservation Division of the Commission and the UIC to state its position in the case and whether they are in support of, or opposed to, the issuance of a Final Order granting Hunter's application for relief regarding the utilization of the Victoria Falls # 1-5 SWD Well. (See page 6, paragraph 10 of Interim Order No. 635847). 11. Interim Order No. 635847 approved the Victoria Falls #1-5 well with certain requirements. It permitted disposal into the Arbuckle formation at a depth of 6,626' to 9,326' with a maximum injection volume of 25,000 barrels per day at a maximum pressure of 1,500 psi. It also mandated, as a result of earthquakes in the area where the Victoria Falls #1-5 well is located, these following requirements (taken from page 6, paragraph 10 of the Interim Order). 10. Special Findings: The requirements for issuance of an Interim Order under OAC 165:10-5-5 and 165:10-5-6 have been met. An Interim Order shall issue granting the relief requested and providing that the ru
ORDER - PAGE 5 Operator shall monitor and record, on a daily basis, volumes, the casing tubing annulus pressure and the surface injection pressure for the well. This information shall be submitted weekly to an authorized representative of the UIC. Additionally, the Operator shall shut in its well every sixty (60) days for a period of forty-eight (48) hours to obtain a bottom hole pressure by running an instrument into the well which will measure the bottom hole pressure. The Operator also will provide a calculated bottom hole pressure on the well that can be compared with the measured pressure readings. This shall occur for a period of six (6) months, therefore there will be three (3) periods in which the well will be shut in for forty-eight (48) hours. The Applicant shall collect from the OGS seismic data within two (2) miles of the injection well and shall supply such data, if any, to the UIC Department on a weekly basis. The UIC Department shall independently collect seismic data for review and comparison. The well shall not be used for disposal/injection until it meets the testing and reporting requirements of OAC 165:10-5-6. The Applicant shall notify the UIC Manager immediately upon the initiation of injection operations. The record will be reopened in this cause on April 24, 2015 (unless continued by agreement or order of this Commission) for the purpose of evaluating the pressure information and other data submitted by the Applicant as set forth in this Order. At the time of such reopening, the Conservation Division of the Commission and the UIC will state its position in the case and whether they are in support of, or opposed to, the issuance of a Final Order granting the Application and the utilization of the Victoria Falls # 1-5 SWD Well. To the extent provided by the Codes, Statutes, and Rules of the Commission, the Commission retains authority to immediately order the suspension of disposal/injection operations or take other actions designed to enforce the special findings and provisions contained in this Order. In the event that the frequency or magnitude of background seismicity increases to a point where the Director of Conservation or designee is concerned about the potential for triggered seismic activity, the Director of Conservation or designee shall determine whether injection operations are to be temporarily and immediately limited or suspended. Resumption of injection operations may resume when, and under appropriate restrictions if any, as determined by the Director of Conservation or designee. Any action by the Director of Conservation or designee to suspend or restrict operations shall be based upon the scientific analysis of all available data to determine and manage the risk of triggered seismicity. Testimony of John Paul Dick, Consultant Petroleum Engineer on behalf of Hunter. 5
ORDER - PAGE 6 Mr. J. Fred Gist Direct 12. Mr. Dick has testified on numerous occasions before the Commission and he has had his qualifications as an expert in the field of petroleum engineering accepted by the Commission. Mr. Dick testified that he is familiar with the subject cause and the Court retained him as an expert witness. 13. Mr. Dick testified that the Victoria Falls #1-5 is an Arbuckle disposal well. 14. Mr. Dick testified that the pressure data required to be taken and submitted under the Interim Order was provided to the UIC Department. 15. Mr. Dick testified that Exhibit 10 is a copy of Mechanical Integrity Test results dated January 30, 2015. The test was run in compliance with Commission rules. 16. Mr. Dick testified that Exhibit 11 is a daily injection report from the beginning of the well's operations through August 31, 2015 for the Victoria Falls #1-5. Mr. Dick testified that this data was submitted to the UIC Department on a weekly basis. Mr. Dick testified that the total amount of injected water as of the date of the hearing was 1,156,670 barrels. Mr. Dick testified that the well was originally permitted to inject for disposal 25,000 barrels of water per day. Mr. Dick testified that injection volumes were reduced to 5,000 barrels on or about March 13, 2015 because of concerns regarding seismicity in the immediate area by the UIC Department. Since that date, the Applicant has voluntarily kept injection volumes at levels requested by the UIC Department. 17. Mr. Dick testified that Exhibit 12 is a graphical representation of the information submitted to the Commission as depicted in Exhibit 11. The blue dots are the injection volumes in terms of barrels per day (marked on the left-hand side of the graph). The red dots are surface injection pressures in terms of psi (marked on the right-hand side of the graph). There are several high points above 1,000 psi on the pressure scale. Mr. Dick testified that this is because most injection wells do not run continuously (24-hours a day). Rather, the pumps will kick-on or kick-off based on fluid levels in the tanks. According to Mr. Dick, the pressures were taken when the pumps turned-on because high pressure was needed for the first few seconds to minutes of operation to overcome friction pressure in the hydrostatic head. On average, the 5,000 barrels have been injected at 250 to 350 psi. The high psi indicated on the graph are the result of measurements taken when the pumps turned-on. This is corroborated by Exhibit 11. Mr. Dick testified that the high psi does not indicate pushback from the reservoir but rather indicates pressure from fluid going down the tubular. 18. Mr. Dick testified that Exhibit 13 depicts pressure test data taken after 60 days where the well was shut in for 48 hours with a pressure bomb run to record the bottom hole pressure No
ORDER - PAGE 7 at the total depth of the well's tubing (6.550'). The tests were run on April 17, 2015, June 5, 2015 and August 7, 2015. a. Mr. Dick testified that the April 17 test recorded 3089 psi. b. Mr. Dick testified that the June 5 test recorded 3091 psi. c. Mr. Dick testified that the August 7 test recorded 3096 psi. 19. The tests were conducted in accordance with the Interim Order. The results of the three tests were close in comparison: the calculated pressure was within an approximate pound of the recorded pressure; the pressures were similar over a 6 month period; and, the calculations were close to the actual bottom hole pressures. Overall, these pressures do not indicate any problems with the well, according to Mr. Dick. 20. Exhibit 14 is a Hall Integral and Derivative Plot. This is a diagnostic monitoring measure recommended by the Environmental Protection Agency ('EPA") for wells injecting into the Arbuckle. It helps to identify issues in injecting, such as fracing out of zone or injecting into faults. Exhibit 14 shows the Hall Integral (blue line on the exhibit), depicting the summation of the change in pressure to the original pressure cumulatively over the injection period. If a well is performing as expected, and intended, a gradually increasing line from the southwest corner to the northeast corner of the graph will be depicted. The graphical depiction where the injection line bends upwards suddenly is an indication that a boundary has been encountered. The graphical depiction where the injection line levels off is an indication that the well is fracing and out of zone. In the present case, the graph depicts a normal increase in the Hall Integral, showing it is injecting as intended and not into faults nor out of zone, according to Mr. Dick. Mr. Dick also testified that the information in Exhibit 14 was not required under the Interim Order, but that Hunter provided the information to assist the Commission in its well diagnostic analysis. Overall, Mr. Dick testified that the data provided in Exhibit 14 indicates that the Victoria Falls #1-5 well is performing as intended. 21. Exhibit 15 is a map prepared by Hunter showing seismic activity over an approximate 6 mile radius centered on the Victoria Falls #1-5. The Interim Order requires the operator to provide Oklahoma Geological Survey ("OGS") seismic data within 2 miles of the injection well. The UIC Department requested that an expanded analysis within an (approximate) 6 mile radius be conducted. Hunter complied with the extended request of the UIC Department and Mr. Dick has provided the seismic activity data within the radius in Exhibit 15. Exhibit 15 displays requested information highlighted by a red circle, which is the radius centered on the Victoria Falls #1-5. The exhibit also shows the following: a. The dark blue lines depict faults from the OGS website. 7
ORDER - PAGE 8 b. The faint gray lines are horizontal wells. c. The faint gray points are vertical wells. d. The blue circles are injection wells. e. The pink squares are cities and/or towns. f Seismic events are shown on the map. Each has the epicenter depth and date of occurrence. i. 2013 seismic events are shown in pink. ii. 2014 seismic events are shown in orange. iii. 2015 seismic events are shown in red. iv. March 15, 2015 to present seismic events (6 months prior to the present hearing) are shown as red points in green boxes. Three clusters emerge on the exhibit where seismic activity occurs the most frequently. These are to the NW, NW, and NE of the Victoria Falls #1-5 well. Mr. Dick testified that the map indicates that these clusters do not correspond to known faults in the area. Mr. Dick testified that the seismic activity occurs north of the township line and not south of the township line near where the Victoria Falls #1-5 is located. Mr. Dick testified that within a 2 mile radius of the Victoria Falls #1-5 there has been no seismic activity. Outside of the two mile radius, he said, there is a lot of seismic activity. 22. Exhibit 16 shows a zoomed-in area of Exhibit 15. Mr. Dick testified, in reference to the exhibit, to the following. a. There was a 2.8 earthquake in May 2015 in Section 2, Township 24 North, Range 4 West. b. There was a 4.0 earthquake on August 5, 2015 in Section 36, Township 25 North, Range 5 West. Another Hunter disposal well named the Trent #1-35 SWD is a couple of miles from this earthquake epicenter. Mr. Dick testified that the 4.0 is not tied into the present case. Mr. Dick testified that, because of the seismic activity near the Trent #1-35 well, Hunter is considering using the Victoria Falls #1-5 well to offset current injection in the Trent #1-35. 23. Mr. Dick testified that Hunter requests to continue operations pursuant to the Interim Order, abiding by the same requirements and maintaining the current injection volumes unless and until the UIC Department directs otherwise. Mr. Dick testified that:
ORDER - PAGE 9 a. Hunter wants the flexibility of an Interim Order where the UIC Department will have authority to either request voluntary increases or decreases in the Victoria Falls 41-5. b. Hunter will follow the directives of the UIC Department regarding requests for injection volumes. c. He has limited concerns regarding maintaining the Interim Order with the occurring seismicity in the area because some of the seismicity occurred before the Victoria Falls #1-5 started operations and there is no definite correlation to the Victoria Falls #1-5 injection operations and seismic events (in Northern area) relative to the well during the past 6 months. Mr. Dick added that there is no known trigger for the earthquake clusters. d. Continuing the Interim Order (until February 17, 2015) will allow for Hunter to collect more information for submission to the Commission over a 6 month period at which time the Commission can examine the results of 3 more pressure tests and the seismicity in the area. Such a course of action where the UIC Department directs injection rates is, in his opinion, useful to Hunter as an operator and the UIC department. Ms. Susan Conrad Cross 24. Mr. Dick testified that he does not know the specifics regarding the Trent #1-35 in response to Ms. Conrad's question regarding that well's operations and the 4.0 earthquake that occurred in its immediate vicinity. 25. Mr. Dick testified that the Applicant is actively drilling in the area, developing formations within their large leasehold footprint. AIJ Andrew Dunn Questioning 26. In response to the AL's question, Mr. Dick testified that the UIC department requested the reduction of injection volumes to a maximum of 5,000 barrels of water per day on (or about) March 13, 2015. 27. In response to the AL's question, Mr. Dick testified that on Exhibit 12, the pressures above 1,000 psi were instantaneously recorded at the time the pump turned-on and do not reflect the pump operating at that psi for periods of entire days. He further testified that he "double checked" this fact in order to ensure that it is true and correct. Testimony of Mr. Charles Lord, Manager and Senior Hydrologist on behalf of the Commission.
ORDER PAGE 10 Ms. Susan Conrad Direct 28. Mr. Lord has testified on numerous occasions before the Commission and he has had his qualifications as an expert witness accepted by the Commission. Mr. Lord testified that he is familiar with the subject cause and the Court retained him as an expert witness. He currently serves as a senior hydrologist at the Commission where he supervises 4 hydrologists and reviews seismic information. 29. Mr. Lord testified regarding Exhibit 17, which is a map with the location of the Victoria Falls #1-5 well circled (in red) by a 6.21 mile radius. The map displays faults in the area. The map displays earthquakes in the area. The information was taken for making the exhibit from the OGS in August 2015. The code legend on Exhibit 17 explains the current status indicators used in the map. The code legend also color codes the faults. Mr. Lord testified that slip faults are the faults seismologists are concerned with because of the likelihood of shifting. a. Red indicates faults optimally aligned with regional stress. b. Yellow indicates faults sub optimally aligned with regional stress. c. Green indicates faults not optimally aligned with regional stress. 30. Mr. Lord testified that the map shows seismic events that have occurred in past 60 days (prior to the current hearing). The magnitude of these quakes are color coded with the color coding explained on the map legend. 31. Mr. Lord testified that on March 12, 2015 the UIC Department requested that the injection volumes be restricted for the Victoria Falls #1-5. 32. Mr. Lord testified that the Trent #1-35 well does not dispose in the granite. This well will be subject to meetings in the future due to the seismic activity near its operations. 33. Mr. Lord testified that Exhibit 18 is a similar map, differing only in that it shows seismic events for the past 30 days within the 6.21 mile radius of the Victoria Falls #1-5. 34. Mr. Lord testified that Exhibit 19 is a similar map except that it is centered on the Trent #1-35 well and depicts the seismic activity near that well. Mr. Lord testified that there was a 4.0 magnitude earthquake in adjacent Section 36 to the Trent #1-35 well. 35. Mr. Lord testified that the OGS updates its information regarding seismic events periodically and the new data will come out in the near future. This information may impact future well operations. 10
ORDER - PAGE 11 36. Mr. Lord testified that he prepared Exhibits 17, 18, and 19. Mr. Lord testified that he has been involved in hearings covering similar disposal well subjects. 37. It is his opinion that a second Interim Order for 6 months would be beneficial to providing the Commission information regarding its continued disposal. Mr. J. Fred Gist Cross 38. In response to Mr. Gist's questioning, Mr. Lord has no objection to continuing Hunter's operations of the Victoria Falls #1-5 well as provided under the Interim Order if such operations are conducted by Hunter voluntarily maintaining current injection volumes at 5,000 barrels of water per day. 39. In response to Mr. Gist's questioning, Mr. Lord does request the ALJ to recommend a second Interim Order rather than continue the current Interim Order. 40. In response to Mr. Gist's questioning, Mr. Lord testified that the information he provided is the most recent information provided to the Commission. Mr. Lord testified that he will provide the Commission with an additional map of information updated prior to this cause reaching the signing agenda. AL! Andrew Dunn Questioning 41. In response to the AL's questioning, Mr. Lord does not know when Trent #1-35 well began operations. Mr. Lord testified that November 9. 2011 is when the well was completed. 42. In response to the AL's questioning, Mr. Lord testified that it was after injection operations began that the UIC Department limited the well's disposal volumes due to the earthquake clusters in the vicinity. Mr. Lord testified that seismic events on or around March 3, 2015 to the north and east of Victoria Falls #1-5 led to the UIC Department's reduction to 5,000 barrels of water per day. The Victoria Falls 91-5 well began injection operations only (approximately) a month before on February 4, 2015. 43. In response to the AL's questioning, Mr. Lord testified that there have not been any seismic events since March 2015 in the vicinity of the Victoria Falls #1-5 well which, in his expert opinion, would lead him to request a reduction in injection volumes to an amount below 5,000 barrels of water per day. 44. In response to the AL's questioning, Mr. Lord testified that the cluster of earthquakes in the North-East (NE Cluster) has subsided in the last 3 months. Mr. Lord does not claim to know if the reduction in seismic activity is the result of the reduction of injection volumes of the Victoria Falls #1-5. 11
ORDER PAGE 12 45. In response to the AL's questioning, Mr. Lord testified that Exhibit 17 depicts faults according to OGS ranking. There are more faults. The faults depicted have more certain locations than others. 46. In response to the AL's questioning, the UIC Department requests that a second Interim Order be recommended, containing the same stipulations as Interim Order No. 635847 and including the present UIC Department's guidance to Hunter to keep the injection volumes voluntarily at 5,000 barrels of water per day. 47. In response to the AL's question of whether such a recommendation will not present a threat to the health, safety, welfare of the State of Oklahoma, Mr. Lord responded that the UIC Department neither supports nor opposes applications. However, they did (in the case of the Victoria Falls #1-5) reduce the volumes to 5,000 barrels of water per day with these concerns in mind. CONCLUSIONS OF LAW Jurisdictional Charges 48. The EPA delegated primary enforcement authority for the Federal UIC program through Part C of the Safe Drinking Water Act ("SDWA") to the State of Oklahoma. The State of Oklahoma under 52 O.S. 139 granted the Commission exclusive jurisdiction over the Federal UJC program related to Class II wells."1 2 3 The Commission is thereby charged to "carry out the purpose" of the Federal UIC program by enforcing its requirements (as 'See 52 O.S. 139 which states that "The Corporation Commission is vested with exclusive jurisdiction, power and authority, and it shall be its duty, to make and enforce such rules and orders governing and regulating the handling, storage and disposition of saltwater, mineral brines, waste oil and other deleterious substances produced from or obtained or used in connection with the drilling, development, producing, and operating of oil and gas wells and brine wells within this state as are reasonable and necessary for the purpose of preventing the pollution of the surface and subsurface waters in the state, and to otherwise carry out the purpose of this act." (emphasis added). 2 See 17 O.S. 52(A)(i) which states that the Commission shall have jurisdiction over: "the handling, transportation, storage and disposition of saltwater, mineral brines, waste oil and other deleterious substances produced from or obtained or used in connection with the drilling, development, producing and operating of oil and gas wells." See O.A.C. 165: 10-7-2(c)(8)(9) and (10) which state that the Commission has jurisdiction over "(8) The handling, transportation, storage and disposition of saltwater, drilling fluids, mineral brines, waste oil and other deleterious substances produced from or obtained or used in connection with the drilling, development, production, and operation of oil and gas wells at any facility or activity specifically subject to Commission jurisdiction or other oil and gas extraction facilities and activities. (9) Spills of deleterious substances associated with facilities and activities specified in O.A.C. 165:10-7-4(c)(8) or otherwise associated with oil and gas extraction and transportation activities. (10) Groundwater protection for activities subject to the jurisdictional areas of environmental responsibility of the Commission." 12
ORDER - PAGE 13 provided under 40 C.F.R. 145.1(f)).4 5 The importance of the Commission's authority to restrain individuals engaged in such endangering or damaging activities is implicit in the state's delegation of jurisdiction to the Commission authority over the Federal UIC program as such a delegation creates the exclusive obligation of the Commission to ensure UIC operations are being conducted properly statewide. 6 It is the duty of the Commission to "carry out the purpose" of the federal law by restraining, when necessary, individual activities that pose an imminent risk to the public health, safety, and welfare. 7 49. The Commission's authority to restrain any person from engaging in any activity which endangers or causes damage to public health or the environment derives from these delegations of primary enforcement authority. 8 This power to restrain extends over any individual who is engaged in the potentially endangering or damaging activities involving "the handling, transportation, storage and disposition of saltwater, mineral brines, waste oil and other deleterious substances produced from or obtained or used in connection with the drilling, development, producing and operating of oil and gas wells." 50. Commission rules have been promulgated under these federal and state delegations of exclusive authority which govern the location, installation and operation of Class II wells in a manner that protects against harm to the public health or environment. t0 O.A.C. 10-5-9, titled "Duration of underground injection well orders or permits" provides under subsection (a) the Commission power over disposal well permit revocations for 'just cause." 11 Continuing, subsection (c) of O.A.C. 165: 10-5-9 stipulates that Commission orders may be "modified, vacated, amended, or terminated after notice and hearing if'; See 40 C.F.R. 145.1(f) which states that: "Any State program approved by the Administrator shall at all times be conducted in accordance with the requirements of this part." Note: The Commission is also not precluded from adopting or enforcing requirements that are more stringent than the federal regulations (under 40 C.F.R. 145.1(g)(1)) See 40 C.F.R. 145.1(g)(1) which states that: "Nothing in this part precludes a State from adopting or enforcing requirements which are more stringent or more extensive than those required under this part." 6 See footnotes 1, 2, and 3. See footnote 1 at "carry out the purpose." 8 See 40 C.F.R. 145.13(a) which states that "Any State agency administering a program shall have available the following remedies for violations of State program requirements: (1) To restrain immediately and effectively any person by order or by suit in State court from engaging in any unauthorized activity which is endangering or causing damage to public health or environment." (emphasis added). See footnote 2. ' See footnotes 1, 2, 3. "See O.A.C. 165:10-5-9 which states that "(a) Subject to 165:10-5-10, authorization of injection into enhanced recovery injection wells and disposal wells shall remain valid for the life of the well, unless revoked by the Commission for just cause or lapses and becomes null and void under the provisions of 165:10-5-5(g). (b) An order 13
ORDER PAGE 14 (1) There is a substantial change in conditions in the enhanced recovery injection well or the disposal well operation, or there are substantial changes in the information originally furnished. (2) Information as to the permitted operation indicates that the cumulative effects on the environment are unacceptable. 12 51. To summarize, O.A.C. 165: 10-5-9(a) provides that disposal well permits may be revoked for 'just cause" and O.A.C.165: 10-5-9(c) authorizes, after notice and hearing, that the Commission may modify, vacate, amend or terminate any order granting underground injection upon its own initiative if information related to the operation of a well indicates evidence of substantial change or unacceptable environmental effects. 13 Therefore, the Commission has explicit authority to revoke disposal well permits under O.A.C.165: 10-5-9. 52. It stands to be noted that the Commission also has authority to deny disposal well permits under O.A.C. 165: 10-5-9. Legal reasoning leads to the aforementioned conclusion: If the Commission has the authority to modify, vacate, amend or terminate any order that has been granted (permitting underground injection) based on new information of substantial change or unacceptable environmental effects, it also has the authority to modify, vacate, amend, or deny an application (seeking underground injection) for the same reasons. 14 Therefore, in addition to its explicit authority to revoke a permit, the Commission also has the implied authority to deny a permit. 53. Commission rules have been promulgated under the federal and state delegations of exclusive authority to govern the location, installation, and operation of Class II wells in a manner that protects against harm to the public health and the environment. 1 ' O.A.C. granting underground injection may be modified, vacated, amended, or terminated during its term for cause. This may be at the Commission's initiative or at the request of any interested person through the prescribed complaint procedure of the Conservation Division. All requests shall be in writing and shall contain facts or reasons supporting the request. (c) An order may be modified, vacated, amended, or terminated after notice and hearing if. (1) There is a substantial change of conditions in the enhanced recovery injection well or the disposal well operation, or there are substantial changes in the information originally furnished. (2) Information as to the permitted operation indicates that the cumulative effects on the environment are unacceptable. (d) If an operator fails to complete or convert a well as approved by the Conservation Division within eighteen (18) months after the effective date of the order or permit authorizing injection into the well, then the order or permit authorizing injection into the well shall expire." (Emphasis added). I? Id. Id. " Id. See footnotes 1, 2, 3. 14
ORDER - PAGE 15 165: 10-5-9 provides, in summary, that underground injection is to be regulated based on the environmental impacts of its associated activities. Therefore, the Commission, through its promulgation and enforcement of rules regulating underground injection carries out the purpose of the federal law by restraining, when necessary, individual activities that pose an imminent risk to the public health, safety, and welfare. 16 54. The primary context for enforcing these rules has been regulation of UIC activities which may endanger the public health or environment in regards to the groundwater and surface water of the state. Initially, Commission rules promulgated to govern the location, installation and operation of Class II wells in accordance with the Federal UIC program (including O.A.C.165: 10-5-9) were applied with a focus on protecting groundwater and surface water from pollution as harm to the ground and surface waters represents an endangerment to the public health and environment. 55. The contemporary context for enforcing these rules is to regulate UIC activities which endanger the public health or environment in regards to seismicity. Presently, the recent phenomena of frequent seismic events requires refocusing the application of the Commission's rules as earthquakes endanger the public health and environment of the state. It is common knowledge that earthquakes are capable of causing catastrophic damage to any society. 56. The authority of the Commission to address the risks and dangers of harm to property, human health safety, and the environment arising from induced seismicity derives from the same delegation to the Commission of jurisdiction over UIC operations cited to protect against pollution. The same restraining powers of the Commission extend to preventing the same subjects from risks of harm only now those risks come from earthquakes rather than surface and groundwater pollution. The increasing frequency and magnitude of earthquakes requires a new analysis of the harm UIC wells present to the state's public health and/or environment. Conclusively, the Commission has broad authority to regulate UIC Class II wells to protect the state from activities that endanger or cause damage to the public health and that such authority is not limited by the type of cause of harm, whether it be pollutants, earthquakes, or some other harm inducer. Furthermore, it is not beyond the Commission's authority to take preventative, restraining measures based on the information available. Such restraints, when used to protect property, human health and safety, and the environment, "carry out the purpose" of these federal and state acts. 17 8 16 See footnote I. 17 See footnote 1. Note: While the science linking oil and gas activity to induced seismicity has not been settled conclusively, the Commission has authority to restrain UIC activities as a preventative measure to protect the public health and environment. 15
ORDER PAGE 16 57. It stands to be noted, that induced seismicity is not "pollution" per Se. "Pollution" is defined under O.A.C.: 10-1-2 as the contamination of fresh water or soil, either surface or subsurface, by salt water, mineral brines, waste oil, oil, gas, and/or other deleterious substances produced from or obtained or used in connection with the drilling, development, producing, refining, transporting, or processing of oil or gas within the State of Oklahoma." 9 While induced seismicity does not fit into the definition of pollution, earthquakes are known to cause the release of energy vibrations and shocks which can damage the facilities and equipment used in oil and gas activities. Such destruction could very likely lead to pollutant releases into the groundwater and surface water of the state, the exact type of releases which the SDWA seeks to prevent. Therefore, the Commission has the power to restrain underground injection for its potential to cause earthquakes which would, in turn, cause harm to the public health and environment through injury to the ground and surface waters of the State of Oklahoma. 58. Additional sources exist that provide the Commission the power to protect property, human health and safety, and the environment. These sources derive from interpretations of the Commission's rules and from nuisance law. The Commission is thereby empowered to regulate UIC activities accordingly under these sources of authority. 59. The legal doctrine of in pari materia provides that statutes and rules with a common purpose and comparable subject matter "should be construed together as one system of regulations." 20 Under this accepted legal principle, this public policy set forth for the regulation of storage tanks should extend to the regulation of Class II UIC wells and systems since both sets of statutes and rules have the common purpose and comparable subject matter of oil and gas conservation. The Commission is authorized to issue orders necessary to protect property, human health and safety, and the environment with respect to the risks and hazards associated with above ground storage tanks. 21 It stands to logic that the Commission has authority to protect property, human health and safety, and the environment in Oil and Gas Conservation matters other than storage tanks. 60. The Commission also has the power to stop public nuisances that arise from oil and gas activities. In Union Texas Petroleum Corp. v. JackNon, the Court defined a nuisance as "unlawfully doing an act or omitting to perform a duty, which act or omission either annoys, injures or endangers the comfort, repose, health or safety of others or in any way renders other persons insecure in life or in the use of property." 22 The Court held that ' 9 See O.A.C. 165: 10-1-2. 20 See Fiske v. Framingham Manufacturing Co., 29 Mass. (12 Pick.) 68 (1831). 21 See O.A.C. 165:26-1-26(a) which states that "The Commission will issue orders as necessary to enforce the provisions of this Chapter to protect property, human health and safety, and the environment." 22 See Union Texas Petroleum Corp. 1995 OK CIV APP 63, 909 P.2d 131 where the Court said that "A nuisance consists in unlawfully doing an act or omitting to perform a duty, which act or omission either annoys, injures or 16
ORDER - PAGE 17 "although the proper forum for a landowner to recover damages for nuisance caused by encroaching saltwater is in district court, the Commission may proceed to abate such nuisance. including assessment of liability therefore, in accordance with State statutes and court decisions, including the law of nuisance in order to enforce compliance with its 23 rules and regulations. " Induced seismicity, through releases of energy vibrations and shocks, fits the definition of a public nuisance as it can injure or endanger the comfort, repose, health, or safety of others or render people insecure in life and use of property. Therefore, the Commission has authority to assess and to abate a public nuisance related to induced seismicity. 61. In conclusion, the Commission has exclusive jurisdiction to govern the location, installation and operation of Class II wells in a manner that protects against harm to the public health or environment for all of the legal reasons aforementioned in this Report. 62. In summary; a. The EPA has delegated primary enforcement authority for the Federal UIC program through Part C of the SDWA to the State of Oklahoma. b. The State of Oklahoma has given charge of the Federal UIC program related to Class II wells to the Commission. c. Therefore, the Commission is in charge of "carrying out the purpose" of the federal program. d. The federal program provides under 40 C.F.R. 145.1(f) that: "Any State program approved by the Administrator shall at all times be conducted in accordance with the requirements of this part." This provides the Commission these remedies for violations of State program requirements: "(1) To restrain immediately and effectively any person by order or by suit in State court from endangers the comfort, repose, health or safety of others or in any way renders other persons insecure in life or in the use of property. 50 O.S. 1991 1; Cities Service Oil Company v. Merritt, 332 P.2d 677, 684 (Okla. 1958). In Cities Service, the Supreme Court determined the basis of liability for injury or damage to property by pollution of subterraneous waters, from oil, gas or saltwater from oil wells, must be either negligence or nuisance. Cities Service, at 684. Cities or towns may seek abatement of a public nuisance, including protection of public water supplies, within their respective corporate limits in district court. 50 O.S. 1991 16, 17. A public nuisance is one which affects at the same time an entire community or neighborhood, or any considerable number of persons, although the extent of the annoyance or damage inflicted upon the individuals may be unequal. 50 O.S. 1991 2; Miller v. State, 74 Okla. Crim. 104, 123 P.2d 699 (Okla. Crim. App. 1942). The remedies for public nuisance are through indictment or information, civil action, or abatement. 50 O.S. 1991 8. A public nuisance may be abated by any public body or officer authorized thereto by law. 500.S. 1991 11." 23 Id. 17
ORDER PAGE 18 engaging in any unauthorized activity which is endangering or causing damage to public health or environment." See 40 C.F.R. 145.1 3 (a)." (emphasis added). e. Therefore, the Commission is charged with ensuring that the public health and environment is protected from harm under the Federal UIC program. f. The Commission has followed through on its duties through the promulgation of rules governing the location, installation and operation of UIC Class II wells. O.A.C. 165: 10-5-9 empowers the Commission to revoke or deny disposal well permits and provides the Commission the power to modify, vacate, amend, or terminate an application or order after notice and hearing for disposal wells. g. The primary context for enforcing these rules has been regulation of UIC activities which may endanger the public health or environment in regards to the groundwater and surface water of the state as harm to these waters represents an endangerment to the public health and environment. h. The contemporary context for enforcing these rules is the regulation of UIC activities which may endanger the public health or environment in regards to seismicity. It is common knowledge that earthquakes are capable of causing catastrophic damage to any society. i. The increasing frequency and magnitude of earthquakes requires a new analysis of the harm UIC wells present to the state's public health or environment. While the science linking oil and gas activity to induced seismicity has not been settled conclusively, the Commission is authorized to restrain UIC activities as a preventative measure. The Commission has broad authority to regulate UIC Class II wells to protect the state from activities that endanger or cause damage to the public health and that authority is not limited by the type of cause of harm, whether it be pollutants, earthquakes, or some other harm inducer. j. Additional sources of the Commission's power to protect property, human health and safety, and the environment derive from interpretations of the Commission's rules and from nuisance law. The Commission is empowered to regulate UIC activities accordingly under these sources of authority. k. In conclusion, the Commission has exclusive jurisdiction to govern the location, installation and operation of Class II wells in a manner that protects against harm to the public health or environment for all of the legal reasons aforementioned in this report. Victoria Falls #1-5: Reopening of Interim Order No. 635847 for Cause PD. No. 201400143 18
ORDER - PAGE 19 63. The re-opening of Interim Order No. 635847 is for the Commission to adjudge whether the Hunter is in compliance with the Order's requirements regarding the operations of the Victoria Falls #1-5. Specifically, Interim Order No. 635847 required the record to be reopened for the purpose of evaluating the pressure information and other data submitted by Hunter. Hunter has submitted the required data set out on page 6, paragraph 10 of Interim Order No. 635847; and, thus, it satisfies the Interim Order requirements. It should be noted that Hunter submitted additional information not required under the Interim Order; the Hall Integral and Derivative Plot (Exhibit 14) and earthquake events within a 6.21 mile radius (rather than a 2 mile radius) of the Victoria Falls #1-5 well (Exhibits 15 and 16) voluntarily at the request of the UIC Department. 64. Interim Order 635847 also requires the Conservation Division of the Commission and the UIC to state its position in the case and whether they are in support of, or opposed to, the issuance of an order granting Hunter's application for relief regarding the utilization of the Victoria Falls # 1-5 SWD Well. During the hearing, Mr. Lord testified to the AU that the UIC Department neither supports nor opposes underground injection applications regarding whether the well presents a threat to the health, safety, welfare of the State of Oklahoma. Mr. Lord also testified during the hearing, however, that the UIC Department did in the case of the Victoria Falls #1-5 request a reduction in barrels injected to 5,000 per day with these concerns in mind. While the Interim Order stipulates that the UIC Department either support or oppose the underground injection application without the option of opting out from either position, ALJ determines that the UIC Department, through its actions in requesting that the well be regulated to maximum injection volumes of 5,000 barrels of water per day, at least supports (as implied through its request for regulation to Hunter) the operations of the Victoria Falls #1-5 to that limit. Therefore, such complies with the Interim Order's stipulation that UIC take a position regarding this underground injection application. 65. Both parties request that the requirements set out on page 6, paragraph 10 of Interim Order No. 635847 be incorporated into the order to issue in this cause, regardless of whether the order to issue is an Interim Order or Second Interim Order. As well, both parties agree that the interim for the order to issue should be 6 months in length. These points are not in dispute. 66. It is disputed whether Interim Order No. 635847 should be continued for 6 months or whether a Second Interim Order should issue for a period of 6 months. It is the determination of the ALJ that a Second Interim Order is appropriate in this case. This is because an initial order has already issued, concluding with the re-opening of this cause. Furthermore, a Second Interim Order is also appropriate because it is necessary to add to the terms, conditions, and requirements provided in the Interim Order. 24 24 Note: Hunter requested that Interim Order 635847 be granted for a period of 6 months under the same terms, conditions, and requirements. The Commission (via Conservation Division of the Commission and Underground Injection Control Department of the Commission) requested that a Second Interim Order be granted for a period of 6 months under the same terms, conditions, and requirements as Interim Order 635847. 19