Oneok seeks to halt Red Bluff drilling

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CASHION – One energy company is trying to put the brakes on another’s operations to protect an underground natural gas storage cavern. Oneok Gas Storage LLC’s attorney asked the Oklahoma Corporation Commission to prevent Red Bluff Resources Operating from drilling and hydraulically fracturing a well close to the rock formation where highly volatile fuel is stored. Oklahoma Energy and Environment Secretary Mike Teague said Oneok is right to ask state regulators to examine the issue.

“We must make sure we are doing this safely and correctly,” he said.

It’s critical that states develop individual policies to protect underground gas storage infrastructure, he said. The Interstate Oil and Gas Compact Commission, a quasi-governmental body, recently published a regulatory guide for policymakers. That is a great place to start, he said.

Oneok operates the Edmond Gas Storage Unit and facility, a depleted oil rock formation that now stores natural gas. The gas is piped to power plants that serve millions of customers in the spanning several areas, including the Oklahoma City metro, the Enid metro, as far south as Ardmore and as far west as Woodward. Oklahoma Gas & Electric Co. recently spent $35 million to expand the line Oneok has from the Edmond Gas Storage cavern to serve the new electric generators at its Mustang power plant.

Red Bluff has plans to drill and frack the Herod 2-27MH horizontal well, according to public documents filed on the commission’s website. The 4,000-foot lateral wellbore will cross underneath a substantial portion of the Edmond Gas storage cavern in one land section near Cashion. Red Bluff’s analysis showed the lateral wellbore is about 313 feet from the bottom of the rock layer that forms the cavern. But Oneok’s analysis showed the wellbore would be significantly closer.

State statutes require a well operator to give a gas storage operator time to evaluate and develop a remediation plan for any wells drilled within 500 feet of a gas storage center. In mid-May, Red Bluff agreed to give Oneok’s staff a week to evaluate the situation. Oneok then asked for more time to study the infrastructure and Red Bluff resisted, according to commission documents. Oneok then asked for an emergency.

Red Bluff hasn’t been able to provide with certainty the frack job can be completed without damaging the rock formation where the natural gas is stored, according to Oneok’s amended application filed June 15. Potential damage could include potential pressure loss or hydrocarbons escaping from the formation, irreparable damage to the rock layer, unsafe conditions and the ability to serve electric utilities that provide power to customers.

The general public welfare can’t be overstated, Oneok’s attorney wrote.

“As the operator of the Edmond Gas Storage Unit and facility that benefits producers, the utilities, the cities and millions of natural gas consumers in Oklahoma and after considering the magnitude of harm that could be inflicted on such persons if the facility were damaged, Oneok is unable, in good faith, to consent to a completion operation presenting any risk or injury or impairment to its Edmond Gas Storage Unit and facility,” according to the application.

Red Bluff agreed not to move forward with the frack job, according to Oneok’s amended application filed June 15.

The issue of horizontal frack jobs damaging other nearby oil and gas wells isn’t new to Kingfisher County residents and well operators. As early as 2014, some vertical well operators brought the issue to the Corporation Commission, asking the agency to develop rules to prevent the damage. But since each well design, frack design and local geology is unique, it’s not easy for regulators to develop a single solution. The agency’s staff is examining dozens of alleged cases, known as well-bashing incidents, to determine if a nearby frack job did damage another well.

Commission spokesman Matt Skinner said the oil and gas division is still in a fact-finding mode as it develops guidance to mitigate potential well bashing.

“This is an ongoing process,” he said. “As we get more data, we’ll continue (to develop guidance). We can’t consider our rules final.”

The commission has rules requiring an operator to notify all nearby well owners in the same rock formation within a half-mile of the proposed frack job. It also has rules establishing a 600-foot buffer from a frack job that’s close to an existing well. That notice must be published in a newspaper. In order for the notification rule to be applicable to Edmond Gas Storage cavern, it must be in the same rock formation, Skinner wrote in an email to The Journal Record. *State statutes related to notification specify that drilling operations must be in the same common source of supply, which is a subset of a rock formation.

Commission staff members can’t comment on pending cases.

Oneok spokesman Brad Borror wrote in an email to The Journal Record that the company would not discuss the issue until it had resolved the matter with state regulators. Red Bluff representatives did not return requests for comment by press time.

Teague said there are several stark examples in other states that underscore the importance of protecting underground natural gas storage. The largest natural gas leak in U.S. history was at the Aliso Canyon storage cavern near Los Angeles. The incident began in October 2015. More than 4,000 homes were evacuated in the area and it took experts nearly four months to get the natural gas leak under control, according to IOGCC’s policy guide.

“If you look at issues with Aliso Canyon and on a national perspective related to underground natural gas storage, we must address this,” Teague said. “We are not the state with the biggest underground gas storage, but we ought to make sure we are doing this in a safe and manner.

“We need to delay drilling to make sure it is safe,” he said. “I understand (the delay) it impacts folks’ business, but if you don’t do it safely, you impact business a whole lot more.”

A hearing was scheduled at the OCC on June 18. Another hearing is scheduled for July 10.

*Reporter Sarah Terry-Cobo updated this article on June 26, 2018 to clarify state rules relating to drilling notifications within a rock formation to specify notice rules apply to the same common source of supply, a specific, defined layer within a rock formation.