Monday, August 22, 2016

Earthquake rates fall, but Oklahoma regulators prepare for increased energy industry activity

Earthquake activity has slowed in Oklahoma over the past six months, but the state still is shaking at a rate that far outpaces the historical average.
The recent declines have occurred as state regulators have enacted new directives designed to reduce earthquakes and as oil and natural gas activity has slowed because of two years of low commodity prices.
"This is going to take time," said Michael Teague, Oklahoma Secretary of Energy and Environment. "This is not a light switch. You can't hang a 'mission accomplished' banner and then go away. It's going to take time to roll down."
It's also unclear how much of the recent seismic decline is because of stricter regulations at the Oklahoma Corporation Commission and how much is because of the slowing drilling activity.
"It's both. I don't know how to separate that," Teague said. "If an operator decided to reduce the volume of water he was going to dispose of and a commission regulation set a top limit, either way the volume is going down."
Shaking on decline
Until 2008, Oklahoma averaged about one earthquake of magnitude 3.0 or greater every year. that number grew to a couple dozen a year from 2009 to 2012 before climbing to 585 in 2014 and 907 last year. The state has experienced 455 such tremors so far this year and is on pace to mark the first year-over-year decline in five years.
"It's still going to be a big number, but at least it's going down," Teague said.
Oklahoma regulators and researchers throughout the country have attributed the state's earthquake swarm to large volumes of water poured into the Arbuckle formation, which is the deepest sedimentary rock layer throughout much of Oklahoma.
Oil wells in Oklahoma and much of the world produce large amounts of saltwater along with the oil and natural gas. Sometimes called fossil water, the produced water is believed to be remnants of ancient oceans, containing many times the salt content of seawater, along with other chemicals and components.
While there are options for purifying produced water, most available techniques are considered too expensive for widespread use. Instead, much of the water is pumped deep underground through saltwater disposal wells. The process has been used in Oklahoma for more than half a century.
Until the earthquakes started, Oklahoma's disposal process was praised by state and federal regulators as a way to safely dispose of produced water well below the water table and aquifers.
While most Oklahoma oil fields produce water, it is not evenly distributed. The Mississippi Lime formation, which underlies much of northwest and north central Oklahoma, produces many times more saltwater per barrel of oil than most other formations in the state and region.
Regulatory action
The Oklahoma Corporation Commission has addressed the earthquakes by directing operators to shut in 90 wastewater disposal wells and reducing disposal volumes an additional more than 250 wells.
The commission late last year and early this year rolled out widespread directives designed to restrict disposal well volumes throughout much of central and northwestern Oklahoma to levels less than those seen in 2012.
"I think the directives that are now fully implemented have made a difference," Commissioner Dana Murphy said. "And I think you've seen a shift to development in the STACK and SCOOP plays that do not have the same water issues that the Mississippian does in northern Oklahoma."
Recent Corporation Commission regulations also have required disposal well operators to record and report

pressure, temperature and other data in a move designed to help quickly identify which wells are near and could be contributing to earthquake
Drilling activity all but stalled in the state and throughout the country earlier this year as oil prices dipped to 12-year lows. Oil companies must notify the Oklahoma Corporation Commission before they plan to drill a well. Intents to drill filed with the commission dipped to less than 100 per month twice earlier this year before recovering to 160 in July.
Oil prices have rebounded somewhat in recent months, and companies have indicated plans to gradually increase drilling activity.
Of concern is whether new drilling will cause a new spike in earthquake activity.
“The reality is that in the Mississippi Lime, drilling is not going to go back up,” said Chad Warmington, president of the Oklahoma Oil and Gas Association. “The caps in place aren't going anywhere, and they're going to be restrictive to the amount of new production that can be added in the Mississippi Lime. That will limit the amount of production brought online.”
As drilling activity has slowed over the past two years, companies have limited activity to the areas that offer the highest return. In Oklahoma, drilling largely has moved away from the Mississippian and toward central Oklahoma's STACK and SCOOP plays, which produce less
“In the SCOOP and the STACK, not many operators use the Arbuckle, and the water volume is small,” Warmington said. “New production is not going to be in the Mississippi Lime until we can resolve this issue.”
Still, operations are continuing in the Mississippi Lime. Oklahoma City-based SandRidge Energy Inc. is the largest operator in the area. The company is in Chapter 11 bankruptcy protection, but said this week it could emerge from bankruptcy as early as next month and that it expects to shed $4.4 billion in debt in the process.
A SandRidge spokesman declined to comment for this article.
Another large player in the area is White Star Petroleum LLC, formerly known as American Energy Partners-
Woodward LLC. The company last month said it agreed to buy 210,000 Mississippi Lime acres in Payne, Lincoln, Logan and Garfield counties from Devon Energy Corp.
White Star has not detailed its plans for the area, and a spokesman did not return phone calls or emails to The Oklahoman this week.
Besides drilling in other areas, companies also are drilling disposal wells into layers other than the Arbuckle or plugging back existing saltwater wells so they dispose into shallower layers. While reducing the earthquake risk, those options create their own challenges, said Kim Hatfield, chairman of the Oklahoma Independent Petroleum Association's induced seismicity working group.
“Until we get a better understanding of the Arbuckle and what's going on there, I would expect that to be an option,” Hatfield said. “But that comes at a price as well. The other formations don't accept water as easily as the Arbuckle and are shallower. Depending on where they are, you may have to drill through them to get to your production horizon. So if that zone has been pressured up by water injection, that complicates the drilling process
Ongoing research
While researchers and regulators have focused their efforts on disposal volumes in the Arbuckle formation, several questions remain.
“I believe it is an issue of volume, but we still don't know what specifically it is,” Teague said. “Is it all the volume being injected at the same time or total volume overall? Does it happen over 10 miles? If we've undershot the range, we need to raise it. If we've overshot it, we need to lower it.”
Ongoing research is seeking to answer those questions and guide future regulations.
“We still need more research,” Teague said. “There's still a piece of this we don't understand. It's our role to study it until we do understand.”
The lingering questions have created challenges for oil companies trying to meet regulations and maintain their operations, Hatfield said.
“A lot of the regulations are essentially based on guesses as to the underlying causes,” he said. “As we understand which regulations may be effective and which regulations may not, that will hopefully permit us to be more focused.”
Still, Hatfield said oil companies continue to work with regulators and researchers.
Most operators have complied with the Corporation Commission's voluntary directives. Marjo Operating Co. Inc. and SandRidge separately balked at regulations last year before eventually agreeing to following the directives.
“We understand that having a return to an increase in earthquake activity linked to injection is not a viable option,” Hatfield said.
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