July 01, 2015

Oklahoma regulators implement evolving regulatory directives in response to earthquakes

Craig D. Sundstrom

Oklahoma experienced 585 magnitude 3+ earthquakes in 2014, a five-fold increase from 2013. Seismologists and other academics have documented the relationship between produced water disposal from oil and gas production operations and triggered seismic activity. As the rise in the number of earthquakes in the state quickly exceeded the range of historical trends and concerns about disposal wells and seismicity were raised by seismologists, the Oklahoma Corporation Commission set in motion an evolving regulatory response to address the issue.

Producing more water

In Oklahoma and other oil and gas producing states, underground disposal of produced water is a common, well-accepted, cost-effective, and often necessary result of oil and gas production. In general terms, unconventional production practices in Oklahoma’s resource plays produce high volumes of water, which co-exist with oil and gas in the subsurface. Operators face disposing of more water, often at higher pressures, in the same Class II underground injection control (UIC) wells that have been in use for decades. Class II UIC wells in Oklahoma have not traditionally been permitted based on seismicity risk considerations because the primary purpose of the program is to protect underground sources of drinking water.

Water disposal and seismicity concerns

Scientists and regulators have had some difficulty confirming clear connections between individual well operations and seismic events—a challenge that is exacerbated by the vast number of both UIC wells and earthquakes in the area. On April 21, 2015, the Oklahoma Geological Survey (OGS) determined that the majority of recent earthquakes in central and north-central Oklahoma are very likely triggered by produced water disposal. The OGS noted that recent seismicity patterns are unlikely to represent naturally occurring processes, based on observed seismicity rates and the geographical relationship to major oil and gas plays with large amounts of produced water.

Oklahoma Corporation Commission jurisdiction

The Oklahoma Corporation Commission (OCC) is an independent agency with three statewide elected commissioners and is statutorily granted exclusive jurisdiction over the conservation of oil and gas and Class II UIC wells. 52 Okla. Stat. §139 (B). Oklahoma law gives OCC the authority to take extraordinary measures in the interest of public safety, without notice and hearing, though OCC normally operates under its general authority to permit oil and gas and UIC well operations. 52 Okla. Stat. §139 (D).

Regulatory response

OCC opened a standard rulemaking in 2014 aimed at enhancing the agency’s ability to collect data necessary to address the relationship between UIC wells and seismic events. OCC finalized the rule, which took effect in September 2014 and requires UIC well operators in the state’s deepest geologic formation, the Arbuckle, to report well pressure and volumes daily and to utilize modern technology to determine true well depth. The rules also require annual mechanical integrity tests for wells disposing of 20,000 barrels a day or more.

An evolving “traffic light” system

OCC also instituted a parallel permitting framework to address both new UIC well applications and existing wells in seismically active areas. Recommended by the National Academy of Sciences and known as the “traffic light” system for UIC well permitting, OCC staff now reviews well permit applications on a case-by-case basis to determine the risk of seismicity in the area. “Yellow light” permits are recommended for wells that present seismicity concerns and “red light” permit situations occur when OCC determines that a well should not be permitted due to the known seismic risks. “Yellow light” permits are temporary, contain certain restrictions aimed at mitigating seismicity, and are considered in the adjudicative process rather than through administrative approval. These requirements are not set out in agency rules, but are set forth as staff directives for operators.

A key component of the traffic-light system is OCC’s delineation of “areas of interest” which are determined by proximity to recent “seismic swarms,” or groups of seismic events. “Areas of interest” are areas within which both permit applications and existing wells are now subject to new agency directives. These directives are aimed at addressing and mitigating seismicity risks based on the most recent studies and new data. Wells operating under existing, pre-traffic-light permits could be required to alter operations or shut-in based on the new directives.

Latest developments

Seismologists generally agree that disposal of produced water in the basement rock (i.e., the hardened layer of rock that lies beneath most oil and gas operations) presents a potential risk for triggered seismicity. In the latest round of directives, OCC addressed this concern by directing well operators within areas of interest to prove that wells are not disposing into the basement rock and required wells found to be in contact with the basement rock to “plug back.” Plugging back, or using cement to elevate the total depth of the well, is meant to ensure that the injected fluid is not in communication with the basement rock. Entities with permitted disposal well operations subject to the new directives could appeal OCC’s staff’s actions and request a hearing before an administrative law judge. This option has not yet been exercised.

Voluntary compliance vs. backstop authority

OCC is establishing directives that can evolve based on changing events and scientific study. Though it may take some time to determine the efficacy of the directives, the success of the traffic-light system relies on voluntary compliance by operators, especially those operating under existing, pre-traffic-light permits. Should the directives face legal challenge, OCC could feasibly prevail under its public safety backstop authority, though this theory has not yet been tested in the courts when addressing seismicity concerns. An evolving framework with robust voluntary compliance may prove to be preferred when addressing concerns raised by recent scientific study, mitigating risk, and continuing operations safely.

Craig D. Sundstrom

Craig D. Sundstrom serves as Deputy Secretary of Energy in the Office of the Oklahoma Secretary of Energy and Environment. He is a member of the Section’s Special Committee on Congressional Relations and a vice chair of the Section’s 2016 Spring Conference Planning Committee. This material is solely the work of the author and does not necessarily reflect the views of the Governor of Oklahoma or the Oklahoma Secretary of Energy and Environment.