How To Get A Court Order To Increase Saltwater Disposal

Transcription

1 APPLICANT: BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA S&TSWD,LLC I L E JUL RELIEF SOUGHT LEGAL DESCRIPTION AUTHORIZATION TO INCREASE RATE, PRESSURE AND INJECTION INTERVAL IN THE T & S SWD NO.i, A PERMITTED COMMERCIAL SALTWATER DISPOSAL WELL W/2 W/2 SW/40F SECTION ) 16, TOWNSHIP NORTH, ) RANGE a WEST, MCCLAIN ) COUNTY, OKLAHOMA ) COURT CLERK'S OFFICE - OKC CORPORATION COMMISSION OF OKLAHOMA CAUSE CD NO. PD ) Case Summary Report of the Administrative Law Judge S & T SWD, LLC wants to expand existing disposal capacity and GLB opposes the increase because saltwater is impairing its drilling program. Recommendations Adding salt to an area being developed that salt has already adversely impacted will not prevent waste. The application should be denied. C. Hearing Date March 25, 2015 D. Appearances Cheri Wheeler, Attorney at Law, appeared on behalf of the Applicant, S & T SWD, LLC;

2 Page 2 of 8 Richard Grimes, Attorney at Law, appeared on behalf of GLB Exploration, Inc.; Sally Shipley and Travis Weedn, Attorney's at Law, appeared on behalf of the Oklahoma Corporation Commission. E. Exhibits i. Filed Application Packet with Attachments 2. GLB Exploration, Inc., Kelly #i Drilling Report (Beginning 4/24/2013). GLB Exploration, Inc., Kelly #i Drilling Report (Beginning 11/11/2013) 4. GLB Exploration, Inc., Kelly #i Drilling Report (Beginning 7/12/2014) F. Evidence Summary Mr. Oscar Goode, Geologist and Engineer i. S & T's first witness was Oscar Goode, a geologist and engineer, and he stated S & T had applied to amend its 1015 Commercial Saltwater Disposal form to expand well capacity. They are disposing into a single lens of sand in the Hoxbar and wish to expand to five additional lenses of sand in the Hoxbar to increase volume pursuant to area production. They also take the water from four of their own commercial pits and those cannot be operated without injected saltwater disposal. They require 1500 to z000 barrels of saltwater disposal per day. 2. The base of treatable water is about 200 feet and porosity is around 20%. It is 3,888 feet from the base of treatable water to the top of the disposal zone. S & T requests to add new tubing to increase their barrels of saltwater disposal per day from 4,000 to 7,200 and increase the present psi of 1,500 to 2,030. Mr. Goode states they are disposing fresher water than is naturally found in the Hoxbar disposal zone. There is only one fresh water well in the area and there are no problem wells within a half mile radius. There is presently about twenty feet of net sand for disposal and he wishes to add an additional ioo feet of net sand for disposal. He believes another disposal well in the area, disposing much higher in the Hoxbar, was the cause of a GLB well being flooded with saltwater. He did not believe the GLB well was sufficiently deep to encounter the S & T disposal zone. The Hoxbar is not productive in the area.

3 Page 3 of 8 3. On cross examination, Mr. Goode said they had disposed 4,500 barrels of saltwater per day at 1,500 psi during the week of the hearing and their monthly average disposal for the month of August 2014 was 2,000 barrels per day at i,00 psi. Mr. Goode represents that, although the 4,500 barrels per day exceeds the 4,000 authorized amount, the 0CC UIC Division figures daily disposal using a monthly average and they did meet that standard. There is nothing in the rules to support this practice.. S & T is allowed to dispose 120,000 barrels of saltwater per month at 4,000 barrels per day and they disposed of 1.18 million barrels in 2012 and 81o,000 in In the last four or five years they have averaged about 6o,000 barrels disposal per month. Mr. Goode stated his reasons for the increased volume request are that the price of oil may rebound, the volume of mud, and a pressure issue. S & T disposed 417,000 barrels of saltwater through August 2014 and this was mostly from the mud pits.. The additional zones for disposal requested do not overlap the zones used by the other area disposal well. The GLB Kelly well may be affected by the other disposal well, but S & T does not believe it was affected by their disposal well. GLB may drill closer to the S & T disposal well. 6. On re-direct examination Mr. Goode noted that S &T has had the saltwater disposal well since 1997 and GLB started drilling in They were aware of the saltwater disposal well when they started the drilling program. He admitted the rate increase request is for future development. S & T could not possibly dispose of the requested rates without new tubing. Pressure is the bigger issue. S & T is turning away business and they need to release some of the pressure to new non-productive zones in the Hoxbar. Mr. Ronald Harris, Drilling, Completion and Organizational Production Supervisor i. GLB presented Mr. Ronald Harris as its drilling, completion and organizational production supervisor. He is the person in charge of these sorts of matters at GLB. Although a contract employee, 90% of his work is done for GLB and he had been in the oil field for 52 years. He testified increased water pressure creates inflow issues with drilling projects. Chlorides increase at 4,500 feet and below in the drilling mud. The mud keeps the hole from collapsing and carries out drilling cuttings. The muds he used for drilling are not compatible with salt. They are unable to soil farm the mud due to its high salt content. The 0CC has a soil farming limit of 2,500 parts chloride per million. 2. In addition, the salt does not allow chemicals to properly work and this compromises the muds ability to function properly. He believed the salt

4 Page 4 of 8 went up as they penetrated lower depths. He also desired to keep a low mud weight for drilling. With a heavier mud weight, it could break down the formation, lose the mud, the hole collapse and the drilling pipe could stick in the hole. There were similar problems in two other GLB wells. 3. He testified he did not know where the additional chlorides came from but probably above the drilling depth. Salt comes from the formation. He believed there was a high potential the salt came from the S & T well as it is in very close proximity. At this time, GLB is not in opposition to the existence of the S & T saltwater disposal well but they do oppose the additional perforations, additional pressure, and additional volumes. These factors will add salt to the formation and Mr. Harris believes this will create additional problems with drilling. He will have to spend additional money, keep the mud weight higher than desired, and not soil farm. 4. On cross examination, Mr. Harris admitted he could not measure the amount of saltwater inflow and added he believed additional salt in three GLB wells came from one of the two disposal wells but he could not know for certain which disposal well. He admitted he adjusts the mud program to the circumstances as they occur. The GLB wells had from the most expensive mud cost of around $37,000 to the least expensive mud cost of around $16,000, however most of the six wells were in the low to mid $20,000 range. Fletcher Lewis, Engineer and Geologist On direct examination, GLB presented Mr. Fletcher Lewis, an engineer and geologist, and he stated the additional saltwater inflow added an extra half day per well to drill and it cost about szo,000 per day to drill. He also noted that one time soil farm land application cost about $2.95 a barrel, but it cost $5.90 per barrel to truck the drilling fluids. There were about 9,000 barrels for disposal per well and this added about $26,00 extra cost per well for trucking the fluids. 2. He stated GLB has interests in the area, including interests in Section 17 and he is advising it will encounter the same saltwater problems as they have had. Mr. Lewis believed that each of the existing saltwater wells had impacted one of GLB's wells. He admitted the pressure variance shows the 20 foot Hoxbar disposal zone is mostly full. New disposal zones, with disposal, will affect any Section 17 wells. Mr. Lewis believes additional disposal will cause added cost and difficulties to drilling programs. One of the problems is the formation breaks down. This pushes mud into the formation and the mud weight becomes much higher and difficult to work around. This higher pressure may not allow oil and gas shows.

5 Page of 8 4. On cross examination, he confirmed he was 95% certain the S & T disposal well had impacted one of GLB's producing wells. The well Mr. Lewis believes was impacted by the S & T well had problems before it reached the disposal zone in the Hoxbar. He did not believe they could have saved much cost by being proactive rather than reactive due to that trouble hole. He also admitted that any trouble wells drilled by GLB took approximately the same time to drill as wells that encountered no trouble. GLB uses the S & T pits for saltwater disposal. 5. To stop saltwater injection during drilling would not mitigate the damage because the disposal slowly affected pressure and the drilling time was not long enough to see the full result. Mr. Lewis stated he was 95% sure that any Section 17 proposed wells would certainly encounter problems from the S & T well. 6. On rebuttal, Mr. Goode did not agree with Mr. Lewis' cost overrun estimates. He felt that a half day additional time was too long, the chloride levels were already high before they reached the disposal zone, and the mud could be diluted in the soil farm, leaving only some of the mud to be hauled. 7. In closing, S & T noted the other disposal well had been in the area since 1979 and they had operated since GLB entered the picture in zoli. The Hoxbar does not produce hydrocarbons. GLB continues to drill and dispose into the S & T well. They noted saltwater is the primary disposal and the mud pits cannot take the mud without the water removal. They believe without the requested relief their business will no longer be solvent. Shutting down S & T and area drilling activities will create waste. The request is reduced from 7,000 barrels per day to 5,500 barrels per day. The additional ioo feet of disposal interval is needed to keep everything operational, since the 20 foot zone is almost full. 8. GLB closed by noting prevention of waste is not concerned with oil field waste but the ability to recover oil and gas. They were unsure about the effect on drilling because they only opposed the increased disposal rate and not disposal entirely. The problems GLB had with their mud program began at 5,000 feet. This interferes with drilling and this is waste. GLB noted that S & T had presented no basis or any evidence showing that drilling will stop in the area if this application were denied. GLB is already using heavier mud than desired, which is more expensive and, if this application is granted, the problem could become worse with increased saltwater disposal. This could lead to loss of production and that constitutes waste. GLB alleged S & T had presented no evidence their business would fail without this approved application. They also question why S & T wishes to perforate shallower zones when perforating deeper zones would avoid any known saltwater issues.

6 Page 6 of 8 G. Findings of Fact S & T is disposing into a single lens of sand in the Hoxbar formation and desires to expand to dispose in five additional lenses of sand in the Hoxbar. z. It is 3,888 feet from the base of treatable water to the top of the disposal zone.. S & T wants to add new tubing and increase their disposal from 4,000 barrels per day to 7,200 barrels per day and increase the psi from I,5oo to 2,030 (this request was amended at the hearing from 7,000 barrels per day to 5,500 barrels per day). 4. S & T does not dispute GLB having drilling difficulties due to saltwater. They believe the saltwater came from another saltwater disposal well, disposing much higher in the Hoxbar formation. 5. S & T admitted disposing of 4,500 barrels of saltwater per day at 1,500 psi during the week of this hearing. This exceeds the authorized 4,000 barrels per day disposal authorized by the Commission. 6. S & T is authorized to dispose about izo,000 barrels of saltwater per month, at 4,000 barrels per day. S & T's reasons for the increased volume request are that the price of oil may rebound, the volume of mud they are putting in their pits, and the pressure issue. S & T requests the increased capacity for future development. They need to release pressure into additional nonproductive zones in the Hoxbar. 7. GLB testified that increased water pressure creates inflow issues and that chlorides increase at 4,500 feet and below. 8. The drilling mud used for the GLB projects is not compatible with salt. They are unable to soil farm the mud because of its high salt content.. The high salt content does not allow the chemicals to properly work. This means a heavier mud weight must be used and a heaver mud weight can break down the formation, lose the mud, have the hole collapse, and drilling pipe could become stuck in the hole. Although GLB did not know exactly where the additional chlorides originated, there was a high potential the salt came from the S & T disposal well due to its close proximity. Additional perforations and

7 Page 7 of 8 disposal capacity into the Hoxbar will increase the opportunity for even more salt to impair the GLB drilling program. it. GLB admitted pressure variance shows the Hoxbar disposal zone is mostly full. However, disposing into additional disposal zones will affect any planned Section 17 wells. Any additional chlorides pushed into a formation will cause increased mud weight for drilling and that high pressure may not allow oil and gas shows. 12. GLB admitted their drilling was impacted by saltwater problems before it reached the S&T disposal zone in the Hoxbar. GLB also admitted trouble wells drilled by GLB took approximately the same time to drill as wells that encountered no trouble. H. Conclusions of Law S & T is disposing into a single lens in the Hoxbar sand and requests the Commission expand that disposal to include five additional Hoxbar sand lenses. There is no allegation this request will interfere with treatable water. S & T requests a disposal rate from 4,000 barrels a day to 7,200 barrels a day and psi from 1,500 to 2,030 (this request was later amended to 5,500 barrels per day disposal). 2. It is undisputed the GLB drilling program has had trouble with saltwater. The additional salt does not allow the chemicals to properly work and this compels the use of a heavier mud weight, that could break down the formation, lose the mud, have a hole collapse, and leave drilling pipe stuck in the hole. 3. There is no certainty as to exactly where the saltwater came from and how much saltwater invaded the GLB drilling program. S & T alleges they may shut down the S & T disposal well because the excessive pressure won't allow continued disposal. GLB admits the disposal zone is nearing capacity. 4. However, shutting down a disposal well does not constitute waste as contemplated by the Commission duty to prevent waste. Prevention of waste is not concerned with oilfield waste but with the ability to recover oil and gas. GLB has already had problems with its drilling program due to saltwater. Adding saltwater increases the likelihood of additional trouble for the GLB drilling program.. In addition, increased capacity is unnecessary. S & T is already authorized to dispose izo,000 barrels of saltwater a month and over the last 4-5 years they have averaged about 6o,000 barrels disposed per month. Both parties

8 Page 8 of 8 and I understand that pressure is the problem causing this single zone to almost reach capacity. But the requested five additional lenses of sand for Hoxbar disposal, going from about 20 feet of sand to about ioo feet of sand is considerably more than is necessary for relieving the pressure and increasing capacity. The continuation of the GLB drilling program does prevent waste. It is not worth endangering such drilling program by adding salt to wells in a drilling program already troubled by salt intrusion. The application should be denied. Respectfully submitted this 31st day of July, PEP: tt L Paul E. Porter Administrative Law Judge Cc: Michael Decker Oil-Law Records Commission File Office of General Counsel